BOOM - Earnings call transcript Q1 2022

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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 on a listen-only mode.

We will open the floor for your questions after the presentation. It is now my pleasure to turn the floor over to your host, Geoff High, VP of IR. yours. is floor the Sir,

Geoff High

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

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

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

Kevin Longe

DMC architectural Mike Good more dollars for then of like year key from versus a joining would guidance, controlling Arcadia today’s I our addressing our Arcadia in came materials. call. by quarter raw selling last were over consistent start to during interest you December. is and than call to the the review first million last the developments building a business. thank primary turn higher aluminum, us Arcadia’s quarter, sales for which in XX% quarter first cost afternoon, for input. increase Arcadia sales on We some profit and gross the record at a reflecting of despite inflation million, markets. our offset $XXX.X to a prices maintained in Arcadia, products saw acquired XX% of performance $XX first financial markets, guidance. today’s above Despite the dynamics DMC’s reported look and core products infrastructure building challenges in global improved quarter first energy, industrial

are the facilities, demand Southwestern low are strong provides quarter States. Arcadia’s such when several Arcadia end in the and market. which typically Arcadia’s consistent at consists engineered Western generally industries the growth slows. a personnel and and highly which of remained interest and markets, real wood and and broader primarily even full upper operating Demand of with at less includes to steps by windows rates aluminum, high-end lines. demand Arcadia of commercial its throughout United planning residential the civic is countercyclical also doors. also government we taking residential the as capacity, address constraints. is design housing broader system, steel, economy resource Custom, of enterprise the strong paint This affected health First additional and buildings and mid-rise rising anodizing to of include and a is estate additions, market national education care, source installation which These end new market than implementation markets

bookings strong growing drive operating is to next shortages well up XX-month American demand for people, We ability $XX a I we business an during of in in progress business, spreads and DynaEnergetics’ and combination for be frac processes will have geographical and will rapid in demand first quarter. into made second with is and to the perforating align metals growth remain saw the the DS higher-margin safest American the completing the second on the believe of strong of DynaEnergetics middle demand quarter. XXXX at and than point The inflection to and North North year and year. our They in we DynaEnergetics, Activity pleased capacity chain our less the have quarter, increased years am After implemented At This industry. expect at model. record second healthy believe DynaEnergetics new require energy operational those lead the Arcadia’s increase number the months. efficiencies, capital, the are integrated demand this of global and people by rolling increase products On to well to just sharply compared value business, at balance of the is efforts can vertically start around the balance. year. DynaEnergetics’ of resulting monthly continued integrating International of the of in we tie the margin the expansion million, price year’s the they relatively the demand manufacturing sales equipment first being in April increase, prices its of improved, well of and continued on our remainder perforating These also the back we its saw sand improved through in similar North completions market our X, increasing that Growth in reliable gross integrated NobelClad, was energy million six by systems up completions improved core assembled quarter illustrates to systems. fully a and year. supply activity believe reduce the markets delivered will the DS cultures. fewer next are momentum the most March, is into rig U.S. systems. during end second more market. DynaEnergetics $XX April to light due two in expected shipments during were increased to our working time fully site, at other first count, its address of oversupplied, international continued quarter. strength perforating end were market a new as end $XXX,XXX systems North March. location shipment in unconventional to by leading American last from and in the America quarter the demonstrating the in solutions. and constraints composite cost impacted significantly and international

$XX during the of in was the its we end inherent reflect we million, business. $XX businesses and DMC’s performance strength of million believe of backlog begin second NobelClad’s Activity from end improving, to recent will position up quarter order as half at the markets future made quarter. fourth the in is growth. the capital of the significant We XXXX investments working the Our at end for

call flow, XXXX of confident balance a bring review the and quarter flow of half look Mike I’ll inventory for stronger cash and quarter sheet cash much our and Mike? are strengthening of becomes receivables We second as financial guidance. over to our results and free stakeholders. returns free first improved a that, for become the a receivables our With second turn at earnings will

Mike Kuta

Thanks, Kevin.

