DMC Global Reports Third Quarter 2022 Financial Results

CONTACT:

                                                                                                                                           Geoff High

                                                                                           Vice President of Investor Relations

                                                                                                                                   303-604-3924

DMC GLOBAL REPORTS THIRD QUARTER FINANCIAL RESULTS

• Third quarter sales were $174.5 million, up 5% sequentially and up 160% versus Q3 2021
• Excluding Arcadia, sales were $93.8 million, up 5% sequentially and up 40% versus Q3 2021
• Third quarter consolidated gross margin was 29% versus 31% in Q2 2022 and 25% in Q3 2021
• Third quarter net income attributable to DMC was $6.7 million
• Third quarter net income per diluted share, inclusive of adjustment for redeemable noncontrolling interest, was $0.46
• Third quarter adjusted net income attributable to DMC*, inclusive of $4.3 million in non-cash amortization expense for Arcadia purchased intangible assets, was $6.7 million, or $0.35 per diluted share
• Third quarter adjusted EBITDA attributable to DMC* was $21.8 million

 

BROOMFIELD, Colo. - November 3, 2022 - DMC Global Inc. (Nasdaq: BOOM) today reported financial results for its third quarter ended September 30, 2022.

 

Third quarter sales were $174.5 million, up 5% sequentially and up 160% versus sales in last year's third quarter. This year’s results include contributions from Arcadia, a leading supplier of architectural building products.  DMC acquired a 60% controlling interest in Arcadia on December 23, 2021.

 

Excluding $80.7 million in sales from Arcadia, third quarter sales were $93.8 million, up 5% sequentially and up 40% versus the third quarter of 2021. The increases reflect stronger demand for well perforating products from DynaEnergetics, DMC's energy products business.

 

Third quarter gross margin was 29% versus 31% in the second quarter and 25% in the third quarter a year ago. The sequential decline reflects an expected dip in gross margin at Arcadia resulting from recent volatility in aluminum prices.  The gross margin improvement compared to last year’s third quarter reflects higher sales volume on fixed manufacturing overhead expenses at DynaEnergetics.

 

Selling, general and administrative expense (SG&A) was $30.5 million. Excluding Arcadia, SG&A was $17.6 million versus $18.0 million in the second quarter and $15.3 million in the year-ago third quarter. The increase versus last year’s third quarter principally reflects higher variable incentive compensation, the expiration of the Employee Retention Credit under the CARES Act, and implementation costs associated with a new enterprise resource planning (ERP) system at NobelClad, DMC’s composite metals business.

 

Third quarter operating income was $13.4 million and included $7.4 million in non-cash amortization expense primarily associated with purchased intangible assets at Arcadia. This compares with operating income of $9.9 million in the second quarter, and $1.1 million in last year's third quarter.

 

Third quarter net income attributable to DMC was $6.7 million. Due to the acquisition of the 60% controlling interest in Arcadia, the calculation for net earnings per diluted share must account for the change in redemption value of the 40% redeemable noncontrolling interest in Arcadia. Redemption value is estimated at the end of each quarter based on the formula used to calculate a Put and Call Option in the Arcadia Operating Agreement. During the third quarter, the adjustment decreased the redeemable noncontrolling interest by $2.3 million. When added to the $6.7 million in net income attributable to DMC stockholders, the resulting net income is $9.0 million, or $0.46 per diluted share, based on 19.4 million diluted shares outstanding.  Net income in the prior-year third quarter was $403,000, or $0.02 per diluted share on 18.7 million diluted shares outstanding.

 

Third quarter adjusted net income attributable to DMC*, which includes $4.3 million in non-cash amortization expense of the purchased intangible assets of Arcadia, was $6.7 million, or $0.35 per diluted share.

 

Third quarter adjusted EBITDA attributable to DMC* was $21.8 million, down 3% from $22.4 million in the second quarter of 2022 and up 276% from $5.8 million in the 2021 third quarter.

 

Third quarter cash flow from operations was $21.8 million versus $4.1 million in the prior-year third quarter. Cash and cash equivalents were $18.5 million versus $30.8 million at December 31, 2021.

