DMC Global (BOOM) Q4 2025 Earnings Call Transcript

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DATE

Monday, Feb. 23, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — James O'Leary
• Chief Financial Officer — Eric V. Walter

TAKEAWAYS

• Consolidated Sales -- $143,500,000, reflecting a 6% decline year over year driven by weakened demand in core oilfield and construction markets.
• Net Debt -- $18,700,000 at year-end, a 67% reduction from 2024 and the lowest level since the Arcadia acquisition in 2021.
• Arcadia Sales -- $57,000,000, representing a 5% decrease year over year and 8% decrease sequentially, attributed to high interest rates, elevated input and labor costs, and project deferrals in the Western U.S. region.
• Arcadia Adjusted EBITDA -- $2,400,000, slightly up from $2,200,000 in the prior year's quarter, but down from $5,100,000 in the third quarter; margin declined from 13.8% to 7.1% sequentially.
• DynaEnergetics Sales -- $68,900,000, an 8% increase year over year and flat sequentially, as unit volumes held steady but pricing remained pressured.
• DynaEnergetics Adjusted EBITDA -- Negative $2,700,000, including approximately $7,000,000 in discrete accounts receivable inventory write-offs due to customer challenges in the North American oil and gas market; margin fell from 8% to negative 4% year over year.
• Tariff Impact -- DynaEnergetics paid over $3,000,000 in tariffs during Q4 and over $10,000,000 since February, contributing materially to margin pressure.
• NobelClad Sales -- $17,700,000, down 38% year over year and 15% sequentially, with order delays and uncertainty attributed to evolving tariff policies.
• NobelClad Adjusted EBITDA -- $2,100,000, a 64% decline versus the prior year with margin of 12% vs. 20.6% previously, reflecting lower absorption of overhead and reduced sales.
• NobelClad Backlog -- $62,600,000, up 28% year over year and 10% sequentially, backed by a record $25,000,000 international petrochemical order.
• Cash and Liquidity -- Cash and cash equivalents ended at approximately $32,000,000, while total debt was reduced to $52,000,000, a 28% decrease compared to prior year.
• SG&A Expense -- $29,600,000, accounting for 20.6% of sales, up from $25,100,000, or 16.5%, in the previous year, mainly due to DynaEnergetics account write-offs.
• Adjusted Net Loss -- $9,900,000, with adjusted loss per share of $0.50.
• Q1 2026 Guidance -- Sales expected between $132,000,000 and $138,000,000; adjusted EBITDA projected between $2,000,000 and $4,000,000, reflecting ongoing macro pressures and severe weather disruptions.
• Aluminum Price Increases -- Arcadia's average aluminum price rose 55% year over year and 12% sequentially, pressuring margins as costs could not be fully passed to customers.
• Strategic Initiatives -- DynaEnergetics is developing opportunities in enhanced geothermal and pursuing international shale markets; NobelClad is monitoring the U.S. Naval Readiness Program for future volume opportunities.

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RISKS

• CEO O'Leary said, "we are equally displeased with our overall financial performance," citing persistent market headwinds and tariff-driven cost pressures.
• Input costs, especially aluminum for Arcadia, "continue to increase" and cannot be fully passed on to customers, contributing to declining gross margins.
• Fourth quarter consolidated adjusted EBITDA was negative $1,600,000, reflecting both discrete write-offs and broad weakness across end markets.
• NobelClad sales were heavily impacted by "Reduced bookings during 2025," and tariff-related uncertainty remains a headwind.

SUMMARY

DMC Global (NASDAQ:BOOM) delivered a significant year-over-year contraction in sales and profitability, as persistent macroeconomic challenges, including tariffs and high interest rates, suppressed activity across all three operating segments. Net debt reduction and strong cash flow were the primary financial positives, while segment-level metrics revealed notable declines in EBITDA margins and revenue, especially within NobelClad and Arcadia. Management emphasized readiness to pursue additional cost reduction measures and highlighted longer-term growth opportunities in geothermal, international shale, and naval markets, though recovery timing remains highly uncertain amid ongoing cyclical and structural pressures.

• CEO O'Leary stated, "Currently, each of our businesses are assessing the expected impacts of the Supreme Court tariff decision while working on additional tariff mitigation strategies."
• "We are looking at all the right things. We appreciate your patience. And we are trying like heck to do a better job for you," O'Leary said, underlining both management's acknowledgment of current underperformance and its intent to improve operationally.
• Guidance for the first quarter underscores caution, with explicit management commentary that negative factors "continue into 2026" and that any upturn will likely occur in the latter half of the year or later.
• Management framed ongoing end-market weakness as cyclical and not unique to DMC Global, while indicating that a step-function recovery in monthly sales could drive substantial margin improvement due to operating leverage.

