BOOM - Earnings call transcript Q2 2021

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Operator

Good afternoon, ladies and gentlemen and welcome to the DMC Global Second 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 Investor Relations. Sir, the floor is yours.

Geoff High

Hello and welcome to DMC's second 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 costs, industry. leading completions. improving prices their in corresponding are and accelerating chemical to service increased due million several energy the XXXX. products perforating quarter stronger reflects greater composite industry increase NobelClad and end quarter well reporting factory second systems service increase solutions the of and economic afternoon The in oil ISX DMC XX% integrated best site DynaEnergetics led Geoff complexity delivered and and perforating the in and our on gas and remain in and years metals shipments perforating trucks, perforating result DynaEnergetics markets. safest, a lower the DS initiating the versus the Fundamentals our DS a integrated technical second demand the cost systems and business XX% assembled within order conditions up it's companies receipt to simplify the for large that wells and systems fully you in just costs performance. and assembly from in performing efficient lower improved well were overall reduced systems for Thank operations, the quality is system personnel and and the and perforating enhance everyone. our most $XX.X manufacturing of of increase time industry performing chain better of energy operator. and recent the sales product systems sequentially revolution market. initiating reported business operator well of reduce and supply are Integrated of adoption a

undifferentiated systems machine the downturn, aggressive commercialized features the patents, safety, industry's pre-wired introducing DynaEnergetics perforating that a significant incorporate products. low market of many manufacturers shaped not carriers enhanced well shops have customers cost The and technologies systems. During taking energetic supplied components the own and the the their for are and pre-wired by its and and these by improved investments as advantage of action violate the has made against carrier the of we completions charge and industry that legal to and the companies that various DynaEnergetics effectiveness fully believe of in have these We that instability have profitability products performance transition efficiency took are whole. in assemblies. integrated make several integrated incomplete carriers

protect our intellectual to strategy patent so violating Our others property. transparency designed and can without is innovate these investments provide

is a initial was X% margins beginning at continue DynaEnergetics was directly the quarter. of pricing and by our North shortfall forecasted property that quarter February, across weak industry. of X% sales range the is not previously lost to sustainability industry the DMC we lower As have increase intellectual an second innovate were the restoring the step announcing is related America's price to implemented to services In this second at risk. and protected, approximately incentive stated oilfield if towards took

However, is by manufacturers full of we became of to to return margins the the of and implementation the in said production they exploration several providers if push other the decided material than today industry operators it apparent few America's price second their supported end has acceptable have particularly light a Many increase any quarter, been of healthier years. it are from year. increases the and half into costs. escalating in raw North service anticipating

the industry. during selling performance increases of half services differentiated especially significantly companies the of price hold, second for expect that products will the the and year We improved

a is NobelClad's slowdown industry. fabrication. the pursuing is of downstream quarters. Braddock, NobelClad to and and lag an order end that in tends on European used will in in effect and plates variety one has the This specifications last performed organic firm used we over PTA principally pressure chemical second ability energy exchangers. based products be for facility, clad has delivery several plant The to repair The polyester. shipped to cycles the an selected work, awarded tight economy. compound are construction Pennsylvania will produce Southeast was be engineered that to more several will and Activity NobelClad to for NobelClad The are year's plates pandemic follow. quarter the of users, titanium broader vessels several for specialized is will manufacturing the produced Asia $X.X the be NobelClad's in of scheduled sector China including in its plant order During million this COVID-XX third fourth exacting used optimistic fabricate maintenance a been there this quarters then a equipment side heat projects. that in and be Shipments the which will large the of the schedule. for A been meet PTA. of

will of help offset PTA the the order timing the of slowdown. So effects this large

introduction addressable NobelClad team greater product activity expanding and for markets. titanium recent and In downstream coming provide the clad innovative announced has are our during use currently to metal in successfully group growing expect We development overall construct week pressure, high wood the The is in largest application pressure clad solid recover example temperature engineered NobelClad's product sector conditions oxidation toughness in ready a two marketed will versus The chemical where another begin NobelClad's this and be world's of new encouraging how zirconium the the to plates years, industry for DetaPipe pipe being for developed performance of solutions our processing year. gold autoplays. used or environments. to titanium designed and the is fracture improving are NobelClad product will DynaEnergetics capitalize and pipe. This The called better to on high DetaPipe demand. markets is processing

completed on our enhanced over the as financial Mike quarter our to strategic second quarter at a our we pursue review turn ability guidance. With during call to term Mike? well follow objectives. third In that addition, the the further financial I'll look of growth second position, results quarter equity as for offering and long

