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 that are included in our Annual Report filed on Form 10-K for the year ended December 31, 2025.
Unless stated otherwise, all dollar figures are presented in thousands (000s).
Overview
General
DMC Global Inc. ("DMC", "we", "us", "our", or the "Company") operates three manufacturing businesses: Arcadia Products, DynaEnergetics and NobelClad, which produce differentiated products and engineered solutions primarily for the construction, energy, and industrial processing 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's common stock 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 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.
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 $135,595 in the first quarter of 2026 versus $159,290 in the first quarter of 2025, a decrease of 15%. The decline was attributable to lower sales at all three business segments, as described below.
•Arcadia Products reported net sales of $56,706 in the first quarter of 2026, representing a decrease of 14% compared with the first quarter of 2025. The decrease was primarily attributable to lower sales volumes in longer-cycle commercial and high-end residential markets.
•DynaEnergetics reported net sales of $59,547 in the first quarter of 2026, representing a decrease of 9% compared with the first quarter of 2025. The decline largely resulted from lower sales volumes and a decrease in pricing due to a highly competitive core North American market, which collectively reduced net sales by $6,908. This decrease was partially offset by an increase in international sales of $904 primarily due to project timing.
•NobelClad reported net sales of $19,342 in the first quarter of 2026, representing a decrease of 31% compared with the first quarter of 2025 driven by the timing of large project shipments out of backlog and lower activity levels due in part to the impact of evolving tariff policies.
•The Company's leverage ratio, calculated in accordance with its credit facility, was 1.76x as of March 31, 2026 in comparison to the maximum ratio permitted of 3.0x. The Company's adjusted leverage ratio, calculated using net debt, a non-GAAP measure, was 0.76x as of March 31, 2026.
Refer to "Consolidated Results of Operations" and "Business Segment Financial Information" below for additional discussion.
Outlook
Our three manufacturing businesses continue to closely monitor evolving macroeconomic conditions, including the conflict in the Middle East and other geopolitical and economic challenges, such as volatility in global oil and gas markets, persistently elevated interest rates, and evolving global tariff policies. DynaEnergetics and NobelClad serve the upstream and downstream segments of the oil and gas industry, respectively, and continue to address the impacts of volatile crude oil prices. Sales and profitability could be adversely affected if we, or our customers, are unable to mitigate the above described impacts.
Arcadia Products is working to mitigate the impact of elevated interest rates, volatile input costs, and generally lower construction activity in its core regional markets. These factors have created a competitive and challenging bidding environment, which has impacted Arcadia Products' current ability to fully pass through higher input costs, mainly with respect to aluminum, which recently reached a multi-year high. While the business continues to focus on strengthening its core commercial operations, which generate approximately 75% of the segment's sales, the current environment is expected to continue impacting Arcadia Products' net sales and profitability during 2026. An important twelve-month leading indicator for Arcadia Products is the Architectural Billings Index ("ABI"). In March 2026, the ABI for Arcadia Products' core western U.S. market rose above 50 for the first time since December 2024, indicating that more firms are reporting increased billings than those reporting declining billings.
DynaEnergetics is continuing a series of initiatives designed to reduce costs and increase market share. These efforts are intended to offset volatility in crude oil prices and potentially lower international activity associated with the current conflict in the Middle East. DynaEnergetics also is pursuing growth opportunities in the enhanced geothermal market and has expanded its sales and marketing efforts in certain emerging global shale markets.
At NobelClad, we use backlog, defined as all unfilled firm purchase orders and commitments at a point in time, to assess near-term demand. Most firm purchase orders and commitments are realized and shipped within 12 months. Order backlog increased to $70,308 at the end of the first quarter of 2026, the highest level in more than 15 years and up 12% from $62,612 at the end of the fourth quarter of 2025. We expect shipments of orders associated with the previously announced international petrochemical project to improve NobelClad's financial performance during 2026. NobelClad is pursuing additional opportunities with the U.S. Navy following its recently announced plans to accelerate its Naval readiness program.
Each of our businesses are evaluating additional mitigation strategies and targeted cost reduction programs if business does not improve as 2026 progresses.
