DMC Global Reports Second Quarter Financial Results
08/04/2022 - 04:05 PM
Second quarter sales were $165.8 million , up 20% sequentially and up 153% versus Q2 2021 Excluding the acquisition of Arcadia, sales were $89.4 million , up 26% sequentially and up 37% versus Q2 2021 Second quarter consolidated gross margin improved to 31% from 27% in Q1 2022 and 26% in Q2 2021 Second quarter net income attributable to DMC was $5.6 million Second quarter net income per diluted share, inclusive of adjustment for redeemable noncontrolling interest, was $0.20 Second quarter adjusted net income attributable to DMC*, inclusive of $7.6 million in non-cash amortization expense for Arcadia purchased intangible assets, was $5.6 million , or $0.29 per diluted share Second quarter adjusted EBITDA attributable to DMC* was $22.4 million , up 113% sequentially and up 198% versus Q2 2021 BROOMFIELD, Colo., Aug. 04, 2022 (GLOBE NEWSWIRE) -- DMC Global Inc. (Nasdaq: BOOM) today reported financial results for its second quarter ended June 30, 2022.
Second quarter sales were $165.8 million , up 20% sequentially, and up 153% versus sales in last year’s second quarter. This year’s first and second quarter 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 $76.5 million in sales from Arcadia, second quarter sales were $89.4 million , up 26% sequentially and up 37% versus the second quarter of 2021. The increases reflect stronger North American and international demand for well perforating products from DynaEnergetics, DMC’s energy products business.
Second quarter gross margin was 31% versus 27% in the first quarter and 26% in the second quarter a year ago. The improvements reflect higher selling prices at Arcadia, and higher sales volume on fixed manufacturing overhead expenses coupled with higher average selling prices at DynaEnergetics.
Selling, general and administrative expense (SG&A) was $29.4 million . Excluding $11.4 million in expenses from Arcadia, SG&A was $18.0 million versus $17.9 million in the first quarter and $14.0 million in the year-ago second quarter. The increase versus last year’s second 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 system at NobelClad, DMC’s composite metals business.
Second quarter operating income was $9.9 million and included $12.8 million in non-cash amortization expense primarily associated with purchased intangible assets at Arcadia. This compares with an operating loss of $3.9 million in the first quarter and operating income of $2.7 million in last year’s second quarter.
Second quarter net income attributable to DMC was $5.6 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 second quarter, the adjustment was $1.5 million dollars. When deducted from the $5.6 million in net income attributable to DMC stockholders, the resulting net income is $4.0 million , or $0.20 per diluted share, based on 19.4 million diluted shares outstanding. Net income in the prior-year second quarter was $1.7 million , or $0.10 per diluted share on 17.6 million diluted shares outstanding.
Second quarter adjusted net income attributable to DMC*, which includes $7.6 million in non-cash amortization expense of the purchased intangible assets of Arcadia, was $5.6 million , or $0.29 per diluted share.
Second quarter adjusted EBITDA attributable to DMC* was $22.4 million , up 113% from $10.5 million in the first quarter of 2022 and up 198% from $7.5 million in the 2021 second quarter.
Cash flow provided by operations was $7.1 million versus cash flow used in operations of $8.2 million in the prior-year second quarter. Cash and cash equivalents were $11.8 million versus $30.8 million at December 31, 2021.
DMC’s debt-to-adjusted EBITDA leverage ratio at June 30, 2022, was 2.48. The Company’s debt-to-adjusted EBITDA leverage ratio covenant for the end of the quarter was 3.25.
Arcadia $76.5 million , up 12% sequentially and up 25% from pro forma sales in last year’s second quarter. The increase versus both periods reflects higher average selling prices, which were implemented to address inflation on raw materials.
Second quarter gross margin was 34% versus 30% in the first quarter and 35% in last year’s second quarter. The gross margin increase versus the first quarter reflects increases in selling prices. Adjusted EBITDA attributable to DMC was $9.8 million versus $6.9 million in the first quarter of 2022 and pro forma adjusted EBITDA of $8.2 million in the comparable year-ago quarter.
DynaEnergetics $67.5 million , up 38% sequentially and up 60% versus last year’s second quarter. Sales in North America increased 31% sequentially, while international sales increased 95% sequentially. When excluding a large order from a customer in South Asia, international sales increased 31% sequentially. Gross margin was 30% versus 26% in the first quarter and 25% in the 2021 second quarter. Adjusted EBITDA increased to $13.3 million from $5.3 million in the first quarter and $5.3 million in the 2021 second quarter.