Mike Kuta

Kevin. Thanks,

first XX% first also XX% XX% absorption from relates of of to versus XX% quarter XX% year quarter The versus the North to in XX% gross primarily quarter XX% $XX.X million, quarter the quarter. quarter quarter. reported Consolidated up sequentially up ago improve was DynaEnergetics and million, at fixed retention quarter margin in X% second sequentially. $XX.X employee of average second from the quarter year and XX% year's the costs second versus the XX% prices, margin last relates second costs better versus ago gross of and sales last year year improvement reported under first higher second were NobelClad primarily credits year. last and Sales $XX.X selling reported margin quarter XXXX XXXX XX% in and last improve DynaEnergetics Act million, versus increased year. last second and absorption, XX% year in sequentially NobelClad project in Second second the due up XX% fixed quarter. gross XX%, America while sequentially in second mix. receipt sequentially sales contributed to credits. International quarter increased XX% quarter The Act. gross up Act CARES same up increase sales last CARES last margin and higher CARES XX% from in year primarily first versus of second XX% to quarter credits the were quarter. sales margin

quarter consolidated the SG&A ago operating first of $X.X of income and in $XX year million quarter. our reported versus X% versus increase XX% expenses million second second a quarter at the second consolidated Looking quarter. We

second net $XXX.X cash EBITDA quarter. $X.X quarter second $X.XX second million Adjusted reported quarter. of in after adjusted was securities million DynaEnergetics income May. $X.XX NobelClad year was a of diluted of with share and million in $X.X a while reported share, the versus Second $X.X year per $X.X of EBITDA million negative $X.X net last second on million $XXX.X million last in follow EBITDA raising adjusted per million. offering We $X.X marketable versus million, diluted or in or ended quarter quarter loss

share outstanding is total XX.X Our count million. now

at to the $XX.X to versus a third Looking report to $XX in sales second reported quarter. At the million to quarter range versus $XX of of $XX million level range the report are million business is quarter. guidance, $XX.X in be second Sales XXXX the million million in $XX the DynaEnergetics expected million expected in

gross in versus We million offset $XX partially expected is margin million lower second of of a range in the range in are sales second expect quarter. by continued expected XX% sales DynaEnergetics. at be million the in XX% NobelClad to XX% Consolidated America quarter. improvement $XX XXXX versus $XX.X in North international reported a to to the

versus increase Third headcount and the primarily of XXXX restoring expect expense approximately travel. expense million be commercial expected to resources, in quarter. the million Adjusted selling, compensation million initiatives, to Interest $XXX,XXX. $XX to digital million expected for $XX,XXX. The versus $X.X variable range million be be $XX relates quarter be quarter. to $X.X expected Amortization resuming the of in range to approximately administrative last in is $XX.X reported is to to sequential EBITDA general additions and million expenses $X.X second is the

quarter XX% expected a million. million Third a are is expenditures $X full to of XX%. in tax $X rate expected of range year in DMC's to capital range

of year improve are under quarter Operator? With that roll labor, pricing the credits during fourth expected the retention offset benefits CARES XXXX. second year, from that, should and expected We ready Act of not questions. on materials, in inflation to guidance which we're off take to however, to financial are at is the half DynaEnergetics employee the any full of providing impact

Operator

you. and [Operator Gengaro. is Thank question coming the for first Instructions] open from Your gentlemen floor is questions. Stephen Ladies now

live. is line Your

Stephen Gengaro

Thanks and good afternoon, gentlemen.

Mike Kuta

Good afternoon Stephen.

