# DMC Global Inc. (BOOM) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from DMC Global Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/34067/000003406725000028/boom-20241231.htm
Accession: 0000034067-25-000028
Filing date: 2025-02-24
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/BOOM/
All MD&A years: /company/BOOM/mda/
Previous year: /company/BOOM/mda/fy2023/ (FY 2023)
Next year: /company/BOOM/mda/fy2025/ (FY 2025)

ITEM 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our historical Consolidated Financial Statements and notes included elsewhere in this annual report. A discussion regarding our financial condition and results of operations as well as our liquidity and capital resources for fiscal 2023 compared to fiscal 2022 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which is available on the SEC’s website at www.sec.gov and our Investor Relations website at www.dmcglobal.com/investors.

Unless stated otherwise, all dollar figures in this report are presented in thousands (000s). N/M indicates that the change in dollars or percentage was not meaningful.

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 segments of the construction, energy, industrial processing and transportation markets. 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 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 $48,885 at December 31, 2024 compared to $59,357 at December 31, 2023.

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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 net sales were $642,851 in 2024 versus $719,188 in 2023, a decrease of 11%. The decline in performance primarily was driven by lower Arcadia Products sales volumes in longer-cycle high-end residential and certain short-cycle commercial markets, and a decrease in pricing of DynaEnergetics’ DS perforating systems as a result of industry consolidation in the United States.

•Consolidated gross profit of 23.4% in 2024 decreased from 29.5% in 2023. The decline was primarily attributable to margin declines at DynaEnergetics and Arcadia Products, 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 $108,656 in 2024 compared with $124,442 in 2023. The year-over-year decrease was primarily attributable to a reduction in variable compensation costs of $5,297, outside services costs of $5,735, as well as internal leadership and sales meeting expense of $1,176, partially offset by an increase in bad debt expense of $3,784. Additionally, there were $7,383 of CEO transition expenses and related accelerated stock-based compensation in 2023.

•Cash and marketable securities of $14,289 at December 31, 2024 decreased $29,370 from $43,659 at December 31, 2023 and was primarily attributable to debt repayments made in conjunction with the Company’s amended credit agreement.

•Net debt, a non-GAAP measure, of $56,529 (comprised of $70,818 of total debt less $14,289 in cash, cash equivalents and marketable securities) at December 31, 2024 decreased $15,663 from $72,192 at December 31, 2023. The decrease was due to a reduction in outstanding debt attributable to voluntary repayments made after execution of the credit agreement amendment in February 2024.

•The Company’s leverage ratio, calculated in accordance with its credit facility, was 1.35 to 1.0 as of December 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 December 31, 2024, was 1.09 to 1.0.

Outlook

We expect Arcadia Products’ first quarter sales will be flat to modestly above the 2024 fourth quarter, with continued weak demand from the luxury residential market. In January, Arcadia Products’ former president, Jim Schladen, returned to lead the organization. He is currently focused on strengthening Arcadia Products’ core commercial operations and stabilizing and developing an improvement plan for its high-end residential products, which may include the elimination of underperforming product offerings. As a regional architectural building products leader based in the Los Angeles metro area, management believes Arcadia Products is uniquely positioned to participate in the long-term reconstruction of many neighborhoods destroyed by the recent wildfires in Southern California.

At DynaEnergetics, first quarter sales are expected to be flat to modestly up versus the seasonally soft 2024 fourth quarter. Anticipated sales growth in North America is expected to be partially offset by lower international sales. DynaEnergetics has completed a value-engineering initiative designed to reduce the cost and improve the performance of its flagship DynaStage product offering. DynaEnergetics also has made significant progress automating its North American manufacturing center, with cost benefits that are expected to begin to be realized in the first half of 2025. These initiatives are expected to partially offset persistent pricing pressure in North America’s well completions industry.

NobelClad expects first quarter sales will be comparable to the 2024 fourth quarter, which was NobelClad’s second strongest sales quarter in more than a decade. NobelClad continues to experience 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.

Our businesses are closely monitoring the potential impact of evolving U.S. and reciprocal tariff policies.

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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 from 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.

