DMC Global Reports First Quarter Financial Results
- Consolidated first quarter sales were $100.1 million, up 11% sequentially and 49% versus Q1 2018
- Gross margin was 36%, up from 35% in Q4 2018 and 34% in Q1 2018
- Operating income was $20.5 million versus $5.3 million in Q1 2018
- Net income was $15.2 million, or $1.01 per diluted share; adjusted net income* was $15.2 million, or $1.02 per diluted share
- Adjusted EBITDA* of $23.9 million was up 41% sequentially and 105% versus Q1 2018
BOULDER, Colo. - April 25, 2019 - DMC Global Inc. (Nasdaq: BOOM) today reported financial results for its first quarter ended March 31, 2019.
Consolidated sales were a record $100.1 million, up 49% versus the first quarter of 2018 and up 11% sequentially from the 2018 fourth quarter. The sales growth was driven by continued strong customer demand for intrinsically safe integrated switch-detonators and Factory-Assembled, Performance-Assured™ well perforating systems from DynaEnergetics, DMC’s oilfield products business. Sales at NobelClad, DMC’s composite metals business, also exceeded forecasts.
First quarter gross margin was 36% versus 34% in the 2018 first quarter and 35% in the 2018 fourth quarter. The improvement primarily resulted from a higher proportion of sales from DynaEnergetics, and an improved project mix at NobelClad.
Operating income was $20.5 million versus $5.3 million in the 2018 first quarter. Net income was $15.2 million, or $1.01 per diluted share, versus $3.9 million, or $0.26 per diluted share, in last year’s first quarter.
Adjusted operating income* was $20.5 million, and excludes $78,000 in restructuring expenses at NobelClad. Adjusted net income was $15.2 million, or $1.02 per diluted share.
First quarter adjusted EBITDA was $23.9 million versus $11.6 million in the 2018 first quarter and $16.9 million in last year’s fourth quarter.
Net debt* (total debt less cash and cash equivalents) at March 31, 2019, was $28.5 million versus $28.0 million at December 31, 2018.
First quarter sales at DynaEnergetics were $79.8 million, up 63% from the 2018 first quarter and 26% sequentially. Gross margin was 39%, down from 40% in last year’s first quarter and flat versus the 2018 fourth quarter. Operating income was $23.1 million versus $8.7 million in the comparable year-ago quarter. Adjusted EBITDA was $24.5 million versus $13.4 million in last year’s first quarter.
NobelClad reported first-quarter sales of $20.3 million, up 12% versus the 2018 first quarter and down 25% sequentially. The sequential decline relates to the accelerated production and delivery of a large chemical-industry order during last year’s fourth quarter. Gross margin was 26%, up from 18% in the 2018 first quarter and 25% in the fourth quarter. The improvement reflects the completion of NobelClad’s European consolidation effort, as well as the business’ successful efforts to capture value for its unique products and technologies, which led to a higher margin project mix. Operating income was $1.8 million versus an operating loss of $12,000 in the year-ago first quarter. Excluding restructuring charges, adjusted operating income was $1.9 million. Adjusted EBITDA was $2.7 million versus $948,000 in last year’s first quarter.
NobelClad’s trailing 12-month book-to-bill ratio at the end of the first quarter was 1.02. Order backlog was $40.5 million versus $29.9 million at the end of the 2018 fourth quarter.
“DynaEnergetics continues to transform North America’s unconventional well-completion industry with its Factory-Assembled, Performance-Assured perforating systems,” said Kevin Longe, president and CEO. “During the first quarter, the business also benefitted from improved market conditions, which included a 32% increase in crude prices and improved well completion activity.
“The safety, efficiency and reliability of the DynaStage system is made possible by DynaEnergetics’ intrinsically safe, integrated switch-detonator, which remains a critical point of differentiation versus other pre-wired systems entering the market. The unmatched simplicity associated with installing this wire-free initiating system has helped reduce gun string assembly times by up to 80% versus conventional guns, and has enabled customers to complete up to 40% more stages per day. These benefits are leading to the continued expansion of DynaEnergetics’ customer base in unconventional basins across the United States.”
Longe said DynaEnergetics continues to add manufacturing capacity in response to improving market conditions and increasing demand. “A third automated detonator assembly line recently commenced production at our facility in Troisdorf, Germany, and we will begin installing an additional automated shaped charge line at our Blum, Texas plant later in the second quarter.”
Longe added, “NobelClad’s first quarter results benefitted from healthy demand from the downstream energy and aluminum smelting industries, as well as the award of multiple mid-size projects. NobelClad’s order backlog at the end of the quarter was at its highest level since the fourth quarter of 2015.
“The first quarter represented a strong start to 2019. I am very appreciative of the outstanding efforts of our employees and the continued support of our customers. I also am pleased we achieved a 25% return on invested capital*, which reflects the impact of our technology, product and market development programs, as well as our multi-year efforts to improve the operating efficiencies of our businesses.”
Michael Kuta, CFO, said second quarter sales are expected in a range of $102 million to $107 million versus the $80.9 million reported in the 2018 second quarter. At the business level, DynaEnergetics is expected to report sales in a range of $82 million to $85 million versus $58.9 million reported in last year’s second quarter. NobelClad’s sales are expected to be approximately $20 million to $22 million versus $22 million reported in the 2018 second quarter.
Consolidated gross margin is expected to be in the 35% range versus 33% reported in the year-ago second quarter. The potential decline versus the 36% reported in this year’s first quarter reflects the possibility of higher material costs in advance of DynaEnergetics’ transition to in-house production of key components used in the DynaStage system.
Second quarter selling, general and administrative (SG&A) expense is expected to be approximately $16.5 million versus SG&A of $15.5 million in last year’s second quarter. Amortization expense is expected to be approximately $400,000 versus $791,000 in the second quarter last year, while interest expense is expected to be approximately $500,000.
Adjusted EBITDA is expected in a range of $22 million to $24.5 million versus $13.9 million in last year’s second quarter.
Kuta said that after a stronger-than-expected start to fiscal 2019, management has revised its prior full-year forecasts. Sales are now expected in a range of $405 million to $425 million versus the $326.4 million reported in 2018. Sales at DynaEnergetics are expected in a range of $325 million to $340 million versus the $237.4 million reported in 2018, while NobelClad’s expected sales remain in a range of $80 million to $85 million versus the $89.0 million in 2018. Full-year gross margin is expected in a range of 35% versus the 34% reported in 2018.
Kuta said full-year SG&A should be approximately $63 million to $66 million versus the $61.2 million reported in 2018. The increase relates to higher expected spending on sales and marketing programs at both DynaEnergetics and NobelClad. Anticipated amortization expense remains at approximately $1.6 million versus the $2.9 million reported in 2018.
Anticipated interest expense in 2019 remains in a range of $2.0 million to $2.25 million, and the expected effective tax rate for 2019 is still approximately 30%.
Adjusted EBITDA is expected in a range of $90 million to $100 million, up from 2018 adjusted EBITDA of $59.6 million. Full-year adjusted net income per share is expected in a range of $3.40 to $3.70 versus the $2.07 reported in fiscal 2018.
Anticipated capital expenditures in 2019 remain in the range of $25 million to $30 million.