DMC Global Reports Third Quarter Financial Results

  • Third quarter sales were $172.1 million, down 1% vs. Q3 2022
  • Net income was $11.5 million, while net income attributable to DMC was $8.9 million
  • Adjusted net income attributable to DMC* was $9.9 million, up 47% versus Q3 2022
  • Adjusted diluted EPS attributable to DMC* was $0.50, up 43% versus Q3 2022
  • Adjusted EBITDA attributable to DMC* was $24.6 million, up 13% vs. Q3 2022
  • Total adjusted EBITDA, inclusive of non-controlling interest (NCI), was $30.0 million, or 17.4% of sales, up 220 basis points versus Q3 2022
  • Third quarter free cash flow* was $21.9 million

BROOMFIELD, Colo., Nov. 02, 2023 (GLOBE NEWSWIRE) -- DMC Global Inc. (Nasdaq: BOOM) today reported financial results for its third quarter ended September 30, 2023.

“Our third quarter sales of $172.1 million were comparable to the third quarter of 2022, but below our forecasts,” said Michael Kuta, president & CEO. “While our adjusted EBITDA was within our forecasted range and we delivered solid free cash flow, our sales shortfall was disappointing, and was principally due to lower-than-expected top-line results at our Arcadia and DynaEnergetics businesses.”

“Arcadia, our architectural building products business, saw steady demand at its primary regional service centers and its ultra-high-end residential business. However, third quarter sales of $71.5 million were down 11% year-over-year due to lower product pricing, soft demand for commercial interior products, and brief operational challenges related to the go-live of a new ERP system. Adjusted EBITDA margin was 18.8%, up from 15.0% in the 2022 third quarter, as the decline in product pricing was not as pronounced as the year-over-year drop in raw material costs.

“DynaEnergetics, our energy products business, reported sales of $73.0 million, up 4% versus last year’s third quarter and down 14% sequentially. Demand in Dyna’s core North American market was impacted by a 10% sequential decline in U.S. well completions, as well as customer project delays late in the quarter. The sales decline in North America was partially offset by the continued strong performance of Dyna’s international business, which is on pace to deliver record full-year sales. Dyna’s third quarter adjusted EBITDA margin was 17.2%, down from 19.8% in last year’s third quarter and 23.0% in this year’s second quarter. The decline was related to lower absorption and customer mix.

“NobelClad, our composite metals business, reported third quarter sales of $27.7 million, up 18% versus last year’s third quarter and the strongest quarterly performance in nearly 10 years. Adjusted EBITDA margin was 23.1%, up from 14.6% in last year’s third quarter. NobelClad is benefitting from robust activity across several industrial end markets, including liquified natural gas, downstream energy and petrochemicals. Order backlog at the end of the third quarter was $61 million versus $64 million at the end of the second quarter. Rolling 12-month bookings increased sequentially to $110.9 million from $108.4 million; and the book-to-bill ratio at the end of the quarter was 1.1.”   

Kuta added, “Arcadia and DynaEnergetics both are taking steps to strengthen sales, profit margins and cash flow. Arcadia has nearly completed the first phase of an expansion in paint capacity, which will increase the sales potential of its commercial and ultra-high-end residential businesses. We also expect Arcadia’s new ERP system will deliver incremental operational benefits in the coming quarters. DynaEnergetics is implementing a series of automation, lean manufacturing and cost-reduction initiatives designed to enhance profitability and improve quality. DynaEnergetics has incurred approximately $1 million in fourth-quarter restructuring expenses, which we anticipate will result in roughly $3 million in annualized savings.”

Eric Walter, CFO, said, “We recorded approximately $22 million in third-quarter free cash flow, reflecting our focus on maximizing profitability and reducing inventory. We further strengthened our balance sheet in the third quarter, improving our debt-to-adjusted EBITDA leverage ratio to 1.26x, and our net-debt leverage ratio to 0.89x. This was the seventh consecutive quarter in which we de-levered DMC’s balance sheet.”

Walter said roughly half of this year’s $20 million capex budget has been allocated to the fourth quarter. “Our fourth quarter expenditures should be in a range of $8 million to $10 million and will include additional investments in painting capacity at Arcadia and manufacturing automation at DynaEnergetics.”

Kuta concluded, “Despite macro-economic uncertainties, I am encouraged by the resiliency of Arcadia’s and NobelClad’s diverse end markets, and by the expected acceleration in well-completion activity in DynaEnergetics’ core North American market beginning early next year. Our long-term strategy is to deliver adjusted EBITDA margins of 20% or better at the business level, and we are positioning our businesses to achieve this objective with greater consistency. I want to thank DMC’s employees for their consistent dedication and hard work.”