NobelClad $21.9 million , flat versus the first quarter and down 6% versus the 2021 second quarter. Gross margin was 28% , versus 19% in the first quarter and 28% in the prior-year second quarter. Adjusted EBITDA was $3.4 million versus $1.7 million in the first quarter and $4.3 million in the 2021 second quarter.
NobelClad’s trailing 12-month book-to-bill ratio at the end of the second quarter was 1.05. Order backlog increased to $46.8 million from $44.4 million at the end of the first quarter.
Six-month results $304.5 million , up 151% versus the six-month period a year ago. Excluding $144.4 million in contributions from Arcadia, year-to-date sales were $160.1 million , up 32% from the same period last year.
Gross margin was 29% versus 25% in the 2021 six-month period. Operating income was $6.0 million versus operating income of $2.0 million in last year’s six-month period.
Six-month net income attributable to DMC was $2.3 million . The adjustment related to the change in redemption value of the 40% redeemable noncontrolling interest in Arcadia was $7.3 million dollars. When deducted from the $2.3 million in net income attributable to DMC stockholders, the resulting net loss is $5.0 million , or $0.26 per diluted share, based on 19.3 million diluted shares outstanding. Net income in the prior-year six-month period was $2.2 million , or $0.13 per diluted share on 16.5 million diluted shares outstanding.
Six month adjusted net income attributable to DMC*, which includes $15.3 million in non-cash amortization expense of the purchased intangible assets of Arcadia, was $2.5 million , or $0.13 per diluted share.
Six-month adjusted EBITDA attributable to DMC* was $32.9 million , up 184% versus last year’s six-month period. Cash flow provided by operations during the six-month period was $2.5 million versus cash flow used in operations of $6.0 million in the prior-year six-month period.
Arcadia $144.4 million , up 22% from pro forma sales in last year’s six-month period. Gross margin was 32% versus pro forma gross margin of 36% in the 2021 six-month period, and adjusted EBITDA attributable to DMC was $16.6 million , up 4% from the same period a year ago.
DynaEnergetics $116.4 million , up 45% versus last year’s six-month period. Gross margin improved to 28% from 24% a year ago, and adjusted EBITDA increased 111% to $18.6 million versus last year’s six-month period.
NobelClad $43.7 million , up 8% from the same period last year. Gross margin was 23% versus 27% last year, while adjusted EBITDA was $5.1 million versus $7.0 million in the 2021 six-month period.
Management Commentary
“At DynaEnergetics, the 38% sequential sales increase reflects strong customer demand in both North America and our international markets, as well as the impact of recent price increases. Shipments of fully integrated DS perforating systems in North America were a quarterly record, and we expect robust demand for these systems will persist during the second half of the year given the strong energy price environment and growing global demand for U.S. oil and gas. DynaEnergetics is planning a series of product introductions during the coming months, which we expect will strengthen our technological lead in the perforating industry.
“Arcadia’s second quarter results were above our forecast, principally due to price increases. Arcadia is reporting resilient demand from the commercial construction and high-end residential markets, and despite tight raw material supplies, Arcadia’s commercial teams were effective at maintaining relatively short customer lead times and reliable product availability, which have long been cornerstones of Arcadia’s commercial success. Our integration efforts are proceeding well, and we are making important progress on the design and planning of new finishing capacity.
“While NobelClad’s industrial end markets have been slower to recover from the Covid-19 pandemic and related supply chain disruptions, the business is capitalizing on the strong metal price environment, and its order backlog continues to improve. NobelClad has seen a surge in demand for its cryogenic transition joints, which are multi-layer composite-metal components used in processing equipment by the liquified natural gas (LNG) industry. NobelClad also is reporting increasing interest in its new DetaPipe offering.
“Our second quarter performance illustrates the growing strength of DMC and its family of innovative, differentiated businesses,” Longe added. “It also reflects the outstanding efforts of our talented employees. I am more encouraged than ever by DMC’s prospects for long-term, profitable growth and strong returns for our stakeholders.”
