DMC Global Inc.

$2.2 million, while adjusted EPS attributable to DMC was $0.11. With respect to liquidity, we ended the first quarter with cash and cash equivalents of approximately $15 million. Total debt inclusive of debt issuance costs was approximately $72 million, and net debt was roughly $58 million. Our debt to adjusted EBITDA leverage ratio was 1.38, which remains well below our covenant threshold of 3.0. On a pro-form and net debt basis, after subtracting cash, our leverage ratio at the end of the first quarter was 1.11. And now on to guidance. In Arcadia, we anticipate lower project billings due to the completion of a substantial portion of a large mixed-use project in California. Additionally, Arcadia's results are expected to be below the year-ago second quarter, which benefited from very strong demand for residential and commercial exterior products. Since last year's second quarter, demand in the luxury residential market has declined significantly, reflecting persistently high interest rates, renewed inflation concerns, and broader macroeconomic uncertainty. For Dynaenergetics, second quarter guidance assumes sequentially stable well completion activity in its core U.S. onshore oil and gas markets. Finally, noble clad sales are expected to slow sequentially, as customers seek clarity on evolving U.S. and reciprocal tariff policies. Based on these assumptions, we expect second quarter consolidated sales will be in a range of $149 to $157 million, and adjusted EBITDA attributable to DMC will be in a range of $10 to $13 million. I should note that our guidance is heavily influenced by macroeconomic concerns, volatility, and visibility issues created by current tariff policies and the current level of energy prices. It's subject to change both upward or downward as greater clarity emerges. Now I'll turn it back to Jim for some additional comments.

Thanks, Eric. We ended 2024 by successfully extending the maturity of our Arcadia put call arrangement and stabilizing operations across our business portfolio. We're now entering 2025 focused on our primary near-term objectives. Drive absolute EBITDA growth, generate strong free cash flow, and restore our balance sheet to full health through deleveraging over the coming quarters and year ahead. I want to thank our business leaders and the dedicated DMC associates around the world for their continued hard work and loyalty and for effectively executing our operating improvement strategies in what continues to be a very challenging environment. And with that, operator, we'd be glad to take any questions.

Thank you. And at this time, we'll conduct our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question comes from Jerry Sweeney with Roth Capital Partners. Please state your question.

Good afternoon, Jim, Eric, Jeff. Thanks for taking my call.

Yeah,

Jerry. Dyches Quarter, start with that. Did want to also just ask a question about guidance, but in a larger sort of frame. I'm just curious, so sort of what are the puts and takes behind the guidance? Maybe specifically any impact from tariffs, higher steel costs, et cetera, in some of your results, sort of looking at the revenue and EBITDA looks like we're sort of focusing in or implying a little bit of lower gross margin. So maybe frame that out a little bit better with guidance. How much is sort of tariffs, impacts from tariffs on calls versus maybe lower volumes and just end markets pricing because of tariffs?

There's a little bit in there for tariffs. If you look at what we were able to cover by pulling in inventory, some of our own mitigation strategies, this would be the least quarter going forward for the year that's impacted by tariffs, just the timing of when they roll on. Ignores the fact that tariffs are creating demand disruption now. Nobleclad, if you look at them last year where they had pretty much spectacular results all year, our comments on them having lower order intake, it obviously suggests they're going to be a bit lower next year. That's baked into the guidance for the rest of this year. And we specifically called out Arcadia, which is less impacted by tariffs and really any of our businesses. It is impacted by interest rates where last year was really the last tour off of the residential business where we'd had pretty significant pull in from, I take pull in a demand from strategies that the company had been employing since the acquisition. It led to a pretty strong quarter for the residential business at Arcadia. But if you look at and their numbers aren't out until Tuesday, but if you look at most of the home builders, if you look at Geldwin last quarter, if you look at anybody in the construction business, interest rates at the level they've been at for the past year do impact demand a little bit, particularly on high end residential. And that's explicitly baked into our guidance. So a little bit tariffs, a lot of demand destruction. And as Eric said, if the tariffs go away and demand picks up, they should be better. If they don't, you know, we could certainly be worse. But we've tried to explicitly factor in each one of those items. And a key takeaway would be this is probably the lightest tariff impact we'll see in the quarter because of timing and because of some mitigation efforts we've been able to employ. Gary, the other thing I would add

to it is that, you know, we're guiding to lower sales quarter over quarter. So there's going to be a little less overhead absorption of manufacturing costs.

That was sort of my next sort of implied question, but thanks. What about obviously your, you know, back to basics has been the mantra recently, right? And Dinah had a phase one automation process. You're introducing Dinah stage 2.0. There's some benefits there. And I think you also talked about an automation phase two at Dinah Energetics. And then as well as in Arcadia, you know, Jim Schladen just came back. You know, where are we in terms of additional opportunity taking costs out on both those segments? I think Dinah is probably a little bit further along, but I'm curious about Arcadia as

well. Arcadia really is about fixing the, fixing the residential business, refocusing on the commercial business. Jim is definitely focused on cost containment to a much greater extent than the company's been in the last couple of years. But are we in early innings? Probably. But we're not going to quantify what the total impact would be. This is, you know, this is in a program. This is the way of life until we get the Arcadia put call taken care of.