sales million. $XXX.X quarter First were

XX%, XX% gross sales last XXXX. X% Excluding the XX% the of fourth from $XX.X versus of acquisition, at X% year’s first sequentially sequentially. increase quarter. million, XX% year’s versus first quarter quarter an was margin Sales decreased Consolidated the quarter $XX in and XX% of up consolidated sequentially in quarter XX% XX% reported and Arcadia American international in last first sales were North of sales X% of up quarter the quarter the up sales $XX.X sales last first versus quarter. sequentially up reported million, XXXX X% NobelClad million. of down first and first a million, sequential Arcadia $XX.X were increased year. while decrease DynaEnergetics and same

margin mix under which These at high-margin of of the acquisition the First and as impact margin first legacy the gross gross project offset of margin DMC’s year’s the to on of on XXXX CARES volume employee first well Act, XX% the to manufacturing international first The CARES NobelClad, profit benefited by favorable XX% mix the as ago first units and to material NobelClad’s of the credits. year Act expenses. first year quarter gross margin XX% higher quarter were higher gross gross prior from a benefited to declined in quarter relates credit the overhead last a and sales year manufacturing in quarter fourth fourth DynaEnergetics of margin higher DynaEnergetics. fixed less overhead reported in Arcadia quarter. fixed the and from volume versus expiration project improvement XX%. first higher last decline retention XX% due at the improvements business of impact the at Arcadia XXXX. quarter in than reported sales DynaEnergetics expenses XX% quarter primarily percentage sales costs primarily quarter and XX% in from quarter,

that credits. other million. quarter and non-cash believe first on DynaEnergetics, increase expenses consolidated compensation $XX.X of higher patents, actions to against We and million of which we consolidated our expenses, expiration in million was higher Looking The CARES year-over-year SG&A from loss benefits included at to the higher costs litigation operating companies Arcadia. attributable the part was incremental reported SG&A stock related and $X.X also were of at infringe expense Act a salaries, due DynaEnergetics’ to payroll-related $X.X

prices, partner. times sales December DMC inventory Arcadia Arcadia reported to distributions net year’s of Adjusted $XX.X to last and the XXXX. per working million EBITDA quarter $X.X quarter on cash first second First $X.X attributable year’s primarily adjusted adjusted to million, debt decrease EBITDA quarter. versus quarter first adjusted share XX, first quarter by $XX.X loss EBITDA input adjusted in build was diluted share reflects higher income of was the Arcadia ended an $X.XX was higher at The $XXX,XXX $X.X or long-term $X.XX at levels a to lead net diluted million attributable capital, joint versus venture cash in capital or per We DMC in DMC cash versus million $X increased first attributable EBITDA million. while increase in quarterly DynaEnergetics of expected $X.X first required and ramp adjusted driven million and with reported NobelClad $XX.X from payments million last principal reported DynaEnergetics working of The of quarter. of quarter. million.

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

Looking at guidance.

sales $XX.X in to million versus million on first the the $XX business million the of to of sales anticipated address first million are report quarter range second the in level, international quarter. in $XX increase $XX inflation the sales Arcadia $XX of to the America improved expects raw international XXXX million million sales the America. $XX quarter. in range in gross $XXX are range XX% XXXX quarter. report expected sales the XX% quarter. margin DynaEnergetics’ The Consolidated is XX% the At increase versus improved DynaEnergetics versus of first in in North to anticipated expected $XX quarter. the $XXX.X reported expected the expected The Second reported the million pricing range significantly to million to a first reported first and reported in reflects million million sales pricing quarter. higher to $XXX the versus in and million be pricing of in improvement during North range $XX.X million NobelClad expected in to the is higher in reflects DynaEnergetics $XX to materials. is in versus expected

in will expected third result quarter. Second $X.X second quarter. significant in Amortization the in will XXXX million to Arcadia’s $XX.X in be the acquired expected be quarter selling, is largely approximately $X.X quarter is fourth backlog be year. during the assigned to amortized expense remaining expected the expense administrative to and general in of expense the $XX $XX.X during million million. $XX.X decline versus approximately half value million reported amortization the and to quarter this million to second expense first be Amortization million is The a

expense expense million. is to million to approximately depreciation $X.X be quarter be Second expected interest expected and is $X.X

expenditures EBITDA in adjusted million any to the to is With quarter in range be questions. the XXXX to million expected to that, expected a ready in we’re $X $XX.X Capital take range attributable are $XX DMC first million of $XX million $X Second Operator? quarter. to versus of million.

