Earnings call transcript Q3 2022

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Operator

Good afternoon, ladies and gentlemen, and welcome to the DMC Global Third Quarter Earnings Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions-and-comments after the presentation.

It is now my pleasure to turn the floor over to your host, Geoff High, Vice President of Investor Relations. Sir, the floor is yours.

Geoff High

Hello, and welcome to DMC's third quarter conference call. and Longe; President Kuta. CFO, are today CEO, and Kevin Mike Presenting

our assumptions like matters are disclosed statements our include on that remind subject that filings projections during based I'd uncertainties everyone in may to discussed risks to that date, of as today's this and call are with estimates, and SEC. and are forward-looking the

assumes differ is no materially statements untrue that results could business cause forward-looking forward-looking risks statements. to subject our obligation certain DMC those update that from because to events. to anticipated of in Our actual become subsequent

A be the after webcast today's replay of call available at will dmcglobal.com call.

In for release. addition, two Details listening approximately to available the available replay a news will replay be today's call. hours after the are telephone in

call I'll Kevin with to turn Longe. And the over Kevin? that,

Kevin Longe

and thank results. review joining quarter us for third DMC's you for of Good a financial afternoon,

were sales our demand markets the quarter end and third businesses. Our our manufacturing profitability strong continued guidance, within asset-light by reflecting served above three

sales Consolidated year. million, and the last quarter were the which third up XXX% third quarter from X% a second quarter up from were $XXX.X record

in quarter million a X% December, and which increased we the quarter from controlling interest $XX.X Excluding last Arcadia XX% third versus XX% sequentially of sales revenues XXXX. third in acquired

providers. adoption sales sales quarter growth performance were North activity The service third continues is benefiting year's safety up of production increased quarter. $XX.X last in energy perforating up The from efficiency stronger at third and products companies America's integrated by XX% systems million, reflects DynaEnergetics sequentially healthy versus industry. completion the and to drive exploration and fully our DynaEnergetics DS business, and DynaEnergetics which global X% well

of units was mark assembled surpassed million been unit product its million shipped DS the a one systems. first launched DynaEnergetics the perforating have since in has year the for already This is It factory in single year time performance-assured one shipments XXXX.

at a were system. and a deployed seven-year which XX.XX%, without success of. of we customers single by systems rate proud is DS were are the deployed rate incident our delivery on-time also XX.XX% the very of of safety these they The systems The history commercial in

We without $XX.X and Building up a Arcadia, third units forma business Architectural quarter issue. million, versus our Products quarter. four of year's pro up last reported X% have shipped reported sales sales XX% nearly million safety third sequentially in

rose improvement reflects increase a to prices in products. implemented the prices, costs Arcadia its increased in selling were earlier actually which sharp The faster higher for aluminum year. Aluminum offset than prices

were gross quarter quarter. took quoted third factors effect. XX% year's increases second reduced some in from XX% these the Additionally, in orders last quarter before shipped of backlog and third the out Combined price Arcadia's that margin to XX%

Demand remains educational working range. commercial hotels, XX% casinos. US that projects the Western return booking Arcadia's We at in products on Acadia's Southwestern to will we a collection for include and team service expect is healthy. will time of the through high-priced quarter levels balance the which take it move centers to normalized to Arcadia's another of inventory margins gross facilities mid diverse And expect in commercial aluminum and for low territories

support the since investing planning resource beginning enterprise of been working year. implementation in future a to new the Arcadia is also on resources system growth. the of We've

strong markets personnel Arcadia's service at Dallas that long-term sales large Houston, addition, and in hired two believe manufacturing growth. we In and its new fuel centers will

product and Arizona and market and offering. its demand a strong at adding Custom, is is working also for marketing high-end resources investing It will demand order Tucson, is large facility reporting production its residential that sales in the Arcadia create serves which capacity through differentiated backlog.

the million, backlog up composite NobelClad's metals $XX.X the year's are moved million up outlook up we been several The improve to rolling at XX-month increased Order million award second phase. continues $XX.X third were Third of and see NobelClad to to X% million $XX the at to business and quarter. million, bookings quarter has quarter. last to projects $XX.X beginning pursuing quarter. NobelClad of sales prior sequentially X% from the end from the our in at $XX.X NobelClad, increased versus large industrial

is We quarter, long-term progress for to and shareholders, the for and during made our commitments continued DMC's their I'd thank company. deliver the hard for like significant our returns improved growth, employees. third to employees to and work positioned opportunities DMC well

call over and look our of the quarter Now review I'll a at third a financial for Mike? quarter to results, turn fourth Mike guidance.

