DMC (US:BOOM)2021-04-21 16:00Part I - Financial Information Item 1. Condensed Consolidated Financial Statements Q1 2021 net sales decreased 24% to $55.7 million, with net income at $0.4 million, while total assets increased to $304.8 million and debt was fully repaid Condensed Consolidated Balance Sheets As of March 31, 2021, total assets reached $304.8 million, driven by increased cash, with total liabilities at $86.4 million, equity at $218.4 million, and long-term debt eliminated Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2021 (unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $45,837 | $28,187 | | Total current assets | $168,188 | $143,310 | | Total assets | $304,817 | $279,645 | | Liabilities & Equity | | | | Total current liabilities | $58,373 | $47,108 | | Long-term debt | $0 | $8,139 | | Total liabilities | $86,387 | $82,731 | | Total stockholders' equity | $218,430 | $196,914 | Condensed Consolidated Statements of Operations Q1 2021 net sales decreased 24% to $55.7 million, gross profit fell 47% to $12.9 million, resulting in an operating loss of $0.7 million and net income of $0.4 million Q1 2021 vs. Q1 2020 Statement of Operations (in thousands, except per share data) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Net sales | $55,658 | $73,564 | | Gross profit | $12,913 | $24,470 | | Operating (loss) income | $(710) | $6,347 | | Net income | $432 | $4,155 | | Diluted EPS | $0.03 | $0.28 | Condensed Consolidated Statements of Cash Flows Q1 2021 operating cash flow was $2.2 million, investing activities provided $3.7 million, and financing activities provided $11.1 million, leading to a $17.7 million net increase in cash Cash Flow Summary (in thousands) | Cash Flow Activity | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,176 | $4,920 | | Net cash provided by (used in) investing activities | $3,715 | $(5,121) | | Net cash provided by (used in) financing activities | $11,077 | $(3,681) | | Net increase (decrease) in cash | $17,650 | $(3,902) | | Cash and cash equivalents, end of period | $45,837 | $16,451 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, inventory at $57.9 million, elimination of $11.75 million long-term debt, $25.3 million net proceeds from ATM equity, and segment sales - During Q1 2021, the company sold 397,820 shares through its ATM equity program for gross proceeds of $25.6 million, resulting in net proceeds of $25.3 million84 - In February 2021, the company repaid the remaining Capex Facility balance of $11.75 million, resulting in no outstanding debt as of March 31, 202171 Net Sales by Business Segment (in thousands) | Segment | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | DynaEnergetics | $38,172 | $53,220 | | NobelClad | $17,486 | $20,344 | | Total Net Sales | $55,658 | $73,564 | Operating Income by Business Segment (in thousands) | Segment | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | DynaEnergetics | $1,521 | $8,606 | | NobelClad | $1,604 | $1,476 | | Total Segment Operating Income | $3,125 | $10,082 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated sales declined 24% due to pandemic and operational issues, gross margin fell to 23.2%, while liquidity improved to $66.8 million through equity offerings and debt repayment - Consolidated sales decreased 24% YoY, primarily due to the COVID-19 pandemic's impact on energy demand, a winter storm in Texas affecting DynaEnergetics ($5.1 million sales pushed out), and shipping delays at NobelClad ($1.7 million)123 - The company's net cash position (cash and marketable securities minus total debt) improved from $42.7 million at year-end 2020 to $66.8 million at March 31, 2021, largely due to proceeds from the ATM equity program123167 - The outlook for DynaEnergetics is improving with accelerating well completion activity, but a sustained recovery depends on stable oil prices and a successful global vaccine rollout. The company also expects increased litigation expenses to protect its intellectual property124 Adjusted EBITDA Reconciliation (in thousands) | Reconciliation Item | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Net income | $432 | $4,155 | | Interest expense, net | $135 | $238 | | Income tax (benefit) provision | $(883) | $2,069 | | Depreciation & Amortization | $3,022 | $2,706 | | EBITDA | $2,706 | $9,168 | | Restructuring expenses | $127 | $1,116 | | Stock-based compensation | $1,608 | $1,118 | | Other income, net | $(394) | $(115) | | Adjusted EBITDA | $4,047 | $11,287 | Business Segment Financial Information DynaEnergetics' sales fell 28% to $38.2 million with gross margin at 22.1%, while NobelClad's sales decreased 14% to $17.5 million but its gross margin improved to 26.4% - DynaEnergetics' sales decreased 28% YoY, with gross profit percentage falling from 36.6% to 22.1% due to lower market activity, reduced selling prices, and costs from the Texas winter storm151152 - NobelClad's sales decreased 14% YoY due to shipment timing, but its gross profit percentage increased to 26.4% from 25.3% due to a favorable project mix, leading to a 9% increase in operating income159160163 Liquidity and Capital Resources The company significantly improved liquidity by repaying $11.75 million debt and generating $25.3 million from equity, maintaining $50.0 million available borrowing capacity - The company repaid its outstanding Capex Facility balance of $11.75 million in February 2021 and had no outstanding borrowings as of March 31, 2021170 - Since its inception in Q4 2020, the ATM equity program has sold 1,006,180 shares for net proceeds of $51.0 million166 - As of March 31, 2021, available borrowing capacity was $50.0 million, and the company was in compliance with all financial covenants177180 Item 3. Quantitative and Qualitative Disclosure about Market Risk No material changes occurred in market risk related to foreign currency exchange rates and interest rates compared to the 2020 Annual Report on Form 10-K - There were no material changes in market risk for changes in foreign currency exchange rates and interest rates from the information provided in the company's 2020 Annual Report on Form 10-K189 Item 4. Controls and Procedures The CEO and CFO confirmed the effectiveness of disclosure controls and procedures, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by the report190 - No changes occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting191 Part II - Other Information Item 1. Legal Proceedings The company is not aware of any legal proceedings or claims expected to have a material adverse effect on its business or financial condition - The company is currently not aware of any legal proceedings or claims that it believes will have a material adverse effect on its business, financial condition or operating results108194 Item 1A. Risk Factors No significant changes occurred in the risk factors previously disclosed in the 2020 Annual Report on Form 10-K - No significant changes have occurred in the risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020195 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company retained 56,101 shares at an average price of $65.63 to cover employee withholding tax obligations related to restricted stock vesting - In connection with the vesting of restricted common stock, the company retained shares to satisfy withholding tax obligations. These shares are held as treasury shares196 Share Purchases in Q1 2021 | Period | Total number of shares purchased | Average price paid per share | | :--- | :--- | :--- | | January 1 to January 31, 2021 | — | $ — | | February 1 to February 28, 2021 | 38,001 | $65.75 | | March 1 to March 31, 2021 | 18,100 | $65.37 | | Total | 56,101 | $65.63 | Item 4. Mine Safety Disclosures The company reported no specified health and safety violations, orders, citations, or mining-related fatalities at its MSHA-regulated Coolspring property - During the quarter ended March 31, 2021, the company had no specified health and safety violations, orders, citations, or other reportable events under the Dodd-Frank Act for its MSHA-regulated operations199