Summary Third Quarter Results

  Three months ended   Change
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sequential   Year-on-year
Net sales $ 172,147     $ 188,664     $ 174,465     (9)%   (1)%
Gross profit percentage   30.6 %     32.8 %     29.4 %        
SG&A   28,713       29,226       30,544     (2)%   (6) %
Net income   11,525       17,526       8,213     (34)%   40%
Net income attributable to DMC $ 8,883     $ 13,703     $ 6,717     (35)%   32%
Diluted net income per share attributable to DMC $ 0.38     $ 0.70     $ 0.46     (46)%   (17)%
Adjusted net income attributable to DMC $ 9,861     $ 14,131     $ 6,722     (30)%   47%
Adjusted diluted net income per share $ 0.50     $ 0.72     $ 0.35     (31)%   43%
Adjusted EBITDA attributable to DMC $ 24,607     $ 31,776     $ 21,751     (23)%   13%
Adjusted EBITDA before NCI allocation $ 29,981     $ 38,370     $ 26,577     (22)%   13%


Arcadia

  Three months ended   Change
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sequential   Year-on-year
Net sales $ 71,455     $ 79,158     $ 80,697     (10)%   (11)%
Gross profit percentage   33.3 %     34.7 %     29.6 %        
Adjusted EBITDA attributable to DMC $ 8,060     $ 9,892     $ 7,239     (19)%   11%
Adjusted EBITDA before NCI allocation   13,434       16,486       12,065     (19)%   11%
  • Sales decline reflects reduced product pricing and brief ERP go-live challenges

DynaEnergetics

  Three months ended   Change
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sequential   Year-on-year
Net sales $ 72,998     $ 84,754     $ 70,372     (14)%   4%
Gross profit percentage   26.8 %     31.3 %     30.2 %        
Adjusted EBITDA $ 12,568     $ 19,461     $ 13,935     (35)%   (10)%
  • Sequential sales decline reflects lower North American well-completion activity and project delays at end of quarter

NobelClad

  Three months ended   Change
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sequential   Year-on-year
Net sales $ 27,694     $ 24,752     $ 23,396     12%   18%
Gross profit percentage   33.6 %     32.4 %     27.0 %        
Adjusted EBITDA $ 6,384     $ 5,407     $ 3,412     18%   87%
  • Sales growth reflects healthy pressure vessel construction and strong demand for Cylindra™ cryogenic transition joints
  • Gross margin improvement driven by favorable petrochemical project mix

Fourth Quarter 2023 Guidance

Measure Expected Range
Sales  
DMC Consolidated $170M - $180M
Arcadia $70M - $74M
DynaEnergetics $72M - $76M
NobelClad $28M - $30M
Consolidated Gross Margin 28% - 30%
Consolidated SG&A* $28M - $29M
Depreciation & Amortization ~$9.2M
Interest Expense ~$2.4M
Annualized effective tax rate 27% - 29%
Adjusted EBITDA attributable to DMC $20M - $24M
Adjusted EBITDA before NCI allocation $25M - $29M
Capital Expenditures $8M - $10M

*Excludes one-time expenses

Conference call information
The conference call will begin today at 5 p.m. Eastern (3 p.m. Mountain) and will be accessible by dialing 877-407-5783 (or +1 201-689-8782 for international callers).

Investors are invited to listen to the webcast live via the Internet at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=VxX1JGSY

Webcast participants should access the website at least 15 minutes early to register and download any necessary audio software. The webcast also will be available on the Investor page of DMC’s website, located at: ir.dmcglobal.com. A replay of the webcast will be available for six months.

*Use of Non-GAAP Financial Measures
Adjusted EBITDA, adjusted net income (loss), adjusted diluted earnings per share and free cash flow are non-GAAP (generally accepted accounting principles) financial measures used by management to measure operating performance and liquidity. Non-GAAP results are presented only as a supplement to the financial statements based on U.S. generally accepted accounting principles (GAAP). The non-GAAP financial information is provided to enhance the reader’s understanding of DMC’s financial performance, but no non-GAAP measure should be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of the most directly comparable GAAP measures to non-GAAP measures are provided within the schedules attached to this release.

EBITDA is defined as net income (loss) plus or minus net interest, taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation, restructuring and impairment charges and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance (as further described in the attached financial schedules). Adjusted net income (loss) is defined as net income (loss) attributable to DMC stockholders plus restructuring and impairment charges (if applicable) and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance. Adjusted diluted earnings per share is defined as diluted earnings per share plus restructuring and impairment charges (if applicable) and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance. Free cash flow is defined as cash flows provided by (used in) operating activities minus acquisitions of property, plant and equipment. Management believes that free cash flow is a key measure to assess liquidity of the business. None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income (loss) as an indicator of operating performance or any other GAAP measure.

