# DMC Global Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [DMC Global Inc.](/companies/boom.md) (CIK 34067)
- Form: 10-Q
- Filed: 2024-05-02
- Accepted by EDGAR: May 2, 2024, 16:14 ET
- Period: 2024-03-31
- Accession: 0000034067-24-000075
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/34067/000003406724000075/boom-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/34067/000003406724000075/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $166.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $124.5m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $42.4m | us-gaap:GrossProfit |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $6.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $2.3m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $1.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $2.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.01 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.01 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 19,622,455 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $13.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $3.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $936.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-03-31 | $20.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $307.4m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $860.0m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $121.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $263.0m | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $85.5m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-03-31 | $2.5m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-03-31 | $409.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 40,276 characters.

The following discussion should be read in conjunction with our historical Consolidated Financial Statements and notes that are included in our Annual Report filed on Form 10-K for the year ended December 31, 2023.

Unless stated otherwise, all dollar figures are presented in thousands (000s).

### Overview

#### General

DMC Global Inc. (“DMC”, "we", "us", "our", or the "Company") owns and operates Arcadia Products, DynaEnergetics and NobelClad, three innovative, asset-light manufacturing businesses that provide differentiated products and engineered solutions to niche segments of the construction, energy, industrial processing and transportation markets. Each of our businesses provides a unique suite of highly engineered products and differentiated solutions, and each has established a leadership position in its respective market. Our businesses seek to capitalize on their product and service differentiation to expand profit margins, increase cash flow and enhance shareholder value. Based in Broomfield, Colorado, DMC trades on Nasdaq under the symbol “BOOM.”

#### Arcadia Products

On December 23, 2021, DMC completed the acquisition of 60% of the membership interests in Arcadia Products, LLC, a Colorado limited liability company resulting from the conversion of Arcadia, Inc. (collectively, “Arcadia Products”). Arcadia Products designs, engineers, fabricates, and finishes aluminum framing systems, windows, curtain walls, storefronts, entrance systems, and interior partitions to the commercial construction market. Additionally, Arcadia Products supplies customized windows and doors to the ultra-high-end residential construction market.

Cost of products sold for Arcadia Products includes the cost of aluminum, paint, and other raw materials used in manufacturing as well as employee compensation and benefits, manufacturing facility lease expense, depreciation of manufacturing equipment, supplies and other manufacturing overhead expenses.

#### DynaEnergetics

DynaEnergetics designs, manufactures, markets and sells perforating systems and associated hardware for the global oil and gas industry. These products are primarily sold to oilfield service companies in the U.S., Europe, Canada, Africa, the Middle East, and Asia. The market for perforating products, which are used during the well completion process, generally corresponds with oil and gas exploration and production activity. Well completion operations are increasingly complex, which in turn has increased the demand for intrinsically-safe, reliable and technically advanced perforating systems.

Cost of products sold for DynaEnergetics includes the cost of metals, explosives and other raw materials used to manufacture shaped charges, detonating products and perforating guns as well as employee compensation and benefits, depreciation of manufacturing facilities and equipment, supplies and other manufacturing overhead expenses.

#### NobelClad

NobelClad produces explosion-welded clad metal plates for use in the construction of corrosion resistant industrial processing equipment and specialized transition joints for commuter rail cars, ships, and liquified natural gas (LNG) processing equipment. While most demand for our products is driven by maintenance and retrofit projects at existing plants and facilities, new projects for petrochemical processing, oil refining, and aluminum smelting facilities also account for a significant portion of total demand. These industries tend to be cyclical in nature and the timing of new order inflow remains difficult to predict. We use backlog, defined as all unfilled firm purchase orders and commitments at a point in time, to measure the immediate outlook for our NobelClad business. Most firm purchase orders and commitments are realized and shipped within twelve months. NobelClad's backlog was $52,380 at March 31, 2024 compared to $59,357 at December 31, 2023.

Cost of products sold for NobelClad includes the cost of metals, explosive powders and other raw materials used to manufacture clad metal plates and transition joints as well as employee compensation and benefits, outside processing costs, depreciation of manufacturing facilities and equipment, manufacturing facility lease expense, supplies and other manufacturing overhead expenses.