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Consolidated Results of Operations

[[GREPCENT_TABLE]]
[["","2024","","2023","","$ change","","% change"],["Net sales","$","642,851","","","$","719,188","","","$","(76,337)","","","(11)","%"],["Gross profit","150,569","","","212,052","","","(61,483)","","","(29)","%"],["Gross profit percentage","23.4","%","","29.5","%"],["COSTS AND EXPENSES:"],["General and administrative expenses","61,401","","","75,341","","","(13,940)","","","(19)","%"],["% of net sales","9.6","%","","10.5","%"],["Selling and distribution expenses","47,255","","","49,101","","","(1,846)","","","(4)","%"],["% of net sales","7.4","%","","6.8","%"],["Amortization of purchased intangible assets","21,155","","","22,667","","","(1,512)","","","(7)","%"],["% of net sales","3.3","%","","3.2","%"],["Goodwill impairment","141,725","","","\u2014","","","141,725","","","100","%"],["Strategic review expenses","7,765","","","\u2014","","","7,765","","","100","%"],["Restructuring expenses and asset impairments","2,526","","","3,766","","","(1,240)","","","(33)","%"],["Operating (loss) income","(131,258)","","","61,177","","","(192,435)","","","(315)","%"],["Other expense, net","(1,068)","","","(1,782)","","","714","","","(40)","%"],["Interest expense, net","(8,664)","","","(9,516)","","","852","","","(9)","%"],["(Loss) income before income taxes","(140,990)","","","49,879","","","(190,869)","","","(383)","%"],["Income tax provision","10,970","","","15,120","","","(4,150)","","","(27)","%"],["Net (loss) income","(151,960)","","","34,759","","","(186,719)","","","(537)","%"],["Less: Net (loss) income attributable to redeemable noncontrolling interest","(57,508)","","","8,500","","","(66,008)","","","(777)","%"],["Net (loss) income attributable to DMC Global Inc.","(94,452)","","","26,259","","","(120,711)","","","(460)","%"],["Adjusted EBITDA attributable to DMC Global Inc.","$","52,156","","","$","96,063","","","$","(43,907)","","","(46)","%"]]
[[/GREPCENT_TABLE]]

Net sales were $642,851 for the year ended December 31, 2024, a decrease of 11% compared with 2023, primarily due to lower Arcadia Products sales volumes in longer-cycle high-end residential and certain short-cycle commercial markets, and a decrease in pricing of DynaEnergetics’ DS perforating systems as a result of industry consolidation in the United States.

Gross profit percentage was 23.4% versus 29.5% in 2023. The decline compared to prior year was primarily attributable to margin declines at DynaEnergetics and Arcadia Products, as well as lower absorption of fixed manufacturing overhead costs as a result of the decrease in consolidated sales.

General and administrative expenses decreased $13,940 for the year ended December 31, 2024 compared with 2023. 2023 included CEO transition expenses and related accelerated stock-based compensation of $7,383, and patent infringement litigation costs at DynaEnergetics of $3,610. The remaining year-over-year decrease was primarily attributable to lower employee compensation costs, driven by a decline in variable compensation of $2,402 and lower internal leadership and sales meeting expense of $1,176. These decreases were partially offset by an increase of $762 in expense recognized related to certain alleged violations of stormwater regulatory requirements in the state of California.

Selling and distribution expenses decreased $1,846 for the year ended December 31, 2024 compared with 2023. The lower expense was driven by a decrease in compensation cost of $3,571 and outside marketing consulting costs of $1,564, partially offset by an increase in bad debt expense for $3,784.

Amortization of purchased intangible assets decreased $1,512 for the year ended December 31, 2024 compared with 2023 as the Arcadia Products customer relationship purchased intangible asset is amortized using an accelerated amortization method.

Goodwill impairment of $141,725 for the year ended December 31, 2024 related to the full impairment of Arcadia Products’ goodwill due in part to recent financial performance not in accordance with expectations and downward revisions to the near-term forecast.

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Strategic review expenses of $7,765 for the year ended December 31, 2024 related primarily to the review of strategic alternatives for DynaEnergetics and NobelClad. In connection with this process, strategic review expenses primarily included $4,076 in professional service fees and $2,988 in employee retention compensation, including $372 of stock-based compensation. On October 21, 2024, the Company announced that the Board was no longer actively marketing the DynaEnergetics and NobelClad segments.