Management uses adjusted EBITDA in its operational and financial decision-making, believing that it is useful to eliminate certain items in order to focus on what it deems to be a more reliable indicator of ongoing operating performance. As a result, internal management reports used during monthly operating reviews feature adjusted EBITDA measures. Management believes that investors may find this non-GAAP financial measure useful for similar reasons, although investors are cautioned that non-GAAP financial measures are not a substitute for GAAP disclosures. In addition, management incentive awards are based, in part, on the amount of adjusted EBITDA achieved during relevant periods. EBITDA and adjusted EBITDA are also used by research analysts, investment bankers and lenders to assess operating performance. For example, a measure similar to adjusted EBITDA is required by the lenders under DMC’s credit facility.

Adjusted net income (loss) and adjusted diluted earnings per share are presented because management believes these measures are useful to understand the effects of restructuring and impairment charges (if applicable) and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance, on DMC’s net income (loss) and diluted earnings per share, respectively.

Because not all companies use identical calculations, DMC’s presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the company’s performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures. For example, a company with greater GAAP net income may not be as appealing to investors if its net income is more heavily comprised of gains on asset sales. Likewise, eliminating the effects of interest income and expense moderates the impact of a company’s capital structure on its performance.

All of the items included in the reconciliation from net income (loss) to EBITDA and adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangible assets and stock-based compensation) or (ii) items that management does not consider to be useful in assessing DMC’s operating performance (e.g., income taxes, restructuring and impairment charges, CEO transition expenses). In the case of the non-cash items, management believes that investors can better assess the company’s operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect DMC’s ability to generate free cash flow or invest in its business. For example, by adjusting for depreciation and amortization in computing EBITDA, users can compare operating performance without regard to different accounting determinations such as useful life. In the case of the other items, management believes that investors can better assess operating performance if the measures are presented without these items because their financial impact does not reflect ongoing operating performance.

About DMC Global Inc.
DMC Global is an owner and operator of innovative, asset-light manufacturing businesses that provide unique, highly engineered products and differentiated solutions. DMC’s businesses have established leadership positions in their respective markets and consist of: Arcadia, a leading supplier of architectural building products; DynaEnergetics, which serves the global energy industry; and NobelClad, which addresses the global industrial infrastructure and transportation sectors. DMC’s businesses are led by experienced, strategically focused management teams, which are supported with business resources and capital allocation expertise to advance their operating strategies and generate the greatest returns. Headquartered in Broomfield, Colorado, DMC trades on Nasdaq under the symbol “BOOM.” For more information, visit: HTTP://WWW.DMCGLOBAL.COM.

Safe Harbor Language
Except for the historical information contained herein, this news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including guidance on sales, gross margin, SG&A, depreciation and amortization expense, interest expense, tax rate, adjusted EBITDA, and capital expenditures, as well as our expectation of record full-year sales at DynaEnergetics’ international business; stronger sales, margin and cashflow at Arcadia and DynaEnergetics; operational benefits in the coming quarters from Arcadia’s new ERP system; initiatives expected to deliver improvements in profitability and quality at DynaEnergetics; approximately $3 million in expected annualized savings at DynaEnergetics from cost reduction initiatives; the resiliency of Arcadia’s and NobelClad’s end markets; the expected acceleration in well-completion activity in DynaEnergetics’ core North American market early next year; and our objective to achieve consistent quarterly adjusted EBITDA margins of 20% or greater at our businesses. Such statements and information are based on numerous assumptions regarding present and future business strategies, the markets in which we operate, anticipated costs and the ability to achieve goals. Forward-looking information and statements are subject to known and unknown risks, uncertainties and other important factors that may cause actual results and performance to be materially different from those expressed or implied by such forward-looking information and statements, including but not limited to: our ability to realize sales from our backlog; our ability to obtain new contracts at attractive prices; the execution of purchase commitments by our customers, and our ability to successfully deliver on those purchase commitments; the size and timing of customer orders and shipments; changes to customer orders; product pricing and margins; fluctuations in customer demand; our ability to successfully navigate slowdowns in market activity or execute and capitalize upon growth opportunities; the success of DynaEnergetics’ product and technology development initiatives; our ability to successfully protect our technology and intellectual property and the costs associated with these efforts; consolidation among DynaEnergetics’ customers; fluctuations in foreign currencies; fluctuations in tariffs and quotas; the cost and availability of energy; the cyclicality of our business; competitive factors; the timely completion of contracts; the timing and size of expenditures; the timing and price of metal and other raw material; the adequacy of local labor supplies at our facilities; our ability to attract and retain key personnel; current or future limits on manufacturing capacity at our various operations; government actions or other changes in laws and regulations; the availability and cost of funds; our ability to access our borrowing capacity under our credit facility; geopolitical and economic instability, including recessions, depressions, wars or other military actions; inflation; supply chain delays and disruptions; transportation disruptions; general economic conditions, both domestic and foreign, impacting our business and the business of our customers and the end-market users we serve; as well as the other risks detailed from time to time in our SEC reports, including the annual report on Form 10-K for the year ended December 31, 2022. We do not undertake any obligation to release public revisions to any forward-looking statement, including, without limitation, to reflect events or circumstances after the date of this news release, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

