DMC Global Reports Third Quarter Financial Results

  • Third quarter sales were $174.5 million, up 5% sequentially and up 160% versus Q3 2021
  • Excluding Arcadia, sales were $93.8 million, up 5% sequentially and up 40% versus Q3 2021
  • Third quarter consolidated gross margin was 29% versus 31% in Q2 2022 and 25% in Q3 2021
  • Third quarter net income attributable to DMC was $6.7 million
  • Third quarter net income per diluted share, inclusive of adjustment for redeemable noncontrolling interest, was $0.46
  • Third quarter adjusted net income attributable to DMC*, inclusive of $4.3 million in non-cash amortization expense for Arcadia purchased intangible assets, was $6.7 million, or $0.35 per diluted share
  • Third quarter adjusted EBITDA attributable to DMC* was $21.8 million

BROOMFIELD, Colo., Nov. 03, 2022 (GLOBE NEWSWIRE) -- DMC Global Inc. (Nasdaq: BOOM) today reported financial results for its third quarter ended September 30, 2022.

Third quarter sales were $174.5 million, up 5% sequentially and up 160% versus sales in last year’s third quarter. This year’s results include contributions from Arcadia, a leading supplier of architectural building products. DMC acquired a 60% controlling interest in Arcadia on December 23, 2021.

Excluding $80.7 million in sales from Arcadia, third quarter sales were $93.8 million, up 5% sequentially and up 40% versus the third quarter of 2021. The increases reflect stronger demand for well perforating products from DynaEnergetics, DMC’s energy products business.

Third quarter gross margin was 29% versus 31% in the second quarter and 25% in the third quarter a year ago. The sequential decline reflects an expected dip in gross margin at Arcadia resulting from recent volatility in aluminum prices. The gross margin improvement compared to last year’s third quarter reflects higher sales volume on fixed manufacturing overhead expenses at DynaEnergetics.

Selling, general and administrative expense (SG&A) was $30.5 million. Excluding Arcadia, SG&A was $17.6 million, versus $18.0 million in the second quarter and $15.3 million in the year-ago third quarter. The increase versus last year’s third quarter principally reflects higher variable incentive compensation, the expiration of the Employee Retention Credit under the CARES Act, and implementation costs associated with a new enterprise resource planning (ERP) system at NobelClad, DMC’s composite metals business.

Third quarter operating income was $13.4 million and included $7.4 million in non-cash amortization expense primarily associated with purchased intangible assets at Arcadia. This compares with operating income of $9.9 million in the second quarter, and $1.1 million in last year's third quarter.

Third quarter net income attributable to DMC was $6.7 million. Due to the acquisition of the 60% controlling interest in Arcadia, the calculation for net earnings per diluted share must account for the change in redemption value of the 40% redeemable noncontrolling interest in Arcadia. Redemption value is estimated at the end of each quarter based on the formula used to calculate a Put and Call Option in the Arcadia Operating Agreement. During the third quarter, the adjustment decreased the redeemable noncontrolling interest by $2.3 million. When added to the $6.7 million in net income attributable to DMC stockholders, the resulting net income is $9.0 million, or $0.46 per diluted share, based on 19.4 million diluted shares outstanding. Net income in the prior-year third quarter was $403,000, or $0.02 per diluted share on 18.7 million diluted shares outstanding.

Third quarter adjusted net income attributable to DMC*, which includes $4.3 million in non-cash amortization expense of the purchased intangible assets of Arcadia, was $6.7 million, or $0.35 per diluted share.

Third quarter adjusted EBITDA attributable to DMC* was $21.8 million, down 3% from $22.4 million in the second quarter of 2022 and up 276% from $5.8 million in the 2021 third quarter.

Third quarter cash flow from operations was $21.8 million versus $4.1 million in the prior-year third quarter. Cash and cash equivalents were $18.5 million versus $30.8 million at December 31, 2021.

DMC’s debt-to-adjusted EBITDA leverage ratio at September 30, 2022, was 2.10. The Company’s debt-to-adjusted EBITDA leverage ratio covenant for the end of the quarter was 3.25.

Arcadia
Arcadia reported third quarter sales of $80.7 million, up 6% sequentially and up 24% from pro forma sales in last year's third quarter. The increase versus both periods reflects higher average selling prices, which were implemented to address inflation on raw materials.

Third quarter gross margin was 30% versus 34% in the second quarter and 36% in last year’s third quarter. The sequential decrease reflects higher third quarter raw material costs, which outpaced the increase in average selling prices. Additionally, orders were shipped out of backlog that were quoted prior to the implementation of price increases. Adjusted EBITDA attributable to DMC was $7.2 million versus $9.8 million in the second quarter of 2022 and pro forma adjusted EBITDA of $9.2 million in the comparable year-ago quarter.

