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DMC (BOOM) - 2023 Q4 - Annual Report
BOOMDMC (BOOM)2024-02-22 16:00
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Sales Performance - DynaEnergetics' sales increased by 19% to 315,026in2023,drivenbya28315,026 in 2023, driven by a 28% increase in international sales and an 18% increase in North American sales[435] - Net sales increased by 10% to 719,188 for the twelve months ended December 31, 2023, driven by DynaEnergetics' DS perforating systems and NobelClad's energy and petrochemical markets[468] - DynaEnergetics total revenue increased to 315.026millionin2023from315.026 million in 2023 from 264.327 million in 2022, with significant growth in the United States (245.391millionin2023vs.245.391 million in 2023 vs. 211.025 million in 2022)[802] - Arcadia Products reported sales of 298,909in2023,consistentwith298,909 in 2023, consistent with 299,527 in 2022[462] Expenses and Costs - Consolidated SG&A expenses rose to 124,442in2023,upfrom124,442 in 2023, up from 118,349 in 2022, primarily due to 4,343inCEOtransitionexpensesandhighercompensationcosts[436]−Generalandadministrativeexpensesdecreasedby4,343 in CEO transition expenses and higher compensation costs[436] - General and administrative expenses decreased by 3,821 in 2023, primarily due to lower patent litigation costs of 3,019[486]−Researchanddevelopmentcostswere3,019[486] - Research and development costs were 6,864 in 2023, slightly higher than 6,781in2022butlowerthan6,781 in 2022 but lower than 7,240 in 2021[733] - Restructuring expenses totaled 3,766in2023,including3,766 in 2023, including 1,871 in asset impairments at DynaEnergetics and 440atNobelClad[766]−Totalrestructuringexpensesfor2023were440 at NobelClad[766] - Total restructuring expenses for 2023 were 3,766, primarily related to asset impairments and employee severance[741] - Unallocated corporate expenses, including restructuring and asset impairments, increased by 3,584in2023,primarilydueto3,584 in 2023, primarily due to 2,471 in software asset impairments and 1,295incostreductioninitiativesatDynaEnergetics[470]−Restructuringexpensesandassetimpairmentstotaled1,295 in cost reduction initiatives at DynaEnergetics[470] - Restructuring expenses and asset impairments totaled 17,466, with unallocated stock-based compensation at 8,544[826]AssetsandLiabilities−Currentassetsincreasedto8,544[826] Assets and Liabilities - Current assets increased to 326,812 in 2023 from 286,872in2022,drivenbyhighercashandcashequivalents(286,872 in 2022, driven by higher cash and cash equivalents (31,040 vs. 25,144)andaccountsreceivable(25,144) and accounts receivable (106,205 vs. 94,415)[644]−Property,plant,andequipmentnetvalueslightlydecreasedto94,415)[644] - Property, plant, and equipment net value slightly decreased to 129,267 in 2023 from 129,445in2022,despiteanincreaseingrosspropertyvalueto129,445 in 2022, despite an increase in gross property value to 223,683 from 211,277[644]−Goodwillremainedunchangedat211,277[644] - Goodwill remained unchanged at 141,725 in 2023, while purchased intangible assets decreased to 195,260from195,260 from 217,925 in 2022[644] - Total assets increased marginally to 884,495in2023from884,495 in 2023 from 878,978 in 2022, with a notable increase in inventories to 166,712from166,712 from 156,590[644] - The company's total debt as of December 31, 2023, was 115,851,withatermloanof115,851, with a term loan of 117,500 and no outstanding revolving loan[775] - The company's line of credit with a German bank has a borrowing capacity of €7,000, with no outstanding borrowings as of December 31, 2023[756] - The company's ROU asset and lease liability as of December 31, 2023, were 45,409and45,409 and 47,396, respectively[772] - The company's total future minimum lease payments as of December 31, 2023, were 55,495,withimputedinterestof55,495, with imputed interest of 8,099[752] - The company's total intangible assets were 195,260asofDecember31,2023,withcustomerrelationshipsaccountingfor195,260 as of December 31, 2023, with customer relationships accounting for 176,215 of the net value[769] Income and Profitability - The company's net income attributable to DMC Global Inc. stockholders increased from 12,247,000in2022to12,247,000 in 2022 to 26,259,000 in 2023[712] - Basic EPS increased from 0.72in2022to0.72 in 2022 to 1.08 in 2023, with diluted EPS remaining the same as basic EPS[712] - Adjusted EBITDA increased to 56,270in2023from56,270 in 2023 from 46,932 in 2022, driven by higher operating income and lower depreciation expenses[487] - Total income before income taxes increased to 49.879millionin2023from49.879 