### Factors Affecting Results

- Consolidated sales were $166,869 in the first quarter of 2024 versus $184,341 in the first quarter of 2023, a decrease of 9%. The decline in sales performance was driven by lower sales at Arcadia Products and DynaEnergetics.
- Arcadia Products reported sales of $61,925 in the first quarter of 2024, representing a decrease of 23% compared with the first quarter of 2023. The decrease was attributable to lower sales volumes attributable to a slowdown in our key short-cycle commercial and longer-cycle ultra-high-end residential markets combined with lower customer pricing in response to declines in base aluminum metal costs.
- DynaEnergetics’ sales of $78,122 in the first quarter of 2024 decreased 5% compared with the first quarter of 2023 primarily due to a decrease in pricing of DS perforating systems as a result of industry consolidation in the United States.
- NobelClad’s sales of $26,822 in the first quarter of 2024 increased 22% compared with the first quarter of 2023 reflecting continued healthy activity in core energy and petrochemical end markets.
- Consolidated gross profit was 25.4% in the first quarter of 2024 versus 28.3% in the first quarter of 2023. The decline was primarily attributable to margin declines at DynaEnergetics as well as lower absorption of fixed manufacturing overhead costs as a result of the decrease in consolidated sales.
- Consolidated selling, general and administrative (SG&A) expenses were $28,203 in the first quarter of 2024 compared with $39,324 in the first quarter of 2023. 2023 SG&A included nonrecurring CEO transition expenses and related accelerated stock-based compensation of $6,005, as well as patent infringement litigation costs at DynaEnergetics of $3,065. The remaining year-over-year decrease is primarily attributable to a reduction in internal leadership and sales meeting expense and outside service costs.
- Cash of $20,444 at March 31, 2024 decreased $23,215 from cash and marketable securities of $43,659 at December 31, 2023. The decrease was primarily attributable to debt repayments made associated with the Company’s credit agreement amendment executed in February 2024.
- The Company’s leverage ratio, calculated in accordance with its credit facility, was 1.0 to 1.0 as of March 31, 2024 in comparison to the maximum ratio permitted of 3.0 to 1.0. The Company’s adjusted leverage ratio, calculated using net debt as of March 31, 2024, was 0.77 to 1.0.

### Outlook

We expect Arcadia Products to be the primary driver of DMC’s future financial and operational growth, reflecting the division’s large addressable market and differentiated business model. Arcadia Products is capitalizing on new digital technologies and industrial engineering initiatives to strengthen operations and increase manufacturing capacity. Phase one of a new enterprise resource planning (ERP) system went live in the third quarter of 2023 and is enhancing operating efficiencies and the internal control environment. Additional aluminum painting capacity was added in the second half of 2023, and the business expects industrial engineering programs, coupled with external sourcing, to further expand painting and anodizing capacity in 2024. Key growth initiatives for 2024 include utilizing new painting capacity to increase sales, and ensuring each of Arcadia’s product offerings (commercial exteriors, commercial interiors, and ultra-high-end residential) are represented across all branch locations throughout the western and southwestern United States.

At DynaEnergetics, U.S. well completion activity in the first quarter declined by approximately 10% versus the fourth quarter, according to the U.S. Energy Information Administration. We believe North American well completion activity will remain soft during the second quarter of 2024 based on recent declines in the number of active drilling rigs and well fracking crews. DynaEnergetics introduced various premium products in 2023 and is in the process of implementing several operational excellence initiatives, including automated manufacturing and assembly processes, that collectively are expected to partially offset persistent pricing pressure in North America’s well completions sector.

NobelClad is experiencing strong demand for its Cylindra™ cryogenic transition joints for use in the processing of LNG; and recent enhancements to the Cylindra production process have reduced manufacturing lead times. NobelClad currently is pursuing large order opportunities in the petrochemical industry, which we believe could be awarded later in 2024. NobelClad’s order backlog was $52,380 as of March 31, 2024, down from $59,357 as of December 31, 2023. NobelClad expects to ship most orders in its backlog within twelve months.

On January 29, 2024, DMC announced its Board of Directors had initiated a review of strategic alternatives for its DynaEnergetics and NobelClad businesses. The process formalizes DMC’s ongoing efforts to consider opportunities that unlock shareholder value. The Board has retained financial advisors to assist in evaluating the Company’s current strategy, operations, and capital structure. The Board will consider various strategic, business, and financial alternatives for both businesses. These could include, among other things, a sale, a merger, or other business combination of a portion of DMC’s business-unit assets, and/or a strategic investment. The Board has not set a timetable to complete the strategic review process, and there can be no assurance that the review process will result in any transactions.

