DMC Global Inc.

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

Hello, and welcome to DMC's Fourth Quarter Conference Call. Presenting today are President and CEO Jim O'Leary 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 fourth quarter performance are available on the investors 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 turn the call over to Jim O'Leary. Jim?

Thanks, Jeff, and thanks, everyone, for joining us today. Macroeconomic challenges continue to be a major issue at DMC, notably tariffs, both pre- and post-Friday's turbulence, and the general trend and level of interest rates, which have largely been unforecastable, much to the chagrin of everyone in the building industry. These and other economic challenges weighed heavily on DMC's core oil field and construction markets throughout 2025 and are persisting into early 2026. Despite these difficulties, we remain focused on our main objective, which we've consistently discussed with you each quarter, strengthening our financial position. And on that front, we continue to make significant progress. We reduced our net debt by another $11.4 million during the fourth quarter. At year end, our net debt of $18.7 million was down 67% from the end of 2024, and at the lowest level since the Arcadia acquisition was consummated in 2021. However, while we made progress on the balance sheet front, we received little or no cooperation from our end markets, which continued to worsen during the period. Paris were a significant headwind for us in 2025, and we're currently reviewing Friday's Supreme Court ruling and the White House's subsequent response to understand what it all means for our businesses. At this point, it appears that the Section 232 tariffs on steel and aluminum will remain in place. We're evaluating what refunds we may be entitled to, which the Supreme Court was silent upon in its ruling. With respect to the fourth quarter, consolidated sales declined 6% year over year to $143.5 million. Fourth quarter adjusted EBITDA attributable to DMC was negative $1.6 million, which included approximately $7 million in discrete accounts receivable and inventory write-offs at Dyna Energetics, our core oil field products business, as certain of its customers have been negatively impacted by very challenging conditions in the North American unconventional oil and gas market. Arcadia, our building products business, reported fourth quarter sales of $57 million, down 5% year over year, and down 8% sequentially. Adjusted EBITDA attributable to DMC was $2.4 million, up from $2.2 million in the prior year fourth quarter, but down from $5.1 million in the third quarter. In addition to year-end seasonality, Arcadia's end markets have been impacted by persistently high interest rates and elevated raw material and labor costs, which have collectively slowed architectural activity and led to the deferral of several large projects. The architectural billing index for Arcadia's core western U.S. region has contracted for 12 months, and these conditions have led to a highly competitive bidding environment that's pressured pricing. Most notably, we've experienced a continued increase in the average price of aluminum, Arcadia's primary input, which was up 55% year-over-year and 12% sequentially. In a soft market categorized by project deferrals and delays, this has led to a very price competitive environment. Dyna Energetics reported fourth quarter sales of $68.9 million, an 8% improvement versus the prior year quarter and flat sequentially. Adjusted EBITDA, including the approximately $7 million in write-offs, was negative $2.7 million. As mentioned, Dyna Energetics and its customers have been negatively impacted by challenging conditions in the North American onshore market, which has seen volatile and generally declining oil prices, fewer operating frack crews, and highly competitive pricing. During the fourth quarter, Dyna paid more than $3 million in tariffs and related duties and has paid more than $10 million since the tariffs were imposed in February of last year. Nobleclad, our composite metals business, reported fourth quarter sales of $17.7 million, down 38% from the 2024 fourth quarter and down 15% sequentially. Reduced bookings during the first half of 2025 led to the declines as evolving tariff policies contributed to significant uncertainty in Nobleclad's U.S. and international markets. Adjusted EBITDA was $2.1 million, down 64% versus the comparable prior period, and up 1% sequentially. The year-over-year decline principally reflects lower absorption of fixed manufacturing overhead and significantly reduced sales. Nobleclad's order backlog at the end of the quarter was $62.6 million, up 28% year-over-year, and up 10% sequentially. The increase reflects a record $25 million order during the first quarter of 2025 for an international petrochemical project. I'll now turn it over to Eric for a closer look at the fourth quarter financials and our guidance for the first quarter.

