DMC Global Inc.

Greetings and welcome to the DMC Global Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jeff High, Vice President of Investor Relations. Thank you, Jeff. You may begin.

Hello and welcome to DMC's third quarter conference call. Presenting today are DMC's Chief Executive Officer Mike Kuda and Chief Financial Officer Eric Walter. 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. Today's earnings release and a related presentation on our third quarter performance are available on the investor page of our website located at dmcglobal.com. A webcast replay of today's presentation will be available at our website shortly after the conclusion of this call. And with that, I'll now turn the call over to Michael Kuda. Mike?

Good afternoon, everyone. DMC's third quarter was marked by both strategic accomplishments and operational challenges. We reported consolidated sales of $172 million, flat versus last year's third quarter and below our prior forecasts. Sales at Arcadia, our building products business, were $72 million, down 11% year over year. Steady customer activity at Arcadia's primary regional service centers, as well as healthy sales at its ultra-high-end residential business, were offset by pricing pressure associated with lower raw material costs, soft demand for commercial interior products, and a brief operational slowdown related to the transition to a new ERP system. Dyna Energetics, our energy products business, reported sales of $73 million, up 4% year over year, but down 14% sequentially. The U.S. drilling and completion industry idled additional rigs and fractures during the quarter, and the Energy Information Administration reported a 10% sequential decline in U.S. well completions. Dyna's U.S. sales also were impacted by customer project delays late in the quarter. Soft sales in the US were partially offset by continued strong demand at Dyna's international business, which expects to deliver record full-year sales in 2023. Sales in Nobel-CLAD, our composite metals business, improved 18% to $28 million versus last year's third quarter. Nobel-CLAD's results reflect outstanding execution on a demanding petrochemical project, as well as continued strong demand for pressure vessel plates and specialized transition joints. Nobel-CLAD ended the third quarter with an order backlog of $61 million versus $64 million at the end of the second quarter. Rolling 12-month bookings were $111 million, up sequentially from $108 million, and the book-to-bill ratio was 1.1. Our consolidated third quarter adjusted EBITDA attributable to DMC was $25 million, or 14.3% of sales, and was within our forecasted range. despite the lower than expected sales. EMC's long-term focus is to position each of its businesses to deliver adjusted EBITDA margins of 20% or greater. Our businesses are structuring their operations and making the necessary investments to achieve these objectives on a consistent basis. At Arcadia, additional paint capacity, a new ERP system, and a series of operational enhancements and growth initiatives are expected to drive long-term improvements in sales and profitability. In the North American oil and gas market, where Dyna generates approximately 85% of its sales, we expect continued consolidation by leading operators will sharpen the completion industry's focus on safety, technology, and efficiency. Dyna, which had a challenging third quarter, has taken a number of steps to streamline its cost structure and will incur roughly $1 million in associated one-time expenses during the fourth quarter. These cost reductions are expected to result in approximately $3 million in annualized savings. Dyna also is implementing a series of operational excellence initiatives designed to enhance the safety, quality, and reliability of its perforating systems. These initiatives include greater use of automation throughout Dyna's manufacturing and assembly facilities. Nobel-CLAD is focused on expanding the market for its data pipe and Solyndra product lines and is pursuing emerging opportunities in lithium and hydrogen production. We expect 2024 will be another strong year at Nobel-CLAD. As Eric will discuss in a moment, much improved free cash flow led to further improvements in our financial position during the third quarter. I remain encouraged by the strengths of our differentiated manufacturing businesses and our prospects for profitable long-term growth. DNC's achievements would not be possible without the efforts of our talented workforce. I want to acknowledge all of our employees for their hard work and dedication. I also want to thank our customers for their loyalty. With that, I'll turn the call over to Eric for a closer look at our third quarter financial results and our guidance for the fourth quarter.