DMC Global Q1 2026 Earnings Call - Order Backlog Hits 15-Year High Amid Macro Turmoil

Conference Operator, Conference Call Moderator: Greetings, and welcome to the DMC Global First Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. I will now turn the conference over to your host, Geoff High. Please go ahead.

Geoff High, Investor Relations, DMC Global: Hello, and welcome to DMC’s first quarter conference call. Presenting today are President and CEO, James 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 of 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 first quarter performance are available on the investors page of our website, located at dmcglobal.com. A webcast replay of today’s presentation will be available at our website shortly after the conclusion of this call.

With that, I’ll turn the call over to James O’Leary. Jim?

James O’Leary, President and Chief Executive Officer, DMC Global: Thanks, Jeff, and thanks to everyone for joining us today. The macroeconomic challenges that persisted throughout 2025 carried into the first quarter and continued to pressure our construction, energy, and industrial end markets. In late February, the onset of the Middle East conflict intensified these headwinds, disrupting supply chains and international oil production while fueling raw material inflation, particularly for aluminum, which is by far Arcadia’s biggest cost. Despite these challenges, we delivered financial results that were within our admittedly moderated expectation range. Also, despite all this macroeconomic turmoil, there are some longer-term green shoots we’re hearing about that are worth mentioning, which we’ll discuss later in the call. First quarter consolidated sales were $135.6 million, down 15% from the 2025 first quarter and down 6% sequentially.

Adjusted EBITDA attributable to DMC was $3.9 million, compared with $14.4 million in last year’s first quarter, and a negative $1.6 million in the fourth quarter. Arcadia, our building products business, reported first quarter sales of $56.7 million, down 14% versus the year ago quarter and flat sequentially. The year-over-year decline was principally due to the timing of a large mixed-use project in Southern California that benefited last year’s first quarter. Demand in this year’s first quarter remained soft across both commercial and residential construction markets as sharply higher aluminum prices and persistently high interest rates continue to weigh on project activity and customer demand. Average aluminum costs reached multiyear highs during the first quarter, increasing 64% year-over-year and 16% sequentially. A competitive bidding environment also continues to pressure pricing.

First quarter adjusted EBITDA attributable to DMC was $2.3 million, down from $5.6 million in the 2025 first quarter and $2.4 million in the prior year quarter. At DynaEnergetics, our energy products business, sales were $59.5 million, down 9% year-over-year and down 14% sequentially. The declines were driven by lower product sales in North America, where well completion activity continued to decline and pricing remained competitive. In addition, the conflict in the Middle East delayed customer shipments into that region. First quarter adjusted EBITDA was $2.7 million, compared to $7.4 million in the year-ago quarter and a negative $2.7 million in the prior quarter.

The year-over-year decline was primarily driven by tariffs implemented in April 2025, and the sequential improvement reflects the absence of discrete AR and inventory charges in the fourth quarter. At NobelClad, our composite metal business, first quarter sales were $19.3 million, a 31% year-over-year decline, driven primarily by the timing of large project shipments that benefited the prior year period, as well as reduced bookings in the first half of 2025 due to uncertainty around U.S. and reciprocal tariff policies. Sequentially, sales increased 9%, supported by initial deliveries on a large international petrochemical project. We expect additional shipments from this project throughout the remainder of the year. NobelClad’s adjusted EBITDA was $1.9 million, compared with $5.4 million in the year-ago quarter and $2.1 million in the previous quarter.

Order backlog at the end of the first quarter increased 12% sequentially to $70.3 million, marking the highest level in more than 15 years. Now I’ll turn it over to Eric for more detail on our first quarter results and a look at second quarter guidance. Eric?

Eric Walter, Chief Financial Officer, DMC Global: Thank you, Jim. As previously noted, continued macroeconomic pressures and the conflict in the Middle East slowed activity in our core markets and weighed on our first quarter profitability. Our consolidated adjusted EBITDA margin before allocations of non-controlling interests, or NCI, was 4%, down from 11.4% in last year’s first quarter, but up from break even in the fourth quarter. Arcadia’s first quarter adjusted EBITDA margin before NCI was 6.9%, down from 14.2% in last year’s first quarter and 7.1% in the fourth quarter. Competitive pricing pressure, high aluminum input costs, and lower absorption of fixed manufacturing overhead placed downward pressure on margin during the quarter. Dyna’s adjusted EBITDA margin was 4.6% versus 11.3% in the first quarter last year, and up from a -4% in the fourth quarter.

