• Revenue: $152.4 million, down 11% from both the second quarter and last year's third quarter.
• Adjusted EBITDA: $5.7 million, approximately 4% of sales.
• Arcadia Sales: $57.8 million, down 17% sequentially and 19% year-over-year.
• Arcadia Adjusted EBITDA Margin: 5.8%, down from 17.8% in the second quarter and 18.8% year-over-year.
• DynaEnergetics Sales: $69.7 million, down 9% sequentially and 5% year-over-year.
• DynaEnergetics Adjusted EBITDA Margin: Just under 1%.
• NobelClad Sales: $24.9 million, flat sequentially and down 10% year-over-year.
• NobelClad Adjusted EBITDA Margin: 23.2%.
• SG&A Expenses: $28 million, 18.5% of net sales.
• Adjusted Net Loss: $9.6 million.
• Adjusted EPS: Negative $0.49.
• Cash and Cash Equivalents: Approximately $15 million.
• Total Debt: Approximately $74 million.
• Net Debt: Roughly $60 million.
• Debt to Adjusted EBITDA Leverage Ratio: 1.18.
• Order Backlog (NobelClad): $59 million.
• Fourth Quarter Sales Guidance: $138 million to $148 million.
• Fourth Quarter Adjusted EBITDA Guidance: $5 million to $8 million.

• Warning! GuruFocus has detected 5 Warning Signs with BOOM.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• DMC Global Inc (NASDAQ:BOOM) concluded the strategic review process for its businesses, deciding not to sell them for less than their perceived value.
• NobelClad, the composite metals business, reported an improved adjusted EBITDA margin of 23.2% due to a favorable project mix.
• The company is implementing several margin improvement initiatives, including automation in its DynaEnergetics operations.
• DMC Global Inc (NASDAQ:BOOM) maintains a healthy debt to adjusted EBITDA leverage ratio of 1.18, well below the covenant threshold.
• The company has appointed Chris Skokos as interim President at Arcadia, bringing expertise in lean manufacturing and operational excellence.

Negative Points

• Third-quarter sales were down 11% from both the previous quarter and the same quarter last year, reflecting weakness in the US construction and energy services industries.
• Arcadia's sales dropped 17% sequentially and 19% year-over-year, with adjusted EBITDA margins significantly declining.
• DynaEnergetics faced challenges with a $5 million bad debt and inventory charges, along with lower margin customer mix.
• Persistently high interest rates have negatively impacted sales in Arcadia's high-end luxury home market.
• The company reported a third-quarter adjusted net loss of $9.6 million, with adjusted EPS at negative $0.49.

Q & A Highlights

Q: We've seen a lot of turnover at Arcadia and DynaEnergetics. How much of this change is related to performance or market conditions? A: James O'Leary, Executive Chairman, explained that both market conditions and leadership changes have contributed to the turnover. The market, particularly in the oil field services space, has been challenging, affecting DynaEnergetics. For Arcadia, the high acquisition price and subsequent underperformance have led to leadership changes. The company is focusing on self-help initiatives to improve margins and operations.

Q: Regarding the fourth quarter, how should we think about the performance of Arcadia and DynaEnergetics? A: James O'Leary noted that Arcadia is the wild card due to its exposure to high-end residential markets, which are affected by high interest rates. DynaEnergetics is expected to follow the general market trend, which includes a decline in domestic pressure pumping business due to budget exhaustion and holidays.

Q: Can you discuss the operational improvements planned for Arcadia? Are the systems in place to manage these changes? A: Michael Kuta, CEO, mentioned that improvements are focused on supply chain, sourcing, and planning processes. The company is working on demand planning and improving lead times and delivery performance. The ERP system is being leveraged more effectively, and new leadership with expertise in lean manufacturing is in place to drive these changes.

Q: How much of Arcadia's challenges are due to high-end residential market weakness versus operational issues? A: James O'Leary indicated that the high-end residential market weakness has a disproportionate impact on Arcadia's performance. The absorption issues in manufacturing high-margin, high-price products have significantly affected margins and gross profit.

Q: Can you provide more details on the restructuring actions at Arcadia and the associated costs? A: James O'Leary stated that while no specific restructuring actions are announced, the focus is on upgrading personnel and improving systems. The costs are part of regular business operations, with no significant incremental expenses expected from these changes.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.