 

DMC’s debt-to-adjusted EBITDA leverage ratio at September 30, 2022, was 2.10. The Company’s debt-to-adjusted EBITDA leverage ratio covenant for the end of the quarter was 3.25.

 

Arcadia

Arcadia reported third quarter sales of $80.7 million, up 6% sequentially and up 24% from pro forma sales in last year's third quarter. The increase versus both periods reflects higher average selling prices, which were implemented to address inflation on raw materials.

 

Third quarter gross margin was 30% versus 34% in the second quarter and 36% in last year’s third quarter. The sequential decrease reflects higher third quarter raw material costs, which outpaced the increase in average selling prices. Additionally, orders were shipped out of backlog that were quoted prior to the implementation of price increases. Adjusted EBITDA attributable to DMC was $7.2 million versus $9.8 million in the second quarter of 2022 and pro forma adjusted EBITDA of $9.2 million in the comparable year-ago quarter. 

 

DynaEnergetics

DynaEnergetics reported third quarter sales of $70.4 million, up 4% sequentially and up 59% versus last year's third quarter. Sales in North America increased 6% sequentially, while international sales decreased 5% sequentially.  Second quarter international sales included a $3.6 million order from a customer in South Asia. Gross margin was 30% in both the second and third quarters and 22% in the 2021 third quarter. Adjusted EBITDA increased to $13.9 million from $13.3 million in the second quarter and $3.6 million in the 2021 third quarter.

 

NobelClad

NobelClad, DMC's composite metals business, reported third quarter sales of $23.4 million, up 7% sequentially and up 2% versus the 2021 third quarter. Gross margin was 27%, versus 28% in the second quarter and 30% in the prior-year third quarter. Adjusted EBITDA was $3.4 million in both the second and third quarters of 2022 and $4.6 million in the 2021 third quarter.

 

NobelClad’s trailing 12-month book-to-bill ratio at the end of the third quarter was 1.11. Order backlog increased to $48.0 million from $46.8 million at the end of the second quarter.

 

Nine-month results

Consolidated sales for the nine-month period were $479.0 million, up 154% versus the nine-month period a year ago. Excluding $225.1 million in contributions from Arcadia, year-to-date sales were $253.9 million, up 35% from the same period last year.

 

Gross margin was 29% versus 25% in the 2021 nine-month period. Operating income was $19.4 million versus $3.1 million in last year’s nine-month period.

 

Nine-month net income attributable to DMC was $9.0 million. The adjustment related to the change in redemption value of the 40% redeemable noncontrolling interest in Arcadia was $5.0 million. When deducted from the $9.0 million in net income attributable to DMC stockholders, the resulting net income was $4.0 million, or $0.20 per diluted share, based on 19.4 million diluted shares outstanding.  Net income in the prior-year nine-month period was $2.6 million, or $0.15 per diluted share on 17.3 million diluted shares outstanding.

 

Nine-month adjusted net income attributable to DMC*, which includes $19.6 million in non-cash amortization expense of the purchased intangible assets of Arcadia, was $9.2 million, or $0.48 per diluted share.

 

Nine-month adjusted EBITDA attributable to DMC* was $54.6 million, up 215% versus last year’s nine-month period. Cash flow provided by operations during the nine-month period was $24.3 million versus cash flow used in operations of $1.9 million in the prior-year nine-month period.

 

Arcadia

Arcadia reported nine-month sales of $225.1 million, up 23% from pro forma sales in last year’s nine-month period.  Gross margin was 31% versus pro forma gross margin of 36% in the 2021 nine-month period, and adjusted EBITDA attributable to DMC was $23.9 million, down 5% from pro forma results in the same period a year ago. 

 

DynaEnergetics

Nine-month sales at DynaEnergetics were $186.8 million, up 50% versus last year’s nine-month period. Gross margin improved to 29% from 23% a year ago, and adjusted EBITDA increased 162% to $32.5 million versus last year’s nine-month period. 

 

NobelClad

NobelClad reported nine-month sales of $67.1 million, up 6% from the same period last year. Gross margin was 25% versus 28% last year, while adjusted EBITDA was $8.5 million versus $11.6 million in the 2021 nine-month period.

