BOOM - Earnings call transcript Q1 2021

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Operator

Good afternoon, ladies and gentlemen and welcome to the DMC Global first quarter earnings call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Geoff High, VP of IR. Sir, the floor is yours.

Geoff High

Hello and welcome to DMC's first quarter conference call. and Longe President Kuta. CFO, are today CEO, and Kevin Mike Presenting on and would that and are forward-looking in may based everyone to are statements SEC. our estimates, discussed are I and remind disclosed call subject matters to like uncertainties today's as assumptions of during risks this that filings our date the projections that include with

statements. results DMC certain subsequent to subject of no untrue business to risks in call. available that be our cause become anticipated is dmcglobal.com call today's update forward-looking materially differ events. to after actual assumes from obligation replay that forward-looking the those Our could will at A statements webcast of because

the in for are the call. the replay In now news I Kevin today's to Longe. Details Kevin? available a addition, replay after will listening available telephone And over to turn be will with release. call that, hours approximately two

Kevin Longe

good and afternoon Geoff you Thank everyone.

sales $XX.X Texas at our absorption Consolidated out at the DynaEnergetics. first center DynaEnergetics within a of Our push XX% by following and due to NobelClad, patent our higher filings customer the energy also manufacturing in in range of products $X.X spending the activity lower and gross week in by to at of was impacted the our were two our forecasted in at end DynaEnergetics, halt million low business. storm margin Blum, our by on was business that winter orders Texas range. of were by storm shutdown a and metals forecasted nearly led at quarter and impacted composite U.S. million winter came Margins

several to taken $X are spent patent million we patents. litigation, against which quarter, legal relates we on DynaEnergetics' violating the believe approximately action companies During

repaid determination debt these securities included in ended balance finished DynaEnergetics. selling We in balance million. with term our see are of through and and first $XX successful term a $XX.X quarter marketable for at-the-market of the in cash raised position shares million strong program. sheet $XX.X by and equity to on cases that proceeds full DMC approximately to long the the net resolution have zero the quarter an loan, We confident with million our a

financial operating seeing implemented basins are crews to to The winter number in of May unconventional continued February markets frac international operations barometer by demand. industry safer Our are prospects performance DynaEnergetics completion XX in fewer Integrated storm. month-to-date. of the year, this success later continued and was field at cost of April. spreads, I of the expected of over entered selling spreads first quarter the the dedication back average less cost for during year. for At product market than total turn quarter offering continue improve second and DynaEnergetics, perforating half an teams activity speed to quarter are $XX lower NobelClad and of thank Mike call a to diligence, we guidance. XXXX. and by again enable order employees will our end meeting assembled recovered declining review DMC. our systems, than approaching Frac price with our all are visiting customers to to increase active a and increase are completion the and activity, much more products the a full of look XXX than the X% we completing financial our significantly results operating March of efficient a increase commercialized in are and in conventional suppliers. end a beginning the of new XX I of businesses on at their increased After to impact key with opportunities quarter the several order year, and encouraged X% large prices the want well, stronger a well be our which second systems. effective spreads has which a for last million, backlog see U.S. a challenging are the of at creativity back the to first second following frac After Mike? in now rapidly quarter.

Mike Kuta

Kevin. Thanks

last versus First quarter project down North of DynaEnergetics versus increased first X% reported versus fourth last the up were $XX.X from XX% XX% which while fourth in and year's NobelClad in quarter. quarter NobelClad The first X% gross first in sales quarter reflect February to last first the International quarter year America XX% XX% reported prices XX% relates first last DynaEnergetics. sequentially. XXXX The from versus sales gross a wee $XX.X and decline reported same increased of year's quarter in primarily quarter. last XX% margin DynaEnergetics sales margin quarter. XX% the in XX% quarter. Texas, year's quarter fourth and gross quarter down first decline up XX% ago in storm sales, margin million, average first quarter. selling million, at sequentially first X% the at sequentially year of mix. and the first million, were sequentially XX% $XX.X down in more XX% year. down of a XXXX lower in from XX% XX% quarter sequentially and by XX%, increases year's ago versus of favorable quarter quarter and Consolidated impacted first was Sales