Guidance $155 million to $163 million versus the $165.8 million reported in the second quarter. At the business level, Arcadia is expected to report sales of $70 million to $73 million versus the $76.5 million reported in the second quarter. Sales at DynaEnergetics are expected in a range of $65 million to $69 million versus the $67.5 million reported in the second quarter, which included the previously mentioned large international order. NobelClad’s sales are expected in a range of $20 million to $21 million versus the $21.9 million reported in the second quarter. The expected decline at NobelClad principally reflects soft demand from the downstream energy industry, which is expected to recover in the coming quarters as refineries accelerate investments in repair and maintenance work.
Consolidated gross margin is expected in a range of 29% to 31% versus the 31% reported in the second quarter. The expected decline reflects a less favorable project mix at NobelClad, and a dip in margins at Arcadia resulting from a first quarter spike in aluminum prices that drove up the average cost of Arcadia’s inventory. The majority of this inventory is expected to be shipped during the third quarter.
Third quarter selling, general and administrative (SG&A) expense, which will include approximately $600,000 in implementation expense associated with a new enterprise resource planning system at NobelClad, is expected in a range of $30 million to $31 million versus the $29.4 million reported in the second quarter.
Third quarter amortization expense is expected to be $6.7 million versus the $12.8 million reported in the second quarter. The remaining value assigned to Arcadia’s acquired backlog was largely amortized during the second quarter, and amortization expense is expected to decline to $3.6 million in the fourth quarter.
Third quarter depreciation expense is expected to be $3.5 million , and interest expense is expected in a range of $1.9 million to $2.0 million .
Adjusted EBITDA attributable to DMC, after deducting the 40% noncontrolling interest, is expected in a range of $16 million to $19 million versus $22.4 million in the second quarter.
Third quarter capital expenditures are expected to be $5.0 million to $6.0 million .
Conference call information https://www.webcaster4.com/Webcast/Page/2204/46132 , or by dialing 888-506-0062 (973-528-0011 for international callers) and entering the code 762205. 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 August 11, 2022, by calling 877-481-4010 (919-882-2331 for international callers) and entering the Conference ID #46132.
*Use of Non-GAAP Financial Measures
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 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. 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 third quarter 2022 guidance on sales, gross margin, SG&A, depreciation expense, interest expense, adjusted EBITDA and capital expenditures; third quarter and full-year amortization expense; our expectations there will be strong demand for DynaEnergetics’ DS perforating systems during the second half of 2022; our expectations regarding the energy price environment and global demand for U.S. oil and gas, our plans for future product introductions at DynaEnergetics during the coming months and the impact on DynaEnergetics’ technological lead in the perforating industry and our expectations for improvement to NobelClad’s backlog. Such statements and information are based on numerous assumptions regarding present and future business strategies, the markets in which we operate, anticipated costs and 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; impacts of COVID-19 and any related preventive or protective actions taken by governmental authorities and resulting economic impacts, including inflation, recessions or depressions; 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.
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DMC GLOBAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Share and Per Share Data) (unaudited)