 

Management Commentary

“All three of our differentiated, asset-light manufacturing businesses reported third quarter sales that exceeded our guidance,” said Kevin Longe, president and CEO.  “The results were driven by healthy customer demand within each of our markets, as well as outstanding execution by our global commercial and manufacturing teams.”

 

“DynaEnergetics’ third quarter performance reflects strong well-completion activity in both our North American and international markets,” Longe added. “Adoption of the fully integrated DS perforating systems by North American operators and service companies continues to grow. In October, sales of DS systems surpassed the one-million mark for the first year since the product was commercialized in 2015.

 

“DynaEnergetics is reporting an on-time delivery rate of 99.93% for its DS Systems, which are being deployed at a downhole success rate of 99.98%. Most importantly, there have been zero customer safety incidents associated with the DS system since it was introduced seven years ago.

 

“Third quarter sales growth at Arcadia reflects higher average selling prices and continued strong demand from both the commercial construction and high-end residential markets. As expected, Arcadia’s third-quarter gross margin was negatively impacted by record-high aluminum prices during the first half of 2022. It is taking longer than anticipated for high-cost aluminum inventory to move through our production facilities, and this will likely result in sequentially flat to modestly lower gross margin during the fourth quarter. We expect Arcadia’s gross margin will return to historic averages of approximately 34% during the first half of next year. 

 

“Both Arcadia and Arcadia Custom continue to benefit from large order backlogs and strong booking activity, and we are investing in the resources necessary to support this demand and facilitate future growth. In addition to implementing a modern ERP system, Arcadia is adding sales and manufacturing staff at its newest satellite facilities in Dallas and Houston.

 

“Our NobelClad business reported third quarter increases in both sales and bookings, and ended the period with a $48 million order backlog, which was up 17% since the beginning of the year.  The increase reflects both improving global demand and higher metal prices. 

 

“NobelClad is seeing encouraging signs that several large industrial projects are moving closer to the vendor-selection phase, and we believe NobelClad is well positioned to participate as a key supplier on multiple projects. Demand for repair and maintenance work from the downstream energy and petrochemical industries also is improving. Given current end-market activity, we believe 2023 will be a year of growth for NobelClad.

 

“I want to thank our employees around the world for their creativity, hard work, and commitment to DMC’s continued success. We are encouraged by the growing strength of DMC and believe we are well positioned to deliver improved long-term returns for our stakeholders.”

 

Guidance

Michael Kuta, CFO, said fourth quarter 2022 consolidated sales are expected in a range of $158 million to $168 million versus the $174.5 million reported in the third quarter. At the business level, Arcadia is expected to report sales of $70 million to $75 million versus the $80.7 million reported in the third quarter. The decrease reflects the anticipated impacts of seasonality and maintenance. Sales at DynaEnergetics are expected in a range of $68 million to $72 million versus the $70.4 million reported in the third quarter. NobelClad’s sales are expected in a range of $20 million to $21 million versus the $23.4 million reported in the third quarter.

 

Consolidated gross margin is expected in a range of 27% to 29% versus the 29% reported in the third quarter. Fourth quarter gross margin is expected to be impacted by a less favorable project mix at NobelClad and selling through higher-priced aluminum inventory at Arcadia. 

 

Fourth quarter selling, general and administrative (SG&A) expense is expected in a range of $31.5 million to $32.5 million versus the $30.5 million reported in the third quarter. Fourth quarter SG&A will include approximately $800,000 of anticipated patent litigation expense at DynaEnergetics.

 

Fourth quarter amortization expense is expected to be $3.7 million versus the $7.4 million reported in the third quarter. The remaining value assigned to Arcadia’s acquired backlog was fully amortized during the third quarter.

 

Fourth quarter depreciation expense is expected to be $3.7 million, and interest expense is expected to be $2.4 million.

 

Fourth quarter adjusted EBITDA attributable to DMC, after deducting the 40% noncontrolling interest, is expected in a range of $15 million to $18 million versus $21.8 million in the third quarter.

 

Fourth quarter capital expenditures are expected to be $6.0 million to $7.0 million.