### Use of Non-GAAP Financial Measures

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the United States (GAAP), the Company also discloses certain non-GAAP financial measures that we use in operational and financial decision making. Non-GAAP financial measures include the following:

- **EBITDA:** defined as net income (loss) plus net interest, taxes, depreciation and amortization.
- **Adjusted EBITDA**: excludes from EBITDA stock-based compensation, restructuring expenses and asset impairment charges (if applicable) and, when appropriate, nonrecurring items that management does not utilize in assessing DMC’s operating performance (as further described in the tables below).
- **Adjusted EBITDA attributable to DMC Global Inc.:** excludes the Adjusted EBITDA attributable to the 40% redeemable noncontrolling interest in Arcadia Products.
- **Adjusted EBITDA for DMC business segments:** defined as operating income (loss) plus depreciation, amortization, allocated stock-based compensation (if applicable), restructuring expenses and asset impairment charges (if applicable) and, when appropriate, nonrecurring items that management does not utilize in assessing DMC's operating performance.
- **Adjusted net income (loss):** defined as net income (loss) attributable to DMC Global Inc. stockholders prior to the adjustment of redeemable noncontrolling interest plus restructuring expenses and asset impairment charges (if applicable) and, when appropriate, nonrecurring items that management does not utilize in assessing DMC's operating performance.
- **Adjusted diluted earnings per share:** defined as diluted earnings per share attributable to DMC Global Inc. stockholders (exclusive of adjustment of redeemable noncontrolling interest) plus restructuring expenses and asset impairment charges (if applicable) and, when appropriate, nonrecurring items that management does not utilize in assessing DMC’s operating performance.
- **Net debt:** defined as total debt less total cash, cash equivalents and marketable securities.
- **Free-cash flow:** defined as cash flows provided by (used in) operating activities less net acquisitions of property, plant and equipment.

Management believes providing these additional financial measures is useful to investors in understanding the Company’s operating performance, excluding the effects of restructuring, impairment, and other nonrecurring charges, as well as its liquidity. Management typically monitors the business utilizing the above non-GAAP measures, in addition to GAAP results, to understand and compare operating results across accounting periods, and certain management incentive awards are based, in part, on these measures. The presence of non-GAAP financial measures in this report is not intended to suggest that such measures be considered in isolation or as a substitute for, or as superior to, DMC’s GAAP information, and investors are cautioned that the non-GAAP financial measures are limited in their usefulness. Given that not all companies use identical calculations, DMC’s presentation of non-GAAP financial measures may not be comparable to similarly titled measures of other companies.

### Consolidated Results of Operations

### Three months ended March 31, 2024 compared with three months ended March 31, 2023

|  | Three months ended March 31, 2024 | 2023 | $ change | % change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $166,869 | $184,341 | $(17,472) | (9%) |
| Gross profit | 42,352 | 52,211 | (9,859) | (19%) |
| Gross profit percentage | 25.4% | 28.3% |  |  |
| COSTS AND EXPENSES: |  |  |  |  |
| General and administrative expenses | 15,980 | 26,500 | (10,520) | (40%) |
| % of net sales | 9.6% | 14.4% |  |  |
| Selling and distribution expenses | 12,223 | 12,824 | (601) | (5%) |
| % of net sales | 7.3% | 7.0% |  |  |
| Amortization of purchased intangible assets | 5,292 | 5,667 | (375) | (7%) |
| % of net sales | 3.2% | 3.1% |  |  |
| Strategic review expenses | 2,169 | — | 2,169 | 100% |
| Operating income | 6,688 | 7,220 | (532) | (7%) |
| Other expense, net | (409) | (200) | (209) | 105% |
| Interest expense, net | (2,317) | (2,381) | 64 | (3%) |
| Income before income taxes | 3,962 | 4,639 | (677) | (15%) |
| Income tax provision | 1,643 | 2,500 | (857) | (34%) |
| Net income | 2,319 | 2,139 | 180 | 8% |
| Less: Net (loss) income attributable to redeemable noncontrolling interest | (244) | 1,230 | (1,474) | (120%) |
| Net income attributable to DMC Global Inc. | 2,563 | 909 | 1,654 | 182% |
| Adjusted EBITDA attributable to DMC Global Inc. | $16,683 | $20,091 | $(3,408) | (17%) |

***Net sales*** were $166,869 for the three months ended March 31, 2024, or a decrease of 9% compared with the same period in 2023, due to lower sales at Arcadia Products and DynaEnergetics. The decrease at Arcadia Products was attributable to lower sales volumes attributable to a slowdown in our key short-cycle commercial and longer-cycle ultra-high-end residential markets combined with lower customer pricing in response to declines in base aluminum metal costs. DynaEnergetics’ lower sales were primarily due to a decrease in pricing of DS perforating systems as a result of industry consolidation in the United States.

