Earnings call transcript Q2 2023

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Operator

Good day everyone and welcome to today's DMC Global Second Quarter Earnings Call. At this time, all participants are in listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note this call may be recorded and it will be standing by should you need any assistant.

It is now my pleasure to turn the conference over to your Geoff High.

Geoff High

DMC's conference to welcome and second call. quarter Hello, David Executive Officer, Officer, today Walter. are Kuta; Chief Chairman, DMC Financial Presenting Mike Aldous; and Eric Chief

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

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

webcast presentation on be will of at Today's earnings of today's our located page available related the after website call. second A quarter website this on the a conclusion replay Investors are of available release presentation our and shortly dmcglobal.com. our at

David? that, with David to And Aldous. now over I'll call the turn

David Aldous

afternoon call. pleasure seven as decade for joining of on Thank with his serving for appointment I've you, present you to Good nearly for past Mike CEOs. and Michael working on DMC's while congratulating co-CEOs, months the had DMC like the and we by jointly DMC. have LED I'd board Geoff. Kuta thank today's of CEO for a as us begin

leads employees, I next DMC he him our its as CEO, He of has role businesses. strategic to Mike the look DMC will and a chapter. deep and into thrive is forward supporting and confident thinker he support proven and his a understanding also leader, has board. and its and as of in he respect I'm earned customers,

of I thank in DMC. interviews time process highly with search with qualified us each candidates involved interest want and for several their spent they Our their and extensive to them CEO

has Board. announced candidates appointed that the director Board we DMC to Our been and has yesterday for Sananikone actively interviewing open position, an Ouma been also

level contributions. director to board directors time strategy, candidates extensive and developing c-suites the thank more forward years fellow to experience and and spent want XX than roles Ouma and consideration her and implementing I in both CEO their and for thoughtful look positions. of the has financial we for my corporate brings and

I'll over turn With to Mike. the that, call

Mike Kuta

you future words, enjoyed have collaboration continued you year and appreciated David. kind the for pursue the Thank together to for perspective. and the this thoroughly valuable look working we DMC. I've very Board your promising forward and a as I insight with

on manufacturing DMC our for made important and year. delivered progress and Turning beginning financial initiatives established of second we businesses sales to the earnings our the the and record the operational three results, quarter at

steady of markets Arcadia, all A residential entered during framing. segment the notable reported million, across building business will XXX sales units the quarter second first that comparable product retail up quarter. and use and space. and United ago, in extensive with Arcadia's our in backlog to $XX commercial Southern development that X% of glass The the of makes Arcadia's Western versus were a first second more combine large commercial the project use phase architectural year and project the architectural mixed which final California its Southwestern quarter demand extensive quarter than is States,

EBITDA cost through drag margin reported residential the been on serves Arcadia XX%, which the the aluminum drive past nation's much adjusted during XX% also the Custom, from which roof The activity of margins Arcadia this sold of a process high-end inventory, remainder to first market, up quarters. execution. steady customer in three operational helped high quarter. completion and its

products The Arcadia's smoothly in productivity system very processes improve business performance I'm million, enhance for and Dyna's the history. or buying of quarterly the went. its delivered new completed best a recently pleased sales and the conversion will energy Arcadia's transition second experience to how Arcadia significantly system. should $XX ERP by customers. business DynaEnergetics

second Unit strong record. perforating last or up fully in versus XX% of and quarter integrated and sequentially reflects markets. sales international quarterly results second system X% Dyna's both another quarter The DynaStage were year's North demand American in

expect full the approximately month. unit mark We surpass million months be year than million sales Dyna two unit last year. would reached the This will this later earlier mark when unit

family the oriented incorporating and to requires Gravity system the most X.X no oriented on perforating that well-designed. by the well are at perforating the is is being is into recent and site. customers most addition compact DynaStage received well their market configuration the product Gravity

improved implemented in at the quarter, discuss margin Dyna's beginning the of will a moment, markedly As reflecting of several the impact second in the profitability initiatives Eric enhancement year.