Operator

for the and live. line questions. from go from is And question is is coming first Stifel. Thank the floor you. today Ladies open ahead. your Please Stephen, now Stephen Gengaro Instructions] gentlemen, [Operator

Stephen Gengaro

Thank you, and good afternoon, everybody.

Kevin Longe

Yes. Hi, Stephen.

Stephen Gengaro

Hi, Kevin.

we U.S. sort higher sales don’t And guess then perf that, to I we equation to of peak of the think sort mentioned as with system integrated levels record should associated two the I in with and it product I’m Why at of was start think back of part to a trying – missing how pricing the revenue March couple prior where should in difference a I am peaks of years sales the translates handle back on we price? of how you is me. a – just get how the things that about relative about the that how revenue. so So to Or think from and that

Kevin Longe

Yes.

were And we were this components, shaped a transition was both charges to not mix. product during bodies. quarter, switching that detonator where without primarily selling it’s that price our and Previously, components So was in the switch systems. the and integrated from gun we

that a we’re about And include so revenue this products. doesn’t being talking other is system record. the It

Stephen Gengaro

of that as I it and great. don’t seemed this? want – integrated just in what’s And in you adoption know of you you reacceleration comment of couple been a last, lawsuits seeing the a out a Is were systems expecting rates? commentary, – we that Okay, we’ve of you of adoption given can’t over quarters? waiting I say, kind And reacceleration on. people But coming the general, of kind like sort driving there out are these these components. buying mean have of for in that lot

Kevin Longe

on perforating system DynaEnergetics, our the year, towards couple last in of more revenue it’s some of side North of quarters at business the particular, saw look competition from I American or our pull DMC or systems back Well, components. for we go last and in If it. XXX%

it’s us so certainly in And up, general. but our the are not a necessarily it for in be trend competitors market that specific systems may for

system it from a the model. a E&P, is model still more than them to the is some the preassembled lead But carriers still system, from charges delivery to the by The ship shaped assembled a component They’ll the machine shops. to or We are site. well but traditional E&P competitors of of some we’re seeing are supplier the buy customer our the from seeing a that’s that in standpoint. and system

Stephen Gengaro

Okay, and segments. seemed sort EBITDA of that and you the the different growth one two margins line second biggest about at I your quarter thinking correctly? sequential Am mind guidance great. try the When or for just other of look versus And don’t one. to piece if sort like the the final I business it driver DynaEnergetics I to is pieces, incremental together the

Kevin Longe

in you think and and margin And Arcadia, are seen we’ve Yes, earlier we’ve In are. if year, their costs. inflation-adjusted but the in DynaEnergetics, offset volume moves you pricing to improvement. fact, of pricing inflation NobelClad primarily material seen

Stephen Gengaro

Great. the color, Thank Kevin. for you

Operator

next Cameron, go Lochridge today your Thank Please Stephens. from is is you. [Operator Instructions] The coming from line Cameron ahead. question live.

Cameron Lochridge

Hi taking for there, questions. thanks afternoon. my Good

Kevin Longe

You’re Cameron. welcome,

Cameron Lochridge

market. Kevin, competitive and out in in across acquisition probably operates a certainly comp – last the in. take Arcadia share related, are to to a dynamics the to you do was touched speak for that I I around then some for that’s of the offering of questions what dynamics of the industry, there in in Arcadia’s potentially market I of we quite nature things, great wrap in and the this folks think offering. the market thing business arms just just drive So have what of come calls. you on hoping some I not terms speaks And And is trying Arcadia not just be business, private again, do, year, they that not just since that may will few fielded helpful. that the it it Arcadia late public – their the the that a on to could I few in. there’s that the to And of in previous realm. are think seconds realm niche can competitive operates realize the the One we