INDUSTRY GLOSSARY

• Enhanced Geothermal Systems (EGS): An advanced geothermal technology using techniques and products similar to hydraulic fracturing, targeted for future energy applications.
• Order Backlog: The value of contracted orders not yet fulfilled, often cited as a forward indicator of segment revenue potential.
• Tariff Mitigation Strategies: Corporate initiatives to counteract the negative financial impact of trade tariffs, such as supply chain changes or seeking refunds where available.
• Frac Crews: Operational teams responsible for conducting hydraulic fracturing in oil and gas fields, serving as a proxy for drilling and completion activity levels.
• U.S. Naval Readiness Program: A government initiative aimed at increasing U.S. Navy fleet capabilities, which can drive demand for advanced industrial materials from suppliers like NobelClad.

Full Conference Call Transcript

James O'Leary: Thanks, Geoff, and thanks to everyone for joining us today. Macroeconomic challenges continue to be a major issue at DMC Global Inc. Notably tariffs both pre and post Friday's turbulence and the general trend in level of interest rates which have largely been unforecastable. Much to the chagrin of everyone in the building industry. These and other economic challenges weighed heavily on DMC Global Inc.'s core oilfield and construction markets throughout 2025 and are persisting into early 2026. Despite these difficulties, we remain focused on our main objective, which we have consistently discussed with you each quarter: strengthening our financial position, and on that front, we continue to make significant progress.

We reduced our net debt by another $11,400,000 during the fourth quarter. At year-end, our net debt of $18,700,000 was down 67% from 2024 and at the lowest level since the Arcadia acquisition was consummated in 2021. However, while we made progress on the balance sheet front, we received little or no cooperation from our end markets, which continued to worsen during the period. Tariffs were a significant headwind for us in 2025 and we are currently reviewing Friday's Supreme Court ruling and the White House's subsequent response to understand what it all means for our businesses. At this point, it appears that the Section 232 tariffs on steel and aluminum will remain in place.

We are evaluating what refunds we may be entitled to which the Supreme Court was silent upon in its ruling. With respect to the fourth quarter, consolidated sales declined 6% year over year to $143,500,000. Fourth quarter adjusted EBITDA attributable to DMC Global Inc. was negative $1,600,000, which included approximately $7,000,000 in discrete accounts receivable inventory write-offs at DynaEnergetics, our core oilfield products business, as certain of its customers have been negatively impacted by very challenging conditions in the North American unconventional oil and gas market. Arcadia, our Building Products business, reported fourth quarter sales of $57,000,000, down 5% year over year and down 8% sequentially.

Adjusted EBITDA attributable to DMC Global Inc. was $2,400,000, up from $2,200,000 in the prior year fourth quarter but down from $5,100,000 in the third quarter. In addition to year-end seasonality, Arcadia's end markets have been impacted by persistently high interest rates and elevated raw material and labor costs. Which have collectively slowed architectural activity and led to the deferral of several large projects. The architectural billing index for Arcadia's core Western U.S. region has contracted for twelve months and these conditions have led to a highly competitive bidding environment that has pressured pricing.

Most notably, we have experienced a continued increase in the average price of aluminum, Arcadia's primary input, which was up 55% year over year and 12% sequentially. In a soft market characterized by project deferrals and delays, this has led to a very price competitive environment. DynaEnergetics reported fourth quarter sales of $68,900,000, an 8% improvement versus the prior year quarter and flat sequentially. Adjusted EBITDA, including the approximately $7,000,000 in write-offs, was negative $2,700,000. As mentioned, DynaEnergetics and its customers have been negatively impacted by challenging conditions in the North American onshore market, which has seen volatile and generally declining oil prices, fewer operating frac crews, and highly competitive pricing.

During the fourth quarter, Dyna paid more than $3,000,000 in tariffs and related duties and has paid more than $10,000,000 since the tariffs were imposed in February. NobelClad, our composite metals business, reported fourth quarter sales of $17,700,000, down 38% from the 2024 fourth quarter and down 15% sequentially. Reduced bookings during 2025 led to the declines, as evolving tariff policies contributed to significant uncertainty in NobelClad's U.S. and international markets. Adjusted EBITDA was $2,100,000, down 64% versus the comparable prior period and up 1% sequentially. The year-over-year decline principally reflects lower absorption of fixed manufacturing overhead and significantly reduced sales.