 
 
DMC GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Share and Per Share Data)
(unaudited)
 
  Three months ended   Change
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sequential   Year-on-year
NET SALES $ 172,147     $ 188,664     $ 174,465     (9 )%   (1 )%
COST OF PRODUCTS SOLD   119,550       126,774       123,127     (6 )%   (3 )%
Gross profit   52,597       61,890       51,338     (15 )%   2 %
Gross profit percentage   30.6 %     32.8 %     29.4 %            
COSTS AND EXPENSES:                      
General and administrative expenses   16,259       17,526       19,796     (7 )%   (18 )%
Selling and distribution expenses   12,454       11,700       10,748     6 %   16 %
Amortization of purchased intangible assets   5,667       5,667       7,385     %   (23 )%
Restructuring expenses and asset impairments   515             8     %   6,338 %
Total costs and expenses   34,895       34,893       37,937     %   (8 )%
OPERATING INCOME   17,702       26,997       13,401     (34 )%   32 %
OTHER INCOME (EXPENSE):                    
Other income (expense), net   302       (439 )     120     169 %   152 %
Interest expense, net   (2,392 )     (2,432 )     (1,771 )   (2 )%   35 %
INCOME BEFORE INCOME TAXES   15,612       24,126       11,750     (35 )%   33 %
INCOME TAX PROVISION   4,087       6,600       3,537     (38 )%   16 %
NET INCOME   11,525       17,526       8,213     (34 )%   40 %
Less: Net income attributable to redeemable noncontrolling interest   2,642       3,823       1,496     (31 )%   77 %
NET INCOME ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS $ 8,883     $ 13,703     $ 6,717     (35 )%   32 %
NET INCOME PER SHARE ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS                        
Basic $ 0.38     $ 0.70     $ 0.46     (46 )%   (17 )%
Diluted $ 0.38     $ 0.70     $ 0.46     (46 )%   (17 )%
WEIGHTED AVERAGE SHARES OUTSTANDING:                    
Basic   19,543,251       19,497,871       19,381,489     %   1 %
Diluted   19,596,575       19,504,963       19,381,794     %   1 %
 

Reconciliation to net income attributable to DMC Global Inc. stockholders after adjustment of redeemable noncontrolling interest for purposes of calculating earnings per share

 
  Three months ended
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022
Net income attributable to DMC Global Inc. stockholders $ 8,883     $ 13,703   $ 6,717
Adjustment of redeemable noncontrolling interest   (1,263 )     112     2,256
Net income attributable to DMC Global Inc. stockholders after adjustment of redeemable noncontrolling interest $ 7,620     $ 13,815   $ 8,973


  Nine months ended   Change
  Sep 30, 2023   Sep 30, 2022   Year-on-year
NET SALES $ 545,152     $ 479,012     14 %
COST OF PRODUCTS SOLD   378,454       338,669     12 %
Gross profit   166,698       140,343     19 %
Gross profit percentage   30.6 %     29.3 %    
COSTS AND EXPENSES:          
General and administrative expenses   60,285       56,330     7 %
Selling and distribution expenses   36,978       31,383     18 %
Amortization of purchased intangible assets   17,001       33,154     (49 )%
Restructuring expenses and asset impairments   515       53     872 %
Total costs and expenses   114,779       120,920     (5 )%
OPERATING INCOME   51,919       19,423     167 %
OTHER EXPENSE:          
Other expense, net   (337 )     (35 )   863 %
Interest expense, net   (7,205 )     (4,058 )   78 %
INCOME BEFORE INCOME TAXES   44,377       15,330     189 %
INCOME TAX PROVISION   13,187       4,938     167 %
NET INCOME   31,190       10,392     200 %
Less: Net income attributable to redeemable noncontrolling interest   7,695       1,411     445 %
NET INCOME ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS $ 23,495     $ 8,981     162 %
NET INCOME PER SHARE ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS          
Basic $ 1.07     $ 0.20     435 %
Diluted $ 1.07     $ 0.20     435 %
WEIGHTED AVERAGE SHARES OUTSTANDING:          
Basic   19,492,212       19,352,638     1 %
Diluted   19,540,978       19,357,333     1 %
 