DynaEnergetics
DynaEnergetics reported third quarter sales of $70.4 million, up 4% sequentially and up 59% versus last year's third quarter. Sales in North America increased 6% sequentially, while international sales decreased 5% sequentially. Second quarter international sales included a $3.6 million order from a customer in South Asia. Gross margin was 30% in both the second and third quarters and 22% in the 2021 third quarter. Adjusted EBITDA increased to $13.9 million from $13.3 million in the second quarter and $3.6 million in the 2021 third quarter.

NobelClad
NobelClad, DMC's composite metals business, reported third quarter sales of $23.4 million, up 7% sequentially and up 2% versus the 2021 third quarter. Gross margin was 27%, versus 28% in the second quarter and 30% in the prior-year third quarter. Adjusted EBITDA was $3.4 million in both the second and third quarters of 2022 and $4.6 million in the 2021 third quarter.

NobelClad’s trailing 12-month book-to-bill ratio at the end of the third quarter was 1.11. Order backlog increased to $48.0 million from $46.8 million at the end of the second quarter.

Nine-month results
Consolidated sales for the nine-month period were $479.0 million, up 154% versus the nine-month period a year ago. Excluding $225.1 million in contributions from Arcadia, year-to-date sales were $253.9 million, up 35% from the same period last year.

Gross margin was 29% versus 25% in the 2021 nine-month period. Operating income was $19.4 million versus $3.1 million in last year’s nine-month period.

Nine-month net income attributable to DMC was $9.0 million. The adjustment related to the change in redemption value of the 40% redeemable noncontrolling interest in Arcadia was $5.0 million. When deducted from the $9.0 million in net income attributable to DMC stockholders, the resulting net income was $4.0 million, or $0.20 per diluted share, based on 19.4 million diluted shares outstanding. Net income in the prior-year nine-month period was $2.6 million, or $0.15 per diluted share on 17.3 million diluted shares outstanding.

Nine-month adjusted net income attributable to DMC*, which includes $19.6 million in non-cash amortization expense of the purchased intangible assets of Arcadia, was $9.2 million, or $0.48 per diluted share.

Nine-month adjusted EBITDA attributable to DMC* was $54.6 million, up 215% versus last year’s nine-month period. Cash flow provided by operations during the nine-month period was $24.3 million versus cash flow used in operations of $1.9 million in the prior-year nine-month period.

Arcadia
Arcadia reported nine-month sales of $225.1 million, up 23% from pro forma sales in last year’s nine-month period. Gross margin was 31% versus pro forma gross margin of 36% in the 2021 nine-month period, and adjusted EBITDA attributable to DMC was $23.9 million, down 5% from pro forma results in the same period a year ago.  

DynaEnergetics
Nine-month sales at DynaEnergetics were $186.8 million, up 50% versus last year’s nine-month period. Gross margin improved to 29% from 23% a year ago, and adjusted EBITDA increased 162% to $32.5 million versus last year’s nine-month period.

NobelClad
NobelClad reported nine-month sales of $67.1 million, up 6% from the same period last year. Gross margin was 25% versus 28% last year, while adjusted EBITDA was $8.5 million versus $11.6 million in the 2021 nine-month period.

Management Commentary
“All three of our differentiated, asset-light manufacturing businesses reported third quarter sales that exceeded our guidance,” said Kevin Longe, president and CEO. “The results were driven by healthy customer demand within each of our markets, as well as outstanding execution by our global commercial and manufacturing teams.”

“DynaEnergetics’ third quarter performance reflects strong well-completion activity in both our North American and international markets,” Longe added. “Adoption of the fully integrated DS perforating systems by North American operators and service companies continues to grow. In October, sales of DS systems surpassed the one-million mark for the first year since the product was commercialized in 2015.

“DynaEnergetics is reporting an on-time delivery rate of 99.93% for its DS Systems, which are being deployed at a downhole success rate of 99.98%. Most importantly, there have been zero customer safety incidents associated with the DS system since it was introduced seven years ago.

“Third quarter sales growth at Arcadia reflects higher average selling prices and continued strong demand from both the commercial construction and high-end residential markets. As expected, Arcadia’s third-quarter gross margin was negatively impacted by record-high aluminum prices during the first half of 2022. It is taking longer than anticipated for high-cost aluminum inventory to move through our production facilities, and this will likely result in sequentially flat to modestly lower gross margin during the fourth quarter. We expect Arcadia’s gross margin will return to historic averages of approximately 34% during the first half of next year.

“Both Arcadia and Arcadia Custom continue to benefit from large order backlogs and strong booking activity, and we are investing in the resources necessary to support this demand and facilitate future growth. In addition to implementing a modern ERP system, Arcadia is adding sales and manufacturing staff at its newest satellite facilities in Dallas and Houston.