***Gross profit percentage*** was 25.4% versus 28.3% in the same period in 2023. The decline compared to prior year was primarily attributable to margin declines at DynaEnergetics as well as lower absorption of fixed manufacturing overhead costs as a result of the decrease in consolidated sales.

***General and administrative expenses*** decreased $10,520 for the three months ended March 31, 2024 compared with the same period in prior year. 2023 included nonrecurring CEO transition expenses and related accelerated stock-based compensation of $6,005, and patent infringement litigation costs at DynaEnergetics of $3,065. The remaining year-over-year decrease is primarily attributable to a reduction in internal leadership and sales meeting expense of $1,068 and ERP implementation costs of $509.

***Selling and distribution expenses*** decreased $601 for the three months ended March 31, 2024 compared with the same period in 2023. The year-over-year decrease was driven by a reduction in compensation costs of $1,045 and outside services costs of $241. These decreases were partially offset by an increase in bad debt expense of $631.

***Amortization of purchased intangible assets*** decreased $375 for the three months ended March 31, 2024 compared to the same period in 2023 as the customer relationship purchased intangible is amortized using an accelerated amortization method.

***Strategic review expenses*** of $2,169 for the three months ended March 31, 2024 relate to the initiation of a review of strategic alternatives for the DynaEnergetics and NobelClad business segments. In connection with this process, strategic review expenses incurred primarily included $1,138 in diligence related professional service fees and $489 in employee retention compensation, including $72 of stock-based compensation.

***Operating income*** of $6,688 for the three months ended March 31, 2024 decreased compared to $7,220 in the same period in 2023. The reduction in operating income was the result of decreased financial performance at Arcadia Products and DynaEnergetics.

***Other expense, net*** of $409 for the three months ended March 31, 2024 primarily related to net realized foreign currency exchange losses. Currency gains and losses can arise when subsidiaries enter into inter-company and third-party transactions that are denominated in currencies other than their functional currency, including foreign currency forward contracts used to offset foreign exchange rate fluctuations on certain foreign currency denominated asset and liability positions.

***Interest expense, net*** of $2,317 for the three months ended March 31, 2024 was consistent with the same period in 2023.

***Income tax provision*** of $1,643 was recorded on income before income taxes of $3,962 for the three months ended March 31, 2024. Our most significant operations are in the United States, which has a 21% statutory income tax rate, and Germany, which has a 32% combined statutory income tax rate. The mix of income or loss before income taxes between these jurisdictions is one of the primary drivers of the difference between our 21% statutory tax rate and our effective tax rate. The effective rate was impacted unfavorably by the geographic mix of pretax income, state taxes, and certain compensation expenses that are not tax deductible in the U.S. The operating results of Arcadia Products that are attributable to the redeemable noncontrolling interest holder are not taxed at DMC, which resulted in a partially offsetting favorable impact to the effective tax rate. We recorded an income tax provision of $2,500 on income before income taxes of $4,639 for the three months ended March 31, 2023. The prior year rate was impacted by the same factors previously discussed.

***Net income attributable to DMC Global Inc.*** for the three months ended March 31, 2024 was $2,563, compared to $909 for the same period in 2023.

***Adjusted EBITDA*** for the three months ended March 31, 2024 decreased compared with the same period in 2023 primarily due to the factors discussed above. See “Use of Non-GAAP Financial Measures” above for the explanation of the use

of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.

|  | Three months ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net income | $2,319 | $2,139 |
| Interest expense, net | 2,317 | 2,381 |
| Income tax provision | 1,643 | 2,500 |
| Depreciation | 3,419 | 3,400 |
| Amortization of purchased intangible assets | 5,292 | 5,667 |
| EBITDA | 14,990 | 16,087 |
| Stock-based compensation | 1,477 | 5,027 |
| Strategic review expenses | 2,169 | — |
| CEO transition expenses | — | 2,965 |
| Other expense, net | 409 | 200 |
| Adjusted EBITDA | 19,045 | 24,279 |
| Less: adjusted EBITDA attributable to redeemable noncontrolling interest | (2,362) | (4,188) |
| Adjusted EBITDA attributable to DMC Global Inc. | $16,683 | $20,091 |

24

***Adjusted Net Income and Adjusted Diluted Earnings per Share*** for the three months ended March 31, 2024 decreased compared with the same period in 2023 primarily due to the factors discussed above. See "Use of Non-GAAP Financial Measures" above for the explanation of the use of non-GAAP measures. The following is a reconciliation of the most directly comparable GAAP measures to Adjusted Net Income and Adjusted Diluted Earnings Per Share.