NobelClad's order backlog at the end of the quarter was $62,600,000, up 28% year over year and up 10% sequentially. The increase reflects a record $25,000,000 order during 2025 for an international petrochemical project. I will now turn the call over to Eric V. Walter for a closer look at the fourth quarter financials and our guidance for the first quarter.

Eric V. Walter: Thank you, James. As previously mentioned, our consolidated adjusted EBITDA attributable to DMC Global Inc. of negative $1,600,000 included approximately $7,000,000 in discrete charges at DynaEnergetics. And the majority of these charges were related to accounts receivable reserves. As James noted, the reduced activity and pricing pressure in the North American unconventional oil and gas sector has created significant challenges for some of DynaEnergetics' oilfield services customers. Inclusive of the Arcadia non-controlling interest, adjusted EBITDA was approximately $61,000 versus $11,900,000 in last year's fourth quarter, and $12,000,000 in the third quarter. Arcadia's fourth quarter adjusted EBITDA margin before non-controlling interest allocation was 7.1%. Up from 6.2% in the year-ago fourth quarter but down from 13.8% in the third quarter.

Dyna's adjusted EBITDA margin was a negative 4% compared with 8% in the prior year quarter, and 7.1% in the third quarter. NobelClad's fourth quarter adjusted EBITDA margin was approximately 12% versus 20.6% in the prior year fourth quarter and approximately 10% in the third quarter. The year-over-year decline includes the tariff-related slowdown in bookings earlier in the year. Fourth quarter SG&A expense was $29,600,000, or 20.6% of sales, versus $25,100,000, or 16.5% of sales, in the prior year fourth quarter. The year-over-year increase principally relates to discrete accounts receivable write-offs at Dyna. Fourth quarter adjusted net loss attributable to DMC Global Inc. was $9,900,000, while adjusted loss per share attributable to DMC Global Inc. was $0.50.

With respect to liquidity, we ended the fourth quarter with cash and cash equivalents of approximately $32,000,000. Strong fourth quarter cash flow enabled us to reduce total debt to $52,000,000, a 28% decrease from year-end 2024. As James mentioned, net debt was $18,700,000, down 67% from the end of 2024. And now the guidance for the first quarter. We expect sales will be in a range of $132,000,000 to $138,000,000, while adjusted EBITDA attributable to DMC Global Inc. is expected in a range of $2,000,000 to $4,000,000. Our results will reflect the impact of severe weather across much of the United States that affected our businesses during the first half of the quarter.

We expect many of the factors that negatively impacted our fourth quarter and most of 2025 to continue into 2026. We believe Arcadia products will continue to face the broader factors that have weighed on the construction sector, including persistently high interest rates, volatile input prices, and acute price competition. Project deferrals and generally lower activity in Arcadia's core West Coast markets are expected to continue through at least the beginning of the year. DynaEnergetics' core North American unconventional market remains challenged by margin pressure from both fewer operating frac crews, which has led to a difficult pricing environment, and higher input prices that have been inflated principally by tariffs.

While NobelClad expects improved performance for the full fiscal year, demand erosion following the imposition of tariffs in early 2025 and the resulting impact on major orders will result in a slow start to the year. As a reminder, our guidance is heavily impacted by macroeconomic factors including evolving tariff policies, particularly in our core energy and construction markets. Our guidance is subject to change either upward or downward as these highly volatile inputs evolve in 2026. I will now turn the call back to James.

James O'Leary: Thank you, Eric. So to sum up, while we are pleased with our progress on the balance sheet, we are equally displeased with our overall financial performance. However, we recognize and we expect that many of our constituents recognize that we operate principally in two markets, energy and construction, that historically have been highly volatile and can and have been deeply cyclical. While we navigate what currently are tough conditions, what will hopefully be close to trough conditions in both markets, we are keenly aware of the need to find future avenues of growth. We continue to batten down the hatches to maximize operating leverage when business conditions eventually improve.

Our businesses are actively pursuing potential growth opportunities that align with their core capabilities. For example, DynaEnergetics is exploring opportunities in the enhanced geothermal sector, while we are looking to expand our presence in certain emerging international shale markets. Meanwhile, NobelClad, which already supplies mission-critical components to the U.S. Navy, is closely monitoring opportunities associated with the recently announced acceleration of the U.S. Naval Readiness Program, and expects to be a beneficiary of any increased volume, particularly for future submarine programs. Currently, each of our businesses are assessing the expected impacts of the Supreme Court tariff decision while working on additional tariff mitigation strategies.