 

Conference call information

Management will hold a conference call to discuss these results today at 5:00 p.m. Eastern (3:00 p.m. Mountain). Investors may listen to a live webcast of the call at https://www.webcaster4.com/Webcast/Page/2204/46845 or by dialing 888-506-0062 (973-528-0011 for international callers) and entering the code 560809. Webcast participants should access the website at least 15 minutes early to register and download any necessary audio software. A replay of the webcast will be available for 90 days and a telephonic replay will be available through November 10, 2022, by calling 877-481-4010 (919-882-2331 for international callers) and entering the Conference ID #46845.

 

*Use of Non-GAAP Financial Measures

Adjusted EBITDA, adjusted net income (loss), and adjusted diluted earnings per share are non-GAAP (generally accepted accounting principles) financial measures used by management to measure operating performance and liquidity. Non-GAAP results are presented only as a supplement to the financial statements based on U.S. generally accepted accounting principles (GAAP). The non-GAAP financial information is provided to enhance the reader’s understanding of DMC’s financial performance, but no non-GAAP measure should be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of the most directly comparable GAAP measures to non-GAAP measures are provided within the schedules attached to this release.

 

EBITDA is defined as net income plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation, restructuring and impairment charges and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance (as further described in the attached financial schedules). Adjusted net income (loss) is defined as net income (loss) attributable to DMC stockholders plus restructuring and impairment charges and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance. Adjusted diluted earnings per share is defined as diluted earnings per share plus restructuring and impairment charges and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance. None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure.

 

Management uses adjusted EBITDA in its operational and financial decision-making, believing that it is useful to eliminate certain items in order to focus on what it deems to be a more reliable indicator of ongoing operating performance. As a result, internal management reports used during monthly operating reviews feature adjusted EBITDA measures. Management believes that investors may find this non-GAAP financial measure useful for similar reasons, although investors are cautioned that non-GAAP financial measures are not a substitute for GAAP disclosures. In addition, management incentive awards are based, in part, on the amount of adjusted EBITDA achieved during relevant periods. EBITDA and adjusted EBITDA are also used by research analysts, investment bankers and lenders to assess operating performance. For example, a measure similar to adjusted EBITDA is required by the lenders under DMC’s credit facility.

 

Adjusted net income (loss) and adjusted diluted earnings per share are presented because management believes these measures are useful to understand the effects of restructuring and impairment charges and, when appropriate, other items that management does not utilize in assessing DMC’s operating performance, on DMC’s net income (loss) and diluted earnings per share, respectively.

 

Because not all companies use identical calculations, DMC’s presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the company’s performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures. For example, a company with greater GAAP net income may not be as appealing to investors if its net income is more heavily comprised of gains on asset sales. Likewise, eliminating the effects of interest income and expense moderates the impact of a company’s capital structure on its performance.

 

All of the items included in the reconciliation from net income to EBITDA and adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles and stock-based compensation) or (ii) items that management does not consider to be useful in assessing DMC’s operating performance (e.g., income taxes, restructuring and impairment charges). In the case of the non-cash items, management believes that investors can better assess the company’s operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect DMC’s ability to generate free cash flow or invest in its business. For example, by adjusting for depreciation and amortization in computing EBITDA, users can compare operating performance without regard to different accounting determinations such as useful life. In the case of the other items, management believes that investors can better assess operating performance if the measures are presented without these items because their financial impact does not reflect ongoing operating performance.

 

About DMC Global Inc.

DMC Global operates a portfolio of differentiated businesses that lead niche segments of the energy, industrial infrastructure and building products industries.  The Company’s strategy is to identify well-run businesses with strong management teams, and support them with long-term capital and strategic, financial, legal, technology and operating resources. DMC helps portfolio companies grow their core businesses, launch new initiatives, upgrade technologies and systems to support their long-term growth strategies, and make acquisitions that improve their competitive positions and expand their markets.  The Company’s current portfolio consists of Arcadia Inc., a leading supplier of architectural building products; DynaEnergetics, which serves the global energy industry; and NobelClad, which addresses the global industrial infrastructure and transportation sectors.  Based in Broomfield, Colorado, DMC trades on Nasdaq under the symbol “BOOM.” For more information, visit the Company’s website at https://www.dmcglobal.com.