Restructuring expenses and asset impairments decreased $1,240 for the year ended December 31, 2024 compared with 2023. 2024 costs primarily related to the abandonment of a planned manufacturing expansion at DynaEnergetics and employee severance associated with headcount reductions at DynaEnergetics and Arcadia Products. 2023 costs included $2,471 of asset impairments primarily associated with the abandonment of a software asset at DynaEnergetics and $1,295 of cost reduction initiatives, including employee severance, primarily at DynaEnergetics.

Operating loss of $131,258 for the year ended December 31, 2024 was primarily attributable to the goodwill impairment charge at Arcadia Products and decreased financial performance at DynaEnergetics. Operating income in 2023 was $61,177.

Other expense, net of $1,068 in 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 $8,664 in 2024 decreased 9% compared with 2023 due primarily to lower outstanding balances on our credit facility due to voluntary debt repayments during 2024.

Income tax provision of $10,970 was recorded on loss before taxes of $140,990 as the loss was primarily driven by the full impairment at Arcadia Products' goodwill, which did not result in a tax benefit. The effective rate was also impacted unfavorably by income generated in foreign jurisdictions and the establishment of a valuation allowance against U.S. deferred tax assets.

We recorded an income tax provision of $15,120 on income before income taxes of $49,879 in 2023. The prior year rate was impacted by geographical mix. 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 also impacted unfavorably by state taxes and certain compensation expenses that are not tax deductible in the U.S. The operating results of Arcadia 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.

Net loss attributable to DMC Global Inc. in 2024 was $94,452, or $(8.20) per diluted share compared with net income of $26,259, or $1.08 per diluted share, in 2023.

Adjusted EBITDA in 2024 decreased compared with 2023 due to the factors discussed above. See "Use of Non-GAAP Financial Measures" above for explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.

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[[GREPCENT_TABLE]]
[["","2024","","2023"],["Net (loss) income","$","(151,960)","","","$","34,759"],["Interest expense, net","8,664","","","9,516"],["Income tax provision","10,970","","","15,120"],["Depreciation","13,891","","","13,840"],["Amortization of purchased intangible assets","21,155","","","22,667"],["EBITDA","(97,280)","","","95,902"],["Stock-based compensation","6,530","","","10,115"],["Goodwill impairment","141,725","","","\u2014"],["Strategic review expenses","7,765","","","\u2014"],["Restructuring expenses and asset impairments","2,526","","","3,766"],["CEO transition expenses","\u2014","","","4,343"],["Other expense, net","1,068","","","1,782"],["Adjusted EBITDA","62,334","","","115,908"],["Less: adjusted EBITDA attributable to redeemable noncontrolling interest","(10,178)","","","(19,845)"],["Adjusted EBITDA attributable to DMC Global Inc.","$","52,156","","","$","96,063"]]
[[/GREPCENT_TABLE]]

Adjusted Net Income and Adjusted Diluted Earnings Per Share decreased compared with 2023 due to the factors discussed above. See "Use of Non-GAAP Financial Measures" above for 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.

[[GREPCENT_TABLE]]
[["","Twelve months ended December 31, 2024"],["","Amount","","Per Share(1)"],["Net loss attributable to DMC Global Inc. (2)","$","(94,452)","","","$","(4.80)"],["Goodwill impairment, net of tax","85,035","","","4.32"],["Strategic review expenses, net of tax","5,824","","","0.30"],["Restructuring expenses and asset impairments, net of tax","1,674","","","0.08"],["Establishment of income tax valuation allowance","3,900","","","0.20"],["As adjusted","$","1,981","","","$","0.10"]]
[[/GREPCENT_TABLE]]

(1) Calculated using diluted weighted average shares outstanding of 19,667,673

(2) Net loss attributable to DMC Global Inc. prior to the adjustment of redeemable noncontrolling interest and deemed dividend for purposes of calculating earnings per share

[[GREPCENT_TABLE]]
[["","Twelve months ended December 31, 2023"],["","Amount","","Per Share(1)"],["Net income attributable to DMC Global Inc. (2)","$","26,259","","","$","1.35"],["CEO transition expenses and accelerated stock-based compensation, net of tax","6,284","","","0.32"],["Restructuring expenses and asset impairments, net of tax","2,773","","","0.14"],["As adjusted","$","35,316","","","$","1.81"]]
[[/GREPCENT_TABLE]]

(1) Calculated using diluted weighted average shares outstanding of 19,518,382

(2) Net income attributable to DMC Global Inc. prior to the adjustment of redeemable noncontrolling interest for purposes of calculating earnings per share

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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 (loss) before income taxes by deducting unallocated corporate expenses, unallocated stock-based compensation, other expense, net, and interest expense, net.