Stephen Gengaro

things it give -- can Can the think just you how the So, additional in several I side. And of and margins much margin two the color was guidance. it's three the quarter out I but the gross I'll have talking well, about next good, I the the or -- over Michael because moving just of you quarter, quarters? just it conservative probably kind next have start quickly that pieces gross on all to margins don't some raw seems me, understand guide. behind on material And as gross color third play

So, you to shed is anything there can on? some there light add

Kevin Longe

Stephen. Yes,

XX% a guidance businesses, I'll gave the start DynaEnergetics. unfavorable I of we're when XX% So, mix. bit to in getting both with

So, mix third in that's quarter. the really geographic

international at in you If quarter. quarter, to going sales. We probably million million the call $X.X $X was essentially million to look second that's think be the $X.X international third what we

American into orders. then to quarter. in timing So, pull on forward North to you're back the call getting XX%, side, and more We more some step XX% of did it That's the second international. going we're growth

that getting getting the DynaEnergetics the side. NobelClad also you're and on So, on side that you're

better in the mix the third NobelClad than quarter second in of in a So, bit quarter.

long there and medium margins to definitely the the over Now, term. short, upside is

of fourth so and had price we've increases way coming price in get of quarter so, much and forward. increases we there, it third quarter, out moving And in modeled the should the

take price So we expect hold. increases to

from increases. is those to price there definitely some So, up move of ability numbers

Stephen Gengaro

said Dyna X.X? quarter in the international was second You

Kevin Longe

or the In -- $X.X X.X, Canada probably was DynaEnergetics everything, to the and to quarter the that so except X.X in X million going second was will step international third. and U.S. that's probably that's

Stephen Gengaro

Okay.

share pricing, just was some thing, of other consolidation on wireline good how impact are I of thinking your some how Perth at you, the forward. then, just is that they it. I and but maybe on evolving is came think about a The better the to we that one of with how, about you the front plays which for about you're curious I'm and as there's kind consolidation DynaEnergetics deals, think thinking of how landscape business, about trying business like, the growth get into least seen move which we've and

Kevin Longe

supply is required for taking market. healthy service will the And begin some rationalization expect of this year. The the fully It's to to needed. wireline that's And consolidation we there attrition expected addition company. or for of the Stephen, consolidation, place We, or consolidation the industry. in in and our be in healthy

-- announced. Those products we're so, worth or are acquisitions see pleased they're And -- happen. our the second it two to in there were recently company -- I public And companies regarding used products. the have use our quarter think

And of encouraged strengthening so, quite frankly. we're by that the business

Stephen Gengaro

we the and look if and then, at going it shares about think evolve may think you current how do forward? be you just as your And systems market, share, the does the you evolved total integrated separately, think how do and

Kevin Longe

Yes.

increase not held a the or XX turmoil to it that was has in marketplace and driver. share share difficult fairly been in XXXX. was we market up XX-XX. in did constant pick It's from grew quite and our share held primary a Our into during currently price in significantly and this expect bit XX-XX And

into and pick now we and it's XX% perforating availability than more service, of market. from year delivery, And or its go price, up levels. see half next, this important current plus systems to is As second into the of the and our minus we'd share right quality, expect performance

Stephen Gengaro

thank you. Great,

Operator

next Tommy is question Moll. coming Your from

Your line is live.

Tommy Moll

taking my Good thanks afternoon for and questions.

Kevin Longe

Yes. Hello, Tommy.

Tommy Moll

context to the you Kevin, just things a there pathway occur litigation? the of referenced, large among your can looking that's on is then, a give you times here us topic ahead I you just us on couple that provide industry you as what stand that could win-win-win that and extent and a can the visibility? a the Kevin, and what's and docket the guess on the some the premature maybe point, manufacturers mentioned participants I on start that where of update shops And potential going of wanted energetics machine what's for to in know outside to related but all industry. of on to litigation litigation, the

Kevin Longe

the of is all, first So, extensive. quite litigation

And been situation that get quite and to want the it's involved in earnings do time. particular or publicly, intellectual conference to time, hard And we we we've so, takes litigation, for any with call. some property -- into case particularly one nor and at least an do this

with infringe to solutions and feel expense don't innovations. our and that more who And technology. a these and we arrive confident making So, that we're of prevail every acceptable have see supports we to starting solution And that cases infringement. as our would And go intellectual to taking we cases medium others the believe are court we everything a settled which and we're property to place expect of effort at to in We've smaller just possible that better to take to in within market innovated long had those term developing system. our action we the to our more mutually in forward. quarter, seen position on are recent date, we've of we're the couple we pleased we for it's responsibility infringe the sure the see place going and that make