Mike Kuta

line results. Thanks, top Kevin. recapping Quickly our

quarter this sequentially. DynaEnergetics X% North year's sales versus sequentially. decreased third were NobelClad up $XX.X X% quarter up third American million, while sales quarter $XX.X of million, million, sequentially. DynaEnergetics million, sequentially. Arcadia's second increased were sales sales reported X% international X% quarter. $XXX.X sequentially, sales X% at were Sales Third up $XX.X X% up

in in last the margin and the quarter. third quarter from from up XX% gross third Consolidated year's down XX% quarter, second was XX% in

dip last third at manufacturing an from in Third The Arcadia gross expected higher margin volatility volume sales year's in reflected, to resulting quarter compared reflects prices. overhead DynaEnergetics. recent improvement gross at the expenses margin aluminum quarter, gross margin fixed on

mentioned, expenses. on margin the impact third of The year XX%, and primarily from the up quarter Kevin manufacturing quarter. quarter from Arcadia's third in gross to XX% improvement year's from margin quarter As fixed last down volume, overhead in second versus of quarter. XX%, reported the gross margin DynaEnergetics relates higher sales was third second XX% last flat the

mix impact in credits, favorable quarter year XX% Cares gross prior and XX% Act was a the primarily and the ago versus third the respectively. second NobelClad's in quarter year XX% of less quarter, to the third margin project due

system million planning resource at increase the credits SG&A in expenses, from million million variable of year. consolidated SG&A higher new associated to compared was The $XX.X our third and with employee NobelClad. Arcadia quarter same last and at also implementation of included the to $XX.X quarter incentive attributable expiration Looking the compensation, retention was costs $XX.X year-over-year enterprise

We income reported consolidated $XX.X of million. operating

in or versus EBITDA adjusted share DMC third $XX.X diluted $X.XX $X.X of income was net net adjusted $XXX,XXX quarter year's DMC to million quarter $X.X third quarter income DMC in share last diluted reported $X.XX Third attributable year's EBITDA attributable third of per attributable per EBITDA while reported to of versus or million quarter. $X.X adjusted Arcadia to quarter. of was third NobelClad reported adjusted adjusted $XX.X million. EBITDA million DynaEnergetics last million. $X.X Adjusted million,

a reflects capital of increased XXXX. principal We the quarterly cash working XX, cash increased input distributions quarter and to our ended payments in and Arcadia driven with primarily at increase higher inventory capital, on build third December levels long-term of at $XX.X decrease from higher cash and million million volume, $XX.X by Arcadia The was debt times. partner. The at due working to lead prices required venture sales joint versus DynaEnergetics

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

Looking are to million XXXX reported in the in At at business quarter. $XXX.X report quarter. is expected of the of to sales quarter of guidance. range $XX.X million $XXX Arcadia sequential anticipated in the be $XX the The the decline versus seasonality. the million million in range primarily third to level, expected to million Fourth sales relates $XX third the reported million to versus the impact $XXX

range third sales versus XX% the of quarter. million XX% in range a the report to $XX million of to million the of expected the $XX in versus the million third XXXX expected $XX to in is in versus the million reported expected NobelClad $XX.X Consolidated range quarter. million XX% third sales are a quarter. in in gross to is $XX.X $XX margin DynaEnergetics

general quarter Fourth be inventory selling expected NobelClad by at the versus quarter amortized $X.X less is to The during in was at Fourth XXXX aluminum a is to project assigned million higher-priced gross the Arcadia. and $XX expense, million $XX $XX.X the expected margin Amortization and expense value of Arcadia's through impacted, acquired mix favorable to range selling in the is third million. quarter. fully third quarter. to million be reported expected backlog approximately remaining administrative