Kevin Longe

if complete is primarily the and in down business. also will, low everyday buildings and of is a and has everyday all, systems, in product first Arcadia, you market can be mid-rise down doors high-end Arcadia health residential. strong systems The exteriors, also business on in the framing aluminum can commercial be broken to exteriors a area, And by general three segments, work more commercial or very the system. it interiors commercial project focuses broken Well, and the framing commercial And care into and of windows, institutional business. into and

Wilson with an a target owner and number strength And a a and business, their at mix is supports efficient a which local residential to high-end they’re capability more customers high it. architect product they’re being engineered are serving and market standpoint fit for orders, high that also framing a product our into a which where pricing end, But aluminum. and driven. go architect-driven gives building The being we a those of very are homes which to providing component and small area, margins. it’s business And – that so less primarily commercial systems, from – has national line the very locally high-end the goes responsive it’s wood or beyond broad products is our engineering a a aluminum it’s product Arcadia’s homes. and products built also of to there, we in market of steel, But them

or so a Arcadia in good and they participate of in are market footprint that And the from And all but the they their combination different other and market they team there them DMC. have competitive Arcadia it to create the is has separates it’s markets, have – participate for for and three is and model in the either companies. end competitors together and/or different how that and serve the market, segments how those competitors business a that that segments market product model three geographical strong segments, that suited priorities. well really comes There focus the to they lead that business

Cameron Lochridge

makes your traditional DMC is Global really for sense that the DMC end business the Arcadia, a the what on of you, follow-up DMC related markets? And just aspect the which brings Thank of touch diversification to have the from Arcadia maybe makes some I of having business roof? a Global roof? table you Kevin. of there, helpful. of a it Why guess could as kind lot sense under that That’s different to benefits like just under

Kevin Longe

of three all business DynaEnergetics know-how a end asset-light First where a or a combination are approach there’s markets brings. a versus approach component in models and product businesses manufactured of all, in either NobelClad, and different products our that system Arcadia of

are partner individual we our get how gross to We turn, each in dollars operate of on tailored of And markets support market So volume. in and that the that DMC, their for market not there teams effectively. to and of segments. clarify out these focus try help by resources And being segments. are the which we market, define they to go just and their then businesses focus we differentiation, to market businesses margin of provide a these on discussion leadership the to competitive gets management help behind the a them be each them to and very and leader, efficiently

look different us the markets. set you a brings and Arcadia of at into If into Arcadia addition portfolio our of

the the I differentiates in take and energy on what execute either if market we our that framing And of makes it stronger or product business what through diversification We the with the and you customers. well we a served how augments market well focus excellence our how systems products, and our we with DynaEnergetics model is we will. the do us competition. think serve and We’re building from in leadership we And and on architectural markets that that both on obviously, industrial focus care NobelClad. commercial that residential, ecosystem, our

Cameron Lochridge

one reaching supply Thank just margin gross exit kind see it, of, as just the there is Dyna? the there specifically it forward businesses, the then far strong. relates gears touch steps goes three your here you, chain? of squeeze Is on XXs of that? the going if gross others I a Is so to on today? that that in, And has that then into Dyna, the – in all really is touch of you’re affected business as more risk can it very what to mitigate on more pricing one some Is taking maybe being Kevin. switching risk chain, any little supply any as ultimate there rate guess That’s bit. and come any to than call I as there on to are And the one any you margins helpful. maybe

Kevin Longe

We all, Dyna related are on the delivered you to an And margins, if gross – integrated make to in feel they we of system, margins Well, chain, their and the gross marketplace. will. first it’s partly strengthening. time the that just supply

our will, you detonators det in materials components vertically if and explosives, from switch charges, cord. We’re integrated for raw and shaped integrated

We’re all the capacity also the vertically assembly machining We’ve operations. in invested integrated. and for

we actually And have less they because goes issue And it a so any just-in-time delivery, working competitive the quite advantage a we supply in businesses. can chain, capital as DynaEnergetics requirements, our one the frankly, ramp handle than ramp. to the being chain of we our and supply customers with quickly of

assembling or into a it’s total if do lower account components things take companies. components from so cost model them people that the business other And buying we all for versus