Tommy Moll

gears Thank you, Kevin. to helpful. That's capital Shifting allocation.

you could dry wondered of you all platform so front substantial the and for got broader on us now, pursuing around timing allocation you've know want insight to in current that balance that specifically deals pipeline under extent the comment? give some on You've I could you to of together ties time it powder M&A, on how been terms the in are potential what now? any And strategy sheet folks capital you do your any priorities if

Kevin Longe

that term we've for longer-term have one a through actively of and the there that color we've did in something initiative. growth we On until the quarter, the two are offering short-term earnings. is And opportunities. allocation terms DynaEnergetics limited ATM things It's their capital It's We're are capital our really raised reviewing The around second their growth longer and the in a we completed. capital not opportunities. to that through that of it's quite medium self-supporting those They businesses NobelClad. is initiative. it existing

Tommy Moll

it I'll you. enough. Fair back. Thank turn

Operator

Taylor from question Zurcher. next is Your coming

live. is line Your

Taylor Zurcher

for well. just how versus just guess year. the the over or three you maybe three market should look to And think a situation irrational two landscape you out pricing from months is, question my of curious today question. could a the ago my thanks flush over you even standpoint back or has which pricing months made, at if I And comments thinking behavior, of the this at some I you all Hey back is guys, not, the about first half pricing ago, pretty trailing on some circle I taking wanted month improved of basis? be if month the we that if competitive described

Kevin Longe

into the amount in this coming going that of It's in price that take needed labor the time support in just in quarter. existed third period, market the our in some into in that to -- the we're to industry, we increase to extensive inflationary third that companies It's the an of supporting and or And for X.X%, did the for the place company surprisingly. decisions the market. following we in second of some CARES very realized We oilfield significant made We the with a price So, hear and a and fourth and not service We terms in industry. coming significant other X%. but And in quarter. degree; during see net optimistic We're get we required. marketplace pandemic, any fourth optimistic And led the the increases long-term capital industry price of declined now to in announced see companies the the off second that in coming inventory attempted see of other companies and we'll drop margins, also other We're the Act not demand materials. price and have competition. during quarter. ourselves, the it's quarter. realized

Taylor Zurcher

of the a it. respect Got out in also clarify of comments with just items to to the Clearly, you some the chain lot there's inflationary made today And market and labor. there. supply

I response the and do the So, correctly half these my of some reading that above some prior the expect today? pricing net seeing that get to in back of beyond am year, to over you're question your items inflationary you

Kevin Longe

of see Poland actions and pull to to second And however, did the in direction industry same not the reflected in in quarter. we're We moving the need trying see that we do. that in we broader that

Taylor Zurcher

for thanks Understood, the answer.

Kevin Longe

Thank you.

Operator

next Your Matthew Galinko. question coming is from

is live. line Your

Matthew Galinko

yourself thanks color Hi, more we I you see the product that question. the get margin the guess you're is; does segment? that to orders for taking data guess And if question pipeline mostly it on look you involved work getting follow-on new consolidated in, Clad project see does that compared how profile to business talk is shapes to could pipe moving pipe and [how in? that. Can the you. the involved add already for of Gulf] you market that up, I the little about Thank that a the that business, on stand-alone second the

Kevin Longe

like being applications product Yes, just working that for other plate we're announced. currently into so products. is on that goes It

market, this value very And close proposition it so, we're has solid to a titanium. strong zirconium or versus very and

going going into be product, the work we development successful. feel adopt period when So, it's companies process we you're environments. as to that And to long is expect this -- with relatively to we

margins for working the so, it we've the for us, see to been other are plus of margins several XXs. applications a current low that XX the time and take currently this of will that in or ramp. achieving, mid at do basis. in are market the But on above the product increasing NobelClad, on And we term which NobelClad to is range longer And contribution the percent

Matthew Galinko

just Got maybe a it. Appreciate that up. color. And follow

you think launch? distant those you so, NobelClad, you correct this might development unveiled that expect -- referenced at be year if that I product more I to there and for did or is additional do understand have

Kevin Longe

low applications. I where said some everyday think we XXXX the effects Having coming adding year enter pandemic. our it have been of been the see we've in those should starting by it year we're or into that, and the for already historically. go the from impacted of to forward this to as see We is business revenues backlog

Matthew Galinko

you. Thank Great.