and range be interest million in Fourth is $X.X $XX is million expense in to attributable is expected $XX versus in $X adjusted depreciation of $X be expense million. the be quarter. to expenditures the the quarter million quarter $XX.X third million. Capital range expected DMC expected of to are expected million, Fourth to to million XXXX EBITDA, to $X.X

we're that, With Operator? to ready questions. any take

Operator

gentlemen is the with Thank And the floor now is Instructions] for question [Operator you. from Stephens. Lochridge questions. and Cameron first coming Ladies open

Your is live. line

Cameron Lochridge

Hi, good my questions. taking Thanks for afternoon, guys.

Kevin Longe

afternoon, good Yes, Cameron.

Cameron Lochridge

Arcadia last there? most December. I in the business geographic to how Could comment efforts and wanted about? specifics, excited expansion latest markets start on efforts that you're your you around back you Maybe on, purchased on the share Kevin, just And any the progressing? you outlined when is thoughts

Kevin Longe

we move And and opened them primarily expansion last satellite months XX local geographical and facilities, see the serve moving we've in up I two opportunities over a the was as growth believe, as they're we The direction where to Dallas new market. healthy forward. Houston

Cameron Lochridge

come share into Great. gross fourth Kevin. maybe happen perhaps up expect, Thinking the for us shy had we to the here, margins a great. to needs we XX% but XX% flipping of then pricing, Could DynaEnergetics. basis, that thoughts quarter. hear. plus range to That's on you target Thanks, to nicely to maybe to get just your had Great the heading and discussed? XX% little about a what around year-over-year And that

Kevin Longe

we market, are profit And for that to sales the year, slow-moving at In our working we'll The in from of able forward quarter what we lower couple factors it existing and was the as -- than primarily price There second this of profit. where underlying been that and a exit positively gross are last as half we've strong the will a on gross the today. gross years. stronger the move of albeit, we through lower fourth impact two that fourth books move is the through see quarter. into go is margin inventory

good some throughout an interim We've is the process. Pricing movement seen price year.

us a And share However, practice our customers their increased overall our business. have where best get of prices. best customers business have purchases best our and our from we have also a larger

because has little margin the of terms slower increase mix. a its bit the in customer So gross moved of

However, see the the we'd will in what year. the into Year as accelerate the we think a the in to growth area, market into half for energy further and pricing decent New be of first we go expect

Mike Kuta

Cameron is Mike. Hey, this

Just were contemplates DynaEnergetics, too XX%. margin low a We XXs. currently and at guidance note the at we XX% nine our in months the for for third quarter finished

that call So DynaEnergetics. it XX%, XX% range in for

that marching So we see up.

Cameron Lochridge

but that, the -- for it. I missed guys. back. I appreciate Thank Mike, Michael thanks it answers you and I'll it turn Got

Operator

Capital question Ken The Newman coming Okay. next with from is KeyBanc Markets.

is live. Your line

Ken Newman

nice quarter. guys, Hey

Kevin Longe

Ken. you Thank

Ken Newman

more So how assumed And wanted in a dig to maybe on specifically, Arcadia the just in just revenue being growth I quarter? bit aspect here. price relative on color much how to fourth pricing taken was guide? any And quarter the the the just within in is little -- much just revenue

Kevin Longe

Yeah.

price by are driven out is So what Ken because the raw quarter, third quarters the is fourth we're the in shipping in revenue was volume. and prices seeing the What though have contracted, third outpaced versus we we're material backlog has the growth that things that particular that it XXXX, of where in into what we're margin return shipping low you're the prices as gross in and call to a backlog. out is half selling margin QX we to exit going mid-XXs expect see in normal Arcadia. We of first get we to -- seeing

Ken Newman

where Yeah. XQ. to But guess higher sounds is fourth And that trying stable fourth understand better quarter. for outpaced in go I I'm quarter. for on volumes I the is not to seasonality expectation going be the if Well, the the get -- depending like relatively price point in price here on assume you've I costs what would it

being give pricing? prices color seasonally of too is XQ? a the on to just to little higher seasonality you raise conservative volume have -- risk that in fourth by bit how guidance what's quarter that the from And potentially maybe And covered us much typical XQ if is is a there Arcadia So more gap a more? standpoint maybe