Net sales, segment operating income (loss), and Adjusted EBITDA for each segment were as follows for the years ended December 31:

[[GREPCENT_TABLE]]
[["","2024"],["","Arcadia Products","","DynaEnergetics","","NobelClad","","DMC Global Inc."],["Net Sales","$","249,763","","","$","287,686","","","$","105,402","","","$","642,851"],["% of Consolidated","38.8","%","","44.8","%","","16.4","%"],["Operating (loss) income","(143,636)","","","16,167","","","20,051","","","(131,258)"],["Adjusted EBITDA attributable to DMC Global Inc.","15,268","","","24,803","","","23,226","","","52,156"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","2023"],["","Arcadia Products","","DynaEnergetics","","NobelClad","","DMC Global Inc."],["Net Sales","298,909","","","$","315,026","","","$","105,253","","","$","719,188"],["% of Consolidated","41.6","%","","43.8","%","","14.6","%"],["Operating income","21,407","","","46,353","","","19,427","","","61,177"],["Adjusted EBITDA attributable to DMC Global Inc.","29,767","","","56,270","","","22,760","","","96,063"]]
[[/GREPCENT_TABLE]]

Arcadia Products

[[GREPCENT_TABLE]]
[["","2024","","2023","","$ change","","% change"],["Net sales","$","249,763","","","$","298,909","","","$","(49,146)","","","(16)","%"],["Gross profit","67,025","","","92,252","","","(25,227)","","","(27)","%"],["Gross profit percentage","26.8","%","","30.9","%"],["COSTS AND EXPENSES:"],["General and administrative expenses","30,881","","","30,488","","","393","","","1","%"],["Selling and distribution expenses","16,299","","","17,749","","","(1,450)","","","(8)","%"],["Amortization of purchased intangible assets","21,111","","","22,608","","","(1,497)","","","(7)","%"],["Goodwill impairment","141,725","","","\u2014","","","141,725","","","100","%"],["Restructuring expenses and asset impairments","645","","","\u2014","","","645","","","100","%"],["Operating (loss) income","(143,636)","","","21,407","","","(165,043)","","","(771)","%"],["Adjusted EBITDA","25,446","","","49,612","","","(24,166)","","","(49)","%"],["Less: adjusted EBITDA attributable to redeemable noncontrolling interest","(10,178)","","","(19,845)","","","9,667","","","(49)","%"],["Adjusted EBITDA attributable to DMC Global Inc.","$","15,268","","","$","29,767","","","$","(14,499)","","","(49)","%"]]
[[/GREPCENT_TABLE]]

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Net sales of $249,763 in 2024 decreased $49,146 compared to 2023 primarily due to lower sales volumes in longer-cycle high-end residential markets. Additionally, weak construction activity and internal operational disruptions negatively impacted short-cycle commercial sales for portions of 2024.

Gross profit percentage decreased to 26.8% in 2024 primarily due to lower absorption of fixed manufacturing overhead costs as a result of the decrease in net sales, particularly within longer-cycle high-end residential markets.

Selling and distribution expenses decreased $1,450 in 2024 compared to 2023 due to lower compensation costs.

Amortization of purchased intangible assets decreased $1,497 in 2024 compared to 2023 as the customer relationship purchased intangible asset is amortized using an accelerated amortization method.

Goodwill impairment of $141,725 in 2024 relates to the full impairment of goodwill due in part to recent financial performance not in accordance with expectations and downward revisions to the near-term forecast.

Restructuring expenses and asset impairments of $645 in 2024 primarily related to employee severance associated with headcount reductions.

Operating loss of $143,636 in 2024 compared to operating income of $21,407 in 2023 was due to the factors discussed above.

Adjusted EBITDA decreased in 2024 due to the factors discussed above. See “Use of Non-GAAP Financial Measures” above for explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.