The decline versus last year relates principally to the impact of tariffs and pricing pressure. While the sequential increase reflects the discrete AR and inventory charges in the fourth quarter. At NobelClad, adjusted EBITDA margin was 9.8% versus 19.2% a year ago, and 11.9% in the fourth quarter. The year-over-year decline reflects the timing of a large project in China that benefited last year’s first quarter, while the sequential decline reflects a less favorable project mix in this year’s first quarter. First quarter SG&A expense was $24.6 million, or 18.1% of sales, versus 17.8% of sales in the year ago first quarter and 20.7% of sales in the fourth quarter. The sequential decline principally relates to the discrete AR charges at Dyna in the fourth quarter.

First quarter adjusted net loss attributable to DMC was $5.7 million, while adjusted loss per share attributable to DMC was $0.28. With respect to liquidity, we ended the first quarter with cash and cash equivalents of approximately $32 million. Total debt was $54 million, up slightly from our 2025 year-end due to seasonality. Net debt at quarter end was $22.4 million. Now on to guidance for the second quarter. We expect sales will be in a range of $148 million-$158 million, while adjusted EBITDA attributable to DMC is expected in a range of $6 million-$8 million. We expect the anticipated sequential improvement will be driven by demand growth across all three of our businesses.

At DynaEnergetics, we’re seeing stronger order activity developing in both our international and North American markets. Arcadia is coming off a seasonally softer first quarter, so we expect to see a modest pickup in activity there. At NobelClad, we’re anticipating higher shipment volumes tied to a large international petrochemical project. I should note our guidance assumes a relatively consistent operating environment as we are not factoring in additional supply chain disruptions internationally, which could impact DynaEnergetics shipments into the Middle East, affect raw material availability and order timing at NobelClad, or further increase aluminum input costs at Arcadia. As a reminder, our guidance is heavily impacted by macroeconomic conditions, including evolving tariff policies, particularly in our core energy and construction markets. Our guidance is subject to change either upward or downward as these highly volatile inputs evolve in 2026.

I’ll turn the call back to Jim.

James O’Leary, President and Chief Executive Officer, DMC Global: Thanks. Excuse me. Thanks, Eric. After a prolonged period of challenging macroeconomic conditions, we’re hearing early indication from peers and competitors based on their recent public statements that demand in several of our key end markets may be improving. In DynaEnergetics oil field service market, several leading industry players have recently noted that the prospect of higher for longer oil prices are supporting plans for increased drilling and completion activity in North America’s onshore oil and gas sector. At the same time, expanding interest in enhanced geothermal systems, which leverage technologies developed by the oil and gas industry, represent a long-term opportunity for the business.

At NobelClad, our order backlogs is the highest level in more than 15 years, and we’re seeing a number of leading positive indicators, including increased spending by the Navy on enhanced naval readiness and potential demand tied to industrial infrastructure repair and reconstruction in the Middle East. More broadly, and also harder to quantify, the increasing narratives around global energy security and greater spending on both defense and energy infrastructure can only be positives as you look much further out for 2 of our businesses. Nearer term, Arcadia is tracking positive trends in the Architectural Billings Index, which is a 12-month leading indicator of commercial construction activity. In March, the index for our primary Western U.S. market rose above 50 for the first time since December 2024, meaning more firms were reporting increased billings than declining billings.

While we expect continued near-term volatility across many of our markets. These indicators are encouraging and suggest that capital spending may be improving over the next several quarters. In the meantime, we remain focused on the disciplined execution and tight cost controls as we position DMC for the future. I wanna thank our employees for their continued dedication and hard work. With that, we’ll open the call for your questions.

Conference Operator, Conference Call Moderator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question will come from Ken Newman with KeyBanc Capital Markets.

Ken Newman, Analyst, KeyBanc Capital Markets: Hey, guys. Good evening.

James O’Leary, President and Chief Executive Officer, DMC Global: Hey, Ken.

Ken Newman, Analyst, KeyBanc Capital Markets: Hey there. Nice to hear that we’re expecting sales to improve sequentially across all three of the businesses. You know, as I think about this second quarter sales guide, is there any color on helping us think about where the largest sequential increases come? You know, it sounds like maybe there were some push outs at DynaEnergetics. Is there a catch up there, or maybe a little bit of help on maybe Arcadia just as well, just given that the comp there is pretty easy on a year-over-year basis.