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 consolidated cash and cash equivalents per the Condensed Consolidated Balance Sheets.
Management believes providing these additional financial measures is useful to investors in understanding the Company's operating performance, excluding the effects of restructuring, asset impairment, and other nonrecurring charges, as well as its liquidity. Management typically monitors the business utilizing the above non-GAAP measures, in addition to GAAP results, to understand and compare operating results across accounting periods, and certain management incentive awards are based, in part, on these measures. The presence of non-GAAP financial measures in this report is not intended to suggest that such measures be considered in isolation or as a substitute for, or as superior to, DMC's GAAP information, and investors are cautioned that the non-GAAP financial measures are limited in their usefulness. Given that not all companies use identical calculations, DMC's presentation of non-GAAP financial measures may not be comparable to similarly titled measures of other companies.
Consolidated Results of Operations
Three months ended March 31, 2026 compared with three months ended March 31, 2025
| Three months ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ change | % change | ||||||||||||||||||||
| Net sales | $ | 135,595 | $ | 159,290 | $ | (23,695) | (15 | %) | |||||||||||||||
| Gross profit | 25,443 | 41,199 | (15,756) | (38 | %) | ||||||||||||||||||
| Gross profit percentage | 18.8 | % | 25.9 | % | |||||||||||||||||||
| COSTS AND EXPENSES: | |||||||||||||||||||||||
| General and administrative expenses | 14,132 | 16,674 | (2,542) | (15 | %) | ||||||||||||||||||
| % of net sales | 10.4 | % | 10.5 | % | |||||||||||||||||||
| Selling and distribution expenses | 10,472 | 11,626 | (1,154) | (10 | %) | ||||||||||||||||||
| % of net sales | 7.7 | % | 7.3 | % | |||||||||||||||||||
| Amortization of purchased intangible assets | 4,356 | 4,763 | (407) | (9 | %) | ||||||||||||||||||
| % of net sales | 3.2 | % | 3.0 | % | |||||||||||||||||||
| Strategic review and related expenses | - | 1,298 | (1,298) | (100 | %) | ||||||||||||||||||
| Restructuring expenses | 566 | 325 | 241 | 74 | % | ||||||||||||||||||
| Operating (loss) income | (4,083) | 6,513 | (10,596) | 163 | % | ||||||||||||||||||
| Other expense, net | (45) | (218) | 173 | (79 | %) | ||||||||||||||||||
| Interest expense, net | (1,461) | (1,699) | 238 | (14 | %) | ||||||||||||||||||
| (Loss) income before income taxes | (5,589) | 4,596 | (10,185) | 222 | % | ||||||||||||||||||
| Income tax provision | 1,221 | 2,733 | (1,512) | (55 | %) | ||||||||||||||||||
| Net (loss) income | (6,810) | 1,863 | (8,673) | 466 | % | ||||||||||||||||||
| Less: Net (loss) income attributable to redeemable noncontrolling interest | (745) | 1,186 | (1,931) | 163 | % | ||||||||||||||||||
| Net (loss) income attributable to DMC Global Inc. | (6,065) | 677 | (6,742) | 996 | % | ||||||||||||||||||
| Adjusted EBITDA attributable to DMC Global Inc. | $ | 3,895 | $ | 14,391 | $ | (10,496) | (73 | %) | |||||||||||||||
Net sales were $135,595 for the three months ended March 31, 2026, a decrease of 15% compared with the same period in 2025, due to lower sales at all three business segments. Arcadia Products' net sales decreased 14% as a result of lower sales volumes in longer-cycle commercial and high-end residential markets. DynaEnergetics' net sales decreased 9% largely resulting from lower sales volumes and a decrease in pricing in its core North American market. NobelClad's net sales decreased 31% driven by the timing of large project shipments out of backlog and lower activity levels due in part to the impact of evolving tariff policies.
Gross profit percentage was 18.8% compared with 25.9% for the same period in 2025. The decrease was attributable to tariff impacts which resulted in higher input costs at DynaEnergetics and a less favorable project and regional mix at NobelClad. Additionally, the decline in gross profit percentage was impacted by the lower absorption of fixed manufacturing overhead costs at all three business segments as a result of the decreases in net sales.