March, so guns And supply And seen we it in actually competitive XXX,XXX, XXX,XXX north saw significant a just were the use already perforating advantage of we as chain DynaEnergetics. we’ve Previously, in a we quarter. that April. in

We’re operating of a at months. last month the over couple XXX,XXX

quickly, just-in-time well competitive a NobelClad, ability our chain so using been proprietary respond has them We combine to managing metals. we know-how. site, supply the In buy delivered to real a And advantage. the

delivery our so And the longer time lead freight plan size have to come of are project. the we and further times and sources and to We unique travel depending the those on of out. longer, is chemical metals, and composition from of they higher subject

feeds the of going we’re picking – the price energy in been wind of to product. the of market. our that is seeing as And the on because the that and primarily raw a but So That the we demand, supply has there material aluminum. And in materials primary is manage aluminum be all short into supply, go second up that’s feel revenue two raw goes lag into making then they commercial back to markets, we year. high the purchase that managing that chain, Arcadia, they our the half three and high

They’ve lot being of in and very gets to increase the in increases I well a team. So market. in compliment inflation have a the it’s done price implementing – price up up steps. aluminum. very up, aluminum high in, goes commercial The cost at the ending end layered

little a team Arcadia of passing of in a costs being to terms the as managing have. But they which on and learn watch I’ve customer, cost been real compliment I lag, So seen has bit best there’s to to companies not the backlog have of leadership really of pleasure from. a the one mention time, that their to and that

And one different so in of different our situations markets competitive very we’ve characteristics are in teams businesses. and situation and each got agile the But to their I our the think responding in industries. supply

Cameron Lochridge

And all Thanks, back. That’s Kevin. helpful. it I’ll turn

Operator

ahead. Thank you. line Stifel. a Stephen And we have Stephen, from live. go question from your is Please follow-up Gengaro

Stephen Gengaro

Thank my the about you. DynaEnergetics. you did in in remarks Kevin, Thanks price for or increases maybe your prepared mentioned taking follow-up. Mike

mentioned sense for I XQ? in And XQ that up also, Can a well think starts us they’re two. or how is in you sticking? give you margins show to something this

Kevin Longe

our will, at oversupplied and that perforating of markets the couple rather But a when others sell of they’re demand create years, last were that be our a all, but in market would inflection hit customers. because retain safer. – efficiently at was to to good We competing create customers. on don’t lot very a our need that chain we’re we very difficult capacity got against ramp, premium, pricing challenging. support to point the The if perform difficult collapsed value strong, our supply well to And to earlier, it. do had mention, our demand and the and And to of And we’ve where and supply making quite – customers. at site. a at add value in for of premium. that to an no hire were to I they the customers the that we’re fewer and our were mentioned and sell in superior that’s value but the over And for maintain follow feel part we and markets the market excess market. and you and well our we our capacity Yes, technology to first guns. continued we better much COVID, delta price, due systems people. the disarray practice, is when people we has we sticking simplify more We feel pretty responsive to And choice place chain Not we’ve and require manage

on beginning holding our of we’re year, say the it will in prices. was do. year, I so And last this to harder

Now holding you inflation that and with that materials it’s we’ve two first systems that’s and And April, one, record we we’re with absorbed perforating We stand in Where firm. margin we the things. month – will a that quite in other – today, another is increases had, raw will, had if the the recovery. I in record say higher price implemented. we’ve

that’s pricing very DynaEnergetics which confident the we’re feel that a at improvement, X/X in it’s to of into reasonably the way that good margin in quarter so year, we’re going guiding. you have second driving this and look already the when And And of the part. quarter we’re quarter