$XX NobelClad to delivered NobelClad's order very backlogged million. million of year-over-year. $XXX to second bookings helped XX% XX second up drive A Strong adjusted business EBITDA increase metals XX% quarter and our $XX project margin sales rolling favorable NobelClad's quarter improved bookings XX%. its month mix million sequentially composite to

period will NobelClad. another growth double-digits the of third expect represent at sales We quarter sequential

Our sequentially. second quarter $XX million expense down SG&A million XX was

We are the $XX and quarterly balance closely through remain SG&A below will of structure managing our the expect million cost year.

made to to of I'm X.Xx the the We second from at year's EBITDA of end also first leverage encouraged reduced half progress the X.Xx quarter. by ratio very our during last XXXX. we've adjusted debt

for delivering path stronger returns growth, our our improved focus our on chart we cash As flow, stakeholders. and forward, is

that, Eric call third financial the the turn Eric? quarter. for a to quarter for second closer look at our and over With guidance I'll results our

Eric Walter

points up basis quarter was delivered record versus first quarter. DMC Gross XXX quarter. second gross expansion margin from the last which points $XXX and sequentially second of Thanks XX% last Mike. year's DMC basis and was All quarter. million, achieved the X% during year's XXX second from up sales businesses quarter margin XX%,

second quarter, second Our XX% last $XX expense sales year. SG&A of of million was quarter XX% from the of sales in down

million. EBITDA DMC Second quarter million, XX% consolidated was $XX the to interest, XX% nearly and was over of adjusted year-over-year. up $XX non-controlling sequentially EBITDA attributable Inclusive Arcadia adjusted

healthy of year, which XX% EBITDA sequentially. million, points $XX the or EBITDA percentage million Arcadia expanded versus is quarter, attributable sales, quarter XXX points DMC. but margin was second to total basis down $XX a EBITDA XX%. very XX prior adjusted of reported was As basis of was adjusted. second a adjusted Arcadia

Mike a prior which last margin three EBITDA in reflects the Arcadia's balance inventory. effort cost compressed raw the products. aluminum, to in pricing its its key recover is the quarters selling cost quarter due of sharp after of year's As high improvement material noted, during was second escalation through in Arcadia's Arcadia's margin to

manufacturing $XX quarter a of greater higher costs, Adjusted margin reported and adjusted new product designs, basis second of combination EBITDA XXX driven prior a expanded of mix. margin Dyna litigation EBITDA year product margin versus by improved or sales. second million sequentially EBITDA basis lower points XX% Adjusted quarter. points of XXX overhead, absorption the

for points $X of of margin year-over-year. approximately A projects, XX% of EBITDA sequentially higher adjusted and sales. adjusted EBITDA increased XXX points mix basis reported NobelClad XXX basis margin million by

to first net Second last diluted in was from or adjusted $X.XX per and quarter $X or from attributable income per up diluted quarter quarter. million DMC this million share share, in year's share diluted or million per up second year's $XX $X.XX $X $X.XX

cash second with long-term to $X marketable free our cash XXXX. quarter, investment and used our $X on Arcadia flow distributions joint DMC our primarily of in which compares partner securities. million, quarter principal of for and generated debt, the venture million the We payments flow an During

cash amounts $XX and the In entered liquidity, second and no with revolver. had terms million our under marketable securities of million quarter of outstanding we $XX

sixth the mentioned, quarter and of threshold Mike of times, ratio As X.X was of three times leverage consecutive the at our below the represents which was well end the quarter, second sheet. deleveraging balance the covenant

release. news third quarter in our Highlighting guidance, is our detailed which

sales during the on of anticipate stable the We expect third downward quarter We $XXX reported relatively in volume. $XXX million consolidated pressure $XXX Arcadia million to last a range pricing some experience million quarter. will versus

levels the well in North second soften its Dyna markets American in activity. activity lower a to year expects of based the half completion core bit on

maintain share However, in advance expect its Dyna of market next upcycle. the to does

sequential from with of expects third the is the projects it quarter is its key increase order range XX% second backlog. $XX million. in range $XX quarter. million expected in NobelClad the delivers of Consolidated a gross SG&A to XX% a as to to Consolidated XX% expected from expense margin XX%, compared sales approximately in

is be to $XX to quarter while expect million. attributable in million full expenditures $XX should And we $XX year EBITDA adjusted DMC CapEx in second a of million $X expected a will in million, of million range of quarter Third a capital range finally, to be $XX to $X range million.