[[GREPCENT_TABLE]]
[["","2024","","2023"],["Operating (loss) income","$","(143,636)","","","$","21,407"],["Adjustments:"],["Depreciation","3,681","","","3,695"],["Amortization of purchased intangible assets","21,111","","","22,608"],["Stock-based compensation","1,920","","","1,571"],["Goodwill impairment","141,725","","","\u2014"],["Restructuring expenses and asset impairments","645","","","\u2014"],["CEO transition expenses","\u2014","","","331"],["Adjusted EBITDA","$","25,446","","","$","49,612"],["Less: adjusted EBITDA attributable to redeemable noncontrolling interest","(10,178)","","","(19,845)"],["Adjusted EBITDA attributable to DMC Global Inc.","$","15,268","","","$","29,767"]]
[[/GREPCENT_TABLE]]

DynaEnergetics

[[GREPCENT_TABLE]]
[["","2024","","2023","","$ change","","% change"],["Net sales","$","287,686","","","$","315,026","","","$","(27,340)","","","(9)","%"],["Gross profit","50,055","","","86,701","","","(36,646)","","","(42)","%"],["Gross profit percentage","17.4","%","","27.5","%"],["COSTS AND EXPENSES:"],["General and administrative expenses","10,835","","","15,806","","","(4,971)","","","(31","%)"],["Selling and distribution expenses","21,128","","","21,472","","","(344)","","","(2)","%"],["Amortization of purchased intangible assets","44","","","59","","","(15)","","","(25)","%"],["Restructuring expenses and asset impairments","1,881","","","3,011","","","(1,130)","","","(38)","%"],["Operating income","16,167","","","46,353","","","(30,186)","","","(65)","%"],["Adjusted EBITDA","$","24,803","","","$","56,270","","","$","(31,467)","","","(56)","%"]]
[[/GREPCENT_TABLE]]

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Net sales decreased $27,340 in 2024 compared to 2023 primarily due to a decrease in pricing of DS perforating systems as a result of industry consolidation in the United States.

Gross profit percentage decreased to 17.4% 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 $4,971 compared with 2023 primarily due to a decrease in patent infringement litigation costs of $3,610 and compensation costs of $1,334.

Selling and distribution expenses were lower by $344 compared with 2023 primarily due to a decrease in compensation costs of $1,639, marketing consulting costs of $1,572 and business-related travel of $170, partially offset by an increase in bad debt expense of $3,100.

Restructuring expenses and asset impairments of $1,881 in 2024 related to asset impairment charges of $1,104 primarily associated with the abandonment of a planned manufacturing expansion and employee severance of $777 due to headcount reductions. Restructuring expenses and asset impairments in 2023 were attributable to $1,140 of cost reduction initiatives, primarily employee severance, and an asset impairment charge of $1,871 associated with the abandonment of a software asset.

Operating income decreased by $30,186 compared with 2023 due to a decrease in gross profit.

Adjusted EBITDA decreased in 2024 compared with 2023 primarily due to the factors discussed above. See "Use of Non-GAAP Financial Measures" above for explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.

[[GREPCENT_TABLE]]
[["","2024","","2023"],["Operating income","$","16,167","","","$","46,353"],["Adjustments:"],["Depreciation","6,711","","","6,847"],["Amortization of purchased intangible assets","44","","","59"],["Restructuring expenses and asset impairments","1,881","","","3,011"],["Adjusted EBITDA","$","24,803","","","$","56,270"]]
[[/GREPCENT_TABLE]]

NobelClad

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

Net sales and gross profit percentage were consistent in 2024 compared with 2023 due to steady, healthy activity in core energy and petrochemical end markets, including Cylindra™ cryogenic transition joints and pressure vessel plate shipments.

General and administrative expenses increased by $207 compared with 2023 primarily due to higher variable compensation costs.

Operating income increased $624 compared to 2023 due in part to an increase in gross profit.

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Adjusted EBITDA increased due to the factors discussed above. See "Use of Non-GAAP Financial Measures" above for explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.

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[[/GREPCENT_TABLE]]

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 $56,529 at December 31, 2024 compared to $72,192 at December 31, 2023. The decrease in net debt during 2024 was due to a reduction in outstanding debt attributable to voluntary repayments made after executing the amended credit agreement 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 provided 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. As of December 31, 2024, we were in compliance with all financial covenants and other provisions of our debt agreements.

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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 3.00 to 1.0. The actual leverage ratio as of December 31, 2024, calculated in accordance with the amended credit facility, was 1.35 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 December 31, 2024 was 3.41 to 1.0.

As of December 31, 2024, borrowings of $48,125 on the Term Loan under our credit facility were outstanding, and $24,375 was outstanding on the revolver.

