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DMC (BOOM) - 2019 Q3 - Earnings Call Transcript
BOOMDMC (BOOM)2019-10-25 04:27
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Financial Data and Key Metrics Changes - Consolidated sales for Q3 2019 were 100.1million,up14100.1 million, up 14% year-over-year but down 10% sequentially [5] - Adjusted gross margin was 37%, compared to 34% in Q3 2018 and 38% in Q2 2019 [7][8] - Adjusted net income was 13.4 million or 0.90perdilutedshare,upfrom0.90 per diluted share, up from 10 million or 0.68perdilutedshareinQ32018[9]−AdjustedEBITDAwas0.68 per diluted share in Q3 2018 [9] - Adjusted EBITDA was 23.2 million, up from 17.2millioninQ32018butdownfrom17.2 million in Q3 2018 but down from 29 million in Q2 2019 [10] Business Line Data and Key Metrics Changes - Sales at DynaEnergetics were 77.4million,up1777.4 million, up 17% year-over-year but down 13% sequentially [5] - NobelClad sales were 22.7 million, up 5% year-over-year and up 2% sequentially, with an order backlog of 33.2million[6]−AdjustedoperatingincomeforDynaEnergeticswas33.2 million [6] - Adjusted operating income for DynaEnergetics was 21.4 million, while NobelClad reported 2.2million[9]MarketDataandKeyMetricsChanges−DynaEnergeticsisfocusingononboardingnewservicecompaniesandimprovingsafetyandefficiencyinwellcompletion[11][12]−NobelCladisseeingincreasedinterestincompositemetalapplicationsacrossvariousendmarkets,includingalternativeenergyandaerospace[16]CompanyStrategyandDevelopmentDirection−Thecompanyismaintainingits2019salesguidanceandhasincreaseditsfull−yearadjustedEPSforecasttoarangeof2.2 million [9] Market Data and Key Metrics Changes - DynaEnergetics is focusing on onboarding new service companies and improving safety and efficiency in well completion [11][12] - NobelClad is seeing increased interest in composite metal applications across various end markets, including alternative energy and aerospace [16] Company Strategy and Development Direction - The company is maintaining its 2019 sales guidance and has increased its full-year adjusted EPS forecast to a range of 3.65 to 3.80[19]−DynaEnergeticsisintroducingnewmodelstoenhancecustomeradoptionratesandimproveperformanceinhydraulicfracturing[13][14]−NobelCladisbiddingonlargeprojectsexpectedtobeawardedsoon,whichcouldleadtosignificantsalesgrowthin2020[17]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthattheenergyindustryisfacingchallenges,butbothbusinesslinesdeliveredsalesgrowthandmarginimprovements[4]−Thecompanyexpectscontinuedfinancialstrength,witha433.80 [19] - DynaEnergetics is introducing new models to enhance customer adoption rates and improve performance in hydraulic fracturing [13][14] - NobelClad is bidding on large projects expected to be awarded soon, which could lead to significant sales growth in 2020 [17] Management's Comments on Operating Environment and Future Outlook - Management noted that the energy industry is facing challenges, but both business lines delivered sales growth and margin improvements [4] - The company expects continued financial strength, with a 43% improvement in net debt and a 30% return on invested capital [18] - Management is optimistic about 2020, expecting it to be better than 2019, despite a weaker second half of the year [37] Other Important Information - The company raised its annual dividend to 0.50 per share from 0.08pershare[18]−ThecompanyanticipatesQ4consolidatedsalesintherangeof0.08 per share [18] - The company anticipates Q4 consolidated sales in the range of 92 million to 97million,withexpectedgrossmarginsof3497 million, with expected gross margins of 34% to 35% [22][23] Q&A Session Summary Question: Onboarding new customers in a softer market - Management acknowledged pricing pressure but emphasized the importance of maintaining margins and not chasing volume at the expense of profitability [26][27] Question: EPS guidance implications - EPS guidance of 3.65 to 3.80isbasedonyear−to−dateadjustedEPSof3.80 is based on year-to-date adjusted EPS of 3.07 [30] Question: Relationship with Halliburton - Management refrained from discussing specifics but acknowledged Halliburton's importance in the industry [31] Question: DynaEnergetics revenue decline - Management noted that the decline in revenue was anticipated and that they expect a smaller drop in Q4 compared to Q3 [36] Question: Capital expenditures for 2020 - Management expects CapEx to be in the 15millionto15 million to 20 million range for 2020, significantly lower than previous years [43] Question: NobelClad's growth opportunities - Management highlighted ongoing bids for sizable projects that could significantly impact revenue in the coming year [82] Question: Market share updates - Management reported an increase in market share from the high teens to the low 20s, indicating stable to growing trends [57] Question: Future acquisitions - Management is open to acquisitions but emphasized a cautious approach to leverage and a focus on organic growth opportunities [61][64]