million in 2023 from 23.209 million in 2022, driven by foreign income (33.698millionin2023vs.33.698 million in 2023 vs. 23.511 million in 2022)[819] - Income before income taxes for Arcadia Products was 21,407,comparedtoalossof21,407, compared to a loss of 2,020 in the previous period[826] - Segment operating income was 87,187,withDynaEnergeticscontributing87,187, with DynaEnergetics contributing 46,353 and NobelClad contributing 19,427[826]TaxesandProvisions−Theincometaxprovision(benefit)fortheyearendedDecember31,2023was19,427[826] Taxes and Provisions - The income tax provision (benefit) for the year ended December 31, 2023 was 15,120, compared to 9,376in2022and(9,376 in 2022 and (1,544) in 2021[796] - Current income tax expense increased to 14.150millionin2023from14.150 million in 2023 from 9.975 million in 2022, with foreign tax expense contributing 9.895millionin2023[819]−Netdeferredtaxassetsdecreasedto9.895 million in 2023[819] - Net deferred tax assets decreased to 4.782 million in 2023 from 5.725millionin2022,primarilyduetochangesinvaluationallowances[821]−Thecompany′staxbenefitsfromuncertaintaxpositionsarerecognizedonlywhenitismorelikelythannotthatthepositionwillbesustaineduponexamination[709]−Thecompanyhadtaxlosscarryforwardstotalingapproximately5.725 million in 2022, primarily due to changes in valuation allowances[821] - The company's tax benefits from uncertain tax positions are recognized only when it is more likely than not that the position will be sustained upon examination[709] - The company had tax loss carryforwards totaling approximately 55,317 as of December 31, 2023, with 37,072foreignand37,072 foreign and 18,245 domestic state loss carryforwards[795] Leases and Contracts - DynaEnergetics leases manufacturing and storage facilities in Germany, the U.S., and Canada, with lease expirations ranging from 2025 to 2050[445][446] - Total operating lease expense for 2023 was 12,822,comparedto12,822, compared to 11,883 in 2022 and 4,453in2021[750]−TheweightedaverageremainingleasetermforoperatingleasesasofDecember31,2023,was7.0years,withaweightedaveragediscountrateof4.34,453 in 2021[750] - The weighted average remaining lease term for operating leases as of December 31, 2023, was 7.0 years, with a weighted average discount rate of 4.3%[752] - Contract liabilities decreased to 21,621 in 2023 from 32,080in2022,withArcadiaProductscontributing32,080 in 2022, with Arcadia Products contributing 13,815 and NobelClad contributing 6,662[722]InvestmentsandFinancialInstruments−Thecompany′sforeigncurrencyforwardcontractsandmoneymarketfundsareclassifiedasLevel2assets,valuedat6,662[722] Investments and Financial Instruments - The company's foreign currency forward contracts and money market funds are classified as Level 2 assets, valued at 3,257 as of December 31, 2023[713] - The company did not hold any Level 3 assets or liabilities as of December 31, 2023 or December 31, 2022[714] - The company's investment policy limits credit exposure to any one issuer and focuses on preserving principal and providing liquidity[687] - The fair value of RSAs and RSUs granted to employees and non-employee directors is based on the fair value of DMC's stock on the grant date[759] Employee Benefits and Compensation - 5,000,000 shares were approved for grant under the 2016 Omnibus Incentive Plan, with 3,360,119 shares available at inception and 1,777,266 shares remaining as of December 31, 2023[780] - Unvested RSUs under the 2016 Plan had a balance of 53,971 shares as of December 31, 2023, with a weighted average grant date fair value of 28.33[784]−TheEmployeeStockPurchasePlan(ESPP)had161,269sharesavailableforfuturepurchaseasofDecember31,2023,with20,686sharespurchasedin2023[785]−TotalDMCcontributionstothe401(k)Planwere28.33[784] - The Employee Stock Purchase Plan (ESPP) had 161,269 shares available for future purchase as of December 31, 2023, with 20,686 shares purchased in 2023[785] - Total DMC contributions to the 401(k) Plan were 2,590, 1,772,and1,772, and 1,057 for the years ended December 31, 2023, 2022, and 2021, respectively[788] - The company recorded an unfunded pension obligation of 1,490and1,490 and 1,352 as of December 31, 2023 and 2022, respectively[789] - Deferred compensation obligations settled in cash are adjusted based on changes in the value of underlying investment options chosen by Plan participants[791] - Stock-based compensation increased to 10.270millionin2023from10.270 million in 2023 from 10.058 million in 2022, with a net impact of 7.166millionaftertaxes[806]−Thecompanycontributed7.166 million after taxes[806] - The company contributed 285 to the defined contribution plan