Three months ended Change Jun 30, 2022 Mar 31, 2022 Jun 30, 2021 Sequential Year-on-year NET SALES $ 165,831 $ 138,716 $ 65,438 20 % 153 % COST OF PRODUCTS SOLD 113,732 101,810 48,467 12 % 135 % Gross profit 52,099 36,906 16,971 41 % 207 % Gross profit percentage 31 % 27 % 26 % COSTS AND EXPENSES: General and administrative expenses 18,816 17,718 8,471 6 % 122 % Selling and distribution expenses 10,545 10,090 5,544 5 % 90 % Amortization of purchased intangible assets 12,793 12,976 288 -1 % 4,342 % Restructuring expenses and asset impairments 13 32 — -59 % — % Total costs and expenses 42,167 40,816 14,303 3 % 195 % OPERATING INCOME (LOSS) 9,932 (3,910 ) 2,668 354 % 272 % OTHER INCOME (EXPENSE): Other income (expense), net 54 (209 ) 108 126 % -50 % Interest expense, net (1,263 ) (1,024 ) (81 ) -23 % -1,459 % INCOME (LOSS) BEFORE INCOME TAXES 8,723 (5,143 ) 2,695 270 % 224 % INCOME TAX PROVISION (BENEFIT) 2,264 (863 ) 971 362 % 133 % NET INCOME (LOSS) 6,459 (4,280 ) 1,724 251 % 275 % Less: Net income (loss) attributable to redeemable noncontrolling interest 907 (992 ) — 191 % — % NET INCOME (LOSS) ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS $ 5,552 $ (3,288 ) $ 1,724 269 % 222 % NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS Basic $ 0.20 $ (0.47 ) $ 0.10 143 % 100 % Diluted $ 0.20 $ (0.47 ) $ 0.10 143 % 100 % WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 19,374,714 19,301,126 17,554,809 — % 10 % Diluted 19,374,736 19,301,126 17,568,444 — % 10 %
Reconciliation to net income (loss) attributable to DMC Global Inc. stockholders after adjustment of redeemable noncontrolling interest for purposes of calculating earnings per share
Three months ended Jun 30, 2022 Mar 31, 2022 Jun 30, 2021 Net income (loss) attributable to DMC Global Inc. stockholders $ 5,552 $ (3,288 ) $ 1,724 Adjustment of redeemable noncontrolling interest (1,535 ) (5,717 ) — Net income (loss) attributable to DMC Global Inc. common stockholders after adjustment of redeemable noncontrolling interest $ 4,017 $ (9,005 ) $ 1,724
Six months ended Change Jun 30, 2022 Jun 30, 2021 Year-on-year NET SALES $ 304,547 $ 121,096 151 % COST OF PRODUCTS SOLD 215,542 91,212 136 % Gross profit 89,005 29,884 198 % Gross profit percentage 29 % 25 % COSTS AND EXPENSES: General and administrative expenses 36,534 16,400 123 % Selling and distribution expenses 20,635 10,787 91 % Amortization of purchased intangible assets 25,769 612 4,111 % Restructuring expenses and asset impairments 45 127 -65 % Total costs and expenses 82,983 27,926 197 % OPERATING INCOME 6,022 1,958 208 % OTHER INCOME (EXPENSE): Other (expense) income, net (155 ) 502 -131 % Interest expense, net (2,287 ) (216 ) -959 % INCOME BEFORE INCOME TAXES 3,580 2,244 60 % INCOME TAX PROVISION 1,401 88 1,492 % NET INCOME 2,179 2,156 1 % Less: Net loss attributable to redeemable noncontrolling interest (85 ) — — % NET INCOME ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS $ 2,264 $ 2,156 5 % NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS Basic $ (0.26 ) $ 0.13 -300 % Diluted $ (0.26 ) $ 0.13 -300 % WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 19,338,049 16,495,685 17 % Diluted 19,338,049 16,507,500 17 %
Reconciliation to net income attributable to DMC Global Inc. stockholders after adjustment of redeemable noncontrolling interest for purposes of calculating earnings per share
Six months ended Jun 30, 2022 Jun 30, 2021 Net income attributable to DMC Global Inc. stockholders $ 2,264 $ 2,156 Adjustment of redeemable noncontrolling interest (7,252 ) — Net (loss) income attributable to DMC Global Inc. common stockholders after adjustment of redeemable noncontrolling interest $ (4,988 ) $ 2,156
DMC GLOBAL INC. SEGMENT STATEMENTS OF OPERATIONS (Amounts in Thousands) (unaudited)
Arcadia