Yeah, and I'd say on the, yeah, sorry, just to answer the question on the Dinah side. So we've had some impact in Q1 from the product reengineering that we referenced earlier. The automation is coming online in Q2, so we haven't fully achieved all those savings. But the counterbalance of that is that the business is going to be impacted by tariffs. So it's really hard for us to predict how much of those savings are going to fall to the bottom line.

If Dinah States 2.0 has a smaller form factor, uses less steel, does that make you a little bit more competitive against competitors? It does. Well,

yeah, it, you know, can't comment on the supply chain for our competitors, but for Dinah, it definitely will help relative to what the product looked like this time last year. There's just less steel to be subject to a tariff.

Yeah, I'll jump back into Q.

Your next question comes from Ken Newman with KeyBank Capital Markets. Please see your question. Thanks.

Good evening, guys. Hi, Ken. Eric, hey, Eric, maybe for my first question, is there any way you can help size up just how much the large California commercial project added to the first quarter EBITDA in Arcadia? And, you know, just trying to think about that sequential EBITDA margin for that segment at the midpoint of the 2Q guide. Do you think that business could still be profitable at the operating income level in 2Q? Just any help there would be appreciated.

Yeah, I mean, that was in that was the commercial side of our business. And yes, it'll be profitable in Q2. It's the largest part of our business. We haven't commented publicly on the size of that project, but it was a relatively large project for us, one of the larger one in the last two to three years that substantially is complete. So that'll impact the top line and then obviously will impact EBITDA in Q2 as well.

OK, that's helpful. And then, you know, maybe circling back kind of to tariffs, but obviously we're starting to see some maybe early signs of suppliers pushing price at the, you know, at the early end of the supply chain. I'm curious if you're seeing any of that from your own suppliers and what are you embedding for organic price this quarter and your ability to push price in the back half of the year?

Yeah, it's we're continuing to evaluate the supply chain really across all three of the businesses. I'd say it's difficult right now to predict how we're going to be able to impact that, you know, through the next quarter as well as the second half of the year. Certainly something we're looking at, but really difficult to assess right now.

Understood.

Thank you. And a reminder to the audience, if you'd like to ask a question, press star one on your phone. To remove your question from the queue, press star two on your phone. Our next question comes from Steven Gengaro with Stiefel. Please state your question.

Thanks and good afternoon, everybody. Just a quick one to start. You had released something, I think, a couple of weeks back on a tariff surcharge on the Dynabusiness. And I'm just curious how that has gone so far and just kind of what you're seeing in the Perfgun market as far as pricing is concerned, given some of the cross-current we're dealing with right now.

We've had some success passing along as a surcharge, not 100%. We're having discussions with a number of our customers about what the gain sharing or what the pain sharing is probably a better way to put it is going to be. And, you know, given how many private competitors we have and how visible our numbers are standalone in our financials, that, you know, commenting on price increases isn't a great policy for a company like us. So, you know, we're having some success passing the surcharge along, not total success. We've recovered part of it from the supply chain, thanks to partnership with our suppliers. And we're still in discussions with some of our customers. But, you know, the guidance reflects more than 50% recovery of what we've got out there. And just as a policy matter, we've got it out there as a surcharge because when the tasks go away, the surcharge goes away. That way it's not a, there's no risk of it being permanently embedded in the eyes of our customers as a price increase. It's really pain sharing.

Okay, that's fair. And when we think about what we're hearing from a lot of the upstream players, and, you know, the crude price is obviously soft and we're looking at kind of a second half, you know, at this point, maybe it looks like it'll be down somewhat in the year over year, North America activity probably down. How do you think the Dyna business performs in the second half of the year? I'm not asking you for guidance, I'm not asking you to set the parameters, but if rig count drops by, you know, 50 to 75 rigs over the next 12 months, or next two or three quarters, do you think you'll outperform? How do you think margins react? Like, is there a way to frame it in that kind of a scenario?

If oil stays in the 50s, and rig count goes down, frag stages go down, obviously our business is going to be softer. Right now, we're expecting it to be flat to modestly down, could be substantially worse if the end market's substantially worse.

Okay, okay. And then one other quick one, and I imagine you won't have a chance to answer this one, but I get asked about this all the time, so I'm going to ask you, what's going on with the whole Skill Connect situation? Is there any update you can give even at a high level?

There are larger shareholders. We have conversations with them periodically, and I think you find out contemporaneously, if not shortly thereafter, whenever they have a public release, which there hasn't been in a while. So other than they're our larger shareholder, and we appreciate their patronage, there really is nothing to report.

Okay, great. Thank you for the color.

You're welcome, Stephen.

Thank you, and there are no additional questions at this time, so I'll hand the floor back to Jim Leary, CEO, for any closing remarks. Thank you.

Well, operator, thank you, and thanks for those of you who participated in the call today. We will talk to you in a couple of months. Thank you, and

with that, we conclude today's call. All parties may disconnect.

Have

a good day.