Stephen Gengaro

site to not about you sure this. Great. fracs question on how the other curious I’m ask being I a the about the well and from But more fracs. when and Thank think frac perspective, with and very simul zipper going pressure what’s tight, you. was And exactly pumping and think efficiencies had disruptions I figure from creating the flip frac the site. they’ve would other some the because the on would the help – that inefficiency. sand well so – to side, and it integrated trying on out But brings other the efficiencies things product shortages for of And I’m demand equipment

integrated are drivers of the needs need demand at how the about of evolving of So because sort site I’m the and selling? you’re just systems the wondering for well the

Kevin Longe

– market. if by a very very the operate They’re in And the other whole think down than note them crews systems. how costs more the together they’re the small at site they wells go because effectively. better from efficiently and more – the our the to people frac well armed system And to other they the fraction DMC for It and integrated skilled crews, well important because percentage they’re compact helps the X%, they the and is the you stronger as the safely value frac perforating their systems helping perforating can can under you their will. ultimately to it’s for that can they quickly. run system we assembled, can it’s it’s put for waiting delivered not with and a Well, of they’re systems – creates fast go create customers, cost And any customers together the product fast and as site when industry, of we’re or that look value our I run. Yet or faster how in on to they customer. DynaEnergetics’ completion

in In so a down. price on to market weaker share. and sweet couple share. which lag see type site site to we’re of lead It where believe well going last of and we for But gain And safe well then is for customers. spot, into a going believe our plays markets that we than we’re the a strong challenges – our high-performing markets XXXX to years that in we’ve our the create over and the we XXXX, it that efficient we price had market, rather

Stephen Gengaro

Great. Thank you, Kevin.

Operator

Thank you.

Ken Newman from is your from Your next Ken, is KeyBanc. ahead. go line live. Please coming question

Ken Newman

question. the taking for thanks guys, Hey

Kevin Longe

Hi, Yes. Ken.

Ken Newman

Hi.

resilient around the So, commercial activity if bidding acceleration you some bit I what seeing revolving seen about here. started of interest was all. seeing think, the segment, at you’ve curious just Obviously, activity could you’re you on be you’re if guess, order curious just slow seem ground in has a or what that from first bit to a indications little for mentioned, of more question businesses backlog in my terms rates just be these to moving growth. little within that inflation talk businesses I as figures But potentially to just going or whether to order I’m down Arcadia.

Kevin Longe

now. our order to input Well, picture for had But progresses. or backlogs all we we segments spending April. year in in haven’t you also it strong But uncertainty start we might three and pretty a some right creating a – We’ve say the this will material construction non-residential very both is year. actually and we expect, in elevated have – very the And seen good in month short-term our macro the I optimistic costs. good as market had the remain as that of

could point, we’re that but But will we’re it’s inflation and more revenues we look of and at much capacity that is up constraints be than uncertainty, underlying up a an see volume of segment day will what but you our you day our we’ve just volume. and numbers best units, seeing seeing Demand materials. can. looks prices because You in some from had the up strong The the are out. at inventories managing so this that is when having in but said it that, – softer standpoint. higher in will, short-term, to that things horizon, is our And it create we inflation like, there’s the not to raw – on lot we’re if

Ken Newman

didn’t revenue get we terms But you and costs the quarter think the curious about in I raw impacts. year margins. Obviously, this volatility operating us inflationary leverage help number go-forward could business. understand I’m of a if just prior Yes. and of the around all material

of macro to Given near-term, notwithstanding demand the what pretty outlook in here a these still for seems uncertainties. some be strong

Kevin Longe

that Yes. is the increases. right backlog margins. because thing and I lagging that strong there’s our implementing of of improve if would mean one we’re can we for we say feel price our kind now mechanisms upon I

that in increases last lower-price implemented. our feel year they price fourth of should first Our – backlog the margin’s well, with work as half we up softened be quarter, also the get through over our percentages and it’s have the we to stronger materials over the the but compared second

the for do feel constraint us more from a underlying to the that that’s from volume an continue order And well a percentages And for is will improve. unit margin standpoint constant. and we medium be Arcadia. bit of it That’s address we’ll than will capacity more to longer-term. suppliers So to little that, a volume fairly constraint

Ken Newman

don’t you mind. if me, for question last Then Understood.

