DMC Global Reports Fourth Quarter and Full-Year Financial Results
- Full-year 2019 sales were a record $397.6 million, up 22% from 2018
- Fourth quarter sales were $86.4 million, down 14% sequentially and down 4% versus Q4 2018
- Fourth quarter gross margin was 35% versus 36% in Q3 2019 and 35% in Q4 2018
- DynaEnergetics completes previously announced exit of Siberian manufacturing facility and consolidates its manufacturing and distribution infrastructure
- Fourth-quarter and full-year restructuring charges were $13.2 million and $19.5 million, respectively
- Fourth quarter operating income was $499,000; adjusted operating income* was $13.8 million
- Fourth quarter net loss was $5.3 million, or $0.36 loss per diluted share, while adjusted net income* was $9.5 million, or $0.65 per diluted share
- Fourth quarter adjusted EBITDA* was $17.6 million
- Full-year 2019 net income was $34.0 million, or $2.28 per diluted share, while full-year adjusted net income was $55.6 million, or $3.75 per diluted share
- Year-end net cash* was $6.1 million compared with net debt* of $16.0 million at September 30, 2019 and $28.0 million at the end of 2018
BROOMFIELD, Colo. - February 20, 2020 - DMC Global Inc. (Nasdaq: BOOM) today reported financial results for its fourth quarter and fiscal year ended December 31, 2019.
Fourth quarter sales were $86.4 million, down 14% sequentially versus the 2019 third quarter, and down 4% versus the 2018 fourth quarter. The sales decline was principally due to the previously reported sharp decline in North American well completion activity, which negatively impacted demand at DynaEnergetics, DMC’s oilfield products business. Fourth quarter gross margin was 35% versus 36% in the third quarter and 35% in the prior-year fourth quarter.
Fourth quarter operating income was $499,000 versus $13.1 million in the 2018 fourth quarter. Net loss was $5.3 million, or $0.36 loss per diluted share, versus net income of $15.3 million, or $1.02 per diluted share, in the prior-year fourth quarter.
Adjusted operating income* was $13.8 million, and excludes $13.2 million in restructuring charges ($12.1 million of which were non-cash) principally related to the closure of DynaEnergetics’ manufacturing plant in Tyumen, Siberia. Adjusted net income*, which excludes the restructuring charges, was $9.5 million, or $0.65 per diluted share.
Fourth quarter adjusted EBITDA was $17.6 million versus $23.2 million in the 2019 third quarter and $16.9 million in the prior-year fourth quarter. Cash flow from operations was $29.5 million versus $21.1 million in the fourth quarter of 2018.
Net cash* (cash and cash equivalents less total debt) was $6.1 million versus net debt*(total debt less cash and cash equivalents)of $16.0 million at the end of the 2019 third quarter and $28.0 million at December 31, 2018. Total debt at December 31, 2019, was $14.3 million and the Company’s debt-to-adjusted EBITDA leverage ratio was 0.2.
DynaEnergetics reported fourth quarter sales of $64.6 million, down 16% sequentially and an increase of 2% versus the prior-year fourth quarter. Gross margin was 38% versus 39% in the 2019 third quarter and 39% in the 2018 fourth quarter. Adjusted EBITDA was $18.5 million versus $15.2 million in the 2018 fourth quarter.
NobelClad reported fourth quarter sales of $21.8 million, down 4% sequentially and down 20% versus the 2018 fourth quarter. Gross margin was 27%, up from 26% in the 2019 third quarter and 25% in the prior-year fourth quarter. Adjusted EBITDA was $2.4 million versus $4.0 million in the prior-year fourth quarter.
NobelClad’s trailing 12-month book-to-bill ratio at the end of the fourth quarter was 1.03. Order backlog was $31.7 million versus $33.2 million at the end of the third quarter.
Consolidated sales in 2019 were a record $397.6 million, up 22% from $326.4 million in 2018. Gross margin was 36% versus 34% in the prior year.
Operating income was $58.4 million versus $37.4 million in 2018. Excluding $19.5 million in restructuring charges ($16.6 million of which were non-cash), 2019 full-year adjusted operating income was $78.7 million.