General and administrative expenses decreased $2,542 for the three months ended March 31, 2026, compared with the same period in 2025, primarily due to a decrease in compensation expense of $2,293, lower outside services costs of $156, and a decrease in business-related travel of $92.
Selling and distribution expenses decreased $1,154 for the three months ended March 31, 2026, compared with the same period in 2025, driven by lower bad debt expense of $645, a decrease in compensation expenses of $222, and reduced outside services costs of $112.
Amortization of purchased intangible assets decreased $407 for the three months ended March 31, 2026, compared to the same period in 2025, as the Arcadia Products customer relationship purchased intangible asset is amortized using an accelerated amortization method.
Strategic review and related expenses of $1,298 for the three months ended March 31, 2025 included $932 in professional service fees and $366 in employee retention compensation, including $36 of stock-based compensation.
Restructuring expenses of $566 and $325 for the three months ended March 31, 2026, and 2025, related to employee severance associated with headcount reductions at Arcadia Products and DynaEnergetics.
Operating loss was $4,083 for the three months ended March 31, 2026, compared to operating income of $6,513 in the same period in 2025, primarily due to lower net sales and corresponding gross profit.
Other expense, net of $45 for the three months ended March 31, 2026 primarily related to net realized foreign currency exchange losses. Currency gains and losses can arise when subsidiaries enter into intercompany 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.
Income tax provision of $1,221 was recorded on loss before income taxes of $5,589 for the three months ended March 31, 2026, and we recorded an income tax provision of $2,733 on income before income taxes of $4,596 for the three months ended March 31, 2025. 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. Additionally, the effective rates were impacted unfavorably by state taxes and a valuation allowance in the U.S. which results in no benefit for losses generated domestically. The operating results of Arcadia Products that are attributable to the redeemable noncontrolling interest holder are not taxed at DMC, which resulted in a partially offsetting favorable impact to the effective tax rates.
Net loss attributable to DMC Global Inc. for the three months ended March 31, 2026 was $6,065, compared with net income attributable to DMC Global Inc. of $677 for the same period in 2025, primarily due to the factors discussed above.
Adjusted EBITDA decreased for the three months ended March 31, 2026, compared with the same period in 2025, due to the factors discussed above. See "Use of Non-GAAP Financial Measures" above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net (loss) income | $ | (6,810) | $ | 1,863 | |||||||
| Interest expense, net | 1,461 | 1,699 | |||||||||
| Income tax provision | 1,221 | 2,733 | |||||||||
| Depreciation | 3,715 | 3,660 | |||||||||
| Amortization of purchased intangible assets | 4,356 | 4,763 | |||||||||
| EBITDA | 3,943 | 14,718 | |||||||||
| Stock-based compensation | 902 | 1,563 | |||||||||
| Strategic review and related expenses | - | 1,298 | |||||||||
| Restructuring expenses | 566 | 325 | |||||||||
| Other expense, net | 45 | 218 | |||||||||
| Adjusted EBITDA | 5,456 | 18,122 | |||||||||
| Less: adjusted EBITDA attributable to redeemable noncontrolling interest | (1,561) | (3,731) | |||||||||
| Adjusted EBITDA attributable to DMC Global Inc. | $ | 3,895 | $ | 14,391 | |||||||
Adjusted Net (Loss) Income and Adjusted Diluted Earnings Per Share decreased for the three months ended March 31, 2026, compared with the same period in 2025, due to the factors discussed above. See "Use of Non-GAAP Financial Measures" above for the explanation of the use of non-GAAP measures. The following is a reconciliation of the most directly comparable GAAP measures to Adjusted Net (Loss) Income and Adjusted Diluted Earnings Per Share.
| Three months ended March 31, 2026 | |||||||||||
| Amount | Per Share (1) | ||||||||||
Net loss attributable to DMC Global Inc. (2) | $ | (6,065) | $ | (0.30) | |||||||
| Restructuring expenses, net of tax | 368 | 0.02 | |||||||||
| As adjusted | $ | (5,697) | $ | (0.28) | |||||||
(1) Calculated using diluted weighted average shares outstanding of 20,066,158.