Three months ended Change Jun 30, 2022 Mar 31, 2022 Sequential Net sales $ 76,462 $ 67,968 12 % Gross profit 26,227 20,245 30 % Gross profit percentage 34 % 30 % COSTS AND EXPENSES: General and administrative expenses 7,412 6,143 21 % Selling and distribution expenses 3,960 3,737 6 % Amortization of purchased intangible assets 12,633 12,808 -1 % Operating income (loss) 2,222 (2,443 ) 191 % Adjusted EBITDA 16,292 11,420 43 % Less: adjusted EBITDA attributable to redeemable noncontrolling interest (6,517 ) (4,568 ) 43 % Adjusted EBITDA attributable to DMC Global Inc. $ 9,775 $ 6,852 43 %
Six months ended Jun 30, 2022 Net sales $ 144,430 Gross profit 46,472 Gross profit percentage 32 % COSTS AND EXPENSES: General and administrative expenses 13,555 Selling and distribution expenses 7,697 Amortization of purchased intangible assets 25,441 Operating loss (221 ) Adjusted EBITDA $ 27,712 Less: adjusted EBITDA attributable to redeemable noncontrolling interest $ (11,085 ) Adjusted EBITDA attributable to DMC Global Inc. $ 16,627
DynaEnergetics
Three months ended Change Jun 30, 2022 Mar 31, 2022 Jun 30, 2021 Sequential Year-on-year Net sales $ 67,517 $ 48,887 $ 42,268 38 % 60 % Gross profit 19,960 12,608 10,676 58 % 87 % Gross profit percentage 30 % 26 % 25 % COSTS AND EXPENSES: General and administrative expenses 4,411 5,322 4,012 -17 % 10 % Selling and distribution expenses 4,158 3,903 3,300 7 % 26 % Amortization of purchased intangible assets 82 85 163 -4 % -50 % Operating income 11,309 3,298 3,201 243 % 253 % Adjusted EBITDA $ 13,276 $ 5,282 $ 5,284 151 % 151 %
Six months ended Change Jun 30, 2022 Jun 30, 2021 Year-on-year Net sales $ 116,404 $ 80,440 45 % Gross profit 32,568 19,111 70 % Gross profit percentage 28 % 24 % COSTS AND EXPENSES: General and administrative expenses 9,733 7,587 28 % Selling and distribution expenses 8,061 6,442 25 % Amortization of purchased intangible assets 167 362 -54 % Operating income 14,607 4,720 209 % Adjusted EBITDA $ 18,558 $ 8,803 111 %
NobelClad
Three months ended Change Jun 30, 2022 Mar 31, 2022 Jun 30, 2021 Sequential Year-on-year Net sales $ 21,852 $ 21,861 $ 23,170 — % -6 % Gross profit 6,026 4,181 6,460 44 % -7 % Gross profit percentage 28 % 19 % 28 % COSTS AND EXPENSES: General and administrative expenses 1,132 1,037 889 9 % 27 % Selling and distribution expenses 2,323 2,324 2,075 — % 12 % Amortization of purchased intangible assets 78 83 125 -6 % -38 % Restructuring expenses and asset impairments 13 32 — -59 % — % Operating income 2,480 705 3,371 252 % -26 % Adjusted EBITDA $ 3,404 $ 1,652 $ 4,316 106 % -21 %
Six months ended Change Jun 30, 2022 Jun 30, 2021 Year-on-year Net sales $ 43,713 $ 40,656 8 % Gross profit 10,207 11,077 -8 % Gross profit percentage 23 % 27 % COSTS AND EXPENSES: General and administrative expenses 2,169 1,702 27 % Selling and distribution expenses 4,647 4,022 16 % Amortization of purchased intangible assets 161 250 -36 % Restructuring expenses and asset impairments 45 127 -65 % Operating income 3,185 4,976 -36 % Adjusted EBITDA $ 5,056 $ 6,987 -28 %
DMC GLOBAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS
Change Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sequential From year-end (unaudited) (unaudited) ASSETS Cash and cash equivalents $ 11,819 $ 15,376 $ 30,810 -23 % -62 % Accounts receivable, net 92,998 79,782 71,932 17 % 29 % Inventories 152,023 143,304 124,214 6 % 22 % Other current assets 11,888 17,354 12,240 -31 % -3 % Total current assets 268,728 255,816 239,196 5 % 12 % Property, plant and equipment, net 124,829 120,479 122,078 4 % 2 % Goodwill 135,464 140,234 141,266 -3 % -4 % Purchased intangible assets, net 229,365 242,568 255,576 -5 % -10 % Other long-term assets 105,169 104,827 106,296 — % -1 % Total assets $ 863,555 $ 863,924 $ 864,412 — % — % LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY Accounts payable $ 45,179 $ 48,114 $ 40,276 -6 % 12 % Contract liabilities 33,202 26,952 21,052 23 % 58 % Accrued income taxes 289 834 9 -65 % 3,111 % Current portion of long-term debt 15,000 15,000 15,000 — % — % Other current liabilities 27,740 30,288 29,477 -8 % -6 % Total current liabilities 121,410 121,188 105,814 — % 15 % Long-term debt 125,017 128,710 132,425 -3 % -6 % Deferred tax liabilities 2,019 937 2,202 115 % -8 % Other long-term liabilities 62,858 64,398 66,250 -2 % -5 % Redeemable noncontrolling interest 197,196 197,196 197,196 — % — % Stockholders’ equity 355,055 351,495 360,525 1 % -2 % Total liabilities, redeemable noncontrolling interest, and stockholders’ equity $ 863,555 $ 863,924 $ 864,412 — % — %
