DMC Global Inc. (NASDAQ:BOOM) announced financial results for today’s second quarter ended June 30, 2022. Second-quarter sales were $165.8 million, up 20% sequentially and 153% compared to last year’s period. Arcadia, a leading provider of architectural building goods, contributed to this year’s first and second quarter results. On December 23, 2021, DMC bought a 60% stake in Arcadia.
Excluding Arcadia sales of $76.5 million, second quarter revenues were $89.4 million, up 26% sequentially and 37% compared to the second quarter of 2021. The prices reflect increased demand for well-perforating products from DynaEnergetics, DMC’s energy products division. The second quarter gross margin was 31%, compared to 27% in the first quarter and 26% in the second quarter of last year. High selling prices at Arcadia and higher sales volume on some fixed manufacturing overhead expenses, together with higher average selling prices at DynaEnergetics, account for the improvements.
According to PressReach, the selling, general, and administrative (SG&A) expense was $29.4 million. SG&A was $18.0 million, excluding $11.4 million in Arcadia expenditures, compared to $17.9 million in the first-quarter and $14.0 million in the year-ago second-quarter. The increase over last year’s second quarter is primarily due to higher incentive compensation, the expiration of the Employee Retention Credit under the CARES Act, and costs associated with implementing a new company resource planning system at NobelClad, DMC’s composite metals business.
The second-quarter operating income was $9.9 million, including $12.8 million in non-cash amortization expense, which is principally related to Arcadia’s bought intangible assets. This compares to an operating loss of $3.9 million in the first quarter and an operating profit of $2.7 million in the previous year’s second quarter.
DMC’s net income for the second quarter was $5.6 million. The computation for net earnings per diluted share must account for the change in redemption value of the 40% redeemable noncontrolling interest in Arcadia due to the acquisition of the 60% controlling interest in Arcadia.
The redemption value is estimated each quarter using the Arcadia Operating Agreement’s formula for calculating a Put and Call Option. The adjustment was $1.5 million in the second quarter. When net income attributable to DMC stockholders is deducted, the resulting net income is $4.0 million, or $0.20 per diluted share, based on 19.4 million diluted shares outstanding. On 17.6 million diluted shares outstanding, net income in the prior-year second quarter was $1.7 million, or $0.10 per diluted share.
Second-quarter adjusted net income attributable to DMC* was $5.6 million, or $0.29 per diluted share, including $7.6 million in non-cash amortization expense of Arcadia’s bought intangible assets. DMCsecond *’s quarter adjusted EBITDA was $22.4 million, up 113% from $10.5 million in the first quarter of 2022 and 198% from $7.5 million in the second quarter of 2021.
The cash flow created by operations was $7.1 million, compared to $8.2 million in the prior-year second quarter. On December 31, 2021, cash and cash equivalents were $11.8 million vs. $30.8 million. On June 30, 2022, DMC’s debt-to-adjusted EBITDA leverage ratio was 2.48. By the end of the quarter, the Company’s debt-to-adjusted EBITDA leverage ratio requirement was 3.25.
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