in 2023, compared to 261in2022and261 in 2022 and 282 in 2021[814] - Unvested PSUs under the 2016 Plan decreased to a balance of 33.62 at the end of 2023, down from 51.67 at the end of 2022[811] Market and Industry Dependence - NobelClad's business is highly dependent on cyclical markets and metal prices, with demand driven by maintenance, retrofit projects, and new industrial projects[460][295] - NobelClad's backlog increased to 59,357asofDecember31,2023,comparedto59,357 as of December 31, 2023, compared to 55,451 in 2022, with most orders expected to ship within twelve months[439] Foreign Currency and Exchange Rates - Sales in currencies other than U.S. dollars accounted for 9% of total sales in 2023, down from 16% in 2021, with the Euro being the primary foreign currency exposure[629] - The company's functional currency for foreign operations is the local currency, with assets and liabilities translated at period-end exchange rates, and Statements of Operations at average exchange rates during the period[657] Credit and Allowances - The allowance for doubtful accounts increased from 925,000in2022to925,000 in 2022 to 1,955,000 in 2023, with a current period provision for expected credit losses of 1,508,000[689]−Thecompany′sleverageratioiscappedat3.0to1.0fromDecember31,2023,asperthecreditfacilityterms[804]−Thecompany′sdebtservicecoverageratiounderthecreditfacilitymustmaintainaminimumof1.35to1.0[777]RevenueRecognition−RevenuerecognitionforDynaEnergeticsandNobelCladoccurswhencontrolistransferredatapointintime,whileArcadiaProductsmayrecognizerevenueovertimeforcustomizedproducts[700]−Thecompany′srevenuerecognitionforcustomizedproductsinArcadiaProductsisbasedonanover−timeoutputmethod,withshipmentsfulfillingperformanceobligations[703]DepreciationandAmortization−Consolidateddepreciationandamortizationdecreasedto1,508,000[689] - The company's leverage ratio is capped at 3.0 to 1.0 from December 31, 2023, as per the credit facility terms[804] - The company's debt service coverage ratio under the credit facility must maintain a minimum of 1.35 to 1.0[777] Revenue Recognition - Revenue recognition for DynaEnergetics and NobelClad occurs when control is transferred at a point in time, while Arcadia Products may recognize revenue over time for customized products[700] - The company's revenue recognition for customized products in Arcadia Products is based on an over-time output method, with shipments fulfilling performance obligations[703] Depreciation and Amortization - Consolidated depreciation and amortization decreased to 36.507 million in 2023 from 51.207millionin2022[800]−Consolidatedacquisitionofproperty,plant,andequipmentdecreasedto51.207 million in 2022[800] - Consolidated acquisition of property, plant, and equipment decreased to 15.974 million in 2023 from 18.584millionin2022[800]−Thecompany′spurchasedintangibleassetshavearemainingweightedaverageamortizationperiodofapproximately13years[746]LegalandRegulatoryMatters−Thecompanyreachedasettlementof18.584 million in 2022[800] - The company's purchased intangible assets have a remaining weighted average amortization period of approximately 13 years[746] Legal and Regulatory Matters - The company reached a settlement of 375 out of a total 600toresolvePAGAclaimsintheFelipeandMayorgaactions[837]−Thecompany′sdisclosurecontrolsandproceduresweredeemedeffectiveasofDecember31,2023[843]−NochangesordisagreementswithaccountantsonaccountingandfinancialdisclosureforthefiscalyearendedDecember31,2023[842]InterestandDebt−Interestexpense,net,increasedto600 to resolve PAGA claims in the Felipe and Mayorga actions[837] - The company's disclosure controls and procedures were deemed effective as of December 31, 2023[843] - No changes or disagreements with accountants on accounting and financial disclosure for the fiscal year ended December 31, 2023[842] Interest and Debt - Interest expense, net, increased to 9,516 in 2023 from 6,187in2022[826]−Theredeemablenoncontrollinginterestwas6,187 in 2022[826] - The redeemable noncontrolling interest was 187,760 as of December 31, 2023, compared to 187,522in2022[725]AssetImpairments−Assetimpairmentsof187,522 in 2022[725] Asset Impairments - Asset impairments of 2,471 were recorded in 2023, including 1,871forasoftwareassetatDynaEnergeticsand1,871 for a software asset at DynaEnergetics and 440 for a manufacturing asset at NobelClad[719] - The company's reporting units for goodwill impairment assessment are Arcadia Products, DynaEnergetics, and NobelClad[663] Earnings Per Share - Earnings per share calculations for 2023 and 2022 included all potentially dilutive shares, as the company was in a net income position[736]