Thank you, Jim. As previously mentioned, our consolidated adjusted EBITDA attributable to DMC of negative $1.6 million included approximately $7 million in discrete charges at DynEnergetics. And the majority of these charges were related to accounts receivable reserves. As Jim noted, the reduced activity and pricing pressure in the North American unconventional oil and gas sector has created significant challenges for some of Dyna Energetics' oilfield services customers. Inclusive of the Arcadia non-controlling interest, adjusted EBITDA was approximately $61,000 versus $11.9 million in last year's fourth quarter. and $12 million in the third quarter. Arcadia's fourth quarter adjusted EBITDA margin before non-controlling interest allocation was 7.1%, up from 6.2% in the year-ago fourth quarter, but down from 13.8% in the third quarter. Dinah's adjusted EBITDA margin was a negative 4% compared with 8% in the prior year quarter and 7.1% in the third quarter. Novoclad's fourth quarter adjusted EBITDA margin was approximately 12% versus 20.6% in the prior year fourth quarter and approximately 10% in the third quarter. The year-over-year decline includes a tariff-related slowdown in bookings earlier in the year. Fourth quarter SG&A expense was $29.6 million, or 20.6% of sales, versus $25.1 million, or 16.5% of sales in the prior year of fourth quarter. The year-over-year increase principally relates to discrete accounts receivable write-offs at Dyno. Fourth quarter adjusted net loss attributable to DMC was $9.9 million, while adjusted loss per share attributable to DMC was 50 cents. With respect to liquidity, we ended the fourth quarter with cash and cash equivalents of approximately $32 million. Strong fourth quarter cash flow enabled us to reduce total debt to $52 million, a 28% decrease from year-end 2024. As Jim mentioned, net debt was $18.7 million, down 67% from the end of 2024. And now the guidance for the first quarter. We expect sales will be in a range of $132 and $138 million while adjusted EBITDA attributable to DMC is expected in a range of $2 million to $4 million. Our results will reflect the impact of severe weather across much of the United States that affected our businesses during the first half of the quarter. We expect many of the factors that negatively impacted our fourth quarter and most of 2025 will continue into 2026. We believe Arcadia products will continue to face the broader factors that have weighed on the construction sector, including persistently high interest rates, volatile input prices, and acute price competition. Project deferrals and generally lower activity in Arcadia's core West Coast markets are expected to continue through at least the beginning of the year. Dyna Energetics' core North American unconventional market remains challenged by margin pressure from both fewer operating frack crews, which has led to a difficult pricing environment, and higher input prices that have been inflated principally by tariffs. While Novoclad expects improved performance for the full fiscal year, demand erosion following the imposition of tariffs in early 2025 and the resulting impact on major orders will result in a slow start to the year. As a reminder, our guidance is heavily impacted by macroeconomic conditions, including evolving tariff policies, particularly in our core energy and construction markets. Our guidance is subject to change either upward or downward as these highly volatile inputs evolve in 2026. Now I'll turn the call back to Jim.

Thank you, Eric. So to sum up, while we're pleased with our progress on the balance sheet, we're equally displeased with our overall financial performance. However, we recognize, we expect that many of our constituents recognize, that we operate principally in two markets, energy and construction. that historically have been highly volatile and can and have been deeply cyclical. While we navigate what currently are tough conditions, what will hopefully be close to trough conditions in both markets, we're keenly aware of the need to find future avenues of growth while we continue to batten down the hatches to maximize operating leverage when business conditions eventually improve. Our businesses are actively pursuing potential growth opportunities that align with their core capabilities. For example, Dyna Energetics is exploring opportunities in the enhanced geothermal sector while we're looking to expand our presence in certain emerging international shale markets. Meanwhile, Nobleclad, which already supplies mission-critical components to the U.S. Navy, is closely monitoring opportunities associated with the recently announced acceleration of the U.S. Naval Readiness Program and expects to be a beneficiary of any increased volume particular for future submarine programs. Currently, each of our businesses are assessing the expected impacts of the Supreme Court tariff decision while working on additional tariff mitigation strategies. They're ready to take further cost reduction activity in addition if business conditions do not improve as we move further into 2026. Finally, I'd like to thank the EMC's associates around the world for their contributions during a very challenging year. Their contribution and commitment is greatly appreciated. And with that, we'd be glad to take any questions, operator.

Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two 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 start fuse. And our first question comes from the line of Jerry Sweeney with Roth Capital Partners. Please proceed.

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

Joe?

I wanted to start with Dyna Energetics. Obviously, you know, at the end of your prepared remarks, you talked about being keenly aware of growth opportunities. And I was wondering if you could touch upon the geothermal opportunity and the international shale opportunity. Joe, are you there? Hello? Can you hear me? Can you guys hear me?

Yeah, I can hear you now.

Yeah. All right, I apologize.

Hey, Joe.

Did you catch anything, or was I just not there?

You weren't there. Can you start over?

Yep, I can. I apologize. So, well, Jim, Eric, Jeff, thanks for taking my call, but... Jim, you spoke at the end of your prepared remarks about being keenly aware of growth. And I wanted to see if you could just discuss the opportunities on the geothermal side and the international shale side. And on the international shale side, how you go to market and what's the opportunity there.

Sure, sure. And we'll definitely talk about the growth. But again, we're keenly aware these are cyclical markets. Two of them are down. So while we've been taking costs out all along, supply chain, variable costs, and if there were further attrition, everything's on the table. Headcount across the board, spending across the board. So the goal for at least until we start to see the markets improve is make sure we're maximizing operating leverage on the other side. As the builders show last week, We're not experiencing anything different than anybody else. Onshore oil and gas, certainly the same. And we're particularly exposed to onshore oil and gas where the price pressure and the volume has been okay, but the price pressure, particularly the tariff impact on margins has been challenging. So job one is make sure we have the maximum operating leverage possible on the other side of this. But, and to your question, Our product, particularly for EGS, enhanced geothermal, it's exactly the product we use for fracking. If you looked at the One Big Beautiful bill from a couple of months ago, the renewable technology that was most favored and came out, not just intact, but better than it went in before the bill was put up. Enhanced geothermal is the preferred, and really, it came out with a halo on it. There are a number of industry players that we're working with right now. They're through, and if you were to look at the CVs of most of the people in leadership positions at EGS companies, they're all former people who were in leadership roles at fracking companies, oil and gas companies. It's very much a similar technology. It's the same sales channels. And it's something that Dyna is extremely good at. And I think we're uniquely well positioned if, in our opinion, it's when geothermal takes off. It'll be principally in North America. But remember, we're one of the few companies with an international footprint as well. So we're exploring that globally, but first and foremost in North America. The second and particularly noteworthy, again, because it's in the papers every day, Naval readiness, particularly around issues, and it's not just in Asia, it's across the world, where the state of naval readiness around submarines, battleships, almost anything that has been underinvested in for now decades is something Noble Cloud is uniquely positioned in. We're sole source on a number of things that go into most nuclear subs. right now and openly discussed, and I believe in the budget for next year, is a doubling of sub volume. Now that might be going from one to two or one and a half to two plus. But doubling of volume has a pretty pronounced impact on noble clad. We don't want to quote the numbers for an individual, you know, for a unique vertical right now. But doubling of sub volume for noble clad principally in the U.S., That doesn't include what else might go on elsewhere in the world, which we're looking into actively. Any additional, particularly on pressure vessels and battleships and some of the additional things that are being talked about by the Trump administration would have a pronounced impact. It won't be 2026 unless it's very late in 2026, but in 2027 and beyond, the revving up of the Naval Readiness Program would have a significant impact on us. The third thing, which we talked about, going back to Dinah, in our international shell, principally in South America, Vaca Muerte in Argentina is the one that you see most in the press. But in Saudi Arabia and other parts of the world, again, we think we're uniquely positioned because of our global footprint and our technology, but that's something we're also revving up the efforts on.