They are ready to take further cost reduction activity in addition if business conditions do not improve as we move further into 2026. Finally, I would like to thank DMC Global Inc.'s associates around the world for their contributions during a very challenging year. Their contribution and commitment is greatly appreciated. And with that, we will now open for questions. Operator.

Operator: Ladies and gentlemen, our first question comes from the line of Gerard J. Sweeney with ROTH Capital Partners. Please proceed. Good afternoon, James, Eric, and Geoff. Thanks for taking my call. Joe?

Gerard J. Sweeney: Wanted to start with DynaEnergetics. Obviously, keenly aware of growth opportunities. And I was wondering if you could touch upon the geothermal opportunity and international shale opportunity.

Eric V. Walter: Gerard, are you there?

Gerard J. Sweeney: Hello? Hear me? Can you hear me? Me? I can hear you now. Yes. All right. Did you catch anything or was I just not there?

Eric V. Walter: You were not there. Can you start over?

Gerard J. Sweeney: Yep. I can. I apologize. So, well, James, Eric, Geoff, thanks for taking my call. But James, you spoke at the end of your prepared remarks about being keenly aware of growth. And I want to see if you could just discuss the opportunities on the geothermal side and the international shale side. And on the international shale side, you know, how you go to market and what is the opportunity there? Sure. Sure. And

James O'Leary: we will definitely talk about the growth. But again, we are keenly aware these are cyclical markets. Two of them are down. So while we have been taking costs out all along, supply chain, variable costs, and if there were further attrition, everything is on the table, headcount across the board, spending across the board. So the goal for at least until we start to see the markets improve is make sure we are maximizing operating leverage on the other side. I was at the Builders Show last week. We are not experiencing anything different than anybody else. Onshore oil and gas, certainly the same.

And we are particularly exposed to onshore oil and gas where the price pressure and the volume, you know, volume has been okay, but the price pressure, particularly the tariff impact on margins has been challenging. So job one is make sure we have the maximum operating leverage possible on the other side of this. But to your question, our product, particularly for EGS, enhanced geothermal, it is exactly the product we use for fracking.

If you looked at the one big beautiful bill from a couple of months ago, the renewable technology that was most favored and came out not just intact, better than it went in before the bill was put up, enhanced geothermal is the preferred and really out with a halo on it. There are a number of industry players that we are working with right now. They are through. And if you were to look at the CVs of most of the people in leadership positions at EGS companies, they are all former people who were in leadership roles at fracking companies, oil and gas companies. It is very much a similar technology. It is the same sales channels.

And it is something that Dyna is extremely good at. And I think we are uniquely well positioned if, in our opinion, it is when geothermal takes off. It will be principally in North America, but remember, we are one of the few companies with an international footprint as well. So we are exploring that globally, but first and foremost in North America. Excuse me.

The second, and particularly noteworthy again, because it is in the papers every day, naval readiness, particularly around issues, and it is not just in Asia, it is across the world where the state of naval readiness around submarines, battleships, almost anything that has been underinvested in for now decades is something NobelClad is uniquely positioned in. We are sole source on a number of things that go into most nuclear subs. Right now, and openly discussed and I believe in the budget for next year is a doubling of sub volume. That might be going from one to two or 1.5 to two plus. But doubling our volume has a pretty pronounced impact on NobelClad.

We do not want to quote the numbers for an individual, for a unique vertical right now. But doubling of sub volume for NobelClad principally in the U.S., that does not include what else might go on elsewhere in the world, which we are looking into actively. Any additional, particularly on pressure vessels and battleships, and some of the additional things that are being talked about by the Trump administration, would have a pronounced impact. It will not be 2026 unless it is very late in 2026. But in 2027 and beyond, the revving up of the naval readiness program would have a significant impact on us.

The third thing, which we talked about going back to Dyna, international shale, principally in South America, Vaca Muerta, Argentina is the one that you see most in the press. But in Saudi Arabia and other parts of the world, again, we think we are uniquely positioned because of our global footprint and our technology. But that is something we are also revving up the efforts on.

Gerard J. Sweeney: Got it. I always like to start with the good things, the growth side, but a little bit different tack, Arcadia. And I want to make, I believe I read this right when I was rereading the transcript. But I think you anticipated actually, I think, better margins with the 3Q call in that segment. I am just curious if that just saw increased pressure in the second half. And as you also said, there is nothing off the table. Anything there that you need to sort of fix or even invest into, you know, help on the margin front?