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

Operator

ROTH [Operator from Sweeney Capital. our first Gerry with we'll Instructions] And take question

line is open. Your

Gerry Sweeney

congratulations, on Monday a So it see to of nice you all, Mike, was release press a first morning. been

congratulations. again, Well So deserved.

they aluminum of in quarter activity sort system?? have, curious you into would on a able of margins deeper, sort as jumping With higher I'm little of the longer margins well. aluminum work to lot maybe costs sure There's what the if or Just get higher in a dig system equilibrium is fall right, as of ideally through of through the the And I'm out through as be right maybe partially. some costs. to term? we Arcadia, we were would the sort way all know, you they so just where there questions. not the

Mike Kuta

lost expected than margin a in probably from recovered we Gerry, and standpoint. Yes. quicker recovery QX was guidance the

probably longer type a from XX, think so that low XXs code. we in think would XX I term zip

Gerry Sweeney

deleveraging, with Houston, at Dallas. right? starting Dyna's do versus of First going of that XX some penetrate over nice to we great, doing but and call got also How obviously, this then opportunities also then have XX at seeing we at, deleveraging all, on great look growth had just growth also, we And you're look Arcadia starting months? Arcadia How or things we're the year. to next next markets a in put you a you quarter really balance do in here, opportunities to look couple

Mike Kuta

Yes.

path first there. a strong know we've the and we feel So that out put that's all, and we definitely very on but of like clear got call

cash on this So and we're feel growth generating investment side remainder side. very the do the to with the into bullish about of the balance XXXX. going Arcadia year flow, We

Dyna, and next in that in place business investing and in optimistic making in Arcadia be balance be on paint continuing 'XX some with investments feel well and second capacity capacity a year investments we leg with put invest So, able pretty pretty and to to going that continue put in able in this of also to to we're year NobelClad. that and, to

Eric Walter

Yes, with And and the go delivering excess need thing we that support one, cash, that for we question capital the it One their and when is, just are what process, start is the use to can first this process. And fund that. ask we allocation with Eric. then that add businesses sure maybe to the make growth? we we through is to

other longer comfortable going of pretty objectives themselves businesses throwing additional feel go we that, terms So, also fund that off paying from Dynas and we're term to that the ahead able the but delivering got we're that process. capacity be through other in that of to use to cash everything

Mike Kuta

some what big mean, I terms of the Jerry, impact, looking things are Lastly CapEx. but lower CapEx at we're of in

Gerry Sweeney

and activity then we're it things into maybe into into of it that slow pick but Dyna fourth sort well great the Obviously maybe and that feeling accurate you assessment into you. an would XQ what second quick end at this year? XQ, maybe though quarter, down. And quarter, also on maybe is But slowed up. least I'll next seeing my at market feeling going as the What's half this that next with is one of XQ, your supposed point jump some back of question to there's then was quarter, sounds said sense

Mike Kuta

for soft a think we so think going well, a forward QX bit better We to of guidance. in we off as a, into recovery QX be I Yes, XXXX, reflected But and it's than nice maybe a setup nice really softer QX. bit as we're that a 'XX. could a be XH that's our projecting look XXXX

fourth So, into third pretty we're quarter, up the nicely. XXXX, here feeling looking in set quarter optimistic through the we're

Operator

with from Ken Newman Our next Capital Keybanc Markets. question comes

open. is line Your

Ken Newman

how there. of term longer but started line the lot versus want from that moving to circle here. margins this revenue for getting profile of there's growth to was can volumes? you pieces, just Thanks guess clarify been for quarter, a Understand on color maybe on So back gross I the the just much price I revenue Arcadia.

Mike Kuta

QX probably from Eric. year-over-year, You know, flattish both sequentially, think to fronts on that's and QX we

Eric Walter

fairly to constrained going as we've calls, volume because it's standpoint. primarily is the other year-over-year, pricing in about a Yes, business talked be from

So, can in is any type paint capacity be this pricing. to of add going fluctuation until primarily we

Ken Newman

Yes.

about I some half new today So, are capacity pricing think further material the of is these you and little raw If putting as of kind volumes flattish kind I I and capacity talked think a moderating back know on costs. through about, bit you're in 'XX. expansions of the paint in

do we gross how to XQ as you about impact segment the Just think for think margins about that and XQ?

