DMC Global Inc. Common Stock 2026 Q3 Earnings Call

Hello, and welcome to DMC's third 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 third 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 on our website shortly after the conclusion of this call.

And with that, I'll turn the call over to Jim O'Leary.

Jim? Great. Thanks, Geoff, and thanks to everyone for joining us.

Today, we reported significantly improved financial results for the third quarter, with both sales and adjusted EBITDA attributable to DMC, well above year-ago levels and comfortably above the high end of our guidance. These results were driven by initiatives implemented over the past two years to improve the performance of our businesses, despite continued uncertainty and highly challenging end market conditions. Consolidated third-quarter sales were $172.8 million, a 14% increase versus last year's third quarter, and a 10% sequential improvement. Reported EBITDA attributable to DMC was $19 million, which included $5.4 million of tariff refunds at DynaEnergetics. Excluding tariff refunds, adjusted EBITDA attributable to DMC was $13.6 million, a 59% increase versus the year-ago third quarter, and 48% above the prior quarter. Sales at Arcadia, our building products business, were up 25% year-over-year and up 14% sequentially.

Adjusted EBITDA attributable to DMC increased 32% versus the year-ago quarter and was up 23% sequentially. This improvement was driven by higher sales of commercial aluminum framing products and high-end residential doors and windows. Arcadia's improved performance reflects its renewed focus on service levels and product availability in its short-cycle operations. Arcadia also benefited from higher residential sales and a large, prestigious long-cycle project in L.A. during the quarter. These efforts offset still difficult market conditions and included elevated interest rates and materially higher aluminum costs, which continued and negatively impacted larger, longer cycle commercial projects. However, we believe we have recently regained local market share in our key short-cycle operations due to the focused initiatives just discussed. DynaEnergetics, our energy products business, delivered improved third-quarter profitability on relatively flat year-over-year and sequential sales.

Adjusted EBITDA was $11.9 million during the quarter, which included $5.4 million of tariff refunds. Excluding these refunds, adjusted EBITDA increased 34% versus last year's third quarter and was up 57% sequentially. The improvement was driven by cost-saving initiatives and a favorable sales mix that reflects Dyna's ongoing market diversification efforts, with early contributions from the defense and enhanced geothermal sectors. Sales at NobelClad, our composite metals business, increased 38% year over year and 30% sequentially. Adjusted EBITDA increased 120% year over year and was up 51% sequentially. NobelClad's improved performance resulted from increased shipments related to a record petrochemical order and the resolution of supply chain issues that had delayed shipments on a large defense order. Order activity was healthy during the quarter, with significant new bookings from the energy, engineered wood, and defense sectors.

NobelClad ended the third quarter with an order backlog of $72.4 million, up from $63.5 million at the end of the second quarter. This included a quarterly record $16 million in orders related to US Navy vessel construction. Now, I'll turn the call over to Eric for a closer look at our third-quarter financial performance and our fourth-quarter guidance.

Eric? Thanks, Jim. I'll start with a review of our third-quarter profitability.

At Arcadia, adjusted EBITDA margin before NCI allocation was 14.7%, up from 13.8% in the year-ago quarter and 13.6% in the second quarter. The EBITDA margin improvement principally reflects higher sales volumes across our commercial, residential And commercial interior product offerings, which resulted in improved fixed cost absorption.

Excluding tariff refunds, DynaEnergetics adjusted EBITDA margin was 9.7%, up from 7.1% in last year's third quarter and up from 6.2% in this year's second quarter. The improvements reflect the implementation of cost savings initiatives, a more favorable sales mix, and a higher margin contribution from new end markets. NobelClad reported adjusted EBITDA margin of 15.9%, up from 9.9% in the year ago third quarter and 13.7% in the second quarter. The improvement was principally attributable to higher gross profit and lower SG&A. Third quarter SG&A expense was $27.5 million, or 15.9% of sales, versus 17.1% of sales in the prior third quarter and 15.6% in the second quarter. Third quarter adjusted net income attributable to DMC, inclusive of tariff refunds, was $9.8 million, or $0.48 per diluted share.

With respect to liquidity, we ended the third quarter with cash and cash equivalents of $38 million. Net debt improved to $13.7 million, down from $18.7 million at our 2025 year-end, and down from $30.5 million at the end of the second quarter. The decrease was primarily due to improved free cash flow of $16.6 million during the quarter from better profitability across our businesses, more stable working capital needs, and the receipt of tariff refunds. Now turning to guidance for the fourth quarter. We expect sales will be in a range of $154 million to $164 million. Adjusted EBITDA attributable to DMC is expected in a range of $10 million to $13 million.

Our guidance reflects normal seasonal moderation in Arcadia, which will be further impacted by a temporary shutdown of our California finishing facility for planned maintenance, an expected decline in large long cycle project activity, the negative impact of still rising interest rates on construction activity, ongoing volatility in aluminum input costs, and continued tight labor conditions for commercial and residential builders. Our guidance also assumes steady well completion in DynaEnergetics core U.S. end market, with the benefit from previously discussed cost optimization programs more than offsetting input cost increases. Finally, our guidance assumes continued improvement in shipping activity at NobelClad. Our guidance does not contemplate increased disruptions in international supply chains due to ongoing hostilities in the Middle East, which could impact both DynaEnergetics and NobelClad, or generally weaker end market conditions.

Moreover, our guidance remains highly dependent on macroeconomic conditions, particularly within our core energy and construction markets, and may change either positively or negatively as these factors evolve throughout the remainder of 2026. With that, I'll turn the call back over to Jim.