quarter Looking versus expenses. of We adjusted loss XX% ago at year at reported a consolidated versus excludes declined which NobelClad. charges in first operating the and X% $XXX,XXX quarter first Consolidated the increased fourth quarter. million $XXX,XXX, restructuring $XX.X SG&A of our

million EBITDA reported versus EBITDA income or quarter $X.X last EBITDA $XX.X $X.XX quarter. year's share $X.X $X income $XXX,XXX net last in First NobelClad was quarter was of adjusted per million, versus $X.X $X.XX adjusted net of first of in while diluted first million quarter. million reported adjusted diluted of share per million. DynaEnergetics first year's adjusted Adjusted

full debt the equity and million balance bringing marketable our in and As securities an million to Kevin program at-the-market quarter noted, cash $XX.X during we our million. $XX.X on additional under total repaid term first $XX.X raised

at guidance. Looking

the to in margin level, $XX a is in of the in to million sales Second range to the in first first of $XX million reported expected quarter quarter. of expected quarter. reported in million in Consolidated expected quarter. are $XX is a $XX a of first in a NobelClad to XXXX million quarter. $XX be million expected business versus the versus XX% range gross are report XX% the versus million to reported $XX.X At million to versus the $XX.X $XX.X range in million sales $XX sales million XX% first range the XXXX DynaEnergetics

last Operator? $X to XXXX First Adjusted range in $XX to investments expected expense restoring the a expense business With of to of a in reported compensation. quarter and that, is Amortization quarter. first expected in is is take to million selling, in increase approximately to digital resuming million $XX.X transformation, $XXX,XXX. the is million The general range million ready EBITDA expected primarily administrative we to $XX,XXX. $X be million million $XX of any Interest $X to due million at questions. is are versus DynaEnergetics, be expense $X.X variable versus sequential and anticipated expense litigation approximately related quarter. expected an travel

Operator

Instructions]. [Operator

Your Moll. first question is coming from Tommy

line live. Your is

Tommy Moll

and afternoon taking Good questions. for thanks my

Kevin Longe

Good Tommy. afternoon

Tommy Moll

to I DynaEnergetics. Kevin, wanted start on

up believe. four quarter-over-quarter for You in I another quarter second are would which again. a for row, be Guidance calls sequential increase

right the in moving is direction industry the So here.

from You have announced It have a some sounds benefits increase. like you pricing that. realize to started

the other recent potentially On there. you quarters in whole inventory have crosscurrent the landscape, so overhang talked to hand, the across competitive a

competitive that marketplace unpack you right if are of some Thanks. the wonder for dynamics now? the seeing So us I you could in

Kevin Longe

Yes.

half system. today worked we to going that price I think of be overhang demand are forward to board. through captured demand where companies. first going a from anticipating compared out second it's have some year believe There with are this We has greater are is, with level way the we Pricing front but the building the people much into of inventory in for pretty The half. not Tommy. is going the actually across increase. and it still inventory It's certain that its you the well,

it's customers selling as it the activity, our improve also necessary margins seeing and us are of in our The results of is are positive April, and And always terms our margins. their profitability see to up, still we And customers. one support some into improvement going albeit for on need over time. for profitability to April. average the will prices conscious in our market We our to improve pricing picks of early in still that thing it's

Tommy Moll

the to pivot Thank That's you wanted to very I helpful. sheet. Kevin. balance

all So debts been your repaid.

called cash, out continued offering have part release. through the the you in You earnings the in to build that

here. tea might forthcoming? about hoping So sheet? as again, the strategy pretty conservatism you leaves near in term? downturn Or to Should the that of just the protect us on we wanted and heels could think we potential a allocation should help severe potential this be more capital change Any view balance acquisitions read just

Kevin Longe

flow DMC their expand through to cash to or portfolio. We two the for cash generation businesses our cash. opportunities markets directed new that activities, for to believe niche standpoint. markets businesses. and product is position, But the forward. and total is that looking of available or is from acquisition they your holding in. channels may the future our adding The competitive for quarter-to-quarter, from the companies we grow add fund are within businesses company could ATM, a themselves cash as that help our cash their market also and all-in-all, At capital standpoint, two our market in sales way markets we or our businesses generate of us lines day, look it's their on end the and total at they to consumer Month-to-month their improve go we to a would towards project, available leverage building areas are sustainable businesses technical to part expand expect And depending businesses two of generate a bolt-on balance

are so towards M&A as And we forward. go working we

Tommy Moll

talked you incentivizing is old in Washington wells. if could one I There toss Kevin. plugging And Thank about more new a that's potentially in. administration