Mike Kuta

Yes.

think gross the some margins We because see going some in from pricing do our to QX think the we're the that be I now that going out based there pressure see to moderate levels next the of call XX days. are can is and to stable So it what to what markets. relatively over select volumes will right is XX backlog going on be we

really for going Arcadia. strategic The that for year at going paint adding that's end of be be to transformational capacity XX% XXXX the that's going think for be us. something this to going be that business. to to We is And going upwards into capacity and is the to top-line beginning

time been volumes. first long a be actually we've to time It'll the that grow in able

increases into year, overhead, also could XXXX. to manufacturing margins So the it's next this volumes. we year, relatively balance be it of could amount But for absorption going going that the of help flat as in of gross which increase think

Ken Newman

point? season as kind this the you near-term inventories seeing kind kind and if businesses question kind of you're moving, those maybe any normalizing have earning for we the customers general across at being from supply normalize. just destocking about of inventories chains across that all And other at industrials Curious, is heard a about all or of this that point of that but businesses, if impacts that's customer something some of some then watch impact a three of this

Mike Kuta

Dyna, cycle, significant quick pretty our Ken, as a that and we they're think two don't turn. you when see issue. And businesses, short about largest Arcadia

don't or our customers results, future. mouth, is of to of business sort lot an hand don't customer Our of, destocking I a a so, have just our our impact inventory, And don't, I'd guidance, lot in -- see say that right? right? A I impact in

Operator

Instructions] next And we'll Partners. question Daniel from take Energy [Operator our Mitchell Sean with

line Your is open.

Sean Mitchell

Dyna that than it QX, you're the DS just more about know kind within Obviously in anything, kind Dyna? bit the but at didn't my around Gravity is in talk will margin some have you you about litigation revolve little enhancements could but had working I expense question QX you a on more second you enhancement one going customer of be then mix changing margin Gravity Dyna. are the And would the all. X.X? And how just conversations DS the can talk given X.X, around in of

Mike Kuta

Yes.

we've of how our So, one, our a questions we're in got working initiatives plants gets just couple initiatives the well, there, those. our that once and but margin products not and operational into think OpEx plants, in on we're I first streamlining that as

a traction that's Gravity we're self-orienting contributing systems, that's interest. starting get So, the to From some X.X to margin. and one customer standpoint, that around

as from QX we impact QX, market. bit QX a of expect pretty and but as XX our of as basis. and our business are a from to XX results, mean, a move if that that forward we mentioned, something mix some be mix There softer well strong of I product standpoint impacting upwards go will we a seeing to could absorption we our customer be on a help seeing, and a move in That's margins resilient, not forward. could QX as also XX% we're

Operator

Instructions] [Operator from next And our Stifel. we'll Alec with question Scheibelhoffer take

open. Your line is

Alec Scheibelhoffer

congrats to and see Monday. on everyone, Michael, afternoon appointment, Good again, the a again to that hear great on

maybe or you're XQ you during on to how color think guess prepared your it I and sometime just And outlook Can the even X kind seeing the month again next year so. and volume month what going strong So, been DynaEnergetics, remarks, any the share talk said you're have And market remainder competitive to relative has of for in honing approaching unit landscape activities there? sales, I performed, how clearly on in side? the was just you be the with the know, what the million looks if of or in about you I just doing. so completion very quarter

Mike Kuta

there's share intensity prop customers customers. with to standpoint a customer's so here. we and in we value think leader. competitive trending market up competitive and that's in Yes, intensity think DynaEnergetics, from our on due our part But the that We're our high

So, leading we got with we've are that the that partner great customers on this. charge

And so, tick a I you're think QX up in the that's think big of part and the QX. I resilience seeing

Operator

program further no now And to I'll time. appears back turn at Michael for questions Kuta we it the closing have remarks. this

Mike Kuta

the made and reflects and to for Thank of sincerely strengthen The to care. customers employees, again their Company. them effort I support. exceptional you to Board again with DMC their us for thank to their forward for Take want year I for our thank today. of grow you soon. commitment to our look speaking we've progress the Directors joining our want also We loyalty, this continued

Operator

you today's your may This for at disconnect you does time. conclude any participation program. and Thank

DMC Global (BOOM) 8 Aug 232023 Q2 Earnings call transcript