|  | Three months ended March 31, 2024 Amount | Per Share (1) |
| --- | ---: | ---: |
| Net income attributable to DMC Global Inc. (2) | $2,563 | $0.13 |
| Strategic review expenses, net of tax | 1,604 | 0.08 |
| As adjusted | $4,167 | $0.21 |

(1) Calculated using diluted weighted average shares outstanding of 19,622,455

(2) Net income attributable to DMC Global Inc. prior to the adjustment of redeemable noncontrolling interest

|  | Three months ended March 31, 2023 Amount | Per Share (1) |
| --- | ---: | ---: |
| Net income attributable to DMC Global Inc. (2) | $909 | $0.05 |
| CEO transition expenses and accelerated stock-based compensation, net of tax (3) | 5,235 | 0.27 |
| As adjusted | $6,144 | $0.32 |

(1) Calculated using diluted weighted average shares outstanding of 19,462,636

(2) Net income attributable to DMC Global Inc. prior to the adjustment of redeemable noncontrolling interest

(3) Includes CEO transition expenses of $2,965 and accelerated stock-based compensation of $3,040 related to the vesting of the former CEO’s outstanding equity awards, net of tax.

### Business Segment Financial Information

We primarily evaluate performance and allocate resources based on segment revenues, operating income and Adjusted EBITDA as well as projected future performance. Segment operating income is defined as revenues less expenses identifiable to the segment. DMC consolidated operating income and Adjusted EBITDA include unallocated corporate expenses and unallocated stock-based compensation expense. Stock-based compensation is not allocated to wholly owned segments, DynaEnergetics and NobelClad. Stock-based compensation is allocated to the Arcadia Products segment as 60% of such expense is attributable to the Company, whereas the remaining 40% is attributable to the redeemable noncontrolling interest holder. Segment operating income will reconcile to consolidated income before income taxes by deducting unallocated corporate expenses, unallocated stock-based compensation, other (expense) income, net, and interest expense, net.

### Arcadia Products

### Three months ended March 31, 2024 compared with three months ended March 31, 2023

|  | Three months ended March 31, 2024 | 2023 | $ change | % change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $61,925 | $80,338 | $(18,413) | (23%) |
| Gross profit | 16,813 | 22,094 | (5,281) | (24%) |
| Gross profit percentage | 27.2% | 27.5% |  |  |
| COSTS AND EXPENSES: |  |  |  |  |
| General and administrative expenses | 7,656 | 7,857 | (201) | (3%) |
| Selling and distribution expenses | 4,468 | 5,452 | (984) | (18%) |
| Amortization of purchased intangible assets | 5,277 | 5,652 | (375) | (7%) |
| Operating (loss) income | (588) | 3,133 | (3,721) | (119%) |
| Adjusted EBITDA | 5,906 | 10,470 | (4,564) | (44%) |
| Less: adjusted EBITDA attributable to redeemable noncontrolling interest | (2,362) | (4,188) | (1,826) | (44%) |
| Adjusted EBITDA attributable to DMC Global Inc. | $3,544 | $6,282 | (2,738) | (44%) |

***Net sales*** decreased $18,413 for the three months ended March 31, 2024 compared to the same period in 2023 due to lower sales volumes attributable to a slowdown in our key short-cycle commercial and longer-cycle ultra-high-end residential markets combined with lower customer pricing in response to declines in base aluminum metal costs.

***General and administrative expenses*** decreased $201 for three months ended March 31, 2024 compared to the same period in 2023 due primarily to lower ERP system implementation costs.

***Selling and distribution expenses*** decreased $984 for three months ended March 31, 2024 compared to the same period in 2023 due primarily to lower compensation costs.

***Amortization of purchased intangible assets*** decreased $375 for the three months ended March 31, 2024 compared to the same period in 2023 as the customer relationship purchased intangible asset is amortized using an accelerated amortization method.

***Operating income*** decreased $3,721 for the three months ended March 31, 2024 compared to the same period in 2023 primarily due to the decrease in gross profit.