James O'Leary: No. I do not think there is anything obvious that needs to be fixed. We are looking at every discrete physical operation. We are looking at and we have continued to look at every product line, whether it is contributing or not. But Gerard, the entire industry just took a leg from the second quarter going into the first quarter of this year. It worsened more than we expected, more than our management team there anticipated. I think you have heard us talk about the run rate going from $20,000,000 in sales per month up to $25,000,000 as a pronounced impact on operating leverage.

But we dipped below $20,000,000 going into the third, excuse me, going into the fourth quarter, and into the first. And if it were something unique that we were doing poorly or something unique about our footprint, and do not get me wrong, we are concerned. We are looking at everything. But it is not concern that we are doing anything particularly wrong. I do not know if you have visibility into anybody, but there is one public comp, and I do not like to speak about tiers in the price, but there is one public comp. But there are two private comps, both of which are private equity-owned.

We get to see, and I believe you probably could figure out how their performance has been. Of the three or four data points we have, two private but pretty prominent debt issuers, one public, there is absolutely nothing unique about our performance, which is unfortunate. And I was at the Builders Show earlier this week, and, you know, it is the gloomiest I remember since 2011. Now I am hoping the saying, it is always darkest before the dawn, holds true. Yep. I thought interest rates would kind of break in our way, in our favor, a bit sooner. You know, I think we are going to have to stay tuned there.

You know, the cross currents of inflation, is it caused by tariffs or not? Just general stickiness of longer-term interest rates, relative to the likelihood that at some point this year there will be cuts. Hopefully that precipitates the darkest before the dawn comment. But right now it is about the gloomiest I have seen since 2010 and 2011. But it is nothing unique to Arcadia. The only thing that may impact us a bit more than some of the peers I just mentioned, we are disappointed. I know the people who live there and are directly impacted are very disappointed. But the rebuilding in Los Angeles is taking a lot longer than I think we anticipated a year ago.

It has taken a lot longer than people I talked to at the Builders Show last week have expected. And that is one where it has to be impacting us a bit more pronounced because we are the leader in that market. If you were, if you have been through Vegas for any trade shows or any of your other coverage universe, I mean, Vegas is not a lot of laughs these days. We are still holding up very well because of our market share.

But whereas in an up market, our footprint is really beneficial because we continue to be in some of the better MSAs in the country, right now at least a number of them, and I am thinking particularly California and Vegas, are a bit gloomier than they normally are in the building market. And again, nothing that is specific to Arcadia, and that is borne out by what we see and what we can tell from our comps. But it does not make us feel any better about it and does not make us any more alert about looking at everything. Like I said, everything is on the table.

Gerard J. Sweeney: Got you. And I saw the read-throughs on some of the competition, so I appreciate that. And you also preempted my question on the Palisades rebuild. My sense is there is a lot of, there is building frustration that is taking longer than people, and some of it is being held up by some red tape.

James O'Leary: That is it for me. Just, it is incredible, and it is disappointing.

Operator: The next question comes from the line of Stephen Gengaro with Stifel. Please proceed. Thanks. Good afternoon, everybody. Hey, Stephen. Hey, Stephen. A couple for me. The first on the DynaEnergetics side, it seemed like the fourth quarter revenue was very strong. And I know there was a kind of lower seasonality in the frac business than normal. Did the top line surprise you, and I am curious if what you are seeing, I imagine that would help overhead absorption as to whether there is, I was trying to figure out kind of the margin

Stephen Gengaro: performance even absent the discrete items you took?

James O'Leary: I would not say surprised because we have reasonably good visibility by the time we announce guidance. On the volume side, principally unit volume, it was as we expected. There was nothing disappointing about it. In fact, given what you read in the press, it was absolutely solid. It did fall off a little bit going into the end and then going the beginning of the year. So that is why we are even a bit more cautious with the first quarter. It really came down to margins, Stephen. The margin pressure from tariffs, and we debated whether we should put in the exact numbers, but the impact on DynaEnergetics from tariffs has been so significant.

We thought it was important for you and your constituents to see the numbers. 3.25% and 10 for the year is pretty impactful for a company the size of DynaEnergetics. The unit volume, and I am making a clear distinction between unit volume and price. Pricing has been challenging on perforating guns in particular. Given it is a narrow universe, it is a subset of the broader equipment market, and I know you cover a lot of our peers, whereas some are seeing the benefits of broadening offshore exposure, some are seeing the benefits of greater penetration or greater activity in conventional, particularly in other geographies, we are pretty, our sandbox is pretty restricted. You know, is it 70/30?