Got it. I always like to start with the good things on the growth side, but a little bit different tack, Arcadia. And I want to make – I believe I read this when I was rereading the transcript, but I think you anticipated actually I think better margins with the 3Q call in that segment. I'm just curious if that just saw increased pressure in the second half. And as you also said, you know, there's nothing off the table. Anything there that you need to sort of fix or even invest in to help on the margin front?

I don't think there's anything obvious that needs to be fixed. We're looking at every discrete physical operation. We're looking at and we've continued to look at every product line, whether it's contributing or not. But, you know, Jerry, the entire industry just took a leg down from the second quarter going into the first quarter of this year. it worsened more than we expected, more than our management team there anticipated. I think you've heard us talk about the run rate going from 20 million in sales per month up to 25 as a pronounced impact on operating leverage. But we dipped below 20 going into the fourth quarter and into the first. And if it were something unique that we were doing poorly or something unique about our footprint, And don't get me wrong. We are concerned. We're looking at everything. But it's not concerned that we're doing anything particularly wrong. I don't know if you have visibility into anybody, but there's one public comp, and I don't like to speak about tears in the press, but there is one public comp. But there's two private comps, both of which are private equity owned. We get to see, and I believe you probably could figure out, how their performance has been. You know, of the three or four data points we have, two private but, you know, pretty prominent debt issuers, one public, there's absolutely nothing unique about our performance, which is unfortunate. And I was at the Builders Show earlier this week, and, you know, it's the gloomiest I remember since 2011. Now, I'm hoping the saying, it's always darkest before the dawn holds true, I thought interest rates would kind of break in our way, in our favor a bit sooner. I think we're going to have to stay tuned there. The cross-currents of inflation, is it caused by tariffs or not? Just general stickiness of longer-term interest rates relative to the likelihood that at some point this year there'll be cuts. Hopefully that precipitates the darkest before the dawn comment. But right now, it's about the gloomiest I've seen since 2010 and 2011. But it's nothing unique to Arcadia. The only thing that may impact us a bit more than some of the peers I just mentioned. We're disappointed. I know the people who live there and are directly impacted are very disappointed. But the rebuilding in Los Angeles is taking a lot longer than I think we anticipated a year ago. It's taken a lot longer than people I talked to at the Builder Show last week have expected. And that's one where it has to be impacting us a bit more pronounced because we're the leader in that market. If you've been through Vegas for any trade shows or any of your other coverage universe, You know, I mean, Vegas is not a lot of laughs these days. We're still holding up very well because of our market share. But whereas in an up market, our footprint is really beneficial because we continue to be in some of the better MSAs in the country. You know, right now, at least a number of them, and I'm thinking particularly California and Vegas, are a bit gloomier than they normally are in the building market. And again, nothing that's specific to Arcadia. And that's borne out by what we see and what we can tell from our comps. But, you know, it doesn't make us feel any better about it and doesn't make us any more alert about looking at everything. And like I said, everything's on the table.

Gotcha. And I saw the read-throughs on some of the competition, so I appreciate that. And you also preempted my question on the Palisades rebuild. My sense is there's a lot of – there's building frustration that's taking longer than people anticipated. And some of it's being held up by – some red tape, but that's it for me.

It's incredible and it's disappointing. Yep.

Yes. Thanks, Eric. I appreciate it. Thanks.

The next question comes from the line of Stephen Gangaro with Steeple. Please proceed.