“Our NobelClad business reported third quarter increases in both sales and bookings, and ended the period with a $48 million order backlog, which was up 17% since the beginning of the year.  The increase reflects both improving global demand and higher metal prices. 

“NobelClad is seeing encouraging signs that several large industrial projects are moving closer to the vendor-selection phase, and we believe NobelClad is well positioned to participate as a key supplier on multiple projects. Demand for repair and maintenance work from the downstream energy and petrochemical industries also is improving. Given current end-market activity, we believe 2023 will be a year of growth for NobelClad.

“I want to thank our employees around the world for their creativity, hard work, and commitment to DMC’s continued success. We are encouraged by the growing strength of DMC and believe we are well positioned to deliver improved long-term returns for our stakeholders.”

Guidance
Michael Kuta, CFO, said fourth quarter 2022 consolidated sales are expected in a range of $158 million to $168 million versus the $174.5 million reported in the third quarter. At the business level, Arcadia is expected to report sales of $70 million to $75 million versus the $80.7 million reported in the third quarter. The decrease reflects the anticipated impacts of seasonality and maintenance. Sales at DynaEnergetics are expected in a range of $68 million to $72 million versus the $70.4 million reported in the third quarter. NobelClad’s sales are expected in a range of $20 million to $21 million versus the $23.4 million reported in the third quarter.

Consolidated gross margin is expected in a range of 27% to 29% versus the 29% reported in the third quarter. Fourth quarter gross margin is expected to be impacted by a less favorable project mix at NobelClad and selling through higher-priced aluminum inventory at Arcadia.

Fourth quarter selling, general and administrative (SG&A) expense is expected in a range of $31.5 million to $32.5 million versus the $30.5 million reported in the third quarter. Fourth quarter SG&A will include approximately $800,000 of anticipated patent litigation expense at DynaEnergetics.

Fourth quarter amortization expense is expected to be $3.7 million versus the $7.4 million reported in the third quarter. The remaining value assigned to Arcadia’s acquired backlog was fully amortized during the third quarter.

Fourth quarter depreciation expense is expected to be $3.7 million, and interest expense is expected to be $2.4 million.

Fourth quarter adjusted EBITDA attributable to DMC, after deducting the 40% noncontrolling interest, is expected in a range of $15 million to $18 million versus $21.8 million in the third quarter.

Fourth quarter capital expenditures are expected to be $6.0 million to $7.0 million.

Conference call information
Management will hold a conference call to discuss these results today at 5:00 p.m. Eastern (3:00 p.m. Mountain). Investors may listen to a live webcast of the call at https://www.webcaster4.com/Webcast/Page/2204/46845 or by dialing 888-506-0062 (973-528-0011 for international callers) and entering the code 560809. Webcast participants should access the website at least 15 minutes early to register and download any necessary audio software. A replay of the webcast will be available for 90 days and a telephonic replay will be available through November 10, 2022, by calling 877-481-4010 (919-882-2331 for international callers) and entering the Conference ID #46845.

*Use of Non-GAAP Financial Measures
Adjusted EBITDA, adjusted net income (loss), and adjusted diluted earnings per share 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 plus or minus net interest plus 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 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 and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance. None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income 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 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 to EBITDA and adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles 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). 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 operates a portfolio of differentiated businesses that lead niche segments of the energy, industrial infrastructure and building products industries. The Company’s strategy is to identify well-run businesses with strong management teams, and support them with long-term capital and strategic, financial, legal, technology and operating resources. DMC helps portfolio companies grow their core businesses, launch new initiatives, upgrade technologies and systems to support their long-term growth strategies, and make acquisitions that improve their competitive positions and expand their markets. The Company’s current portfolio consists of Arcadia Inc., 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. Based in Broomfield, Colorado, DMC trades on Nasdaq under the symbol “BOOM.” For more information, visit the Company’s website at https://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 fourth quarter 2022 guidance on sales, gross margin, SG&A, depreciation expense, interest expense, adjusted EBITDA and capital expenditures; fourth quarter and full-year amortization expense; our expectations Arcadia’s gross margin will return to historic averages of approximately 35% during the first half of next year; and our expectations that 2023 will be a year of growth for NobelClad. 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; potential 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; 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 or depressions; inflation; supply chain delays and disruptions; the availability and cost of energy; 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, 2021. 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, 2022   Jun 30, 2022   Sep 30, 2021   Sequential   Year-on-year
NET SALES $ 174,465     $ 165,831     $ 67,175     5 %   160 %
COST OF PRODUCTS SOLD   123,127       113,732       50,513     8 %   144 %
Gross profit   51,338       52,099       16,662     -1 %   208 %
Gross profit percentage   29 %     31 %     25 %        
COSTS AND EXPENSES:                  
General and administrative expenses   19,796       18,816       9,721     5 %   104 %
Selling and distribution expenses   10,748       10,545       5,593     2 %   92 %
Amortization of purchased intangible assets   7,385       12,793       211     -42 %   3,400 %
Restructuring expenses   8       13           -38 %   %
Total costs and expenses   37,937       42,167       15,525     -10 %   144 %
OPERATING INCOME   13,401       9,932       1,137     35 %   1,079 %
OTHER INCOME (EXPENSE):                  
Other income (expense), net   120       54       (198 )   122 %   161 %
Interest expense, net   (1,771 )     (1,263 )     (14 )   40 %   12,550 %
INCOME BEFORE INCOME TAXES   11,750       8,723       925     35 %   1,170 %
INCOME TAX PROVISION   3,537       2,264       522     56 %   578 %
NET INCOME   8,213       6,459       403     27 %   1,938 %
Less: Net income attributable to redeemable noncontrolling interest   1,496       907           65 %   %
NET INCOME ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS $ 6,717     $ 5,552     $ 403     21 %   1,567 %
NET INCOME PER SHARE ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS                
Basic $ 0.46     $ 0.20     $ 0.02     130 %   2,200 %
Diluted $ 0.46     $ 0.20     $ 0.02     130 %   2,200 %
WEIGHTED AVERAGE SHARES OUTSTANDING:                  
Basic   19,381,489       19,374,714       18,728,278     %   3 %
Diluted   19,381,794       19,374,736       18,739,085     %   3 %