You have do got that for DynaSlot system operators. a can that

to want comment potential in just investors that terms would may the the offer process see So be realizing familiar and for opportunity early here? it's any but with, capabilities less that here, of you system a you the in

Kevin Longe

actually, that that the potentially they greenhouse mean those thousands and no to gas invest I plugged methane gases greenhouse been capping properly so into industry it's leak of and is situation. the abandoned to wells prudent contribute Yes. for hundred there thousands not longer that have

which should are should new And our administration used a pretty so we dedicating we that that customers in to plug fact area, and benefit line the the product and have that tool excited this the abandonment. is effective resources benefit is very about

Tommy Moll

back. Kevin. it. I it appreciate you Thank turn I will

Operator

Zurcher. next is coming Your from question Taylor

is line live. Your

Taylor Zurcher

Thank you U.S. looks I it we if just the good hoping sort in realize were But DynaEnergetics? Hi. up break wanted But help Kevin, the sequential and hard comparison. the U.S. versus of It growth really could will back as storm, start guidance lot whole you sales an parse to it's us pretty in on spring DynaEnergetics, is to fairly for million help obviously QX afternoon. the of like really as QX. that we getting into strong there and you and through QX. Canada a lost can in relates due the sales add I within growth winter And $X parse apples-to-apples mean to us through not international go international. not I sequentially.

Kevin Longe

in of to like the makes is up NobelClad, assembled period, misses into but our recover terms there I and quarter, they a has thing there or business. of week companies it's downstream the is, goes by would to into we two able at delivered time time time is was quarter, it market additive note construction the their around our two system consumption, which we quarter first that to when applications, makes to In that that integrated And that next well regaining. are one industry an product petrochemical just and somewhat the differently the to a something DynaEnergetics a ability that DynaEnergetics, that in service One behaved disruption. Yes. manufacture hard a to when businesses time. our lost have is time in fully that's consumable products, in field that to goes catch

the DynaEnergetics dependent And service companies. upon go the so from quarter it's it doesn't one to next necessarily in because

Mike Kuta

to QX the And that add North America. growth QX, I would is just the Taylor, in all

be QX. We a to are business. to lumpy forecast international flat, QX It's

second to in be stronger much the that expect half. We

seeing So all is you North growth the America. that are

Taylor Zurcher

standpoint, at based that a a in ballpark you future? just of And is place business, margin QX margin business backlog profitability right is can relatively kind I the and in in the That's very rebounded my of as as about certainly that quarter. look you think QX in that XXXX the term guidance From well, know as of work think from a this it. backlog the the be helpful. balance NobelClad. Got over follow-up I nicely strong near EBITDA you of do am well. mix the front and and is right curious did type on for now, strong you lumpy mid-teens that margins you least standpoint was that have the to out

Kevin Longe

low say teens. mid I Yes. would to

The quarter a project was favorable high first mix.

that a XX%, quarter, XX% XX% business in be the to be think think can I gross I to going margin is XX..X%. So first

yes, ballpark is to a think that's So I low mid good teens.

Taylor Zurcher

Great. the I Thanks will for turn it answers. back.

Operator

from next question is Stephen Your Gengaro. coming

live. Your line is

Stephen Gengaro

Thanks. everybody. Good evening

Kevin Longe

Yes. Stephen. Good evening

Stephen Gengaro

A Dyna. at started And I guess, you couple of things.

about of look talked think the towards in industry past have XXXX, another integrated seeing integrated tie this systems in kind reaccelerate are as components? what in the of systems But doing I and you and it perf the about about unraveled. at customers versus trends components that and of as the to perf what you as adoption think would the when But were mode You inventories. world in far they as versus you kind shift the to overall there cutting are cost the question