Kevin Longe

mean I of shipping backlog priced. lot is a been we're already what out where doing of Again Yeah. that it's

to -- think but we in the going So half. a significant again be there's first flywheel effect

your a seven comment around the far the talking for holidays. we're as days seasonality, As

the fourth the marketplace, we're it's so less holiday ship demand in we've for the $XX season at to million. strictly $XX to days any And versus It's million guided seeing in disruption not quarter. the that that's we're why million looking $XX.X just Arcadia

Mike Kuta

and end I'll we Year's and take that's And we're where the inventories holidays Ken the add to doing New for the a at that Christmas Yeah. between quarter that revenues. impacting and week of typically

Ken Newman

chain. few who modest a been a call other That's it. supply there some on heard few but from Got helpful. building have won't We've them comps, delays mostly commercial I have peers to non-residential other product and -- exposure that projects perfect others

on just touched customers any conversations have it with now, maybe I'm regarding commercial but if curious just on in or You have non-res? your the just answer color you

Kevin Longe

input lead Western a we market with the uncertainty XXXX satellites. our which feel of time the haven't States into related there's the we and probably commercial amount in in our for except significant order in half slowdown of backlog. the XXXX. associated seen of But We markets back reasonably United about issues business the and the for in And strong more have

Ken Newman

customer one margins know color your I seeing CapEx activity and I for in for of to and holdbacks more. completion is macro to a you this on XXXX? -- But the where you've activity type demand still of expectations just Maybe on just we looking DynaEnergetics they're this And as given seen comparing have better for well some what just longer-term some kind on mean, then for where completion budgets. do seems enter Okay. we're that the well quarter what conversations question. be maybe

Kevin Longe

we're Most them at if all the customers are Year. New to the start a exit the to of looking that not to talking year and strong of

in And a record for And of a systems most is of XXXX. of our up so month had good to we actually our shipment see picking DS continue October. we volume probably market perforating the

it's about good feel it. pretty And so -- we

Ken Newman

Very you. good. Thank

Operator

Alec question Okay. live. coming is Scheibelhoffer from line Stifel. Alec, next your The with is

Alec Scheibelhoffer

Good okay? Can afternoon, you me, everyone. hear

Kevin Longe

Yes.

Alec Scheibelhoffer

on Congrats Excellent. quarter. the

Kevin Longe

Alec. you, Thank

Alec Scheibelhoffer

versus evolved you're assembling curious systems -- machine can you've that competitive some just products? components kind Just integrated seen with shops in how the space? your what the And perf color seeing I around if you versus of just was landscape provide thoughts on

Kevin Longe

system more more and of you and -- as machine companies provided the ourselves other well seeing assembled move themselves. a purchased that's providing system. there make some of We're they that the that towards by And components are market the factory both integrated are will as shops provided of from if

so component to supply the system supply moving service And a a it's product to company. to more business from of supplied

Alec Scheibelhoffer

Understood. Yes.

Kevin Longe

we on than responsibility our picking performance performance of a take by driven our having And growth for also the time and the but well ability the to share. believe of we're perforating of integrated performance lot having we different system were the performance company It's and full and Yes. where a year. the of system as And machine on good that revenue our that's fully We market up our products also driving as what's is a our equipment. shops. share of market deliver the safety the

Alec Scheibelhoffer

a Understood. Understood. bit And Arcadia. little kind to of shifting gears

Moving demand? impact the forward see evolving in you interest have seen any next rates several how effect that given business moved? guess, from quarters that have rising just I interest And, that where do rates you on through to

Kevin Longe

residential is broad expect And that broadened market to would market building down. the the We residential as interest slow with a to higher slowdown. I activity rates know market reporting the nationally our

believe residential. lag to have residential commercial home We market. the for the luxury in I the And seen not slowdown high-end market a tends market

there would be in but a into market haven't the we a we XXXX. yet, seen and will of half expect the slowdown slower back year And