DMC GLOBAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands) (unaudited)
Three months ended Jun 30, 2022 Mar 31, 2022 Jun 30, 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 6,459 $ (4,280 ) $ 1,724 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 3,678 3,359 2,832 Amortization of purchased intangible assets 12,793 12,976 288 Amortization of deferred debt issuance costs 135 132 56 Amortization of acquisition-related inventory valuation step-up 172 258 — Stock-based compensation 2,291 2,358 1,727 Deferred income taxes 2,550 (2,714 ) (282 ) Restructuring expenses and asset impairments 13 32 — Other 36 9 5 Change in working capital, net (21,007 ) (16,714 ) (14,547 ) Net cash provided by (used in) operating activities 7,120 (4,584 ) (8,197 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from escrow related to acquisition of a business 640 — — Investment in marketable securities — — (123,984 ) Acquisition of property, plant and equipment (4,783 ) (1,536 ) (1,887 ) Proceeds on sale of property, plant and equipment — — 723 Net cash used in investing activities (4,143 ) (1,536 ) (125,148 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayments on term loan (3,750 ) (3,750 ) — Payment of debt issuance costs (79 ) (97 ) — Net proceeds from issuance of common stock through equity offering — — 123,461 Net proceeds from issuance of common stock to employees and directors — — 253 Distribution to redeemable noncontrolling interest holder (2,600 ) (4,400 ) — Treasury stock purchases (6 ) (1,088 ) (16 ) Net cash (used in) provided by financing activities (6,435 ) (9,335 ) 123,698 EFFECTS OF EXCHANGE RATES ON CASH (99 ) 21 173 NET DECREASE IN CASH AND CASH EQUIVALENTS (3,557 ) (15,434 ) (9,474 ) CASH AND CASH EQUIVALENTS, beginning of the period 15,376 30,810 45,837 CASH AND CASH EQUIVALENTS, end of the period $ 11,819 $ 15,376 $ 36,363
Six months ended Jun 30, 2022 Jun 30, 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,179 $ 2,156 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 7,037 5,530 Amortization of purchased intangible assets 25,769 612 Amortization of deferred debt issuance costs 267 112 Amortization of acquisition-related inventory valuation step-up 430 — Stock-based compensation 4,649 3,335 Deferred income taxes (164 ) (2,616 ) Restructuring expenses and asset impairments 45 127 Other 45 (283 ) Change in working capital, net (37,721 ) (14,994 ) Net cash provided by (used in) operating activities 2,536 (6,021 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from escrow related to acquisition of a business 640 — Investment in marketable securities — (123,984 ) Proceeds from maturities of marketable securities — 4,799 Acquisition of property, plant and equipment (6,319 ) (3,252 ) Proceeds on sale of property, plant and equipment — 1,004 Net cash used in investing activities (5,679 ) (121,433 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayments on credit facilities (7,500 ) (11,750 ) Payments of deferred debt issuance costs (176 ) — 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 (7,000 ) — Treasury stock purchases (1,094 ) (2,451 ) Net cash (used in) provided by financing activities (15,770 ) 134,775 EFFECTS OF EXCHANGE RATES ON CASH (78 ) 855 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (18,991 ) 8,176 CASH AND CASH EQUIVALENTS, beginning of the period 30,810 28,187 CASH AND CASH EQUIVALENTS, end of the period $ 11,819 $ 36,363