***Adjusted EBITDA*** decreased for the three months ended March 31, 2024 compared with the same period in 2023 due to the factors discussed above. See “Use of Non-GAAP Financial Measures” above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.

|  | Three months ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Operating (loss) income | $(588) | $3,133 |
| Adjustments: |  |  |
| Depreciation | 875 | 817 |
| Amortization of purchased intangible assets | 5,277 | 5,652 |
| Stock-based compensation | 342 | 579 |
| CEO transition expenses | — | 289 |
| Adjusted EBITDA | 5,906 | 10,470 |
| Less: adjusted EBITDA attributable to redeemable noncontrolling interest | (2,362) | (4,188) |
| Adjusted EBITDA attributable to DMC Global Inc. | $3,544 | $6,282 |

### DynaEnergetics

### Three months ended March 31, 2024 compared with three months ended March 31, 2023

|  | Three months ended March 31, 2024 | 2023 | $ change | % change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $78,122 | $81,968 | $(3,846) | (5%) |
| Gross profit | 16,971 | 24,437 | (7,466) | (31%) |
| Gross profit percentage | 21.7% | 29.8% |  |  |
| COSTS AND EXPENSES: |  |  |  |  |
| General and administrative expenses | 2,891 | 6,197 | (3,306) | (53%) |
| Selling and distribution expenses | 5,223 | 5,057 | 166 | 3% |
| Amortization of purchased intangible assets | 15 | 15 | — | —% |
| Operating income | 8,842 | 13,168 | (4,326) | (33%) |
| Adjusted EBITDA | $10,539 | $14,955 | $(4,416) | (30%) |

***Net sales*** decreased $3,846 for the three months ended March 31, 2024 compared to the same period in 2023 due to a decrease in pricing of DS perforating systems as a result of customer consolidation in the United States.

***Gross profit percentage*** decreased to 21.7% for the three months ended March 31, 2024 primarily due to lower customer pricing as well as lower absorption of fixed manufacturing overhead costs as a result of the decrease in net sales.

***General and administrative expenses*** were lower by $3,306 for the three months ended March 31, 2024 compared to the same period in 2023 driven by a decrease in patent infringement litigation costs of $2,864. The remaining decrease is attributable to a reduction in compensation costs of $592.

***Selling and distribution expenses*** were higher by $166 for the three months ended March 31, 2024 compared to the same period in 2023 due primarily to an increase in bad debt expense of $447, offset by a decrease in marketing consulting costs of $314.

***Operating income*** decreased $4,326 for the three months ended March 31, 2024 compared to the same period in 2023 due to the decline in gross profit.

***Adjusted EBITDA*** decreased for the three months ended March 31, 2024 compared with the same period in 2023 due to the factors discussed above. See “Use of Non-GAAP Financial Measures” above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.

|  | Three months ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Operating income | $8,842 | $13,168 |
| Adjustments: |  |  |
| Depreciation | 1,682 | 1,772 |
| Amortization of purchased intangible assets | 15 | 15 |
| Adjusted EBITDA | $10,539 | $14,955 |

### NobelClad

### Three months ended March 31, 2024 compared with three months ended March 31, 2023

|  | Three months ended March 31, 2024 | 2023 | $ change | % change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $26,822 | $22,035 | $4,787 | 22% |
| Gross profit | 8,644 | 5,783 | 2,861 | 49% |
| Gross profit percentage | 32.2% | 26.2% |  |  |
| COSTS AND EXPENSES: |  |  |  |  |
| General and administrative expenses | 1,074 | 923 | 151 | 16% |
| Selling and distribution expenses | 2,470 | 2,239 | 231 | 10% |
| Operating income | 5,100 | 2,621 | 2,479 | 95% |
| Adjusted EBITDA | $5,880 | $3,361 | $2,519 | 75% |

***Net sales*** increased $4,787 for the three months ended March 31, 2024 compared to the same period in 2023 due primarily to higher activity in core energy and petrochemical end markets, including increased pressure vessel plate shipments.

***Gross profit percentage*** increased to 32.2% for the three months ended March 31, 2024 due to a more favorable project and regional mix, as well as the impact of higher sales on fixed manufacturing overhead expenses.

***General and administrative expenses*** were higher by $151 for the three months ended March 31, 2024 compared to the same period in 2023 due to increases in compensation costs of $70 and legal costs of $66.

***Selling and distribution expenses*** were higher by $231 for the three months ended March 31, 2024 compared to the same period in 2023 due primarily to increases in outside services costs of $73, compensation costs of $67, and business travel of $35.

***Operating income*** increased $2,479 for the three months ended March 31, 2024 compared to the same period in 2023 due primarily to an increase in gross profit.