Thanks. Good afternoon, everybody. Hey, Stephen. Hey, Stephen. A couple for me. The first question On the Dyna energetic side, it seemed like the fourth quarter revenue was very strong. And I know there was a kind of lower seasonality in the frack business than normal. Did the top line surprise you? And I'm curious if what you're seeing, I imagine that would help overhead absorption as to whether there's, I was trying to figure out kind of the margin performance, even absent the, the discrete items you took?

I wouldn't say surprised, because we have reasonably good visibility by the time we announced guidance. On the volume side, principal unit volume, it was as we expected. There was nothing disappointing about it. In fact, given what you read in the press, it was absolutely solid. It did fall off a little bit going into the end and then going into the beginning of the year. So that's why we're even a bit more cautious with the first quarter. It really came down to margins, Stephen. The margin pressure from tariffs, and we debated whether or not we should put in the exact numbers, but the impact on Dyna Energetics from tariffs has been so significant. We thought it was important for you. you know, in your constituents to see the numbers, you know, three and a quarter and 10 for the year is pretty impactful for a company the size of Dyna Energetics. The unit volume, and I'm making a clear distinction between unit volume and price, you know, pricing has been challenging on perforating guns in particular, given it's a narrow universe, it's a subset of the broader equipment market. And I know you cover a lot of our peers, whereas some are seeing the benefits of broadening offshore exposure, some are seeing the benefits of, you know, greater penetration or greater activity in conventional, particularly in other geographies. You know, we are pretty, you know, our sandbox is pretty restricted. You know, is it 70-30? You know, that's probably not a bad number, unconventional in the U.S., principally the Permian and elsewhere. And the price pressure there has been significant. So, you know, kind of simplifying it a bit and back to your question, unit volume was as we expected and it was fine. Price pressure was pretty significant and price coupled with, and it's not just tariffs, you know, labor costs, you know, the friction from having to reverse gears on, you know, what tariffs are doing. And we did do a lot of good things on the supply chain side, but, you know, the friction of having to re-engineer everything a couple of times a year, you know, that has a cost impact as well. So it's mostly margin compression, and it's principally on the cost and a bit on the pricing side.

Okay, thanks. And to follow up to that, this is probably a little higher level, but when we think of die energetics, and like you made the comment earlier, cyclical versus, see, I think you mentioned something about cyclical issues, and what I'm trying to understand about Dyna is how much of this is truly cyclical and how much of this is a structural problem in the U.S. Perth business, given what some of the machine shops have done and given maybe a competitive landscape, which is probably better than it was a couple of years ago. But I'm struggling with that part of it and trying to figure out what it's really going to take for Dyna Energetics margins to start to expand again at some point?

It's the right question. It's the one we're asking ourselves a lot as well. I couldn't give you it's 50-50 or 70-30, but, you know, on the volume side, even though unit volumes are fine, rig count has been down, frack spreads have been down, frack crews are down. If you look at some of the industry data, you know, Would it be better if oil was consistently over 70? Would it be better in a less uncertain world where, you know, is Iran on-stream, off-stream? Are the Saudis going to increase or decrease output? You know, I think a little bit more consistency. And, you know, just because volumes weren't bad doesn't mean they couldn't be a lot better if you had better visibility into the global picture. And yet again, most of the metrics that do affect us were down, it's just unit volume ended up being okay. So it's clearly not all secular, but it's also not as bad cyclically as it was around COVID or in 2015 and 16. I wish I had a better answer in terms of the percentage and when we would see things turn around. We have, and we typically don't talk about this level of detail. But we have made some pretty substantial changes at Dyna on the personnel front as far as manufacturing and some inside salespeople that we think will make a difference. We'd maybe gotten a little, I don't want to say fat and happy, but we probably got a little bit too complacent over a long period. The last two years, particularly as volume came down, but it didn't plummet. You know, it didn't bring people into action the way probably it should have. I hope that's helpful, and I wish we could give you a better answer on how much is cyclical and how much is secular. On the secular side, though, again, and it's intentionally put this way in the press release, you know, we appreciate that cyclical businesses, but we have to find other avenues of growth. And I think international sale opportunities and enhanced geothermal are the two things we've got to be paying attention to until – visibility improves, and we can better answer the question.