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, 2022   Jun 30, 2022   Sep 30, 2021
Net income attributable to DMC Global Inc. stockholders $ 6,717   $ 5,552     $ 403
Adjustment of redeemable noncontrolling interest   2,256     (1,535 )    
Net income attributable to DMC Global Inc. common stockholders after adjustment of redeemable noncontrolling interest $ 8,973   $ 4,017     $ 403


  Nine months ended   Change  
  Sep 30, 2022   Sep 30, 2021   Year-on-year  
NET SALES $ 479,012     $ 188,271     154 %  
COST OF PRODUCTS SOLD   338,669       141,725     139 %  
Gross profit   140,343       46,546     202 %  
Gross profit percentage   29 %     25 %      
COSTS AND EXPENSES:            
General and administrative expenses   56,330       26,121     116 %  
Selling and distribution expenses   31,383       16,380     92 %  
Amortization of purchased intangible assets   33,154       823     3,928 %  
Restructuring expenses   53       127     -58 %  
Total costs and expenses   120,920       43,451     178 %  
OPERATING INCOME   19,423       3,095     528 %  
OTHER INCOME (EXPENSE):            
Other (expense) income, net   (35 )     304     -112 %  
Interest expense, net   (4,058 )     (230 )   1,664 %  
INCOME BEFORE INCOME TAXES   15,330       3,169     384 %  
INCOME TAX PROVISION   4,938       610     710 %  
NET INCOME   10,392       2,559     306 %  
Less: Net income attributable to redeemable noncontrolling interest   1,411           100 %  
NET INCOME ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS $ 8,981     $ 2,559     251 %  
NET INCOME PER SHARE ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS            
Basic $ 0.20     $ 0.15     33 %  
Diluted $ 0.20     $ 0.15     33 %  
WEIGHTED AVERAGE SHARES OUTSTANDING:            
Basic   19,352,638       17,239,306     12 %  
Diluted   19,357,333       17,250,525     12 %  

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, 2022   Sep 30, 2021
Net income attributable to DMC Global Inc. stockholders $ 8,981     $ 2,559
Adjustment of redeemable noncontrolling interest   (4,996 )    
Net income attributable to DMC Global Inc. common stockholders after adjustment of redeemable noncontrolling interest $ 3,985     $ 2,559


DMC GLOBAL INC.
SEGMENT STATEMENTS OF OPERATIONS
(Amounts in Thousands)
(unaudited)

Arcadia

  Three months ended   Change
  Sep 30, 2022   Jun 30, 2022   Sequential
Net sales $ 80,697     $ 76,462     6 %
Gross profit   23,892       26,227     -9 %
Gross profit percentage   30 %     34 %    
COSTS AND EXPENSES:          
General and administrative expenses   8,782       7,412     18 %
Selling and distribution expenses   4,135       3,960     4 %
Amortization of purchased intangible assets   7,233       12,633     -43 %
Operating income   3,742       2,222     68 %
Adjusted EBITDA   12,065       16,292     -26 %
Less: adjusted EBITDA attributable to redeemable noncontrolling interest   (4,826 )     (6,517 )   -26 %
Adjusted EBITDA attributable to DMC Global Inc. $ 7,239     $ 9,775     -26 %


