DMC (US:BOOM)2024-05-02 20:14PART I - FINANCIAL INFORMATION Condensed Consolidated Financial Statements Q1 2024 financials show decreased net sales and gross profit, increased net income, improved operating cash flow, and net cash outflow Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Comprehensive Income Condensed Consolidated Statements of Stockholders' Equity and Redeemable Noncontrolling Interest Condensed Consolidated Statements of Cash Flows Key Financial Highlights (Three Months Ended March 31) | Metric | 2024 (Thousands) | 2023 (Thousands) | Change (Thousands) | % Change | |:---|:---|:---|:---|:---| | Net Sales | $166,869 | $184,341 | $(17,472) | -9% | | Gross Profit | $42,352 | $52,211 | $(9,859) | -19% | | Operating Income | $6,688 | $7,220 | $(532) | -7% | | Net Income attributable to DMC Global Inc. | $2,563 | $909 | $1,654 | 182% | | Net Cash Provided by Operating Activities | $13,440 | $7,065 | $6,375 | 90% | | Net Cash Provided by (Used in) Investing Activities | $9,651 | $(2,226) | $11,877 | -533% | | Net Cash Used in Financing Activities | $(34,296) | $(11,007) | $(23,289) | 212% | Balance Sheet Snapshot (As of) | Metric | March 31, 2024 (Thousands) | December 31, 2023 (Thousands) | |:---|:---|:---| | Total Assets | $860,020 | $884,495 | | Total Liabilities | $263,026 | $286,440 | | Redeemable Noncontrolling Interest | $187,080 | $187,760 | | Total Stockholders' Equity | $409,914 | $410,295 | | Cash and Cash Equivalents | $20,444 | $31,040 | | Total Debt (net of issuance costs) | $88,009 | $115,851 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, disclosures, a credit agreement amendment, legal proceedings, and a strategic review for two business segments 1. BASIS OF PRESENTATION 2. SIGNIFICANT ACCOUNTING POLICIES 3. INVENTORIES 4. PURCHASED INTANGIBLE ASSETS 5. CONTRACT LIABILITIES 6. LEASES 7. DEBT 8. INCOME TAXES 9. BUSINESS SEGMENTS 10. DERIVATIVE INSTRUMENTS 11. COMMITMENTS AND CONTINGENCIES 12. STRATEGIC REVIEW EXPENSES - The Company's Condensed Consolidated Financial Statements are unaudited and should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 202344 - A First Amendment to the credit agreement was executed in February 2024, increasing the maximum commitment amount from $200,000 to $300,000, including revolving loans, a term loan, and a delayed draw term loan facility128248 - The Board of Directors initiated a review of strategic alternatives for the DynaEnergetics and NobelClad segments, incurring $2,169 in strategic review expenses during Q1 2024, primarily for professional service fees and employee retention compensation120219224225 - Arcadia Products settled wage and hour class action (PAGA) claims for $375,000 in April 2024, with the Company indemnified for the liability149156 - An environmental matter involving alleged Clean Water Act violations at Arcadia Products facilities was initiated by Los Angeles Waterkeeper, with a complaint filed in April 2024157 Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated sales decreased 9% in Q1 2024, gross profit percentage declined, but net income increased due to lower operating expenses, with strong liquidity maintained General Factors Affecting Results Outlook Use of Non-GAAP Financial Measures Consolidated Results of Operations Business Segment Financial Information Liquidity and Capital Resources Critical Accounting Estimates - Consolidated sales decreased by 9% in Q1 2024 to $166,869, primarily due to lower sales at Arcadia Products and DynaEnergetics170194222 - Consolidated gross profit percentage declined to 25.4% in Q1 2024 from 28.3% in Q1 2023, mainly due to margin declines at DynaEnergetics and lower absorption of fixed manufacturing overhead costs180187222 - SG&A expenses decreased by $10,520 (40%) in Q1 2024, largely due to the absence of nonrecurring CEO transition expenses and patent infringement litigation costs present in Q1 2023173223 - The company's leverage ratio was 1.0 to 1.0 as of March 31, 2024, well below the maximum permitted ratio of 3.0 to 1.0, indicating strong financial health174249 - Net cash provided by operating activities increased to $13,440 in Q1 2024 from $7,065 in Q1 2023, driven by improved working capital impacts41252 Quantitative and Qualitative Disclosure about Market Risk No material changes in market risk exposures for foreign currency and interest rates were reported compared to the 2023 Annual Report - No material changes in market risk for foreign currency exchange rates and interest rates from the 2023 Annual Report on Form 10-K279 Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2024256 - No material changes occurred in internal controls over financial reporting during the quarter257 PART II - OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 11 for details on legal proceedings, including wage and hour matters and an environmental matter - Legal proceedings information is detailed in Note 11 to the Condensed Consolidated Financial Statements282 Item 1A. Risk Factors No significant changes to risk factors were identified compared to the Company's 2023 Annual Report on Form 10-K - No significant changes in risk factors from the Annual Report on Form 10-K for the year ended December 31, 2023283 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Common stock was retained as treasury shares in Q1 2024 to satisfy tax withholding for equity incentive plans and deferred compensation, and for diversification - Shares of common stock were retained as treasury shares to offset tax withholding obligations from equity incentive plans and deferred compensation, and due to diversification of deferred equity awards260 Shares Purchased During Q1 2024 | Period | Total Number of Shares Purchased | |:---|:---| | January 1 to January 31, 2024 | 20,782 | | February 1 to February 29, 2024 | 5,010 | | March 1 to March 31, 2024 | 28,732 | | Total | 54,524 | Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities during the period - No defaults upon senior securities occurred during the quarter ended March 31, 2024261 Item 4. Mine Safety Disclosures No specified health and safety violations, orders, citations, assessments, legal actions, or mining-related fatalities were reported for Q1 2024 - No specified health and safety violations, orders, citations, related assessments, legal actions, or mining-related fatalities were reported for Q1 2024284 Item 5. Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during Q1 2024 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter262 Item 6. Exhibits Exhibits include a retention agreement, CEO and CFO certifications (SOX 302 and 906), and XBRL formatted financial statements - Exhibits include a Retention Agreement, CEO and CFO certifications (Sections 302 and 906), and XBRL formatted financial statements263291 Signatures The report is signed by the Registrant's Chief Accounting Officer and Chief Financial Officer, dated May 2, 2024 - The report is signed by Brett Seger, Chief Accounting Officer, and Eric V. Walter, Chief Financial Officer, on May 2, 2024167287