Reconciliation to net income attributable to DMC Global Inc. stockholders after adjustment of redeemable noncontrolling interest for purposes of calculating earnings per share

 
  Nine months ended
  Sep 30, 2023   Sep 30, 2022
Net income attributable to DMC Global Inc. stockholders $ 23,495     $ 8,981  
Adjustment of redeemable noncontrolling interest   (2,289 )     (4,996 )
Net income attributable to DMC Global Inc. stockholders after adjustment of redeemable noncontrolling interest $ 21,206     $ 3,985  


 
DMC GLOBAL INC.
SEGMENT STATEMENTS OF OPERATIONS
(Amounts in Thousands)
(unaudited)
 
 
Arcadia
  Three months ended   Change
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sequential   Year-on-year
Net sales $ 71,455     $ 79,158     $ 80,697     (10 )%   (11 )%
Gross profit   23,789       27,459       23,892     (13 )%   %
Gross profit percentage   33.3 %     34.7 %     29.6 %            
COSTS AND EXPENSES:                      
General and administrative expenses   7,413       8,206       8,782     (10 )%   (16 )%
Selling and distribution expenses   4,248       4,021       4,135     6 %   3 %
Amortization of purchased intangible assets   5,652       5,652       7,233     %   (22 )%
Operating income   6,476       9,580       3,742     (32 )%   73 %
Adjusted EBITDA   13,434       16,486       12,065     (19 )%   11 %
Less: adjusted EBITDA attributable to redeemable noncontrolling interest   (5,374 )     (6,594 )     (4,826 )   (19 )%   11 %
Adjusted EBITDA attributable to DMC Global Inc. $ 8,060     $ 9,892     $ 7,239     (19 )%   11 %
 


  Nine months ended   Change
  Sep 30, 2023   Sep 30, 2022   Year-on-year
Net sales $ 230,951     $ 225,127     3 %
Gross profit   73,342       70,364     4 %
Gross profit percentage   31.8 %     31.3 %    
COSTS AND EXPENSES:          
General and administrative expenses   23,476       22,337     5 %
Selling and distribution expenses   13,721       11,832     16 %
Amortization of purchased intangible assets   16,956       32,674     (48 )%
Operating income   19,189       3,521     445 %
Adjusted EBITDA   40,390       39,777     2 %
Less: adjusted EBITDA attributable to redeemable noncontrolling interest   (16,156 )     (15,911 )   2 %
Adjusted EBITDA attributable to DMC Global Inc. $ 24,234     $ 23,866     2 %
 


DynaEnergetics
  Three months ended   Change
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sequential   Year-on-year
Net sales $ 72,998     $ 84,754     $ 70,372     (14 )%   4 %
Gross profit   19,585       26,552       21,237     (26 )%   (8 )%
Gross profit percentage   26.8 %     31.3 %     30.2 %            
COSTS AND EXPENSES:                      
General and administrative expenses   3,095       3,577       4,924     (13 )%   (37 )%
Selling and distribution expenses   5,604       5,227       4,257     7 %   32 %
Amortization of purchased intangible assets   15       15       78     %   (81 )%
Operating income   10,871       17,733       11,978     (39 )%   (9 )%
Adjusted EBITDA $ 12,568     $ 19,461     $ 13,935     (35 )%   (10 )%


  Nine months ended   Change
  Sep 30, 2023   Sep 30, 2022   Year-on-year
Net sales $ 239,720     $ 186,776     28 %
Gross profit   70,574       53,805     31 %
Gross profit percentage   29.4 %     28.8 %      
COSTS AND EXPENSES:            
General and administrative expenses   12,869       14,657     (12 )%
Selling and distribution expenses   15,888       12,318     29 %
Amortization of purchased intangible assets   45       245     (82 )%
Operating income   41,772       26,585     57 %
Adjusted EBITDA $ 46,984     $ 32,493     45 %
                     


NobelClad
  Three months ended   Change
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sequential   Year-on-year
Net sales $ 27,694     $ 24,752     $ 23,396     12 %   18 %
Gross profit   9,309       8,021       6,325     16 %   47 %
Gross profit percentage   33.6 %     32.4 %     27.0 %          
COSTS AND EXPENSES:                    
General and administrative expenses   1,106       949       1,475     17 %   (25 )%
Selling and distribution expenses   2,531       2,365       2,263     7 %   12 %
Amortization of purchased intangible assets               74     %   (100 )%
Restructuring expenses and asset impairments   440             8     %   5,400 %
Operating income   5,232       4,707       2,505     11 %   109 %
Adjusted EBITDA $ 6,384     $ 5,407     $ 3,412     18 %   87 %
                                   