(2) Net loss attributable to DMC Global Inc. prior to the adjustment of redeemable noncontrolling interest.
| Three months ended March 31, 2025 | |||||||||||
| Amount | Per Share (1) | ||||||||||
Net income attributable to DMC Global Inc. (2) | $ | 677 | $ | 0.03 | |||||||
| Strategic review and related expenses, net of tax | 1,298 | 0.07 | |||||||||
| Restructuring expenses, net of tax | 195 | 0.01 | |||||||||
| As adjusted | $ | 2,170 | $ | 0.11 | |||||||
(1) Calculated using diluted weighted average shares outstanding of 19,816,281.
(2) Net income attributable to DMC Global Inc. prior to the adjustment of redeemable noncontrolling interest.
Business Segment Financial Information
We primarily evaluate performance and allocate resources based on segment revenues, operating income (loss) and Adjusted EBITDA as well as projected future performance. Segment operating income (loss) is defined as revenues less expenses identifiable to the segment. DMC consolidated operating income (loss) 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 (loss) 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.
Arcadia Products
Three months ended March 31, 2026 compared with three months ended March 31, 2025
| Three months ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ change | % change | ||||||||||||||||||||
| Net sales | $ | 56,706 | $ | 65,580 | $ | (8,874) | (14 | %) | |||||||||||||||
| Gross profit | 13,665 | 20,361 | (6,696) | (33 | %) | ||||||||||||||||||
| Gross profit percentage | 24.1 | % | 31.0 | % | |||||||||||||||||||
| COSTS AND EXPENSES: | |||||||||||||||||||||||
| General and administrative expenses | 6,431 | 7,459 | (1,028) | (14 | %) | ||||||||||||||||||
| Selling and distribution expenses | 4,385 | 4,818 | (433) | (9 | %) | ||||||||||||||||||
| Amortization of purchased intangible assets | 4,356 | 4,763 | (407) | (9 | %) | ||||||||||||||||||
| Restructuring expenses | 495 | 325 | 170 | 52 | % | ||||||||||||||||||
| Operating (loss) income | (2,002) | 2,996 | (4,998) | 167 | % | ||||||||||||||||||
| Adjusted EBITDA | 3,902 | 9,327 | (5,425) | (58 | %) | ||||||||||||||||||
| Less: adjusted EBITDA attributable to redeemable noncontrolling interest | (1,561) | (3,731) | (2,170) | (58 | %) | ||||||||||||||||||
| Adjusted EBITDA attributable to DMC Global Inc. | $ | 2,341 | $ | 5,596 | $ | (3,255) | (58 | %) | |||||||||||||||
Net sales decreased $8,874 for the three months ended March 31, 2026, compared with the same period in 2025, primarily due to lower sales volumes in longer-cycle commercial and high-end residential markets.
Gross profit percentage decreased to 24.1% for the three months ended March 31, 2026, compared with the same period in 2025, primarily due to lower absorption of fixed manufacturing overhead costs as a result of the decrease in net sales described above.
General and administrative expenses decreased $1,028 for the three months ended March 31, 2026, compared with the same period in 2025, primarily due to lower compensation costs of $1,015 as a result of a reduction in headcount and lower incentive compensation.
Selling and distribution expenses decreased $433 for the three months ended March 31, 2026, compared with the same period in 2025, primarily driven by lower incentive compensation costs of $300 and a reduction in bad debt expense of $154.
Amortization of purchased intangible assets decreased $407 for the three months ended March 31, 2026, compared with the same period in 2025, as the customer relationship purchased intangible asset is amortized using an accelerated amortization method.
Restructuring expenses of $495 and $325 for the three months ended March 31, 2026, and 2025, respectively, related to employee severance associated with headcount reductions.
Operating loss was $2,002 for the three months ended March 31, 2026, compared to operating income of $2,996 in the same period in 2025, primarily due to lower net sales and corresponding gross profit.