 

###

 

Safe Harbor Language

Except for the historical information contained herein, this news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including fourth quarter 2022 guidance on sales, gross margin, SG&A, depreciation expense, interest expense, adjusted EBITDA and capital expenditures; fourth quarter and full-year amortization expense; our expectations Arcadia’s gross margin will return to historic averages of approximately 35% during the first half of next year; and our expectations that 2023 will be a year of growth for NobelClad. Such statements and information are based on numerous assumptions regarding present and future business strategies, the markets in which we operate, anticipated costs and the ability to achieve goals. Forward-looking information and statements are subject to known and unknown risks, uncertainties and other important factors that may cause actual results and performance to be materially different from those expressed or implied by such forward-looking information and statements, including but not limited to: our ability to realize sales from our backlog; our ability to obtain new contracts at attractive prices; the execution of purchase commitments by our customers, and our ability to successfully deliver on those purchase commitments; the size and timing of customer orders and shipments; changes to customer orders; product pricing and margins; fluctuations in customer demand; our ability to successfully navigate slowdowns in market activity or execute and capitalize upon growth opportunities; the success of DynaEnergetics’ product and technology development initiatives; our ability to successfully protect our technology and intellectual property and the costs associated with these efforts; potential consolidation among DynaEnergetics’ customers; fluctuations in foreign currencies; fluctuations in tariffs and quotas; the cost and availability of energy; the cyclicality of our business; competitive factors; the timely completion of contracts; the timing and size of expenditures; the timing and price of metal and other raw material; the adequacy of local labor supplies at our facilities; current or future limits on manufacturing capacity at our various operations; government actions or other changes in laws and regulations; the availability and cost of funds; our ability to access our borrowing capacity under our credit facility; geopolitical and economic instability, including recessions or depressions; inflation; supply chain delays and disruptions; the availability and cost of energy; transportation disruptions; general economic conditions, both domestic and foreign, impacting our business and the business of our customers and the end-market users we serve; as well as the other risks detailed from time to time in our SEC reports, including the annual report on Form 10-K for the year ended December 31, 2021. We do not undertake any obligation to release public revisions to any forward-looking statement, including, without limitation, to reflect events or circumstances after the date of this news release, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

 

DMC GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except Share and Per Share Data)

(unaudited)

 

 

Reconciliation to net income attributable to DMC Global Inc. stockholders after
adjustment of redeemable noncontrolling interest for purposes of calculating
earnings per share

 

	Nine months ended				Change
	Sep 30, 2022		Sep 30, 2021		Year-on-year
NET SALES	$ 479,012		$ 188,271		154 %
COST OF PRODUCTS SOLD	338,669		141,725		139 %
Gross profit	140,343		46,546		202 %
Gross profit percentage	29%		25%
COSTS AND EXPENSES:
General and administrative expenses	56,330		26,121		116 %
Selling and distribution expenses	31,383		16,380		92 %
Amortization of purchased intangible assets	33,154		823		3,928 %
Restructuring expenses	53		127		-58 %
Total costs and expenses	120,920		43,451		178 %
OPERATING INCOME	19,423		3,095		528 %
OTHER INCOME (EXPENSE):
Other (expense) income, net	(35)		304		-112 %
Interest expense, net	(4,058)		(230)		1,664 %
INCOME BEFORE INCOME TAXES	15,330		3,169		384 %
INCOME TAX PROVISION	4,938		610		710 %
NET INCOME	10,392		2,559		306 %
Less: Net income attributable to redeemable noncontrolling interest	1,411		—		100 %
NET INCOME ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS	$ 8,981		$ 2,559		251 %
NET INCOME PER SHARE ATTRIBUTABLE TO DMC GLOBAL INC. STOCKHOLDERS
Basic	$ 0.20		$ 0.15		33 %
Diluted	$ 0.20		$ 0.15		33 %
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic	19,352,638		17,239,306		12 %
Diluted	19,357,333		17,250,525		12 %

 

Reconciliation to net income attributable to DMC Global Inc. stockholders
after adjustment of redeemable noncontrolling interest for purposes of calculating
earnings per share

	Nine months ended
	Sep 30, 2022		Sep 30, 2021
Net income attributable to DMC Global Inc. stockholders	$ 8,981		$ 2,559
Adjustment of redeemable noncontrolling interest	(4,996)		—
Net income attributable to DMC Global Inc. common stockholders after adjustment of redeemable noncontrolling interest	$ 3,985		$ 2,559

 

DMC GLOBAL INC.

