DMC (US:BOOM)2023-05-06 10:49Financial Data and Key Metrics Changes - DMC reported record consolidated first quarter sales of $184 million, up 5% sequentially and 33% year-over-year [29] - Consolidated adjusted net income attributable to DMC was $6 million or $0.32 per diluted share, compared to a loss of $3 million or negative $0.16 per diluted share in the prior year [17] - Free cash flow for the first quarter was $5 million, an improvement from negative $6 million in the first quarter of 2022 [17] - Consolidated gross margin was 28%, up 250 basis points from the fourth quarter and improved 170 basis points year-over-year [29] - Adjusted EBITDA attributable to DMC was $20 million, up 3% sequentially and over 90% year-over-year [52] Business Line Data and Key Metrics Changes - Arcadia reported first quarter sales of $80 million, up 8% sequentially and 18% year-over-year, marking the second-best quarterly performance in its history [36] - DynaEnergetics achieved first quarter sales of $82 million, up 6% sequentially and 68% year-over-year, with record unit sales of DynaStage perforating systems [49] - NobelClad reported first quarter sales of $22 million, down 5% sequentially but flat year-over-year, with a book-to-bill ratio of 1.2 and an order backlog of $60 million [28] Market Data and Key Metrics Changes - Strong demand was noted in industrial construction, medical, education, and hospitality sectors, with steady activity in the high-end residential market [27] - International demand at Dyna accounted for approximately 13% of first quarter sales, indicating healthy global activity [37] Company Strategy and Development Direction - The company is focused on improving operating efficiencies, advancing technology, and investing in initiatives that deliver strong returns [38] - DMC plans to enhance manufacturing capabilities and increase painting capacity at Arcadia by the end of the year [27] - The implementation of an ERP system is expected to provide better visibility around data and improve operational efficiencies [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's financial strength and a clear path towards lower SG&A expenses and improved free cash flow [35] - The expectation for second quarter consolidated sales is in the range of $177 million to $187 million, with Arcadia projected to report sales between $75 million and $80 million [30] - Management anticipates that quarterly litigation costs will decline significantly for the remainder of the year [37] Other Important Information - The company ended the first quarter with cash of $20 million and available capacity under a revolving loan of $50 million [17] - SG&A expenses for the first quarter were $39 million, including $3 million in litigation expenses and $6 million in CEO transition costs [50] Q&A Session Summary Question: What is driving the expectation of the ramp in the second half? - Management noted that frac spreads are expected to ramp back up in the third and fourth quarters, despite flatness in Q2 [58] Question: Can you discuss current pricing trends in the perforating business? - Pricing is currently stable and flat, with expectations for margins to step up throughout the year due to process improvements [65] Question: How is the work-from-home trend impacting demand in key end markets? - The company sees more opportunities in commercial interiors as businesses downsize their offices, presenting an upside opportunity [67] Question: What are the expectations for price in Q2? - There is a slight negative price mix impact expected in Q2, with pricing from Q4 to Q1 being relatively flat [72] Question: Are supply chains and lead times improving? - Supply chains and lead times have eased, but there is not a significant impact on inventory levels in the quick turn smaller project business [82]