DMC (US:BOOM)2021-04-23 01:24Financial Data and Key Metrics Changes - First quarter sales were $55.7 million, down 3% sequentially and down 24% year-over-year [12] - Consolidated gross margin was 23%, up from 21% in the previous quarter but down from 33% in the same quarter last year [13] - Adjusted net income for the first quarter was $559,000 or $0.04 per diluted share, compared to $5.3 million or $0.35 per diluted share in the prior year [15] - Adjusted EBITDA was $4 million, down from $11.3 million in the first quarter of the previous year [15] Business Line Data and Key Metrics Changes - DynaEnergetics reported first quarter sales of $38.2 million, up 8% sequentially but down 28% year-over-year [12] - NobelClad sales were $17.5 million, down 20% sequentially and 14% year-over-year [12] - DynaEnergetics' gross margin was 22%, down from 24% in the previous quarter and 37% in the same quarter last year [13] - NobelClad's gross margin improved to 26% from 18% in the previous quarter and was stable compared to the same quarter last year [13] Market Data and Key Metrics Changes - International sales increased 65% sequentially, while North American sales increased 1% sequentially [12] - Frac spreads in the U.S. approached 200 by the end of the first quarter, indicating a recovery in well completion activity [10] Company Strategy and Development Direction - The company aims to explore bolt-on acquisitions to enhance competitive positioning and expand total available market [23] - DMC is focused on growing through adding new product lines and businesses, positioning itself as a holding company for technical businesses in niche markets [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about stronger financial results in the second quarter and the latter half of 2021, supported by an order backlog of $43 million at NobelClad [9] - The company noted that the inventory overhang in the market has largely been resolved, leading to expectations of increased demand [20] - Management highlighted the importance of customer profitability for improving pricing and margins over time [21] Other Important Information - The company spent approximately $1 million on patent litigation during the quarter, with ongoing legal actions against companies believed to be infringing on DynaEnergetics' patents [7] - The company ended the quarter with cash and marketable securities of approximately $67 million and zero long-term debt [8] Q&A Session Summary Question: Can you elaborate on the competitive dynamics in the DynaEnergetics market? - Management indicated that the inventory overhang has been mostly resolved, and they expect companies to build for demand moving forward [20] Question: Should we expect potential acquisitions or changes in capital allocation strategy? - Management stated that the cash balance is intended to explore acquisition opportunities and enhance competitive positioning [23] Question: How do you see the impact of the new administration's policies on your products? - Management expressed excitement about potential opportunities related to the administration's focus on capping abandoned wells, which aligns with their product capabilities [24] Question: Can you provide insights on the growth expectations for DynaEnergetics in Q2? - Management noted that growth is expected primarily in North America, with international sales forecasted to be flat [29] Question: What is the outlook for gross margins in DynaEnergetics? - Management believes that gross margins can return to 30% or more as market conditions normalize [39] Question: How has COVID impacted the sales cycle for NobelClad? - Management indicated that while there were some logistical challenges, the overall activity in NobelClad's markets remained stable [49] Question: Can you provide an update on the patent litigation timeline? - Management stated that IP litigation is a lengthy process and is expected to continue throughout 2021 and into 2022 [52]