Kevin Longe

early of Well, first very stages. the is all, the recovery in

in and the we XXXX what turning inventory down in the half is was of back large a and on of there as focus and when of those it significant is marketplace, is somewhat cash components the systems, that of move as components And a down the a that have in an inventory was experienced flow for that to turning seat inventory market was And extremely price that cash generating in consuming back was into in moving important to companies that to the inventory and somewhat cash. it. And challenged, factor the in lot inventory. market

having the see invest And manufacturing of there not situation to we component capability out a return to companies that the of The so, the a current working meet number come just path normalized in in as is market. the And are more downturn. of that is and that where consuming were are we demand. beginning downturn companies inventory to components out capital go may the assembled field of we to

Stephen Gengaro

those the some because this, that you like little you price you Is you. front. forth on Got lines, put it bit and along something side that on fair? on Thanks. And increase that a mentioned clearly DynaEnergetics saw seeing are a same you sounded traction

Kevin Longe

see the the market broad pricing We that of do not market traction. activity half yet. have as into But hoping that second going say I strengthen strengthens support the early. based as it's probably the seen we are of year. still we some will will the Yes, in

Stephen Gengaro

Thanks. questions litigation. Great. One is straightforward, And the pretty two I Okay. think. around

quarter The guidance expected is EBITDA is the is that $X the million second million? million, to $X.X after that $X about excluding deducting litigation adjusted of or

Kevin Longe

after spending That's on our litigation.

Stephen Gengaro

$X.X million So it's if -- strip to million, you $X.X

Kevin Longe

it correct. out, strip you if Yes, Correct.

Stephen Gengaro

probably system? Okay. Or reluctant then the this that. the is Good. I delivery you And to around energetics? just but downhole charges wanted around is this I to know check much, the in are say

Kevin Longe

shaped around of of charges areas And yes, one and system of involved. and around, that initiating areas are are the property you system there packaging around the technology. delivery Well, of two the and the the that is intellectual design see, it's the three are

Stephen Gengaro

I Great. in could Okay. And if just slide one more.

in think touch XXXX. not progression XX% average, to your XX% the and this margins and ticked past and Dyna gross have under you the about margin XXXX a gross we in As about quarter for around profit in talked just the margins were above

seeing some think capital you believe, their gross I moves reasonable some expecting maybe, as to that pumping They of into cycles. at E&P to activity kind the those the and industry point, normalizes industry, But things people as Dyna are. it pressured example, improvement can are we I they in I tighten of just seen margins least is sticking not on think at discipline, capital this. prior expecting in to was I discipline, XX%-plus? side, the profit is, think XXXX for E&Ps As not of in are have we get back And curious expecting things the one context an look are as price the are are

Kevin Longe

and Without It's that of with one market light, other ecosystem we the than a we greater a cost to an important and to high have realize have product customer. participate their service and add the total variable companies. They around in their different cost significant companies that a a customers. products organize value it's the and savings business much of systems. value There business have products doubt. our for asset that part is And who some cost differentiated higher use our to a lower

completing they the yet contributor which products of themselves. they And of integrated well well they wells. and are of drilling but look perforating when cost pay the safety completing overall you are productivity, system, the enables and the of and less our at more And the so significant the operations, efficient a for cost to than X% safer completion a are construction, efficiency

a quite the is differentiation bit business it's whole overcapacity that in asset use. and you that cost, high cost performance have the utilized variable and of products be to if on thing a different have it's light you different in it's an need there so assets fixed And a when

of ability acceptable to serve profitability allow customers definitely working the customers us that to margins. And between and So to and will to E&P. have cost approach are our the cognizant a our hard we the them strong with are to optimize businesses return our got of we two we our that with total and think I sensitive

Stephen Gengaro

Great. will Thanks. the I get I color. in line. back the appreciate

Operator

Your next coming Gerry Sweeney. from is question

Your live. line is

Gerry Sweeney

afternoon. call, taking Kevin. Thanks Good for Hi. my

Kevin Longe

Gerry. Hi Yes.