  Nine months ended   Change
  Sep 30, 2023   Sep 30, 2022   Year-on-year
Net sales $ 74,481     $ 67,109     11 %
Gross profit   23,113       16,532     40 %
Gross profit percentage   31.0 %     24.6 %      
COSTS AND EXPENSES:            
General and administrative expenses   2,978       3,644     (18 )%
Selling and distribution expenses   7,135       6,910     3 %
Amortization of purchased intangible assets         235     (100 )%
Restructuring expenses and asset impairments   440       53     730 %
Operating income   12,560       5,690     121 %
Adjusted EBITDA $ 15,152     $ 8,468     79 %


 
DMC GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
 
              Change
  Sep 30, 2023   Jun 30, 2023   Dec 31, 2022   Sequential   Year-end
  (unaudited)   (unaudited)              
ASSETS                    
                       
Cash and cash equivalents $ 28,060   $ 18,724   $ 25,144   50 %   12 %
Marketable securities   7,516     2,414       211 %   100 %
Accounts receivable, net   105,519     112,177     94,415   (6 )%   12 %
Inventories   185,777     190,947     156,590   (3 )%   19 %
Prepaid expenses and other   9,945     16,434     10,723   (39 )%   (7 )%
                       
Total current assets   336,817     340,696     286,872   (1 )%   17 %
                       
Property, plant and equipment, net   126,095     128,627     129,445   (2 )%   (3 )%
Goodwill   141,725     141,725     141,725   %   %
Purchased intangible assets, net   200,925     206,593     217,925   (3 )%   (8 )%
Other long-term assets   90,716     92,706     103,011   (2 )%   (12 )%
                       
Total assets $ 896,278   $ 910,347   $ 878,978   (2 )%   2 %
                     
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY      
                       
Accounts payable $ 45,589   $ 57,559   $ 46,816   (21 )%   (3 )%
Contract liabilities   28,557     32,863     32,080   (13 )%   (11 )%
Accrued income taxes   11,527     9,455     4,256   22 %   171 %
Current portion of long-term debt   15,000     15,000     15,000   %   %
Other current liabilities   36,954     40,259     29,898   (8 )%   24 %
                       
Total current liabilities   137,627     155,136     128,050   (11 )%   7 %
                       
Long-term debt   104,460     108,069     117,798   (3 )%   (11 )%
Deferred tax liabilities   3,336     2,214     1,908   51 %   75 %
Other long-term liabilities   58,167     59,100     63,053   (2 )%   (8 )%
Redeemable noncontrolling interest   187,522     187,522     187,522   %   %
Stockholders’ equity   405,166     398,306     380,647   2 %   6 %
                       
Total liabilities, redeemable noncontrolling interest, and stockholders’ equity $ 896,278   $ 910,347   $ 878,978   (2 )%   2 %


 
DMC GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(unaudited)
 
  Three months ended   Nine months ended
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sep 30, 2023   Sep 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:                      
Net income $ 11,525     $ 17,526     $ 8,213     $ 31,190     $ 10,392  
Adjustments to reconcile net income to net cash provided by operating activities:                  
Depreciation   3,460       3,434       3,541       10,294       10,578  
Amortization of purchased intangible assets   5,667       5,667       7,385       17,001       33,154  
Amortization of deferred debt issuance costs   141       133       145       412       412  
Amortization of acquisition-related inventory valuation step-up                           430  
Stock-based compensation   1,832       1,699       2,242       8,558       6,891  
Deferred income taxes   1,558       482       (1,448 )     2,218       (1,612 )
Restructuring expenses and asset impairments   515             8       515       53  
Other   (1,607 )     (28 )     (340 )     (2,040 )     (295 )
Change in working capital, net   1,113       (17,434 )     2,053       (25,400 )     (35,668 )
Net cash provided by operating activities   24,204       11,479       21,799       42,748       24,335  
CASH FLOWS FROM INVESTING ACTIVITIES:                      
Investment in marketable securities   (5,102 )     (2,414 )           (7,516 )      
Consideration adjustments related to acquisition of business               (2,674 )           (2,034 )
Acquisition of property, plant and equipment   (2,333 )     (2,896 )     (4,958 )     (7,455 )     (11,277 )
Net cash used in investing activities   (7,435 )     (5,310 )     (7,632 )     (14,971 )     (13,311 )
CASH FLOWS FROM FINANCING ACTIVITIES:                      
Repayments on term loan   (3,750 )     (3,750 )     (3,750 )     (13,750 )     (11,250 )
Payment of debt issuance costs               (3 )           (179 )
Distribution to redeemable noncontrolling interest holder   (4,034 )     (3,711 )     (3,293 )     (10,345 )     (10,293 )
Net proceeds from issuance of common stock to employees and directors         212             212        
Treasury stock activity   (157 )     (14 )     2       (2,328 )     (1,092 )
Net cash used in financing activities   (7,941 )     (7,263 )     (7,044 )     (26,211 )     (22,814 )
                   