-- capability. than been we've greater has order However, our our input been

respects And we not so in territories as of demand we feel for serve. the we products because mirror that some market which the in much in the will

Alec Scheibelhoffer

for Got it. end. Thanks on Got all That's color. it. the my

Operator

Askeladden. me, can One hear have – [Operator Samir you us? moment. Askelakin Instructions] with excuse we next Patel Up Samir,

Samir Patel

waiting fault can. name. for a I to Yes you the business name. just pronouncing I choosing weird for was My finish

So is going? it hey, guys. How

Kevin Longe

Yes. Samir. Hi,

Samir Patel

of, a It's answer. question I have platform operating a don't results. about you big for more, really question picture kind to

below late very past levels look including through COVID since negative it been price of over it's or it reached. at you were that when all call if they prices did trading the whatever the at June oil stock the of day or So $XX famously

is your you for going think So take the you're back I it address and and that oil cyclical to more the back evaporate of a the profits. than that just that you is go kind to patch year it to misunderstanding of Is give do market it quarter from going Arcadia think not wanted is? making about is think to they to right? Is they next example maybe just kind what story opportunity step the

just you So opine anything question about? open-ended an if Thanks. to have

Geoff High

certainly as is Samir, and well. this Geoff, we're disappointed

seeing think an the I think going we've that in awfully I through interest in be departure our holders changed new And we high we're it as to performance also what's prospective going our and transition And this shareholder think couple there be long execution as And seeing in that a our has shareholders. to we've confident I reflected we're transition. we're and time share from we're how seen and all seen that where base and the say large price. valuation been I a headed we strategy. our in will is said, that's story our of don't think our a I going level have Kevin we're dictate think to perform. has believe in and we of going

Kevin Longe

add Yes. We've the markets with pleased shipments strong they record team, in They've having that in very And the to got DynaEnergetics. very backlog. Samir NobelClad. management a great employees, got project on serve. a the business Arcadia, We're we're that I'd coming

that performance is the see of company improving. the can You

of Second year is half of year. stronger half the the the than first

recognize up We that expect stock the price value. as continue. soon And to will others as the catch

Samir Patel

just pretty strong the scratching because so. my obviously I've reporting appreciate time. been I keep head results Right. Thanks. you

Kevin Longe

you. Thank

Operator

Okay.

live. line with KeyBanc Next Capital we Ken have Newman your Ken, Markets. is

Ken Newman

Hey, thanks.

increases benefit that across looks especially. on here, color had a pretty was low that follow-up the maybe the XXXX? what's for just benefits carryover Is like contributor? mid-single-digit XXXX, three pricing to like question what price quick last into one Any Arcadia, around Just segments wraparound I aggressive which been given

Mike Kuta

would I to gross margin the is what quarter. for the line guiding we're say mean I XX% XX% fourth Yes. on

be a XXXX that plus XX% expect basis. We consolidated and to as enter we XX% on

that the to contributor to going DynaEnergetics. followed think is by biggest I be Arcadia

Kevin Longe

Arcadia the system volume kind Yes. we had on we'd will the be expect And the hold. DynaEnergetics they've in that success and mix the we just can half mid-XX%s well to And some and that of through also cost masked the prices a selling of to on to and that customer longer-term on inflation margin inventory prices of business. have working at but And pricing the and only go improvements, done had to with kind selling improvement. basis, way its the hopefully side, the basis first as profit a the gross year view our company we've as capture longer-term also strengthen of to medium- kind of they've not

Ken Newman

Thank it. you. Got

Operator

Okay. no closing the queue. to for Instructions] like back Kevin [Operator Longe in I'd questions further Okay. floor are remarks. There to turn

Kevin Longe

for going finish going in – New And safe the for new It's joining everybody interest for our you year holidays. hard a say today's call talk I'm to that to please and holiday as you believe Year, the the a joyful begin Thank and to quarter us your fourth and that company. company. in have we're to you. we Thank

Operator

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

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

DMC Global (BOOM) 3 Nov 222022 Q3 Earnings call transcript