  Nine months ended  
  Sep 30, 2022  
Net sales $ 225,127    
Gross profit   70,364    
Gross profit percentage   31 %  
COSTS AND EXPENSES:  
General and administrative expenses   22,337    
Selling and distribution expenses   11,832    
Amortization of purchased intangible assets   32,674    
Operating income   3,521    
Adjusted EBITDA $ 39,777    
Less: adjusted EBITDA attributable to redeemable noncontrolling interest $ (15,911 )  
Adjusted EBITDA attributable to DMC Global Inc. $ 23,866    

DynaEnergetics

  Three months ended   Change
  Sep 30, 2022   Jun 30, 2022   Sep 30, 2021   Sequential   Year-on-year
Net sales $ 70,372     $ 67,517     $ 44,237     4 %   59 %
Gross profit   21,237       19,960       9,924     6 %   114 %
Gross profit percentage   30 %     30 %     22 %        
COSTS AND EXPENSES:                  
General and administrative expenses   4,924       4,411       4,990     12 %   -1 %
Selling and distribution expenses   4,257       4,158       3,260     2 %   31 %
Amortization of purchased intangible assets   78       82       89     -5 %   -12 %
Operating income   11,978       11,309       1,585     6 %   656 %
Adjusted EBITDA $ 13,935     $ 13,276     $ 3,597     5 %   287 %


  Nine months ended   Change
  Sep 30, 2022   Sep 30, 2021   Year-on-year
Net sales $ 186,776     $ 124,677     50 %
Gross profit   53,805       29,034     85 %
Gross profit percentage   29 %     23 %    
COSTS AND EXPENSES:          
General and administrative expenses   14,657       12,574     17 %
Selling and distribution expenses   12,318       9,702     27 %
Amortization of purchased intangible assets   245       451     -46 %
Operating income   26,585       6,307     322 %
Adjusted EBITDA $ 32,493     $ 12,402     162 %

NobelClad

  Three months ended   Change
  Sep 30, 2022   Jun 30, 2022   Sep 30, 2021   Sequential   Year-on-year
Net sales $ 23,396     $ 21,852     $ 22,938     7 %   2 %
Gross profit   6,325       6,026       6,883     5 %   -8 %
Gross profit percentage   27 %     28 %     30 %        
COSTS AND EXPENSES:                  
General and administrative expenses   1,475       1,132       933     30 %   58 %
Selling and distribution expenses   2,263       2,323       2,208     -3 %   2 %
Amortization of purchased intangible assets   74       78       122     -5 %   -39 %
Restructuring expenses   8       13           -38 %   %
Operating income   2,505       2,480       3,620     1 %   -31 %
Adjusted EBITDA $ 3,412     $ 3,404     $ 4,587     %   -26 %


  Nine months ended   Change
  Sep 30, 2022   Sep 30, 2021   Year-on-year
Net sales $ 67,109     $ 63,594     6 %
Gross profit   16,532       17,960     -8 %
Gross profit percentage   25 %     28 %    
COSTS AND EXPENSES:          
General and administrative expenses   3,644       2,636     38 %
Selling and distribution expenses   6,910       6,230     11 %
Amortization of purchased intangible assets   235       372     -37 %
Restructuring expenses   53       127     -58 %
Operating income   5,690       8,595     -34 %
Adjusted EBITDA $ 8,468     $ 11,573     -27 %


DMC GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)

              Change
  Sep 30, 2022   Jun 30, 2022   Dec 31, 2021   Sequential   From year-end
  (unaudited)   (unaudited)            
ASSETS                  
                   
Cash and cash equivalents $ 18,486   $ 11,819   $ 30,810   56 %   -40 %
Accounts receivable, net   94,191     92,998     71,932   1 %   31 %
Inventories   152,573     152,023     124,214   %   23 %
Other current assets   9,977     11,888     12,240   -16 %   -18 %
                   
Total current assets   275,227     268,728     239,196   2 %   15 %
                   
Property, plant and equipment, net   123,292     124,829     122,078   -1 %   1 %
Goodwill   139,922     135,464     141,266   3 %   -1 %
Purchased intangible assets, net   221,753     229,365     255,576   -3 %   -13 %
Other long-term assets   104,915     105,169     106,296   %   -1 %
                   
Total assets $ 865,109   $ 863,555   $ 864,412   %   %
                   
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY            
                   
Accounts payable $ 41,573   $ 45,179   $ 40,276   -8 %   3 %
Contract liabilities   30,030     33,202     21,052   -10 %   43 %
Accrued income taxes   3,206     289     9   1,009 %   35,522 %
Current portion of long-term debt   15,000     15,000     15,000   %   %
Other current liabilities   32,104     27,740     29,477   16 %   9 %
                   
Total current liabilities   121,913     121,410     105,814   %   15 %
                   
Long-term debt   121,409     125,017     132,425   -3 %   -8 %
Deferred tax liabilities   1,547     2,019     2,202   -23 %   -30 %
Other long-term liabilities   62,625     62,858     66,250   %   -5 %
Redeemable noncontrolling interest   194,962     197,196     197,196   -1 %   -1 %
Stockholders’ equity   362,653     355,055     360,525   2 %   1 %
                   