Adjusted EBITDA decreased for the three months ended March 31, 2026, compared with the same period in 2025, due to the factors discussed above. See "Use of Non-GAAP Financial Measures" above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating (loss) income | $ | (2,002) | $ | 2,996 | |||||||
| Adjustments: | |||||||||||
| Depreciation | 1,029 | 1,006 | |||||||||
| Amortization of purchased intangible assets | 4,356 | 4,763 | |||||||||
| Stock-based compensation | 24 | 237 | |||||||||
| Restructuring expenses | 495 | 325 | |||||||||
| Adjusted EBITDA | 3,902 | 9,327 | |||||||||
| Less: adjusted EBITDA attributable to redeemable noncontrolling interest | (1,561) | (3,731) | |||||||||
| Adjusted EBITDA attributable to DMC Global Inc. | $ | 2,341 | $ | 5,596 | |||||||
DynaEnergetics
Three months ended March 31, 2026 compared with three months ended March 31, 2025
| Three months ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ change | % change | ||||||||||||||||||||
| Net sales | $ | 59,547 | $ | 65,551 | $ | (6,004) | (9 | %) | |||||||||||||||
| Gross profit | 7,505 | 12,811 | (5,306) | (41 | %) | ||||||||||||||||||
| Gross profit percentage | 12.6 | % | 19.5 | % | |||||||||||||||||||
| COSTS AND EXPENSES: | |||||||||||||||||||||||
| General and administrative expenses | 2,640 | 2,747 | (107) | (4 | %) | ||||||||||||||||||
| Selling and distribution expenses | 3,882 | 4,476 | (594) | (13 | %) | ||||||||||||||||||
| Restructuring expenses | 71 | - | 71 | 100 | % | ||||||||||||||||||
| Operating income | 912 | 5,588 | (4,676) | (84 | %) | ||||||||||||||||||
| Adjusted EBITDA | $ | 2,746 | $ | 7,379 | $ | (4,633) | (63 | %) | |||||||||||||||
Net sales decreased $6,004 for the three months ended March 31, 2026, compared with the same period in 2025, primarily due to lower sales volumes and a decrease in pricing due to a highly competitive core North American market, which collectively reduced net sales by $6,908. This decrease was partially offset by an increase in international sales of $904 primarily due to project timing.
Gross profit percentage decreased to 12.6% for the three months ended March 31, 2026, compared with the same period in 2025, primarily due to tariff impacts which resulted in higher input costs as well as lower absorption of fixed manufacturing overhead costs driven by the decrease in net sales in the North American market.
General and administrative expenses were lower by $107 for the three months ended March 31, 2026, compared with the same period in 2025, primarily due to a decrease in lease expense.
Selling and distribution expenses were lower by $594 for the three months ended March 31, 2026, compared with the same period in 2025, primarily due to a reduction in bad debt expense of $491.
Restructuring expenses of $71 for the three months ended March 31, 2026 related to employee severance associated with headcount reductions.
Operating income of $912 for the three months ended March 31, 2026, decreased compared to operating income of $5,588 in the same period in 2025, primarily due to lower net sales and corresponding gross profit.
Adjusted EBITDA decreased for the three months ended March 31, 2026, compared with the same period in 2025, due to the factors discussed above. See "Use of Non-GAAP Financial Measures" above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating income | $ | 912 | $ | 5,588 | |||||||
| Adjustments: | |||||||||||
| Depreciation | 1,763 | 1,791 | |||||||||
| Restructuring expenses | 71 | - | |||||||||
| Adjusted EBITDA | $ | 2,746 | $ | 7,379 | |||||||
NobelClad
Three months ended March 31, 2026 compared with three months ended March 31, 2025
| Three months ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ change | % change | ||||||||||||||||||||
| Net sales | $ | 19,342 | $ | 28,159 | $ | (8,817) | (31 | %) | |||||||||||||||
| Gross profit | 4,377 | 8,097 | (3,720) | (46 | %) | ||||||||||||||||||
| Gross profit percentage | 22.6 | % | 28.8 | % | |||||||||||||||||||
| COSTS AND EXPENSES: | |||||||||||||||||||||||
| General and administrative expenses | 1,168 | 1,192 | (24) | (2 | %) | ||||||||||||||||||
| Selling and distribution expenses | 2,157 | 2,283 | (126) | (6 | %) | ||||||||||||||||||
| Operating income | 1,052 | 4,622 | (3,570) | (77 | %) | ||||||||||||||||||
| Adjusted EBITDA | $ | 1,893 | $ | 5,416 | $ | (3,523) | (65 | %) | |||||||||||||||
Net sales decreased $8,817 for the three months ended March 31, 2026, compared with the same period in 2025, driven by the timing of large project shipments out of backlog and lower activity levels due in part to the impact of evolving tariff policies.