SEGMENT STATEMENTS OF OPERATIONS

(Amounts in Thousands)

(unaudited)

 

Arcadia

 

 

DynaEnergetics

 

 

NobelClad

 

	Nine months ended				Change
	Sep 30, 2022		Sep 30, 2021		Year-on-year
Net sales	$ 67,109		$ 63,594		6 %
Gross profit	16,532		17,960		-8 %
Gross profit percentage	25 %		28 %
COSTS AND EXPENSES:
General and administrative expenses	3,644		2,636		38 %
Selling and distribution expenses	6,910		6,230		11 %
Amortization of purchased intangible assets	235		372		-37 %
Restructuring expenses	53		127		-58 %
Operating income	5,690		8,595		-34 %
Adjusted EBITDA	$ 8,468		$ 11,573		-27 %

 

DMC GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands)

 

							Change
	Sep 30, 2022		Jun 30, 2022		Dec 31, 2021		Sequential		From year-end
	(unaudited)		(unaudited)
ASSETS
Cash and cash equivalents	$ 18,486		$ 11,819		$ 30,810		56 %		-40 %
Accounts receivable, net	94,191		92,998		71,932		1 %		31 %
Inventories	152,573		152,023		124,214		— %		23 %
Other current assets	9,977		11,888		12,240		-16 %		-18 %
Total current assets	275,227		268,728		239,196		2 %		15 %
Property, plant and equipment, net	123,292		124,829		122,078		-1 %		1 %
Goodwill	139,922		135,464		141,266		3 %		-1 %
Purchased intangible assets, net	221,753		229,365		255,576		-3 %		-13 %
Other long-term assets	104,915		105,169		106,296		— %		-1 %
Total assets	$ 865,109		$ 863,555		$ 864,412		— %		— %
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY
Accounts payable	$ 41,573		$ 45,179		$ 40,276		-8 %		3 %
Contract liabilities	30,030		33,202		21,052		-10 %		43 %
Accrued income taxes	3,206		289		9		1,009 %		35,522 %
Current portion of long-term debt	15,000		15,000		15,000		— %		— %
Other current liabilities	32,104		27,740		29,477		16 %		9 %
Total current liabilities	121,913		121,410		105,814		— %		15 %
Long-term debt	121,409		125,017		132,425		-3 %		-8 %
Deferred tax liabilities	1,547		2,019		2,202		-23 %		-30 %
Other long-term liabilities	62,625		62,858		66,250		— %		-5 %
Redeemable noncontrolling interest	194,962		197,196		197,196		-1 %		-1 %
Stockholders’ equity	362,653		355,055		360,525		2 %		1 %
Total liabilities, redeemable noncontrolling interest, and stockholders’ equity	$ 865,109		$ 863,555		$ 864,412		— %		— %

 

DMC GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

(unaudited)

 

	Nine months ended
	Sep 30, 2022		Sep 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 10,392		$ 2,559
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation	10,578		8,400
Amortization of purchased intangible assets	33,154		823
Amortization of deferred debt issuance costs	412		168
Amortization of acquisition-related inventory valuation step-up	430		—
Stock-based compensation	6,891		4,904
Deferred income taxes	(1,612)		(2,046)
Restructuring expenses	53		127
Other	(295)		(298)
Change in working capital, net	(35,668)		(16,543)
Net cash provided by (used in) operating activities	24,335		(1,906)
CASH FLOWS FROM INVESTING ACTIVITIES:
Transaction consideration adjustments related to acquisition of a business	(2,034)		—
Investment in marketable securities	—		(123,984)
Proceeds from maturities of marketable securities	—		4,799
Acquisition of property, plant and equipment	(11,277)		(6,348)
Proceeds on sale of property, plant and equipment	—		1,019
Net cash used in investing activities	(13,311)		(124,514)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on credit facilities	(11,250)		(11,750)
Payments of deferred debt issuance costs	(179)		—
Net proceeds from issuance of common stock through equity offering	—		123,461
Net proceeds from issuance of common stock through at-the-market offering program	—		25,262
Net proceeds from issuance of common stock	—		253
Distribution to redeemable noncontrolling interest holder	(10,293)		—
Treasury stock purchases	(1,092)		(2,476)
Net cash (used in) provided by financing activities	(22,814)		134,750
EFFECTS OF EXCHANGE RATES ON CASH	(534)		503
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(12,324)		8,833
CASH AND CASH EQUIVALENTS, beginning of the period	30,810		28,187
CASH AND CASH EQUIVALENTS, end of the period	$ 18,486		$ 37,020