No, great. No, that's fine. Thank you. I appreciate you giving some color. And just one final one. I'm not sure how grand you'll get on this, but when we think about the first quarter and then maybe as 26 progresses, any commentary on the segment puts and takes in the first quarter and maybe which segments you're probably more or less optimistic about as far as seeing some expansion throughout 26?

Yeah, the first quarter is going to be tough. And Nobleclad doesn't really pick up. And the pickup will largely be driven by that large project we referenced. And that's into the year. It's not in the first quarter. It's really too late to say interest rates or anything in the Elsewhere in the West in particular. So I think they're all going to be equally gloomy. And I think the recovery and the pickup has to be back half of the year, maybe as early as the second quarter. But I don't want to jinx those. And again, everything along the lines of interest rates, greater clarity on tariffs. If you just take the 15% that the administration is going to use from Section 122 of the 74 Act, and you superimpose that, we should see a little bit of relief. It's only a small percentage of the 3 in 10 that we referenced in the press release. You know, but we should see some cost improvement. But, you know, it is almost the end of February. And, you know, I think we tried to be conservative, but not unrealistic about the first quarter. And again, wish we had a better answer, but I think that's, you know, the die is kind of cast for the first quarter.

Great. No, that's helpful. Thank you for all the details.

Okay, thank you, Steven.

The next question comes from the line of Ken Newman with KeyBank Capital Markets. Please proceed.

Hey, good evening, guys. Eric. Hey. Eric, maybe for my first question, I was hoping maybe you could help us bridge a little bit to this first quarter EBITDA guidance. Wanted to get some clarity. First, Is there any other carryover write-down impacts or anything else that, you know, outside of just the core operations that we should be aware of from 4Q to 1Q? And then also maybe a little bit of help from a gross margin perspective across those segments as we think about the sequential moves there.

Yeah, so not aware of any type of carryover write-downs that we would have from Q4 going into Q1. To answer your first question, And I think the second one in terms of gross margins, as we talked about earlier in the prepared remarks, the margins are pressured at both Arcadia and also at Dyna. So the input costs that are coming through for Arcadia, the aluminum costs, they continue to increase. And through just yesterday, or sorry, Friday, the aluminum costs had gone up another 10% on a quarter of a quarter basis. So What Arcadia is seeing is very difficult. It's very difficult for them to pass through all of those costs onto their customers. And the other piece of it is that some of the projects that they bid on are starting to get delayed. And so there's an increased level of price competition that's also impacting them. So in terms of gross margin for Arcadia, I think there's nothing that's going to necessarily return or recover to historical levels in the first quarter, at least from what we see right now. And then, Jim, in answering some of the previous questions that talked about some of the challenges for Dyna, they also have some of the similar challenges from a tariff standpoint. There's no reason to think that the tariff exposure is going to dramatically change from this point through the end of the quarter. And the pricing pressures that they had in the second half of 2025 are going to continue into the first quarter as well. For both of those businesses, they're getting an impact, whether it's pricing to customers, whether it's the input costs are going to put pressure on margins. And then I guess the last thing that I would say across them as well as Novoclad is to the extent that they have less volume flowing through their plants, they obviously have pressure coming from fixed cost absorption or operating leverage, however you want to think about it. So I think... For your second question, I think the pressures that we had in Q4, they're going to continue into Q1 at the gross margin level.

Yep. Okay. That's very helpful. And then for my follow-up here, Jim, you gave a lot of great color. It sounds like there's more blood that could be squeezed from the stone here from a cost-down and efficiency perspective if the demand remains weak. I know you talked a bit to the opportunities for when that demand recovers. But as you think about this from a higher level, how much of this story do you view it as one of just hoping that the end markets improve versus something that you can actively do today to kind of drive that incremental demand? And how much do you have to spend in order to kind of go after those opportunities?