Gross profit percentage decreased to 22.6% for the three months ended March 31, 2026 due to lower absorption of fixed manufacturing overhead costs as a result of the decrease in net sales described above as well as a less favorable project and regional mix.
Selling and distribution expenses were lower by $126 for the three months ended March 31, 2026, compared with the same period in 2025, primarily due to decreases in compensation costs of $58 and outside services costs of $39.
Operating income of $1,052 for the three months ended March 31, 2026, decreased compared with operating income of $4,622 in the same period in 2025, primarily due to lower net sales and corresponding gross profit.
Adjusted EBITDA decreased for the three months ended March 31, 2026, compared with the same period in 2025, due to the factors discussed above. See "Use of Non-GAAP Financial Measures" above for the explanation of the use of Adjusted EBITDA. The following is a reconciliation of the most directly comparable GAAP measure to Adjusted EBITDA.
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating income | $ | 1,052 | $ | 4,622 | |||||||
| Adjustments: | |||||||||||
| Depreciation | 841 | 794 | |||||||||
| Adjusted EBITDA | $ | 1,893 | $ | 5,416 | |||||||
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 $22,443 at March 31, 2026, compared with $18,746 at December 31, 2025. The increase was primarily due to net credit facility borrowings of $3,200 to partially fund the payment of incentive compensation earned in 2025.
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 our short-term and long-term liquidity needs, which could be affected by 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 and increased the maximum commitment amount from $200,000 to $300,000. The credit facility originally allowed for revolving loans of up to $200,000, a $50,000 term loan facility, and a $50,000 delayed draw term loan ("DDTL") facility. On February 6, 2026, the ability of the Company to access the $50,000 DDTL facility expired per the terms of the First Amendment. The $50,000 term loan facility is payable in installments of $938 per quarter through March 31, 2028. Quarterly term loan payments increase 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 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 March 31, 2026, we were in compliance with all financial covenants and other provisions of our debt agreements.
The leverage ratio is defined in the credit facility as the ratio of Consolidated Funded Indebtedness (as defined in the credit facility) on the last day of any trailing four quarter period to Consolidated EBITDA (as defined in the credit facility) for such period. The maximum leverage ratio permitted by our credit facility is 3.0 to 1.0; provided, however, that the Second Amendment (as defined below) provides for a temporary increase in the maximum leverage ratio under certain circumstances as described below. The actual leverage ratio as of March 31, 2026 was 1.76 to 1.0.
The debt service coverage ratio is defined in the credit facility as the ratio of Consolidated EBITDA less the sum of capital distributions paid in cash (other than those made with respect to preferred stock issued under the Operating Agreement), Consolidated Unfunded Capital Expenditures (as defined in the credit facility), and net cash income taxes divided by the sum of cash interest expense, any dividends on the preferred stock paid in cash, and scheduled principal payments on funded indebtedness. Under our credit facility, the minimum debt service coverage ratio permitted is 1.25 to 1.0. The actual debt service coverage ratio for the trailing twelve months ended March 31, 2026, was 2.12 to 1.0.
On June 10, 2025, the Company and certain domestic subsidiaries entered into an amendment to the credit facility (the "Second Amendment") which provided for certain changes to the credit facility, including modifications to the Company's financial covenants and applicable interest rates to assist with the possible acquisition of the remaining 40% minority interest in Arcadia Products. Key provisions of the Second Amendment include a temporary increase in the Company's maximum leverage ratio to 3.5x adjusted EBITDA over the trailing 12 months - up from 3.0x - should either the Put Option or the Call Option be exercised. This elevated leverage limit will apply for the first two quarters following payment of the purchase price of the Put Option or the Call Option, followed by a reduction to 3.25x in the third quarter, and a return to 3.0x thereafter.