***Adjusted EBITDA*** increased for the three months ended March 31, 2024 compared with the same period in 2023 due to the factors discussed above. See “Use of Non-GAAP Financial Measures” above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.

|  | Three months ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Operating income | $5,100 | $2,621 |
| Adjustments: |  |  |
| Depreciation | 780 | 740 |
| Adjusted EBITDA | $5,880 | $3,361 |

28

### Liquidity and Capital Resources

We have historically financed our operations from a combination of internally generated cash flow, revolving credit borrowings, and various long-term debt arrangements. Our net debt position was $67,565 at March 31, 2024 compared to $72,192 at December 31, 2023. The decrease in net debt during the first quarter of 2024 was due primarily to a decrease in outstanding debt attributable to repayments made on the revolving loan subsequent to the credit agreement amendment executed in February 2024.

We believe that cash and cash equivalents on hand, cash flow from operations, funds available under our current credit facilities and any future replacement thereof will be sufficient to fund the working capital, required minimum debt service payments, and other capital expenditure requirements of our current business operations for the foreseeable future. We may also execute capital markets transactions, including at-the-market offering programs, to raise additional funds if we believe market conditions are favorable, but there can be no assurance that any future capital will be available on acceptable terms or at all. Nevertheless, our ability to generate sufficient cash flows from operations will depend upon our success in executing our strategies. If we are unable to (i) realize sales from our backlog; (ii) secure new customer orders; (iii) continue selling products at profitable margins; and (iv) continue to implement cost-effective internal processes, our ability to meet cash requirements through operating activities could be impacted. Furthermore, any restriction on the availability of borrowings under our credit facilities could negatively affect our ability to meet future cash requirements. We will continue to monitor financial market conditions, including the related impact on credit availability and capital markets.

#### Debt facilities

On February 6, 2024, the Company and certain domestic subsidiaries entered into an amendment (the “First Amendment”) to its existing credit agreement with a syndicate of banks, led by KeyBank National Association (the “credit facility”). The First Amendment provides for certain changes to the credit facility, including an increase in the maximum commitment amount from $200,000 to $300,000. The credit facility allows for revolving loans of up to $200,000, a $50,000 term loan facility, and a $50,000 delayed draw term loan facility that can be accessed by the Company at its discretion until February 6, 2026. The $50,000 term loan facility is amortizable at $625 per quarter beginning on June 30, 2024 through March 31, 2026. Quarterly term loan amortization increases to $938 on June 30, 2026 through March 31, 2028, and increases to $1,250 from June 30, 2028 through December 31, 2028. A balloon payment for the outstanding term loan balance is due upon the credit facility maturity date of February 6, 2029. The credit facility retains a $100,000 accordion feature to increase the commitments under the revolving loan and/or by adding one or more term loans subject to approval by the applicable lenders. The credit facility is secured by certain assets of DMC including accounts receivable, inventory, and fixed assets, including Arcadia Products and its subsidiary, as well as guarantees and share pledges by DMC and its subsidiaries.

Borrowings under the $200,000 revolving loan limit and $50,000 Term Loan can be in the form of Adjusted Daily Simple Secured Overnight Financing Rate ("SOFR") loans or one month Adjusted Term SOFR loans. Additionally, U.S. dollar borrowings on the revolving loan can be in the form of Base Rate loans (Base Rate borrowings are based on the greater of the administrative agent’s Prime rate, an adjusted Federal Funds rate or an adjusted SOFR rate). SOFR loans bear interest at the applicable SOFR rate plus an applicable margin (varying from 2.25% to 3.25%). Base Rate loans bear interest at the defined Base Rate plus an applicable margin (varying from 1.25% to 2.25%).

The credit facility includes various covenants and restrictions, certain of which relate to the payment of dividends or other distributions to stockholders; redemption of capital stock; incurring additional indebtedness; mortgaging, pledging or disposition of major assets; and maintenance of specified ratios.

The leverage ratio is defined in the credit facility as the ratio of Consolidated Funded Indebtedness (as defined in the credit facility) on the last day of any trailing four quarter period to Consolidated EBITDA (as defined in the credit facility) for such period. The maximum leverage ratio permitted by our credit facility is 3.0 to 1.0. The actual leverage ratio as of March 31, 2024, calculated in accordance with the amended credit facility, was 1.00 to 1.0.

The debt service coverage ratio is defined in the credit facility as the ratio of Consolidated EBITDA less the sum of capital distributions paid in cash (other than those made with respect to preferred stock issued under the Operating Agreement), Consolidated Unfunded Capital Expenditures (as defined in the credit facility), and net cash income taxes divided by the sum of cash interest expense, any dividends on the preferred stock paid in cash, and scheduled principal payments on funded indebtedness. Under our credit facility, the minimum debt service coverage ratio permitted is 1.25 to 1.0. The actual debt service coverage ratio for the trailing twelve months ended March 31, 2024 was 3.43 to 1.0.