We wouldn't have to spend anything. I mean, there's no big capital project. There's nothing that is transformative on a technology front. You know, we talked in the past about automation and Dyna Energetics. We've talked about some CapEx projects, you know, one-off basis here and there on Arcadia. There's no money that has to be spent. But, you know, Ken, we did go into, and it was intentional, the discussion on the cyclical businesses. I wouldn't say there's blood to squeeze out of the stone. Because we are diligent and we continue to look at, you know, certain things just adjust with volume, overtime, temporary labor, traffic, meaning mileage, and things that are purely variable. When those don't adjust, you know, even if you're a quarter or two late, you jump all over them, and we've been jumping all over them now. Are there things that we can be a little bit more diligent on and push on a little bit harder? Yes, but, you know, I'll see the difference. It'll probably be difficult for you to see the difference. The reference in we're looking at other plans and considering other things we can do is Listen, if there's a step function down, and I lived through 2007 through 2011 in the building industry. I was the CEO of another industrial company during the great financial crisis. You know, you do have to be diligent about another step function down where, you know, you're laying off substantial numbers of people. You're cutting heads, certainly not indiscriminately, but you're cutting heads significantly. at a level that you wouldn't do if you didn't have to. I mean, right now, the drop down over the last four quarters, I'd categorize as measured, and it hasn't been a slow drip. But again, if you look at our peers, if you look at the building industry more broadly, if you take, you know, one of the guys who preceded you's question on is it secular, is it cyclical and onshore unconventional? You know, it's been kind of a slow drip and a steady march downward. What I'm talking about is if there's another drop down and it's precipitous and a step function, you know, we'll be ready. There are other things we can do. But, you know, right now part of this is maximizing operating leverage and being ready if there's a step function up. You know, at some point, and I've lived through this too, when the building industry takes off and we get, you know, monthly sales above 20 million and going from 20 million to 25, the drop through in operating margins, the drop through on gross margins is significant. It's noticeable, not just to me. You guys will see it right away. You know, so that's, you know, it's kind of making sure we're in a position to maximize and harvest all of that. And, you know, we also intentionally in the comments said, we're hoping this is the trough, but you can never get complacent about that. And I think we've had little bits of complacency over the last couple of years, which, you know, we've run all the complacency out. I think people are paying attention to all the variable costs. We're looking at avenues where If there's a step function down, we're prepared to take the actions that would be necessary. But the flip side of that is, if the building industry takes off, you don't want to be the person who can't meet demand. You don't want to be the person who can't be staffed up and in a position to maximize that. I think we're right in that point of balance now. And again, I'm keeping my fingers crossed that it's a leg up at some point this year. It won't be next quarter. And, you know, if it is a step down, we'll be prepared. Let's just hope that's not what it comes to.

Yep. Makes sense. Appreciate it.

You're welcome. Thank you.

Thank you. This concludes the question and answer session. I'll turn the call back over to Jim O'Leary for closing remarks.

All right. Operator, thank you. And for anyone listening on the call, including the fellows who asked questions, thank you. All good questions, all provided the color we want you to leave with. And again, just to repeat something, cyclical ed markets, we don't see anything that's specific to us that is in desperate need of help. We're trying to maximize the operating leverage on the other side. We're prepared if there's another leg down, which hopefully there won't be. Tariffs and the general level of interest rates have not been kind to us, but they haven't been kind to anybody. and not just maximizing the operating leverage, but looking for avenues of growth, which would be geothermal and international with Dyna, certainly the Naval Readiness Initiative at Noble Plaid, amongst getting back in the game with some of the larger projects that we think, now that there's a little bit more stability on the demand front, we should avail ourselves of. We're looking at all the right things. We appreciate your patience, and we're trying like heck to do a better job for you. So with that, thank you, and we're looking forward to talking to you in a couple of quarters.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.