James O’Leary, President and Chief Executive Officer, DMC Global: Ken, I think, just looking at each one of the businesses, we do expect that there’s gonna be improvements quarter-over-quarter at all three of those, like we said. The NobelClad business is expecting to have a pretty significant ramp-up in the 2nd quarter for this international petrochemical project. That’s where you’re gonna see a lot of the increase, you know, for Q2.

Ken Newman, Analyst, KeyBanc Capital Markets: Understood. Okay. You know, we talked a little bit about some ongoing challenges with commodity prices, particularly within aluminum for Arcadia. I’m curious if you just talk a little bit about price cost impacts and how you’re expecting that to trend through the second quarter and maybe any incremental color on what you’re seeing from the tariff side of the business. I know Canada’s been a challenge, but what are your customers kind of saying there in terms of tariffs?

James O’Leary, President and Chief Executive Officer, DMC Global: You know, margins for Arcadia and the margin comps are gonna continue to be challenged. A lot of the aluminum pricing that’s happened, you know, happened post this Iranian conflict, and, you know, that’s gonna carry forward. All of our competitors, you know, particularly on large projects, are dealing with the same issue. Pricing, you’re gonna get bailed out by pricing. We are seeing a little bit more traction, you know, particularly if we’re able to serve, if your customer service and your delivery times are up to where we’re getting to again at Arcadia. You know, I’d expect margins to still be challenged for at least the next quarter or two at Arcadia as the aluminum issue works through.

If it stays high, you know, we’ll continue to have challenges through the year. You know, when the market improves eventually and contractors start breaking ground, projects gets larger projects start getting commissioned, which is where we’re probably having most of the margin pressure. You know, we could get some relief, but you need a healthier building market for that. On tariffs, we did not obviously book anything, and we didn’t put it in our guidance or are expecting it, but we have applied for all the same tariff reliefs and rebates that we’re entitled to. Dyna, in particular, is expecting $several million, but it’s so difficult to forecast. The mechanics and the timing are virtually impossible. You know, that could be a bluebird that flies in the window.

We just have no idea when.

Ken Newman, Analyst, KeyBanc Capital Markets: Understood. Maybe if I could just sneak one more in here. It was good to hear about the rumblings about the potentially improving oil and gas activity here in the U.S. You know, as you talk to your customers, do you get a sense of how quickly they can move on potential orders if they feel comfortable with the CapEx spends? Where would you start to see that initial improvement as it flows through on Dyna? Would it be primarily just on the drilling side, or would you get, you know, further, or maybe a sooner indication on order improvement?

James O’Leary, President and Chief Executive Officer, DMC Global: Well, we have very short lead times there, in every environment. You know, it’s nothing that’s gonna impact dramatically the next quarter. If you look at the guidance from everybody, from Halliburton to one of the peers that released today, nobody’s thinking the second quarter is gonna have real huge improvement. I think most people, and again, it’s all the suspects that I just ticked off and everybody who’s released before us, they’re all talking about as you go into the back half of the year, you know, if you listen to the administration, all these tankers are turning around and heading to the United States. A great many of them are. You know, tracking tanker activity is pretty, is pretty easy to do, it’s pretty granular.

That doesn’t start to help, and that won’t translate into really any big bump in onshore activity till, you know, after this upcoming quarter. We’re not expecting any major pickup. If it happens, we’ve got the capacity, and we’ve got the ability to turn things very quickly. I mean, we operate on very short lead times there.

Ken Newman, Analyst, KeyBanc Capital Markets: Understood. Thanks.

James O’Leary, President and Chief Executive Officer, DMC Global: You’re welcome.

Conference Operator, Conference Call Moderator: As a reminder, that is star 1 if you’d like to ask a question. We’ll go next to Gerard Sweeney with ROTH Capital Partners.

Gerard Sweeney, Analyst, ROTH Capital Partners: Good morning or good afternoon, I’m sorry, Jim or Geoff. Thanks for taking my call. Sticking with DynaEnergetics, obviously, I think in the past you’ve talked about some new product innovations and even some automation. I just wanted to see where that stood and where that could play into potential pickup in the second half of this year.

James O’Leary, President and Chief Executive Officer, DMC Global: Well, it’s already baked into the guidance and already baked into kind of how we look at the balance of the year. We’re getting the savings from the automation that we’ve been talking about for the last, you know, at least the last three or four quarters. It’s not really new products, it’s more value engineering and product re-engineering for cost. Again, it’s in the guidance, it’s in the sequential improvement that we just chatted about. You know, it’s in future years as well. You know, we’ve got a pretty meaningful slate of cost outs that carry forward into this year and then into 2027 as well. It’s from not less new products than it is re-engineered existing products.