EFFECTS OF EXCHANGE RATES ON CASH   508       171       (456 )     1,350       (534 )
                   
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   9,336       (923 )     6,667       2,916       (12,324 )
CASH AND CASH EQUIVALENTS, beginning of the period   18,724       19,647       11,819       25,144       30,810  
CASH AND CASH EQUIVALENTS, end of the period $ 28,060     $ 18,724     $ 18,486     $ 28,060     $ 18,486  


 
DMC GLOBAL INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST
DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS
(Amounts in Thousands)
(unaudited)
 
DMC Global
 
EBITDA and Adjusted EBITDA
  Three months ended   Change
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sequential   Year-on-year
Net income   11,525       17,526       8,213     (34 )%   40 %
Interest expense, net   2,392       2,432       1,771     (2 )%   35 %
Income tax provision   4,087       6,600       3,537     (38 )%   16 %
Depreciation   3,460       3,434       3,541     1 %   (2 )%
Amortization of purchased intangible assets   5,667       5,667       7,385     %   (23 )%
                       
EBITDA   27,131       35,659       24,447     (24 )%   11 %
Stock-based compensation   1,832       1,699       2,242     8 %   (18 )%
CEO transition expenses (1)   805       573           40 %   100 %
Other (income) expense, net   (302 )     439       (120 )   169 %   152 %
Restructuring expenses and asset impairments   515             8     100 %   6,338 %
Adjusted EBITDA $ 29,981     $ 38,370     $ 26,577     (22 )%   13 %
Less: adjusted EBITDA attributable to redeemable noncontrolling interest   (5,374 )     (6,594 )     (4,826 )   (19 )%   11 %
Adjusted EBITDA attributable to DMC Global Inc. $ 24,607     $ 31,776     $ 21,751     (23 )%   13 %


 
  Nine months ended   Change
  Sep 30, 2023   Sep 30, 2022   Year-on-year
Net income $ 31,190     $ 10,392     200 %
Interest expense, net   7,205       4,058     78 %
Income tax provision   13,187       4,938     167 %
Depreciation   10,294       10,578     (3 )%
Amortization of purchased intangible assets   17,001       33,154     (49 )%
             
EBITDA   78,877       63,120     25 %
Stock-based compensation   8,558       6,891     24 %
CEO transition expenses (1)   4,343           100 %
Restructuring expenses and asset impairments   515       53     872 %
Amortization of acquisition-related inventory valuation step-up         430     (100 )%
Other expense, net   337       35     863 %
Adjusted EBITDA $ 92,630     $ 70,529     31 %
Less: adjusted EBITDA attributable to redeemable noncontrolling interest   (16,156 )     (15,911 )   2 %
Adjusted EBITDA attributable to DMC Global Inc. $ 76,474     $ 54,618     40 %
 

(1) The Company and its former CEO entered into a separation agreement in the first quarter of 2023. In conjunction with this event as well as a reprioritization of near-term initiatives, we incurred certain expenses during the nine months ended September 30, 2023, primarily including: (a) severance-related charges for the former CEO and other impacted employees of $1,948; (b) CEO transition and executive search firm costs of $1,893; and (c) contract termination costs of $350.

Adjusted Net Income and Adjusted Diluted Earnings per Share
 
  Three months ended September 30, 2023
  Amount   Per Share(1)
Net income attributable to DMC Global Inc.(2) $ 8,883   $ 0.45
CEO transition expenses, net of tax   620     0.03
Restructuring expenses and asset impairments, net of tax   358     0.02
As adjusted $ 9,861   $ 0.50

(1) Calculated using diluted weighted average shares outstanding of 19,596,575
(2) Net income attributable to DMC Global Inc. prior to the adjustment of redeemable noncontrolling interest

 
  Three months ended June 30, 2023
  Amount   Per Share(1)
Net income attributable to DMC Global Inc.(2) $ 13,703   $ 0.70
CEO transition expenses, net of tax   428     0.02
As adjusted $ 14,131   $ 0.72

(1) Calculated using diluted weighted average shares outstanding of 19,504,963
(2) Net income attributable to DMC Global Inc. prior to the adjustment of redeemable noncontrolling interest

 
  Three months ended September 30, 2022
  Amount   Per Share(1)
Net income attributable to DMC Global Inc. (2) $ 6,717   $ 0.35
NobelClad restructuring expenses, net of tax   5    
As adjusted $ 6,722   $ 0.35

(1) Calculated using diluted weighted average shares outstanding of 19,381,794
(2) Net income attributable to DMC Global Inc. prior to the adjustment of redeemable noncontrolling interest

 
  Nine months ended September 30, 2023
  Amount   Per Share(1)
Net income attributable to DMC Global Inc. (2) $ 23,495   $ 1.20
CEO transition expenses and accelerated stock-based compensation, net of tax (3)   6,284     0.32
Restructuring expenses and asset impairments, net of tax   358     0.02
As adjusted $ 30,137   $ 1.54

(1) Calculated using diluted weighted average shares outstanding of 19,540,978
(2) Net income attributable to DMC Global Inc. prior to the adjustment of redeemable noncontrolling interest
(3) Includes CEO transition expenses of $4,343 and accelerated stock-based compensation of $3,040 related to the vesting of the former CEO’s outstanding equity awards, net of tax.