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 December 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 December 23, 2024 (“Call Option”). The minority interest holder of Arcadia Products has the right to sell its remaining interest in Arcadia Products to the Company (“Put Option”). On December 3, 2024, the Company and minority interest holder entered into an amendment to the Operating Agreement whereby the minority interest holder agreed not to exercise the Put Option until on or after September 6, 2026 in exchange for, among other terms, a one-time payment of $2,500. 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.

As of December 31, 2024, the value of the redeemable noncontrolling interest was $187,080. 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 8 — Financial Statements and Supplementary Data for further information related to the valuation of the redeemable noncontrolling interest and promissory note outstanding.

Other contractual obligations and commitments

The table below presents principal cash flows by expected maturity dates for our debt obligations and other contractual obligations and commitments as of December 31, 2024:

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[[/GREPCENT_TABLE]]

(1)  Represents outstanding borrowings under our credit facility but excludes future interest expense on outstanding credit facility borrowings. For more information about our debt obligations, refer to Note 7 "Debt" within Item 8 — Financial Statements and Supplementary Data.

(2) The operating lease obligations presented reflect future minimum lease payments due under non-cancelable portions of our leases as of December 31, 2024. Our operating lease obligations are described in Note 6 "Leases" within Item 8 — Financial Statements and Supplementary Data.

(3)  Amounts represent firm commitments to purchase goods or services to be utilized in the normal course of business. These amounts are not reflected in the Consolidated Balance Sheets.

(4) The above table does not include amounts potentially payable upon exercise of the Put Option or Call Option associated with the redeemable noncontrolling interest.

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Cash flows from operating activities

Net cash provided by operating activities of $46,596 in 2024 decreased compared to $65,927 in 2023 primarily driven by lower net income attributable to a decline in financial performance at Arcadia Products and DynaEnergetics. This decrease was partially offset by lower working capital in 2024 as compared to 2023.

Cash flows from investing activities

Net cash used in investing activities in 2024 of $3,569 primarily related to the acquisition, net of proceeds received, of property, plant and equipment of $16,188, partially offset by proceeds from the sales and maturities of marketable securities of $12,619.

Net cash used in investing activities in 2023 was $28,101 and primarily related to the acquisition of property, plant and equipment of $15,974 and investments in marketable securities of $12,471.

 Cash flows from financing activities

Net cash used in financing activities in 2024 totaled $59,788 and included net credit facility repayments of $45,000, distributions to the redeemable noncontrolling interest holder of $8,445, payment of debt issuance costs of $2,735, payment of a deemed dividend to the redeemable noncontrolling interest holder of $2,500, and treasury stock purchases of $1,240.

Net cash used in financing activities in 2023 totaled $33,182 and included payments on our Term Loan of $17,500, distributions to the redeemable noncontrolling interest holder of $13,515, and treasury stock purchases of $2,481.

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

Our Consolidated Financial Statements contain information that is pertinent to management’s discussion and analysis of results of operations and financial condition. 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, assets, liabilities, and other related disclosures.

Our critical accounting estimates, described below, are important to the portrayal of our results of operations and financial condition. Management’s judgments and estimates in these areas are based on information available and at times requires management to make difficult, subjective, and complex judgments. Actual results may or may not differ from these estimates.

Inventories

Inventories are stated at the lower-of-cost (first-in, first-out) or net realizable value. Significant cost elements included in inventory are raw materials, labor, freight, subcontract costs, and manufacturing overhead. As necessary, we write down inventory to its net realizable value by recording provisions for excess, slow moving and obsolete inventory. To determine provision amounts, we regularly review inventory quantities on hand and values, and compare them to estimates of future product demand, market conditions, production requirements and technological developments. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by the Company, additional write-downs of inventories may be required.

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Goodwill

Goodwill represents the amount by which the purchase price exceeds the fair value of identifiable tangible and intangible assets and liabilities acquired in a business combination. Goodwill acquired in a business combination and determined to have an indefinite useful life is not amortized, but instead is tested for impairment at least annually during the fourth quarter or whenever events or changes in circumstances indicate that the carrying value might not be fully recoverable. For goodwill, impairment is assessed at the reporting unit level. A reporting unit is defined as an operating segment or a component of an operating segment to the extent discrete financial information is available that is reviewed by segment management. The Company's reporting units are each of the three operating segments disclosed in Note 11 within Item 8 — Financial Statements and Supplementary Data.