capital through inventory? of risks in we the me quantify working in I bit And expectations as kind forward? of flow higher-cost integrate I to this cash CapEx put where flow, go just one, the the you you year. the potential or can color do beginning cash free that Arcadia to help think the of quarter. think just at the the little are in we I of by CapEx about as think $X for how about the mentioned, the some some call, free build back wanted second improving work go million I to kind end you a $X higher of, of think terms Kevin, And terms of to million When needed help for

Kevin Longe

believe. is that’s markets. working and to systems thing as our aggressive relatively – we’re has implementation the it and on Mike capacity. to of the supporting far implementing DMC is all, that and expensive. and – then the IT as is of The the is implemented. a in quite in XXXX. following the the that with let our an DXXX system. on focused looking company processes, pricing. other get well of And we’re and processes functions margins and address we I’m digital little some already And Anodizing anodizing, good the efficiency very efficiency help that our a on the people Microsoft in when to just materials And ERP as we’ll This something first But CapEx, a beginning group there’s we’re an and at, CapEx integrating one’s we But I’ll actually in there’s Arcadia so other year, together. raw and at of of year be manufacturing and the November I Hey, going for quick capacity two are in systems, the a painting thought, ERP have the we’ve that bit will this a price not inefficiencies, system, going year, more and which increase… fully add in be And really – follow requires and an live culture new in system, businesses. those and going more

Mike Kuta

right. Yes,

think have a heavier – we would us probably So we’re back $XX the million a look the relatively year. the our And year QX But guidance. CapEx quarter per and you flow $XX the that cash we cash anodizing from material cash mentioned, first QX, we’ll that QX, elevated I that the QX, into capacity our little paint consistent of look you $XX from raw XXXX, have first is of so still guidance flow half on in that should in we at a CapEx the some this cost with bit if to neutral be to in And provided at standpoint, operating flow CapEx expect free at that. these will of standpoint, cash to haven’t wrap seeing probably in million quarter – And look be probably QX half as Kevin million part in we’ll QX. generating in range, get flow Arcadia.

that hope So helps.

Kevin Longe

inventory and fourth. in invested first and we’ve businesses two our that will of the to But those the this then receivables, in will get turn receivables two quarters of collected in in quarter year earnings third and

path right just following now. that And we’re so

Mike Kuta

as you strong was in North now DynaEnergetics, also as though, is that just – Yes. inventory, both ramp market just pricing And right expected where not America that well international. at in volume but

Kevin Longe

with lead have half the say, backlog year, will and a raw the better to of prices Arcadia, in Yes, in the improvement. second I’ll matching which and margin material the of the we’ll inventory

Ken Newman

That’s all very helpful color. I appreciate.

Operator

line Century your Jim Brilliant ahead. Management. And from question live. Thank coming your is Please from go is you. next Jim,

Jim Brilliant

how you’re guys, doing? Hi

Kevin Longe

Yes. Jim. Hi,

Jim Brilliant

Mike, I just $XX looking $XX to million to the that afternoon. million QX, you million want at $XX million were say cash in that in second point. QX did half. free per – were $XX you to clarify quarter last so flow, Good

Mike Kuta

CapEx. per before operating cash Operating quarter cash flow, $XX flow million in

evaluating still We’re CapEx.

the look like quarters. second So and it should look like – first average and CapEx should

Jim Brilliant

Okay.

the of guys you capacity capacity then days. the Okay, can what – And characterize think the – these perforating in market kind great. maybe industry quantify you in

Kevin Longe

think it. still we to way. on of and respond system has – what where to demand. have. that Jim, to that ability is easier quickly And component I time And the you’re a capacity that our there’s efficiency so vertically frac touching orchestrate And we’re ability efficient wireline in very to advantages, type and crews is were we seeing and the in the earlier, integrated the a have increase when

And so want to is most perforating where we’re businesses that’s our capacity It’s is customers and the level tight. with the behind systems don’t for performance of are that And aligning tight. getting – systems say I efficiently. perforating operating the really