Total liabilities, redeemable noncontrolling interest, and stockholders’ equity $ 865,109   $ 863,555   $ 864,412   %   %


DMC GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(unaudited)

  Three months ended
  Sep 30, 2022   Jun 30, 2022   Sep 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net income $ 8,213     $ 6,459     $ 403  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:          
Depreciation   3,541       3,678       2,870  
Amortization of purchased intangible assets   7,385       12,793       211  
Amortization of deferred debt issuance costs   145       135       56  
Amortization of acquisition-related inventory valuation step-up         172        
Stock-based compensation   2,242       2,291       1,569  
Deferred income taxes   (1,448 )     2,550       570  
Restructuring expenses   8       13        
Other   (340 )     36       (15 )
Change in working capital, net   2,053       (21,007 )     (1,549 )
Net cash provided by operating activities   21,799       7,120       4,115  
CASH FLOWS FROM INVESTING ACTIVITIES:          
Transaction consideration adjustments related to acquisition of a business   (2,674 )     640        
Acquisition of property, plant and equipment   (4,958 )     (4,783 )     (3,096 )
Proceeds on sale of property, plant and equipment               15  
Net cash used in investing activities   (7,632 )     (4,143 )     (3,081 )
CASH FLOWS FROM FINANCING ACTIVITIES:          
Repayments on term loan   (3,750 )     (3,750 )      
Payment of debt issuance costs   (3 )     (79 )      
Distribution to redeemable noncontrolling interest holder   (3,293 )     (2,600 )      
Treasury stock activity   2       (6 )     (25 )
Net cash (used in) provided by financing activities   (7,044 )     (6,435 )     (25 )
EFFECTS OF EXCHANGE RATES ON CASH   (456 )     (99 )     (352 )
           
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   6,667       (3,557 )     657  
CASH AND CASH EQUIVALENTS, beginning of the period   11,819       15,376       36,363  
CASH AND CASH EQUIVALENTS, end of the period $ 18,486     $ 11,819     $ 37,020  


  Nine months ended
  Sep 30, 2022   Sep 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $ 10,392     $ 2,559  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:      
Depreciation   10,578       8,400  
Amortization of purchased intangible assets   33,154       823  
Amortization of deferred debt issuance costs   412       168  
Amortization of acquisition-related inventory valuation step-up   430        
Stock-based compensation   6,891       4,904  
Deferred income taxes   (1,612 )     (2,046 )
Restructuring expenses   53       127  
Other   (295 )     (298 )
Change in working capital, net   (35,668 )     (16,543 )
Net cash provided by (used in) operating activities   24,335       (1,906 )
CASH FLOWS FROM INVESTING ACTIVITIES:      
Transaction consideration adjustments related to acquisition of a business   (2,034 )      
Investment in marketable securities         (123,984 )
Proceeds from maturities of marketable securities         4,799  
Acquisition of property, plant and equipment   (11,277 )     (6,348 )
Proceeds on sale of property, plant and equipment         1,019  
Net cash used in investing activities   (13,311 )     (124,514 )
CASH FLOWS FROM FINANCING ACTIVITIES:      
Repayments on credit facilities   (11,250 )     (11,750 )
Payments of deferred debt issuance costs   (179 )      
Net proceeds from issuance of common stock through equity offering         123,461  
Net proceeds from issuance of common stock through at-the-market offering program         25,262  
Net proceeds from issuance of common stock         253  
Distribution to redeemable noncontrolling interest holder   (10,293 )      
Treasury stock purchases   (1,092 )     (2,476 )
Net cash (used in) provided by financing activities   (22,814 )     134,750  
EFFECTS OF EXCHANGE RATES ON CASH   (534 )     503  
       
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (12,324 )     8,833  
CASH AND CASH EQUIVALENTS, beginning of the period   30,810       28,187  
CASH AND CASH EQUIVALENTS, end of the period $ 18,486     $ 37,020  
       

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, 2022   Jun 30, 2022   Sep 30, 2021   Sequential   Year-on-year
Net income   8,213       6,459       403   27 %   1,938 %
Interest expense, net   1,771       1,263       14   40 %   12,550 %
Income tax provision   3,537       2,264       522   56 %   578 %
Depreciation   3,541       3,678       2,870   -4 %   23 %
Amortization of purchased intangible assets   7,385       12,793       211   -42 %   3,400 %
                   