To test goodwill for impairment, we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. For the qualitative assessment, we consider macroeconomic and market conditions, cost factors, financial performance and other relevant entity-specific events. If we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying value during the qualitative assessment, then we quantitatively estimate the fair value of the reporting unit and compare the estimated fair value to its carrying value. Based on the results of the quantitative assessment, if the carrying value exceeds the fair value of the reporting unit, an impairment loss is recognized for the difference.

In connection with the preparation of its quarterly financial statements during the third quarter of 2024, the Company assessed changes in circumstances that occurred during the quarter to determine whether it was more likely than not that the fair value of its Arcadia Products reporting unit was below its carrying amount. While there was no single determinative event or factor, potential triggering events during the third quarter of 2024, including recent financial performance not in accordance with expectations and downward revisions to the near-term forecast, led the Company to conclude that when considering the events and factors in totality, it was more likely than not that the fair value of the Arcadia Products reporting unit was below its carrying value at September 30, 2024. As such, a quantitative goodwill impairment test was performed. The Company utilized the market approach to estimate the fair value of the Arcadia Products reporting unit, but also considered the income approach to validate the results. The market approach includes observable inputs of fair value, including but not limited to non-binding offers received from third-parties and comparative market multiples. The income approach estimates the fair value by discounting the reporting unit’s estimated future cash flows using an estimated discount rate, or expected return, that a marketplace participant would have required as of the valuation date.

Based on the results of our quantitative goodwill impairment test, we recorded a $141,725 impairment charge to goodwill during the year ended December 31, 2024.

Asset impairments

Finite-lived assets, including purchased intangible assets, property, plant and equipment, and right-of-use assets, are tested for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. We compare the expected undiscounted future operating cash flows associated with applicable assets or asset groupings to their respective carrying values to determine if they are fully recoverable when indicators of impairment are present. If the expected future operating cash flows of an asset or asset grouping are not sufficient to recover the related carrying value, we estimate the fair value of the asset or asset grouping. Impairment is recognized when the carrying amount of the asset or asset grouping is not recoverable and when carrying value exceeds the estimated fair value.

The net carrying value of our purchased intangible assets as of December 31, 2024 was $174,104, which is entirely related to Arcadia Products. The net carrying values of our property, plant and equipment and right-of-use assets as of December 31, 2024 were $129,276 and $42,164, respectively. During the year ended December 31, 2024, we recorded impairment charges on our property, plant and equipment of $1,182. The impairment charges primarily related to a charge associated with the abandonment of a planned manufacturing expansion at DynaEnergetics.

Income taxes

We recognize deferred tax assets and liabilities for the expected future income tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets are recognized for the expected future effects of all deductible temporary differences to the extent we believe these assets will more likely than not be realized. We record a valuation allowance when, based on current circumstances, it is more likely than not that all or a portion of the deferred tax assets will not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning

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strategies, recent financial performance and existing valuation allowances, if any. As of December 31, 2024, we were in a three-year cumulative loss position at the consolidated financial statement level, driven by losses in the U.S. primarily related to the impairment of Arcadia Products’ goodwill in the third quarter of 2024. Accordingly, during the year ended December 31, 2024, we evaluated the impact on all jurisdictions and have recorded a valuation allowance against the corresponding net deferred tax assets in the U.S. We also have a valuation allowance recorded against deferred tax assets in certain of our foreign jurisdictions. As of December 31, 2024, we have recorded a consolidated valuation allowance of $32,121.

We recognize the tax benefits from uncertain tax positions only when it is more likely than not, based on the technical merits of the position, that the tax position will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits recognized in the Consolidated Financial Statements from such a position are measured as the largest benefit that is more likely than not to be realized upon ultimate resolution. As of December 31, 2024, we have an uncertain tax position liability of $5,240 recorded in our Consolidated Balance Sheet related to tax positions taken in prior periods.

Off Balance Sheet Arrangements

At December 31, 2024, we had no off-balance sheet arrangements, as defined by SEC rules, that have or are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recent Accounting Pronouncements

Refer to Note 2 "Significant Accounting Policies" within Part II, Item 8 — Financial Statements and Supplementary Data in this annual report for a discussion, as applicable, of recent accounting pronouncements and their anticipated effect on our business.