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 Jun 30, 2022 Mar 31, 2022 Jun 30, 2021 Sequential Year-on-year Net income (loss) 6,459 (4,280 ) 1,724 251 % 275 % Interest expense, net 1,263 1,024 81 23 % 1,459 % Income tax provision (benefit) 2,264 (863 ) 971 -362 % 133 % Depreciation 3,678 3,359 2,832 9 % 30 % Amortization of purchased intangible assets 12,793 12,976 288 -1 % 4,342 % EBITDA 26,457 12,216 5,896 117 % 349 % Amortization of acquisition-related inventory valuation step-up 172 258 — -33 % — % Restructuring expenses and asset impairments 13 32 — -59 % — % Stock-based compensation 2,291 2,358 1,727 -3 % 33 % Other (income) expense, net (54 ) 209 (108 ) -126 % 50 % Adjusted EBITDA $ 28,879 $ 15,073 $ 7,515 92 % 284 % Less: adjusted EBITDA attributable to redeemable noncontrolling interest (6,517 ) (4,568 ) — -43 % — % Adjusted EBITDA attributable to DMC Global Inc. $ 22,362 $ 10,505 $ 7,515 113 % 198 %
Six months ended Change Jun 30, 2022 Jun 30, 2021 Year-on-year Net income $ 2,179 $ 2,156 1 % Interest expense, net 2,287 216 959 % Income tax provision 1,401 88 1,492 % Depreciation 7,037 5,530 27 % Amortization of purchased intangible assets 25,769 612 4,111 % EBITDA 38,673 8,602 350 % Amortization of acquisition-related inventory valuation step-up 430 — n/a Restructuring expenses and asset impairments 45 127 -65 % Stock-based compensation 4,649 3,335 39 % Other expense (income), net 155 (502 ) 131 % Adjusted EBITDA $ 43,952 $ 11,562 280 % Less: adjusted EBITDA attributable to redeemable noncontrolling interest (11,085 ) — n/a Adjusted EBITDA attributable to DMC Global Inc. $ 32,867 $ 11,562 184 %
Adjusted Net Income and Adjusted Diluted Earnings per Share
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 and asset impairments, net of tax 9 — As adjusted $ 5,640 $ 0.29
(1) Calculated using diluted weighted average shares outstanding of 19,374,736
Three months ended March 31, 2022 Amount Per Share(1) Net loss attributable to DMC Global Inc. $ (3,288 ) $ (0.17 ) Amortization of acquisition-related inventory valuation step-up, net of tax 133 0.01 NobelClad restructuring expenses and asset impairments, net of tax 22 — As adjusted $ (3,133 ) $ (0.16 )
(1) Calculated using diluted weighted average shares outstanding of 19,301,126
Three months ended June 30, 2021 Amount Per Share(1) Net income attributable to DMC Global Inc. $ 1,724 $ 0.10 As adjusted $ 1,724 $ 0.10
1) Calculated using diluted weighted average shares outstanding of 17,568,444
Six months ended June 30, 2022 Amount Per Share(1) Net income attributable to DMC Global Inc. $ 2,264 $ 0.12 Amortization of acquisition-related inventory valuation step-up, net of tax 199 0.01 NobelClad restructuring expenses and asset impairments, net of tax 30 — As adjusted $ 2,493 $ 0.13
1) Calculated using diluted weighted average shares outstanding of 19,338,049
Six months ended June 30, 2021 Amount Per Share(1) Net income attributable to DMC Global Inc. $ 2,156 $ 0.13 NobelClad restructuring expenses and asset impairments, net of tax 127 0.01 As adjusted $ 2,283 $ 0.14
1) Calculated using diluted weighted average shares outstanding of 16,507,500
Segment Adjusted EBITDA
Arcadia Three months ended Change Jun 30, 2022 Mar 31, 2022 Sequential Operating income (loss), as reported $ 2,222 $ (2,443 ) 191 % Adjustments: Amortization of acquisition-related inventory valuation step-up 172 258 -33 % Depreciation 870 541 61 % Amortization of purchased intangible assets 12,633 12,808 -1 % Stock-based compensation 395 256 54 % Adjusted EBITDA 16,292 11,420 43 % Less: adjusted EBITDA attributable to redeemable noncontrolling interest (6,517 ) $ (4,568 ) 43 % Adjusted EBITDA attributable to DMC Global Inc. $ 9,775 $ 6,852 43 %
Six months ended Jun 30, 2022 Operating loss, as reported $ (221 ) Adjustments: Amortization of acquisition-related inventory valuation step-up 430 Depreciation 1,411 Amortization of purchased intangible assets 25,441 Stock-based compensation 651 Adjusted EBITDA 27,712 Less: adjusted EBITDA attributable to redeemable noncontrolling interest (11,085 ) Adjusted EBITDA attributable to DMC Global Inc. $ 16,627