DMC GLOBAL INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASUREMENTS TO MOST

DIRECTLY COMPARABLE GAAP FINANCIAL MEASUREMENTS

(Amounts in Thousands)

(unaudited)

DMC Global

 

EBITDA and Adjusted EBITDA

 

Adjusted Net Income and Adjusted Diluted Earnings per Share

(1) Calculated using diluted weighted average shares outstanding of 19,381,794

 

(1) Calculated using diluted weighted average shares outstanding of 19,374,376

 

1) Calculated using diluted weighted average shares outstanding of 18,739,085

 

1) Calculated using diluted weighted average shares outstanding of 19,357,333

 

1) Calculated using diluted weighted average shares outstanding of 17,250,525

 

Segment Adjusted EBITDA

 

Arcadia

	Three months ended				Change
	Sep 30, 2022		Jun 30, 2022		Sequential
Operating income, as reported	$ 3,742		$ 2,222		68 %
Adjustments:
Amortization of acquisition-related inventory valuation step-up	—		172		— %
Depreciation	733		870		-16 %
Amortization of purchased intangible assets	7,233		12,633		-43 %
Stock-based compensation	357		395		-10 %
Adjusted EBITDA	12,065		16,292		-26 %
Less: adjusted EBITDA attributable to redeemable noncontrolling interest	(4,826)		$ (6,517)		-26 %
Adjusted EBITDA attributable to DMC Global Inc.	$ 7,239		$ 9,775		-26 %

 

	Nine months ended
	Sep 30, 2022
Operating income, as reported	$ 3,521
Adjustments:
Amortization of acquisition-related inventory valuation step-up	430
Depreciation	2,144
Amortization of purchased intangible assets	32,674
Stock-based compensation	1,008
Adjusted EBITDA	39,777
Less: adjusted EBITDA attributable to redeemable noncontrolling interest	(15,911)
Adjusted EBITDA attributable to DMC Global Inc.	$ 23,866

 

DynaEnergetics

	Three months ended						Change
	Sep 30, 2022		Jun 30, 2022		Sep 30, 2021		Sequential		Year-on-year
Operating income, as reported	$ 11,978		$ 11,309		$ 1,585		6 %		656 %
Adjustments:
Depreciation	1,879		1,885		1,923		— %		-2 %
Amortization of purchased intangible assets	78		82		89		-5 %		-12 %
Adjusted EBITDA	$ 13,935		$ 13,276		$ 3,597		5 %		287 %

 

 

	Nine months ended				Change
	Sep 30, 2022		Sep 30, 2021		Year-on-year
Operating income, as reported	$ 26,585		$ 6,307		322 %
Adjustments:
Depreciation	5,663		5,644		— %
Amortization of purchased intangible assets	245		451		-46 %
Adjusted EBITDA	$ 32,493		$ 12,402		162 %

 

 

NobelClad

	Three months ended						Change
	Sep 30, 2022		Jun 30, 2022		Sep 30, 2021		Sequential		Year-on-year
Operating income, as reported	$ 2,505		$ 2,480		$ 3,620		1 %		-31 %
Adjustments:
Restructuring expenses	8		13		—		-38 %		—%
Depreciation	825		833		845		-1 %		-2 %
Amortization of purchased intangible assets	74		78		122		-5 %		-39 %
Adjusted EBITDA	$ 3,412		$ 3,404		$ 4,587		— %		-26 %

 

 

	Nine months ended				Change
	Sep 30, 2022		Sep 30, 2021		Year-on-year
Operating income, as reported	$ 5,690		$ 8,595		-34 %
Adjustments:
Restructuring expenses	53		127		-58 %
Depreciation	2,490		2,479		— %
Amortization of purchased intangible assets	235		372		-37 %
Adjusted EBITDA	$ 8,468		$ 11,573		-27 %

 

DMC GLOBAL INC.