EBITDA   24,447       26,457       4,020   -8 %   508 %
Amortization of acquisition-related inventory valuation step-up         172         -100 %   %
Restructuring expenses   8       13         -38 %   %
Stock-based compensation   2,242       2,291       1,569   -2 %   43 %
Other (income) expense, net   (120 )     (54 )     198   122 %   161 %
Adjusted EBITDA $ 26,577     $ 28,879     $ 5,787   -8 %   359 %
Less: adjusted EBITDA attributable to redeemable noncontrolling interest   (4,826 )     (6,517 )       -26 %   %
Adjusted EBITDA attributable to DMC Global Inc. stockholders $ 21,751     $ 22,362     $ 5,787   -3 %   276 %


  Nine months ended   Change
  Sep 30, 2022   Sep 30, 2021   Year-on-year
Net income $ 10,392     $ 2,559     306 %
Interest expense, net   4,058       230     1,664 %
Income tax provision   4,938       610     710 %
Depreciation   10,578       8,400     26 %
Amortization of purchased intangible assets   33,154       823     3,928 %
           
EBITDA   63,120       12,622     400 %
Amortization of acquisition-related inventory valuation step-up   430           %
Restructuring expenses   53       127     -58 %
Stock-based compensation   6,891       4,904     41 %
Other expense (income), net   35       (304 )   112 %
Adjusted EBITDA $ 70,529     $ 17,349     307 %
Less: adjusted EBITDA attributable to redeemable noncontrolling interest   (15,911 )         %
Adjusted EBITDA attributable to DMC Global Inc. stockholders $ 54,618     $ 17,349     215 %


Adjusted Net Income and Adjusted Diluted Earnings per Share

  Three months ended September 30, 2022
  Amount   Per Share (1)
Net income attributable to DMC Global Inc. $ 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

  Three months ended June 30, 2022
  Amount   Per Share (1)
Net income attributable to DMC Global Inc. $ 5,552   $ 0.29
Amortization of acquisition-related inventory valuation step-up, net of tax   79    
NobelClad restructuring expenses, net of tax   9    
As adjusted $ 5,640   $ 0.29

(1) Calculated using diluted weighted average shares outstanding of 19,374,376

  Three months ended September 30, 2021
  Amount   Per Share (1)
Net income attributable to DMC Global Inc. $ 403   $ 0.02
As adjusted $ 403   $ 0.02

1) Calculated using diluted weighted average shares outstanding of 18,739,085

  Nine months ended September 30, 2022
  Amount   Per Share (1)
Net income attributable to DMC Global Inc. $ 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

  Nine months ended September 30, 2021
  Amount   Per Share (1)
Net income attributable to DMC Global Inc. $ 2,559   $ 0.15
NobelClad restructuring expenses, net of tax   127     0.01
As adjusted $ 2,686   $ 0.16

1) Calculated using diluted weighted average shares outstanding of 17,250,525


Segment Adjusted EBITDA

Arcadia

  Three months ended   Change
  Sep 30, 2022   Jun 30, 2022   Sequential
Operating income, as reported $ 3,742     $ 2,222     68 %
Adjustments:          
Amortization of acquisition-related inventory valuation step-up         172     %
Depreciation   733       870     -16 %
Amortization of purchased intangible assets   7,233       12,633     -43 %
Stock-based compensation   357       395     -10 %
Adjusted EBITDA   12,065       16,292     -26 %
Less: adjusted EBITDA attributable to redeemable noncontrolling interest   (4,826 )   $ (6,517 )   -26 %
Adjusted EBITDA attributable to DMC Global Inc. $ 7,239     $ 9,775     -26 %


  Nine months ended  
  Sep 30, 2022  
Operating income, as reported $ 3,521    
Adjustments:  
Amortization of acquisition-related inventory valuation step-up   430    
Depreciation   2,144    
Amortization of purchased intangible assets   32,674    
Stock-based compensation   1,008    
Adjusted EBITDA   39,777    
Less: adjusted EBITDA attributable to redeemable noncontrolling interest   (15,911 )  
Adjusted EBITDA attributable to DMC Global Inc. $ 23,866    

DynaEnergetics

  Three months ended   Change
  Sep 30, 2022   Jun 30, 2022   Sep 30, 2021   Sequential   Year-on-year
Operating income, as reported $ 11,978   $ 11,309   $ 1,585   6 %   656 %
Adjustments:                  
Depreciation   1,879     1,885     1,923   %   -2 %
Amortization of purchased intangible assets   78     82     89   -5 %   -12 %
Adjusted EBITDA $ 13,935   $ 13,276   $ 3,597   5 %   287 %


  Nine months ended   Change
  Sep 30, 2022   Sep 30, 2021   Year-on-year
Operating income, as reported $ 26,585   $ 6,307   322 %
Adjustments:          
Depreciation   5,663     5,644   %
Amortization of purchased intangible assets   245     451   -46 %
Adjusted EBITDA $ 32,493   $ 12,402   162 %