We also maintain a line of credit with a German bank for certain European operations. This line of credit provides a borrowing capacity of €7,000 on which no amounts were outstanding as of March 31, 2024.

#### Redeemable noncontrolling interest

The Operating Agreement for Arcadia Products contains a right for the Company to purchase the remaining interest in Arcadia Products from the minority interest holder on or after the third anniversary of the acquisition closing date (“Call Option”). Similarly, the minority interest holder of Arcadia Products has the right to sell its remaining interest in Arcadia Products to the Company on or after the third anniversary of the acquisition closing date (“Put Option”). Both the Call Option and Put Option enable the respective holder to exercise their rights based upon a predefined calculation as included within the Operating Agreement, subject to a floor value also as defined within the Operating Agreement which is based primarily upon a contractually stated equity value.

As of March 31, 2024, the settlement amount of the redeemable noncontrolling interest is $187,080 and is equal to the floor value as defined within the Operating Agreement. Upon settlement, consideration paid will be net of the $24,902 promissory note outstanding due from the redeemable noncontrolling interest holder. Refer to Note 2 within Item 1 for further information related to the valuation of the redeemable noncontrolling interest and promissory note outstanding.

#### Other contractual obligations and commitments

Our debt balance, net of deferred debt issuance costs, decreased to $88,009 at March 31, 2024 from $115,851 at December 31, 2023 for the reasons discussed above. Our other contractual obligations and commitments have not materially changed since December 31, 2023.

#### Cash flows provided by operating activities

Net cash provided by operating activities was $13,440 for the three months ended March 31, 2024 compared to $7,065 in the same period last year as working capital impacts on operating cash flows improved in 2024 as compared to 2023.

#### Cash flows provided by (used in) investing activities

Net cash provided by investing activities for the three months ended March 31, 2024 of $9,651 was attributable to proceeds from the sales and maturities of marketable securities of $12,619, partially offset by the acquisition of property, plant and equipment of $2,968. Net cash used in investing activities for the three months ended March 31, 2023 of $2,226 related to the acquisition of property, plant and equipment.

#### Cash flows used in financing activities

Net cash flows used in financing activities for the three months ended March 31, 2024 of $34,296 included net credit facility repayments of $27,500. Additional cash flows used in financing activities included distributions to the redeemable noncontrolling interest holder of $3,125, payment of debt issuance costs of $2,735 and treasury stock purchases of $936.

Net cash flows used in financing activities for the three months ended March 31, 2023 of $11,007 primarily included a quarterly principal payment and prepayment on our term loan of $6,250, distributions to the redeemable noncontrolling interest holder of $2,600, and treasury stock purchases of $2,157.

#### Payment of Dividends

Any determination to pay cash dividends is at the discretion of the Board of Directors. On April 23, 2020, DMC announced that its Board of Directors suspended the quarterly dividend indefinitely. Future dividends may be affected by, among other items, our views on potential future capital requirements, future business prospects, debt covenant compliance considerations, changes in income tax laws, and any other factors that our Board of Directors deems relevant.

### Critical Accounting Estimates

Preparation of financial statements in conformity with generally accepted accounting principles in the United States requires that management make estimates, judgments and assumptions that affect the amounts reported for revenues, expenses, asset, liabilities, and other related disclosures. Our critical accounting estimates have not changed from those reported in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

## Market risk

As filed, 295 characters.

There were no material changes in market risk for changes in foreign currency exchange rates and interest rates from the information provided in Item 7A – Quantitative and Qualitative Disclosures About Market Risk in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

## Controls and procedures

As filed, 958 characters.

Our Coolspring property is subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (The “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the quarter ended March 31, 2024, we had no such specified health and safety violations, orders or citations, related assessments or legal actions, mining-related fatalities, or similar events in relation to our United States operations requiring disclosure pursuant to Section 1503(a) of the Dodd-Frank Act.

## Risk factors

As filed, 176 characters.

There have been no significant changes in the risk factors identified as being attendant to our business in our Annual Report on Form 10-K for the year ended December 31, 2023.

Filed May 2, 2024.
Source: SEC EDGAR, the filing index for accession 0000034067-24-000075. Last ingested by Listed: Nov 11, 2026, 05:52 ET. No prices; not investment advice.