Full-year 2019 net income was $34.0 million, or $2.28 per diluted share, while full-year adjusted net income was $55.6 million, or $3.75 per diluted share. Net income in 2018 was $30.5 million, or $2.04 per diluted share, while 2018 adjusted net income was $30.7 million, or $2.07 per diluted share.
Full-year adjusted EBITDA was a record $93.8 million. Adjusted EBITDA in 2018 was $59.6 million and included $7.6 million in litigation expense.
Cash flow from operations was $64.6 million, which excluded $27.2 million in capital expenditures. In 2018, cash flow from operations was $27.6 million, and excluded $45.1 million in capital expenditures. Trailing 12-month return on invested capital was 18%, down from 29% at the end of the third quarter. The decline principally relates to the closure of DynaEnergetics’ manufacturing plant in Tyumen, Siberia, and the write down of the facility’s carrying value.
Full-year sales at DynaEnergetics were a record $310.4 million, up 31% from $237.4 million in 2018. Gross margin was 40%, up from 38% in the prior year. Adjusted EBITDA was $94.5 million versus $58.8 million in the prior year.
NobelClad reported full-year sales of $87.1 million, down 2% from $89.0 million in 2018. Gross margin was 26% versus 23% in the prior year. Adjusted EBITDA was $11.1 million versus $10.8 million in the prior year.
“Our employees executed extremely well during 2019, and their efforts enabled DMC to deliver record consolidated sales and earnings, strong operating cash flow, and increased shareholder returns that included a significant increase in our annual dividend,” said Kevin Longe, CEO.
“Increased customer adoption of DynaEnergetics’ DynaStage™ DS Factory-Assembled, Performance-Assured™ perforating systems was a key factor in our 2019 performance. More than 20 percent of the perforating systems deployed in North America during 2019 were either DS™ systems, or were enabled by DynaEnergetics’ IS2™ intrinsically safe initiating systems.
“North American well completion activity began slowing in the third quarter of 2019, and the decline accelerated rapidly in the fourth quarter,” Longe said. “This downturn reflects a long-overdue shift in the industry toward capital discipline, free cash flow generation, strengthening of balance sheets, and ultimately, improved returns for investors. While this dynamic has slowed near-term drilling and completion activity, it is necessary for strengthening the health of our industry over the longer term.
“DynaEnergetics capitalized on the fourth-quarter slowdown by accelerating a planned streamlining of its global manufacturing and distribution footprint. This process involved exiting a manufacturing plant in Tyumen, Siberia, and closing distribution facilities in Canada and Oklahoma. DynaEnergetics also accelerated the planned consolidation of its Mt. Braddock, Pennsylvania, assembly operations into its facility in Blum, Texas. We expect approximately $2.0 million in annual cost savings as a result of these initiatives.”
“E&Ps are highly focused on lowering operating costs through more effective well completion programs," Longe added. “Increasingly, these operators are specifying DynaEnergetics’ perforating systems, which remain unmatched in their safety, efficiency and reliability. DynaEnergetics continued to expand its product and technology portfolio during 2019. In addition to launching its DS Trinity™ and DS™ NLine™ systems, DynaEnergetics was awarded 17 new patents and filed 126 patent applications in the U.S. and internationally. It was the most active year ever for patent applications and awards at DynaEnergetics, which currently holds a total of 63 patents and 186 pending patent applications, covering a total of 73 patent families.
Longe continued, “NobelClad’s market development team made significant progress during 2019 at establishing new applications for its composite metal plates. New customers in the aerospace, power generation and engineered wood products sectors have turned to NobelClad’s capabilities to address complex corrosion and temperature resistance issues. NobelClad currently is seeing an anticipated pick up in booking activity for projects expected to ship later this year. We are optimistic 2020 will be a year of growth for NobelClad.
“We have entered 2020 with a strong balance sheet and a very efficient organizational structure,” Longe added. “While current market conditions suggest a relatively slow start to 2020, we are well positioned to navigate the near-term headwinds and pricing pressure in the energy market. We expect financial results to improve at DynaEnergetics and NobelClad as the year progresses. DMC’s financial strength will enable us to continue to invest in research and development, new product introductions, and new market development initiatives. Our focus remains on innovation and achieving profit margins that reflect the inherent value our products deliver to customers.”