As of March 31, 2026, borrowings of $45,000 on the term loan under our credit facility were outstanding, and $10,200 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. As of March 31, 2026, we had no outstanding borrowings, and bank guarantees of €2,876 were secured.
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 also 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.
The purchase price for any interests sold pursuant to the Call Option or Put Option continues to be based upon a predefined calculation as included within the Operating Agreement. In connection with an exercise of the Call Option, the Operating Agreement would require payment of the purchase price in cash. However, in connection with the exercise of the Put Option, the Operating Agreement permits the Company the option to pay the purchase price in either cash, or 20% in cash and 80% in shares of a newly designated series of preferred stock (the "Put Preferred") that would be authorized at that time. The terms of the Put Preferred, including the rights, powers and preferences thereof, are set forth in the Operating Agreement. The number of shares to be issued in connection with the Put Option (if the Company utilizes that payment mechanism) would be initially determined and valued at the volume weighted average trading price of the Company's common stock over the 60 days preceding the delivery of the Put Option notice. The Put Preferred would be entitled to dividends at a rate of 3% per annum and would be convertible into one share of the Company's common stock, subject to Nasdaq rules which generally prohibit private placements of equity securities with voting rights of 20% or more of a company's pre-issuance voting power, including through convertible securities, without stockholder approval; the holder of the Put Preferred would not be allowed to participate in any such stockholder vote. The Company may redeem the Put Preferred at any time; however, beginning on June 23, 2027, the Company must begin proportionate annual redemptions of the Put Preferred and, in any event, the Put Preferred must be redeemed by the third anniversary of its issuance.
As of March 31, 2026, the value of the redeemable noncontrolling interest under the Operating Agreement was $187,080. Upon settlement, consideration paid will be net of the $24,902 promissory note outstanding due from the redeemable noncontrolling interest holder and is subject to potential working capital adjustments. Refer to Note 2 in Part I, Item 1 for further information related to the valuation of the redeemable noncontrolling interest and promissory note outstanding. We are currently evaluating options for financing the purchase of the noncontrolling interest, which may include cash generated from operations, borrowings under the credit facility, and/or proceeds from debt or equity issuances. Debt financing could materially impact the Company's leverage while equity financing could materially dilute existing stockholders.
Other contractual obligations and commitments
Our debt balance, net of deferred debt issuance costs, increased to $53,954 at March 31, 2026, from $50,644 at December 31, 2025, for the reasons discussed above. Our other contractual obligations and commitments have not materially changed since December 31, 2025.
Cash flows from operating activities
Net cash used in operating activities was $2,379 for the three months ended March 31, 2026, compared to net cash provided by operating activities of $4,488 in the same period last year. The decrease in the current year was largely driven by higher working capital balances, which included increased inventory balances at all three business segments given an expectation of near-term activity level increases, as well as higher aluminum costs at Arcadia Products.
Cash flows from investing activities
Net cash used in investing activities for the three months ended March 31, 2026, and 2025, of $1,263 and $3,332, respectively, was attributable to the acquisition, net of proceeds received, of property, plant and equipment.
Cash flows from financing activities
Net cash provided by financing activities for the three months ended March 31, 2026 of $2,833 included net credit facility borrowings of $3,200, which were partially offset by treasury stock purchases of $367.
Net cash used in financing activities for the three months ended March 31, 2025 of $135 included distributions to the redeemable noncontrolling interest holder of $1,151 and treasury stock purchases of $484, which were partially offset by net credit facility borrowings of $1,500.
Payment of Dividends
Any determination to pay cash dividends is at the discretion of the Board of Directors. Future dividends may be affected by, among other items, our views on potential future capital requirements, future business prospects, debt covenant compliance considerations, changes in income tax laws, and any other factors that our Board of Directors deems relevant.
Critical Accounting Estimates
Preparation of financial statements in conformity with generally accepted accounting principles in the United States requires that management make estimates, judgments and assumptions that affect the amounts reported for revenues, expenses, assets, liabilities, and other related disclosures. Our critical accounting estimates have not changed from those reported in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.