DMC Global Inc.

Good afternoon, ladies and gentlemen, and welcome to the DMC Global Second Quarter Earnings Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Jeff High, VP of Investor Relations. Sir, the floor is yours.

Hello, and welcome to DMC's Second Quarter Conference Call. Presenting today are President and CEO Kevin Long and CFO Mike Kuda. I'd like to remind everyone that matters discussed during this call may include forward-looking statements that are based on our estimates, projections, and assumptions as of today's date and are subject to risks and uncertainties that are disclosed in our filings with the SEC. Our business is subject to certain risks that could cause actual results to differ materially from those anticipated in our forward-looking statements. DMC assumes no obligation to update forward-looking statements that become untrue because of subsequent events. A webcast replay of today's call will be available at dmcglobal.com after the call. In addition, a telephone replay will be available approximately two hours after the call. Details for listening to the replay are available in today's news release. And with that, I'll now turn the call over to Kevin Long. Kevin?

Thank you, Jeff, and good afternoon, everyone. DMC's second quarter sales of $65.4 million were up 18% sequentially and 51% versus the second quarter of 2020. The increase reflects improved economic conditions within several of our end markets. Dynergetics, our energy products business, reported greater demand for DS perforating systems due to stronger energy prices and a corresponding increase in well completions. Novoclad, our composite metals business, reported increased product shipments and the receipt of a large order from the chemical industry. Fundamentals in the oil and gas industry are improving, and leading operator and service companies are accelerating their adoption of fully integrated perforating systems that simplify operations, reduce costs, and enhance well performance. Dynanergetics has led a technical revolution in the perforating industry in recent years, and its IS2 initiating systems and DS factory assembled integrated perforating systems remain the safest, most efficient, and best performing solutions on the market. Integrated perforating systems delivered just in time to the well site, lower manufacturing and assembly costs, reduced personnel and trucks, lower the cost and complexity of the supply chain, and increase overall service quality and result in better performing wells for the operator. During the downturn, several machine shops took advantage of the industry's instability and incomplete transition to integrated systems by introducing low-cost, undifferentiated carrier assemblies. The components for these pre-wired carriers are supplied by various shape, charge, and energetic manufacturers that have not fully commercialized their own integrated perforating systems. We believe many of the pre-wired carriers in the market incorporate features that violate DynEnergetics patents, and we are taking aggressive legal action against the companies that make these products. DynEnergetics has made significant investments in technologies and products that have improved the safety, efficiency, and performance of its customers' well completions, and have enhanced the effectiveness and profitability of the industry as a whole. Our patent strategy is designed to protect these investments and provide transparency so others can innovate without violating our intellectual property. As we previously have stated, if intellectual property is not protected, the incentive to innovate is lost and the sustainability of our industry is at risk. DMC's second quarter sales were approximately 2% below our forecasted range, and this shortfall was directly related to continued weak pricing across North America's oilfield services industry. In February, DynEnergetics took an initial step towards restoring margins by announcing a 5% price increase that was implemented at the beginning of the second quarter. However, by the end of the quarter, it became apparent Few, if any, other manufacturers supported a return to acceptable margins, and we decided to push full implementation of the increase into the second half of the year. North America's exploration and production industry is healthier today than it has been in several years. Many operators have said they are anticipating price increases from their service providers, particularly in light of escalating raw material costs. We expect price increases during the second half of the year will hold, especially for companies selling differentiated products and services that significantly improve the performance of the industry. During the second quarter, Noble-Clad was awarded an $8.8 million order for titanium-clad plates that will be used to fabricate specialized pressure vessels and heat exchangers. This equipment will be used in the construction of a chemical plant in Southeast Asia that will produce PTA. PTA is an organic compound used in a variety of products, including polyester. The European firm that engineered the plant selected Novaclad based on its ability to meet the end users, exacting manufacturing specifications, and tight delivery schedule. The plates will be produced at Novaclad's Mount Braddock, Pennsylvania facility, then shipped to China for fabrication. Shipments are scheduled for this year's third and fourth quarters. The order is one of several large projects NOVACLAD has been pursuing over the last several quarters, and we are optimistic there will be several more to follow. A side effect of the COVID-19 pandemic has been a slowdown in NOVACLAD's repair and maintenance work, which is principally performed for the downstream energy industry. Activity in this sector tends to lag the cycles of the broader economy, so the timing of the large PTA order will help offset the effects of this slowdown. We expect downstream activity will begin to recover during the coming year. This week, Novaclad announced a new clad pipe product designed to provide greater fracture toughness and better overall performance versus solid zirconium or titanium pipe. The product called Datapipe will be marketed for use in high pressure, high temperature chemical and metal processing environments. The Datapipe introduction is another example of how Novoclad's product and application development group is successfully expanding our addressable markets. In recent years, this team has developed innovative solutions for the engineered wood sector and for the gold processing industry. where NOBLECLAD's titanium clad plates are currently being used to construct two of the world's largest pressure oxidation autoclays. The improving conditions in our markets is encouraging, and Dynaenergetics and NOBLECLAD are ready to capitalize on the growing demand. In addition, the follow-on equity offering we completed during the second quarter further enhanced our financial position, as well as our ability to pursue long-term strategic growth objectives. With that, I'll turn the call over to Mike for a review of our second quarter financial results and a look at third quarter guidance.