Gerry Sweeney

in on little them of a and curious, be well, just say. people able year, of just today do over Or Just base customers say, your customer about, however you a maybe and that? to there it's course have following did And let's to bit, think it's components was But specced know market through I you answer I up DynaEnergetics. partly sort are the about the Or expanding the year in? would of all want would than past chewing ago? you more a you lot

Kevin Longe

E&P have companies and of are think I that product aware we line. more our operators

not of last a a has market the We have with customers probably number out low are And business, we deep component ago. year for what those been essentially similar is chasing quarters. which about four really going to customers. It's price the

And that to start the the when with and and is a feel market that revenues. right we does awareness so pretty working we improve, our there growth so with see you them strong the will that people go we in are deeper will

Gerry Sweeney

ahead. to But chasing and you On didn't price that sorry. I that go front were imply want I am components.

Kevin Longe

trying all things not to are be people. to all we Well,

and and E&P creating We the for align focused to value people we to where all are are be culturally on optimizing handful things we trying of the a ecosystem.

total companies ESC companies focused technologically we who value actual right doing and safety, focused, an from product are thing after performance also are the standpoint. the more going cost reliability, that so the And

to people. trying not are things all all be to we so And

best best. area to be the with in associate are trying our We the and

Gerry Sweeney

more customers, also have a And activity little absolutely this they deeper said agree in and where bring If picks right, as component of of on, as you are alleviate base remove sort activity the they base understand deeper, labor to upside, that. a because the is load use function with a And want picks and activity equipment maybe people of customers, be? and chain. at up, certain you employees you a digging your I if right? But constraint hiring more do and they need up, to supply picks they your up, the

Kevin Longe

integrated make we fewer mean, for in systems. of over it's knowledgeable explosives assembling have years, less as going and technology industry, in themselves it, the I are has in the and the designed engineering to Yes. to, be and and definitely seven And through not sense are companies aren't components the the directly efficient are around into people of people area they less components together. perforating to it and very systems last the assembling once-in-a-lifetime work support gone who skill are it downturns two that by they skilled fewer the aspects nature, doesn't to

in going consolidation favor the integrated needs. And market one people part can the so and or think companies doing that of complex. to in favor their changes efficiently managing of even people the who were time that part There just systems have place, to view that we than basis effectively it them. do more we it and for we others companies small are more that of this. perforating And will either things for a attrition of and will investment do becoming investment overall build to on supply vertically that's medium the and is It longer taking benefit the in is from or those

Gerry Sweeney

actually, more. long Got How are started COVID lead a well, it. shift that any things time impacted they slightly much these has have Obviously, that are to entirely cycle quarters, impacted -- started, can has sales gears not excluding several if Do do the, the you they how COVID NobelClad. around Switching are once projects or to by but there?

Kevin Longe

the there around on composite slowdowns the longer see are things time, more projects, compared longer on overall where and make term these period difficulties for markets either and plates DynaEnergetics. of shipping basis. been of because a activity. more in I of products, GDP gestation goes or impacted terms that in they driven And Yes. COVID peripheral lot getting stable has longer shipment did lead not, but And it metals logistics it into the mean, and the of to more what been a we not

Gerry Sweeney

it. Got

from I Okay. appreciate it. end. my That's you. Thank it

Operator

is Matthew question Galinko. Your coming next from

Your live. line is

Matthew Galinko

Good And we Hi. process? rough a Thanks that as we how to Maybe hit through Can the litigation on for give should my move sense litigation. time of expect us expenses afternoon. you first taking questions. patent line? litigation

Kevin Longe

Yes.

think I property, our a is more had IP has in to take as I continue filings. the couple marathon It's happening a intellectual doubt. now. will background recognized. and litigation say takes without both then we strength litigation expect the of response patent than we is as a the discussions the the into grown for place, it the accelerated, way XXXX, of the of to And been a kind have place of filing that years with sprint designs and throughout our XXXX and have just portfolio

had September, up are to we letters infringing. October step those year So we in a that of in of sending believe last terms

wish did And responses. of Unfortunately, started filing bag have do not started this. But December. this to we mixed path. suits. infringement we filing We in those we a had not we enjoy have We take

have early the property of in And a and of process. quite that innings some we are two of we so been time. some one for three the have And intellectual just out it areas in the long it's we

Mike Kuta

as of year. and there the rate in million now QX going we that think not run rate, but currently be the about And QX rest QX, for giving well. right run that are expect $X.X Matt, to guidance obviously we the we is for when

Matthew Galinko

Got it.