NobelClad

  Three months ended   Change
  Sep 30, 2022   Jun 30, 2022   Sep 30, 2021   Sequential   Year-on-year
Operating income, as reported $ 2,505   $ 2,480   $ 3,620   1 %   -31 %
Adjustments:                  
Restructuring expenses   8     13       -38 %   %
Depreciation   825     833     845   -1 %   -2 %
Amortization of purchased intangible assets   74     78     122   -5 %   -39 %
Adjusted EBITDA $ 3,412   $ 3,404   $ 4,587   %   -26 %


  Nine months ended   Change
  Sep 30, 2022   Sep 30, 2021   Year-on-year
Operating income, as reported $ 5,690   $ 8,595   -34 %
Adjustments:          
Restructuring expenses   53     127   -58 %
Depreciation   2,490     2,479   %
Amortization of purchased intangible assets   235     372   -37 %
Adjusted EBITDA $ 8,468   $ 11,573   -27 %


DMC GLOBAL INC.
PRO FORMA RESULTS
(Amounts in Thousands, Except Per Share Data)
(unaudited)

Pro Forma Summary Income Statement*

  Three months ended September 30, 2021
  DMC   Arcadia   Redeemable
Noncontrolling
Interest(1)
  Pro Forma
Arcadia
  Pro Forma
Combined
Net sales $ 67,175     $ 65,313         $ 65,313     $ 132,488  
Gross profit   16,662       23,635           23,635       40,297  
Gross profit percentage   25 %     36 %         36 %     30 %
                   
Selling, general, and administrative expenses   15,314       8,781           8,781       24,095  
Amortization of purchased intangible assets   211                       211  
Operating income   1,137       14,854           14,854       15,991  
                   
Depreciation and amortization   3,081       462           462       3,543  
Stock-based compensation expense   1,569                       1,569  
Adjusted EBITDA   5,787       15,316     (6,126 )     9,190       14,977  
Adjusted EBITDA %   9 %     23 %         14 %     11 %

(1) Represents the Adjusted EBITDA attributable to the 40% redeemable noncontrolling interest.

  Nine months ended September 30, 2021
  DMC   Arcadia   Redeemable
Noncontrolling
Interest(1)
  Pro Forma
Arcadia
  Pro Forma
Combined
Net sales $ 188,271     $ 183,692         $ 183,692     $ 371,963  
Gross profit   46,546       66,047           66,047       112,593  
Gross profit percentage   25 %     36 %         36 %     30 %
                   
Selling, general, and administrative expenses   42,501       25,496           25,496       67,997  
Amortization of purchased intangible assets   823                       823  
Restructuring expenses and asset impairments   127                       127  
Operating income   3,095       40,551           40,551       43,646  
                   
Depreciation and amortization   9,223       1,319           1,319       10,542  
Restructuring expenses and asset impairments   127                       127  
Stock-based compensation expense   4,904                       4,904  
Adjusted EBITDA   17,349       41,870     (16,748 )     25,122       42,471  
Adjusted EBITDA %   9 %     23 %         14 %     11 %

(1) Represents the Adjusted EBITDA attributable to the 40% redeemable noncontrolling interest.

Pro Forma EBITDA and Adjusted EBITDA*

  Three months ended September 30, 2021
  DMC   Arcadia   Pro Forma
Combined
Net income $ 403   $ 14,854     $ 15,257  
Interest expense, net   14           14  
Income tax provision   522           522  
Depreciation   2,870     462       3,332  
Amortization of purchased intangible assets   211           211  
EBITDA   4,020     15,316       19,336  
Stock-based compensation expense   1,569           1,569  
Other income, net   198           198  
Adjusted EBITDA   5,787     15,316       21,103  
Less: adjusted EBITDA attributable to redeemable noncontrolling interest       (6,126 )     (6,126 )
Adjusted EBITDA attributable to DMC Global Inc.   5,787     9,190       14,977  


  Nine months ended September 30, 2021
  DMC   Arcadia   Pro Forma
Combined
Net income $ 2,559     $ 40,551     $ 43,110  
Interest expense, net   230             230  
Income tax benefit   610             610  
Depreciation   8,400       1,319       9,719  
Amortization   823             823  
EBITDA   12,622       41,870       54,492  
Restructuring expenses   127             127  
Stock-based compensation expense   4,904             4,904  
Other income, net   (304 )           (304 )
Adjusted EBITDA   17,349       41,870       59,219  
Less: adjusted EBITDA attributable to redeemable noncontrolling interest         (16,748 )     (16,748 )
Adjusted EBITDA attributable to DMC Global Inc.   17,349       25,122       42,471  

*This unaudited pro forma combined financial information was not prepared under Article 11 of SEC Regulation S-X (“Article 11”) or Financial Accounting Standards Board Accounting Standards Codification 805 (“ASC 805”).

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

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Source: DMC Global Inc.