The only thing that would be new products, but I don’t know if it’s necessarily a new product, just a new application, new end market would be a geothermal. Where we do expect some business this year, and we’re really hoping that that ends up being a big growth market in future years. You know, it’s not in our press release, it is talked about in public. You know, the only renewable energy that really survived completely unscathed, in fact, came out better from Trump’s One Big Beautiful Bill was geothermal. There’s a tremendous amount of excitement and enthusiasm for it. It pairs very well with data centers and it fits perfectly with our product in a lot of the applications that fracking has been doing for, you know, for the last decade.

Gerard Sweeney, Analyst, ROTH Capital Partners: I’m just gonna switch over to geothermal. That was my next question. Listen, it is the only base load renewable energy, true base load renewable energy out there. I think that’s part of the demand aspect of it. Just speaking of demand, do you have a visibility to the opportunity, what’s going on with enhanced geothermal in terms of potential market size and when the opportunity may start to maybe show up in the numbers?

James O’Leary, President and Chief Executive Officer, DMC Global: We’ll book sales this year. You know, it won’t be meaningful enough where we’ll break it out. You know, Jerry, I’d really have to direct you to some of the industry literature. Wood Mackenzie, if you look at, you know, there’s a couple of really, really good things in the public marketplace from companies that have gone public recently. I direct you to them, and that’s kinda what we’re hanging our hat on. You know, we don’t have to put in a lot of capital. We’re not making major additions to infrastructure. You know, we’re just redirecting some of our engineering resources and our customer service resources to service a market that we’re really excited about. You know, we’re not basing anything on enormous numbers going forward.

We’re just trying to meet the demand that’s right in front of us. By the way, utility-grade solar did okay coming out of the bill as well. I have to say that because I’m on the board of a utility grade solar company, but I am rooting more for geothermal these days.

Gerard Sweeney, Analyst, ROTH Capital Partners: I got it. That’s fair. I get what you’re saying. I’ll go back and look at that material. Just sticking with Dyna. I mean, obviously you’ve got very good manufacturing. You’ve got a great product. It reduces the need for manpower on the drill pad, et cetera. If there is a quick push back to maybe some or speed up in drilling and even completions, do you think you’re potentially better positioned than some of your competitors to meet that demand just because of your foundation?

James O’Leary, President and Chief Executive Officer, DMC Global: Yeah, not necessarily for, you know, we have some really good competitors in North America. You know, there’s a lot of capacity. That’s why pricing has been so challenging. Why I think we’re better positioned than many, and, you know, one of the things you didn’t mention is energy security and all the things that are being talked about after this Iranian conflict.

Gerard Sweeney, Analyst, ROTH Capital Partners: Yeah.

James O’Leary, President and Chief Executive Officer, DMC Global: While I’m very excited about geothermal, I think if you look at, you know, if you look at some of the public stuff, and I direct you towards, you know, Fervo’s filed an IPO. Their material is fantastic. We’re excited for them. When you look at all the discussion about energy security, I think there’s a general recognition now that it’s not gonna be renewable or it’s not gonna be fossil fuels or it has to be everything.

Gerard Sweeney, Analyst, ROTH Capital Partners: Yeah.

James O’Leary, President and Chief Executive Officer, DMC Global: There’s a guy named Ernest Moniz, who was the Department of Energy head under Obama. You know, I saw him in a presentation not long ago where, you know he was under clearly a Democratic, very pro-renewable administration. He said, "We need everything." This was before the Iranian conflict. Now, there was an article in the journal last week where there’s at least six, and I thought it was more countries that, you know, historically haven’t done fracking. There’s a lot of countries that have fracking resources that are looking at whether or not they should be, you know, getting a lot more serious about that.

Where I think Dyna is particularly well-positioned is, you know, we have an international operation that could be, you know, could be a little challenge making shipments into the Middle East, or some of the other parts it does business, particularly in Asia, because of the supply chain issues and some of the challenges, you know, being created by that conflict. Long term, if the rest of the world gets serious about energy security, and it’s everything, meaning not just renewable and not just fossil fuels, that’s gonna be great for us. That won’t be next quarter, might not be this year.

Longer term, if people are more focused on energy security, recognize that you have to look at the limitations of every possible source, and you have a basket of things, we’re not gonna be talking about getting rid of fossil fuels by 2030, 2035 or, you know, 2050. That’s always been ridiculous, and I think people are recognizing that now.