PRO FORMA RESULTS

(Amounts in Thousands, Except Per Share Data)

(unaudited)

 

Pro Forma Summary Income Statement*

 

	Three months ended September 30, 2021
	DMC		Arcadia		Redeemable Noncontrolling Interest(1)		Pro Forma Arcadia		Pro Forma Combined
Net sales	$ 67,175		$ 65,313				$ 65,313		$ 132,488
Gross profit	16,662		23,635				23,635		40,297
Gross profit percentage	25 %		36 %				36 %		30 %
Selling, general, and administrative expenses	15,314		8,781				8,781		24,095
Amortization of purchased intangible assets	211		—				—		211
Operating income	1,137		14,854				14,854		15,991
Depreciation and amortization	3,081		462				462		3,543
Stock-based compensation expense	1,569		—				—		1,569
Adjusted EBITDA	5,787		15,316		(6,126)		9,190		14,977
Adjusted EBITDA %	9 %		23 %				14 %		11 %

(1) Represents the Adjusted EBITDA attributable to the 40% redeemable
noncontrolling interest.

 

	Nine months ended September 30, 2021
	DMC		Arcadia		Redeemable Noncontrolling Interest(1)		Pro Forma Arcadia		Pro Forma Combined
Net sales	$ 188,271		$ 183,692				$ 183,692		$ 371,963
Gross profit	46,546		66,047				66,047		112,593
Gross profit percentage	25 %		36 %				36 %		30 %
Selling, general, and administrative expenses	42,501		25,496				25,496		67,997
Amortization of purchased intangible assets	823		—				—		823
Restructuring expenses and asset impairments	127		—				—		127
Operating income	3,095		40,551				40,551		43,646
Depreciation and amortization	9,223		1,319				1,319		10,542
Restructuring expenses and asset impairments	127		—				—		127
Stock-based compensation expense	4,904		—				—		4,904
Adjusted EBITDA	17,349		41,870		(16,748)		25,122		42,471
Adjusted EBITDA %	9 %		23 %				14 %		11 %

(1) Represents the Adjusted EBITDA attributable to the 40% redeemable
noncontrolling interest.

 

 

Pro Forma EBITDA and Adjusted EBITDA*

	Three months ended September 30, 2021
	DMC		Arcadia		Pro Forma Combined
Net income	$ 403		$ 14,854		$ 15,257
Interest expense, net	14		—		14
Income tax provision	522		—		522
Depreciation	2,870		462		3,332
Amortization of purchased intangible assets	211		—		211
EBITDA	4,020		15,316		19,336
Stock-based compensation expense	1,569		—		1,569
Other income, net	198		—		198
Adjusted EBITDA	5,787		15,316		21,103
Less: adjusted EBITDA attributable to redeemable noncontrolling interest	—		(6,126)		(6,126)
Adjusted EBITDA attributable to DMC Global Inc.	5,787		9,190		14,977

 

 

	Nine months ended September 30, 2021
	DMC		Arcadia		Pro Forma Combined
Net income	$ 2,559		$ 40,551		$ 43,110
Interest expense, net	230		—		230
Income tax benefit	610		—		610
Depreciation	8,400		1,319		9,719
Amortization	823		—		823
EBITDA	12,622		41,870		54,492
Restructuring expenses	127		—		127
Stock-based compensation expense	4,904		—		4,904
Other income, net	(304)		—		(304)
Adjusted EBITDA	17,349		41,870		59,219
Less: adjusted EBITDA attributable to redeemable noncontrolling interest	—		(16,748)		(16,748)
Adjusted EBITDA attributable to DMC Global Inc.	17,349		25,122		42,471

 

*This unaudited pro forma combined financial information was not prepared under Article 11 of SEC

Regulation S-X (“Article 11”) or Financial Accounting Standards Board Accounting Standards Codification 805 (“ASC 805”).