 
  Nine months ended September 30, 2022
  Amount   Per Share(1)
Net income attributable to DMC Global Inc. (2) $ 8,981   $ 0.47
Amortization of acquisition-related inventory valuation step-up, net of tax   199     0.01
NobelClad restructuring expenses, net of tax   36    
As adjusted $ 9,216   $ 0.48

(1) Calculated using diluted weighted average shares outstanding of 19,357,333
(2) Net income attributable to DMC Global Inc. prior to the adjustment of redeemable noncontrolling interest

Segment Adjusted EBITDA
 
Arcadia
 
  Three months ended   Change
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sequential   Year-on-year
Operating income, as reported $ 6,476     $ 9,580     $ 3,742     (32 )%   73 %
Adjustments:                      
Depreciation   969       889       733     9 %   32 %
Amortization of purchased intangible assets   5,652       5,652       7,233     %   (22 )%
Stock-based compensation   337       323       357     4 %   (6 )%
CEO transition expenses         42           (100 )%   %
Adjusted EBITDA   13,434       16,486       12,065     (19 )%   11 %
Less: adjusted EBITDA attributable to redeemable noncontrolling interest   (5,374 )   $ (6,594 )   $ (4,826 )   (19 )%   11 %
Adjusted EBITDA attributable to DMC Global Inc. $ 8,060     $ 9,892     $ 7,239     (19 )%   11 %


 
  Nine months ended   Change
  Sep 30, 2023   Sep 30, 2022   Year-on-year
Operating income, as reported $ 19,189     $ 3,521     445 %
Adjustments:            
Depreciation   2,675       2,144     25 %
Amortization of purchased intangible assets   16,956       32,674     (48 )%
Stock-based compensation   1,239       1,008     23 %
CEO transition expenses   331           100 %
Amortization of acquisition-related inventory valuation step-up         430     (100 )%
Adjusted EBITDA   40,390       39,777     2 %
Less: adjusted EBITDA attributable to redeemable noncontrolling interest   (16,156 )   $ (15,911 )   2 %
Adjusted EBITDA attributable to DMC Global Inc. $ 24,234     $ 23,866     2 %


DynaEnergetics
  Three months ended   Change
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sequential   Year-on-year
Operating income, as reported $ 10,871   $ 17,733   $ 11,978   (39 )%   (9 )%
Adjustments:                      
Depreciation   1,682     1,713     1,879   (2 )%   (10 )%
Amortization of purchased intangible assets   15     15     78   %   (81 )%
Adjusted EBITDA $ 12,568   $ 19,461   $ 13,935   (35 )%   (10 )%


 
  Nine months ended   Change
  Sep 30, 2023   Sep 30, 2022   Year-on-year
Operating income, as reported $ 41,772   $ 26,585   57 %
Adjustments:            
Depreciation   5,167     5,663   (9 )%
Amortization of purchased intangible assets   45     245   (82 )%
Adjusted EBITDA $ 46,984   $ 32,493   45 %
 

NobelClad

  Three months ended   Change
  Sep 30, 2023   Jun 30, 2023   Sep 30, 2022   Sequential   Year-on-year
Operating income, as reported $ 5,232   $ 4,707   $ 2,505   11 %   109 %
Adjustments:                    
Depreciation   712     700     825   2 %   (14 )%
Amortization of purchased intangible assets           74   %   (100 )%
Restructuring expenses and asset impairments   440         8   100 %   5,400 %
Adjusted EBITDA $ 6,384   $ 5,407   $ 3,412   18 %   87 %


 
  Nine months ended   Change
  Sep 30, 2023   Sep 30, 2022   Year-on-year
Operating income, as reported $ 12,560   $ 5,690   121 %
Adjustments:            
Depreciation   2,152     2,490   (14 )%
Amortization of purchased intangible assets       235   (100 )%
Restructuring expenses and asset impairments   440     53   730 %
Adjusted EBITDA $ 15,152   $ 8,468   79 %

 

 
CONTACT:
Geoff High, Vice President of Investor Relations
303-604-3924
 

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Source: DMC Global Inc.