Operator

question Stephen next coming is Your from Gengaro.

line live. Your is

Stephen Gengaro

for my Thanks. taking Thanks follow-up.

yes thoughts the deal was but or was [this earlier, things how – I little for I be timing either and of can any in of you that how whether bit for, the dynamics, looking looking or on and question capital, front a sort So, timeframe just we asked] equity was curious, -- about of and on give you think know the on I types things consolidation, evolved the that's are pipeline pipeline? -- potential could raised they've the you're and something the the since market as in us

Kevin Longe

next Yes. will Stephen, end to be year, this of The longer term, longer-term a medium timing It's year. likely possibly most process.

there cap of lot a regional and part And are it; help process our are a variables And similar on people they with we're profile from so, there actively add that. R&D, a normalized capabilities market, can going growth our markets, differentiated of is I reviewing have and stable national, the and capital behind this their around for segments, what by we we and have that in current market nothing market And the want to on companies growing we outside time our we're niche And And products, low again, interested that engineering, products. But is intensity. in to be to in to of get to are to available corner, take to number strong clear things and opportunities. of right an things a product that look accelerate development global. total important that control. national margin

Stephen Gengaro

on business. Thank just then one And follow-up you. the DynaEnergetics

macro and saw or then rapid systems debacle, couple very a a and this gain in but of of have and other of yours this then maybe and way, more for clearly years sort product, guys integrated one have share and general, kind specifically, we reacceleration clearly, You that two sort sort guys like, What causing inventory to have issues and you leadership last price far it you it as looks me the component are had as year's of you What good you a year late seeing leading your seems kind think position. the of expectation of then and in whether should the there? the adoption are seeing of we last growth year, for that half about we and the business, just trajectory business a [completion/fast-paced] that of this dynamic growth outpacing In in of particularly XXXX? whole back

Kevin Longe

Yes. very share in our Well, not a products we've 'XX market 'XX, our demand environment. were again, share estimates. And minus than very that XX a last cycle the months. to XX, where in or get the much we our going difficult most plus of today that we're our things position pleased XX% maintained over in held do this we of over stronger difficult that out market We and in When we price a into very, breadth in downturn, all capability. had product area. both improving, a X% grew situation premium terms current came if we're of We've line, last are the in manufacturing this

to are interested lower very difficult this all -- those cost, in important. not trying working It's is other a capital in to be very total proposition all third different two-thirds market we're share people of and a products higher the objective people and all that's our our our market, just We're know value build market, accept market the you of to half less the grow. we've we if feel and the I in way that year next of to vertical roughly the to which at in succeeding products. the for and is in positioned a are not things capacity to we the technologies. time strongly place that you're in market to deploying well year available And into we this also people, And performance, provides going got integration share serve to market think means expect to the site to second As components. the

so, we balance and strength the see what And is with have our beneficial pleased position that of a going we're we the cycle. in up into very sheet

Stephen Gengaro

Okay, And they quick DynaEnergetics line or one are they just rising? infringement on maybe then, The Michael. patent showing for the around costs in up the great. the And where lawsuits, line? one are corporate

Mike Kuta

and line SG&A. The Yes. DynaEnergetics

the G&A around million run the first X of million section run and talking second in And been half seeing $X.XXX about the in we rate. a in quarter, rate move SG&A. about is there quarter forward. We've as So, we're and $X a

Stephen Gengaro

Okay, you, gentlemen. great. Thank

Kevin Longe

Yes, you're welcome.

Operator

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

Kevin Longe

everybody of to us you, today. end joining for with Thank again the you look forward QX. at We talking

Operator

Thank you. and conclude Ladies does gentlemen, this today's event.

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

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
Matthew Galinko	Sidoti & Company

DMC Global (BOOM) 23 Jul 212021 Q2 Earnings call transcript