Three months ended Change Jun 30, 2022 Mar 31, 2022 Jun 30, 2021 Sequential Year-on-year Operating income, as reported $ 11,309 $ 3,298 $ 3,201 243 % 253 % Adjustments: Depreciation 1,885 1,899 1,920 -1 % -2 % Amortization of purchased intangible assets 82 85 163 -4 % -50 % Adjusted EBITDA $ 13,276 $ 5,282 $ 5,284 151 % 151 %
Six months ended Change Jun 30, 2022 Jun 30, 2021 Year-on-year Operating income, as reported $ 14,607 $ 4,720 209 % Adjustments: Depreciation 3,784 3,721 2 % Amortization of purchased intangible assets 167 362 -54 % Adjusted EBITDA $ 18,558 $ 8,803 111 %
NobelClad
Three months ended Change Jun 30, 2022 Mar 31, 2022 Jun 30, 2021 Sequential Year-on-year Operating income, as reported $ 2,480 $ 705 $ 3,371 252 % -26 % Adjustments: Restructuring expenses and asset impairments 13 32 — -59 % — % Depreciation 833 832 820 — % 2 % Amortization of purchased intangible assets 78 83 125 -6 % -38 % Adjusted EBITDA $ 3,404 $ 1,652 $ 4,316 106 % -21 %
Six months ended Change Jun 30, 2022 Jun 30, 2021 Year-on-year Operating income, as reported $ 3,185 $ 4,976 -36 % Adjustments: Restructuring expenses and asset impairments 45 127 -65 % Depreciation 1,665 1,634 2 % Amortization of purchased intangible assets 161 250 -36 % Adjusted EBITDA $ 5,056 $ 6,987 -28 %
DMC GLOBAL INC. PRO FORMA RESULTS (Amounts in Thousands, Except Per Share Data) (unaudited)
Pro Forma Summary Income Statement*
Three months ended June 30, 2021 DMC Arcadia Redeemable (1) Pro Forma Pro Forma Net sales $ 65,438 $ 61,138 $ 61,138 $ 126,576 Gross profit 16,971 21,482 21,482 38,453 Gross profit percentage 26 % 35 % 35 % 30 % Selling, general, and administrative expenses 14,015 8,262 8,262 22,277 Amortization of purchased intangible assets 288 — — 288 Operating income 2,668 13,220 13,220 15,888 Depreciation and amortization 3,120 451 451 3,571 Stock-based compensation expense 1,727 — — 1,727 Adjusted EBITDA 7,515 13,671 (5,468 ) 8,203 15,718 Adjusted EBITDA % 11 % 22 % 13 % 12 %
(1) Represents the Adjusted EBITDA attributable to the 40% redeemable noncontrolling interest.
Six months ended June 30, 2021 DMC Arcadia Redeemable (1) Pro Forma Pro Forma Net sales $ 121,096 $ 118,379 $ 118,379 $ 239,475 Gross profit 29,884 42,412 42,412 72,296 Gross profit percentage 25 % 36 % 36 % 30 % Selling, general, and administrative expenses 27,187 16,715 16,715 43,902 Amortization of purchased intangible assets 612 — — 612 Restructuring expenses and asset impairments 127 — — 127 Operating income 1,958 25,697 25,697 27,655 Depreciation and amortization 6,142 857 857 6,999 Restructuring expenses and asset impairments 127 — — 127 Stock-based compensation expense 3,335 — — 3,335 Adjusted EBITDA 11,562 26,554 (10,622 ) 15,932 27,494 Adjusted EBITDA % 10 % 22 % 13 % 11 %
(1) Represents the Adjusted EBITDA attributable to the 40% redeemable noncontrolling interest.
Pro Forma EBITDA and Adjusted EBITDA*
Three months ended June 30, 2021 DMC Arcadia Pro Forma Net income $ 1,724 $ 13,220 $ 14,944 Interest expense, net 81 — 81 Income tax provision 971 — 971 Depreciation 2,832 451 3,283 Amortization of purchased intangible assets 288 — 288 EBITDA 5,896 13,671 19,567 Stock-based compensation expense 1,727 — 1,727 Other income, net (108 ) — (108 ) Adjusted EBITDA 7,515 13,671 21,186 Less: adjusted EBITDA attributable to redeemable noncontrolling interest — (5,468 ) (5,468 ) Adjusted EBITDA attributable to DMC Global Inc. 7,515 8,203 15,718
Six months ended June 30, 2021 DMC Arcadia Pro Forma Net income $ 2,156 $ 25,697 $ 27,853 Interest expense, net 216 — 216 Income tax benefit 88 — 88 Depreciation 5,530 857 6,387 Amortization 612 — 612 EBITDA 8,602 26,554 35,156 Restructuring 127 — 127 Stock-based compensation expense 3,335 — 3,335 Other income, net (502 ) — (502 ) Adjusted EBITDA 11,562 26,554 38,116 Less: adjusted EBITDA attributable to redeemable noncontrolling interest — (10,622 ) (10,622 ) Adjusted EBITDA attributable to DMC Global Inc. 11,562 15,932 27,494
*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”).