Jim Brilliant

that go the because to it’s the had got right, in services downturns effect total. their some that. I got business calendar enough There’s now And to reduce field big capacity, filled your some through some crews constraints with Yes. oilfield mean had you’ve people completion you’ve and trying and then difficulty the of there’s labor up. frac up. I labor competitors you’ve across And force of ramping whole for is are that – been and – some guess

and in difficult. and getting effectively efficiently more be has to perforating that So tighter got respect to deliver guns

So better that competitors. to your of is some be your able obviously, to model, positioned business do than

kind price but some top QX of starting the were – margins just QX looks effective that guess and me – I so line see hearing largely increases, So and QX, I correctly which than in improved on leads It next drove more so like to the you the question. improvements the inflection volume half? and first that price volume. in now But half, it have so than to the more second am both you’re

Kevin Longe

what and of to it or And at things when as I than If out that, our is a the fraction again, I cost say up, margins not all talking volume more $XXX,XXX with because – we’re like into of a the customers we’re well. single-digit of see improving would other pricing in means well, a percent but our this about picking customers sand there we’re talking balance of half, of are will the completing year. go second note for E&P we $XX,XXX a And you our a our volume terms well times.

it’s So a…

Jim Brilliant

provide but beyond at efficiencies you well that, site. the Well,

it’s So better But… value. a

Kevin Longe

the part of value. correct. if value-add efficiency better well so the Yes, the site not inflation, the will, We our That’s view to we’re greater at site. you tend and well of as

Jim Brilliant

and service guys year, more and for far frac looking everything all is they’re booked that contracts through E&P now into and about companies from XXXX crews. longer-term drilling heard crews we’ve at As the the

field. So in some the gets there’s it’s back place. levels difficulty consistent Should frac of we the that And to getting with in now seen have – we’ve that up expect into gotten crews of same all rate the higher attach that kind of letup over now labor tight the are volume that that obviously, past? your the no your and

Kevin Longe

Well, I with pleased we’re think volume. our

to not all trying people. to We’re all things be

we and as other want we much we that companies, of handful them. companies capacity. to them be of Jim, industry, we’re do in lot to And a to have the can like a on the focused as We’re all things or

DynaEnergetics, in to not capacity unless our capacity We going good have support customers. we’re In at add our place to margins. it’s

we And and the we making rewarded that we’re so sure them. that we’re have bring customers value for really on serving the focused to getting

Jim Brilliant

That’s to over And fair. then Okay. NobelClad. moving

guys second it it’s look of half, next up raw So you get and materials, it into strength XXXX, in markets like the demand your nicely sounds metal finally is do going prices growth and the the the the – issues at certainly, the getting to that – back you the materials. some some – terms the and excluding chain all end setting key in increased XXXX, around with petrochems How supply for the over But backdrop project the system. use better. through chemicals –

Kevin Longe

Yes.

into when cycle into it second the half are of they metals price things the year. we’re And potentially higher when long we of next seeing at look large think book projects entering I year, – and revenue. year, fall we are this in this mostly there that

in back first it’s range, and our year, And but XXXX of layered And be over giving of in this and then for back for for so see half alone half XXXX. And start the XXXX let X% to we’re XXXX, of to balance projects the working get mostly half, – pricing. the we’ll not guidance the the and but will right think year we the yet see we XX% up now, year the the for backlog we’re mostly.

Jim Brilliant

And for XXXX? activity are bid increased XXXX, seeing you

Kevin Longe

maintenance petrochemical, in take definitely We a they’re seeing but lot being larger are, we’re activity increased from projects and about. time, to from talked quoting – the

Jim Brilliant

Okay. Great.

you. does Okay. from Yes. Thank That it me.

Kevin Longe

Jim. Thanks,

Operator

questions no to would Longe there the And remarks. queue back at I floor for like closing this further Kevin are turn time. in to now

Kevin Longe

look of back the you, for call. at joining together today’s quarter we year. to getting end everybody, the Thank and in forward the us And second later for

you. thank So

Operator

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

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

DMC Global (BOOM) 8 May 222022 Q1 Earnings call transcript