Gerard Sweeney, Analyst, ROTH Capital Partners: Got it. One more question. Just speaking about, like, security, the naval readiness program under NobelClad. Any details on that? Or is this one specific program that we can watch or track, or is this a multitude of just, you know, increased shipbuilding or some other aspect?

James O’Leary, President and Chief Executive Officer, DMC Global: It could be a multitude of increased shipping across the board. What we’re talking specifically about and what we’ve got factored into, less of an impact this year, but more going into next year. Just going from one nuclear sub to two is a really big deal. If you look at what the budgets and what Trump and Hegseth and others have talked about under naval readiness, it’s a lot more than one or two subs that they’re talking about increasing. The challenge is, again, I’m not being a shill for The Wall Street Journal, but if you look at it’s been in The Atlantic, it’s been in all the foreign relations magazines too.

You know, the challenge is if you go to Newport News, you know, Groton, the new shipyard in Philadelphia, naval readiness is being hampered by just people. You know, you can’t build this stuff fast enough. If, you know, the NobelClad people must be starting to hate me because, you know, every time I see 1 of these articles, I forward it to them and ask why it can’t be more. The answer is always the same. It’s a question of the constraints, and the constraints are all manpower. You know, that will fix itself. Again, it won’t fix itself by next quarter or the end of this year.

I do think even if peace breaks out around the world, you know, the issues around naval readiness, particularly with, you know, concerns in Asia, you know, a heightened awareness of what’s happened at the Straits of Hormuz, this is never going away, and it’ll long term be a good thing for us.

Gerard Sweeney, Analyst, ROTH Capital Partners: Got it. No, there’s huge, huge spending. Pacific Deterrence Initiative is one out that’s out there. Super helpful. I appreciate the longer look and view on that perspective. Thanks, guys.

James O’Leary, President and Chief Executive Officer, DMC Global: No, you’re welcome. Thank you.

Conference Operator, Conference Call Moderator: This now concludes our question-and-answer session. I would like to turn the floor back over to James O’Leary for closing comments.

James O’Leary, President and Chief Executive Officer, DMC Global: Yep. Harry, other than thanks for your patience, we know it’s been a difficult year. You know, there’s an old saying, I don’t know if it’s one of the immutable laws of nature, but, you know, things can’t go up until they stop going down. It does feel like this quarter, and I’m not, you know, I’m hoping we make next quarter. I’m hoping things continue to look a little bit cheerier. You know, once things start going down, you got enhanced prospects for them going up. We’re not reveling in all the insecurity around the world, but for a company that’s tied to energy infrastructure, you know, older technologies around fossil fuel, the naval readiness we talked about, you know, a world that’s what we’re living in, those are all positives for us.

You know, just the fact that things are a little bit cheerier longer term out is something we haven’t been able to talk about before. You know, not specifically a next quarter or the quarter after thing, but, you know, Arcadia, and I do a lot of other things in the building industry. This is still a pretty gloomy year. The affordability and the interest rate issues, nothing’s changed. But they do feel like they’ve stopped getting worse. Again, you know, things ain’t going up until they stop going down, and they do feel like they’ve, you know, at least stabilized. If you remember this time last year, we’d been through our third or fourth president at Arcadia. We destabilized it badly with integration.

You know, we were struggling with some supply chain challenges and some self-inflicted issues where, you know, they’ve definitely stabilized. You know, Jim Schladen and a couple of new team members we brought there are doing a great job. You know, things have at least stabilized, and I think it’s in the press release. You know, the fact that the ABI index prepped above 50 for the first time or hit 50 for the first time in over a year, you know, it’s a real positive when you look further out. You know, we’re seeing that. You know, that doesn’t help with the affordability issues that the contractors are dealing with, doesn’t help with interest rates. You know, it would have been nice if, you know, the Fed gave a little bit more promise for interest rates going down.

Until the inflationary picture is a little bit better, we won’t expect that. Even at Arcadia, which isn’t necessarily gonna benefit from energy security, naval readiness, some of the bigger themes we talked about. Arcadia, things have stopped going down. The team there has done a great job of stabilizing things. We’ve attracted back some of the team members that had left the company and were really top-notch salespeople. Again, it’s not gonna be next quarter. May not be this year, one of our peers talked about 2027 being a year when they expect things to really start kicking in, and I hope that’s true for us too. When things stop going down, the prospects of them going up are a lot better.

Hopefully, that’s the case for us. Thanks to our investors, thanks to the employees who are, slogging through this every day, and, we’ll talk to you next quarter.

Conference Operator, Conference Call Moderator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines and have a wonderful day.