I a mean, a get So trial, the expect run up of would we we point. if at that to point

a to guess point it courts it or generally I any has And do scheduled expenses a as if in those a there? XXXX, Is for Is And backlog a now? trial? are bump far trial? you do of, expect and out COVID XXXX? XXXX? do see how trial to something up get created Just to a what to you at So you get not we just figure XXXX have maybe you to able are get sense you challenge the

Kevin Longe

A trial are bump But how now. they the parties certainly up we believe all would communicating put understand expenses. with They we infringe. right

first hope open was we potential this we of to filed have knew avoid and are are also be outside action to discussions taken very patents But in We a can for the organized place. we And we and it's court. that the necessary to court. this. efficiently resolving this on important that And may going when

when so first obligation impacting and our the there that part is property is feel us And it's the that infringement we have that intellectual we on the an to in in marketplace place. happening defend filed we

so on be. seeing the But believe, there this conclusion. committed to to focused where straightforward. to it to successful are a we And we jockeying is we very get of and But to path, is lot need

Matthew Galinko

on how the over market Got you And that that efforts been you in much a have follow-up, couple do just it. the in as curious just last I engaging years? was client move put That makes development of sense. guess backlog business pretty nice sequentially. of am I

Kevin Longe

a Well, I amount. think the small market development,

has past book-to-bill. modest is other just the One our increase to our that measure of the addition over And backlog book-to-bill things in we year. seen our a

backlog it doesn't but of is few next some favorable a landing start over quarters. projects the to that we backlog the so hope quite reflect the And

related pretty about the NobelClad commercialize excited to We some that products process are applications commercializing a product. takes product or construction time of new in long a is and related and now it

that And a from so on year stronger feel over improvement here should modest this pretty they we good out. get last. it But have will

Matthew Galinko

Thank you. right. All Great.

Operator

from coming Gengaro. follow-up a is question next Stephen Your

is live. line Your

Stephen Gengaro

products you any LoneStar the that other one color think But that is, one. any talking And highlighting system are worth about quick Two gaining on guys I on traction? started Thanks. last new call? quarter's

Kevin Longe

Yes.

have that's system interest. we interest a the But the of And LoneStar. bit. We are that and pretty get so in out a time gaining cautiously it's in lot deal seeing a worked bugs perforating great the of powerful it rolled a out market we

areas we of have right strongest oriented system the areas so has the our the And LoneStar be now. Gravity perforating that see right that and would interest are two now Those that the also level our systems.

Stephen Gengaro

Another quick one.

business model But year. international million believe the XXXX lumpy that struggle year, in international on to I has target that reasonable did Mike of a the mentioned revenue as Dyna? been think place And to for a think DynaEnergetics. Is how to last sort earlier about $XX it. for I little bit I that start

Mike Kuta

I we everything that $X and last it was in we low million U.S. Stephen, when forecasted $X QX going And it's that for but about And again see $XX range, and it believe million to that international, is million year, $XX and got this million Canada. where in QX. year. XXs $XX did we say have

Stephen Gengaro

Canada All was you gentlemen. for all have. mistake actually That's All Thank right. including right. I by But thanks Thanks. I that. there.

Operator

We further I time. have turn the this remarks. questions Longe lines now from would to the like back for to at Kevin closing floor no

Kevin Longe

would to thank call. everybody this like us joining We for for

As our And get and believe the we further year, to this you are discussing into the I stronger this thank mentioned markets we with July. look expected be you much. forward earlier, we in to very

Operator

ladies does you Thank conference and call. gentlemen. conclude today's This

You for day. Thank lines have time your you may wonderful your a this phone at participation. disconnect and

Geoff High	Vice President of Investor Relations
Kevin Longe	President, Chief Executive Officer
Mike Kuta	Chief Financial Officer
Tommy Moll	Stephens
Taylor Zurcher	Tudor, Pickering, Holt & Co.
Stephen Gengaro	Stifel
Gerry Sweeney	ROTH Capital Partners
Matthew Galinko	Sidoti & Company

DMC Global (BOOM) 23 Apr 212021 Q1 Earnings call transcript