You know, that is probably not a bad number. Unconventional in the U.S., principally the Permian, and elsewhere. And the price pressure there has been significant. So kind of simplifying it a bit and back to your question, unit volume was as we expected and it was fine. Price pressure was pretty significant and price coupled with, it is not just tariffs, labor costs, the friction from having to reverse gears on what tariffs are doing. And we did do a lot of good things on the supply chain side. But the friction of having to reengineer everything a couple of times a year, that has a cost impact as well. So, it is mostly margin compression.

And it is principally on the cost and a bit on the pricing side.

Stephen Gengaro: Okay. Thanks. And the follow-up to that, this is probably a little kind of higher level. But when we think of DynaEnergetics, and, like, you made the comment earlier cyclical, so, yeah, I think you mentioned something about cyclical issues. And what I am trying to understand about Dyna is how much of this is truly cyclical, how much of this is a structural problem in the U.S. perf business, given what some of the machine shops have done and given maybe a competitive landscape, which is probably better than it was a couple years ago.

But I am struggling with that part of it and trying to figure out what it is really going to take for DynaEnergetics' margins to start to expand again at some point?

James O'Leary: It is the right question. It is the one we are asking ourselves a lot as well. I could not give you 50/50 or 70/30, but on the volume side, even though unit volumes are fine, rig count has been down, frac spreads have been down, frac crews are down. If you look at some of the industry data, you know, would it be better if oil was consistent over 70? Would it be better in a less uncertain world where, you know, is Iran on stream, off stream, or are the Saudis going to increase or decrease output?

I think a little bit more consistency, and just because volumes were not bad, it does not mean they could not be a lot better if you had better visibility into the global picture. And yet again, most of the metrics that do affect us were down. It is just unit volume ended up being okay. So it is clearly not all secular. But it is also not as bad cyclically as it was around COVID or in 2015 and 2016. I wish I had a better answer in terms of the percentage and when we would see things turn around.

We have, and we typically do not talk about this level of detail, but we have made some pretty substantial changes at Dyna on the personnel front, as far as manufacturing and some inside salespeople, that we think will make a difference. We have maybe gotten a little, I do not want to say fat and happy, but we probably got a little too complacent over a long period. The last two years, particularly as volume came down, but it did not plummet. It did not spring people into action the way probably it should have. I hope that is helpful, I wish we could give you a better answer on how much is cyclical and how much is secular.

On the secular side though, again, and it is intentionally put this way in the press release, we appreciate that cyclical businesses, but we have to find other avenues of growth. And I think international shale opportunities and enhanced geothermal are the two things we have to be paying attention to until visibility improves and we can better answer the question.

Stephen Gengaro: Great. No, that is fine. Thank you. I appreciate you giving some color. And then just one final one. Like, I am not sure how granular you will get on this, but when we think about the first quarter and then maybe as 2026 progresses, any commentary on segment gives, puts and takes in the first quarter, and maybe which segments you are probably more or less optimistic about as far as seeing some expansion throughout 2026?

James O'Leary: The first quarter is going to be tough. And NobelClad does not really pick up, and largely the pickup will largely be driven by that large project we referenced, and that is into the year. It is not in the first quarter. It is really too late to say interest rates or anything in the broader economy in Los Angeles or elsewhere in the West in particular. So I think they are all going to be equally gloomy, and I think the recovery and the pickup has to be back half of the year, maybe as early as the second quarter, but I do not want to jinx those.

And again, everything along the lines of interest rates, greater clarity on tariffs, if you just take the 15% that the administration is going to use from Section 122 of the '74 Act, and you superimpose that, we should see a little bit of relief. It is only a small percentage of the three and ten that we referenced in the press release. But we should see some cost improvement. But it is almost February and I think we tried to be conservative but not unrealistic about the first quarter. And again, wish we had a better answer, but I think that the die is kind of cast for the first quarter.

Stephen Gengaro: Great. No, that is helpful. Thank you for all the details.

James O'Leary: Okay. Thank you, Stephen.

Operator: The next question comes from the line of Ken Newman with KeyBanc Capital Markets. Please proceed.

Ken Newman: Hey, good evening, guys.

James O'Leary: Hi, Ken. Hi, Ken. Eric, hey.

Ken Newman: Eric, maybe for my first question, I was hoping maybe you could help us bridge a little bit to this first quarter EBITDA guidance. Wanted to get some clarity. First, is there any other carryover write-down impacts or anything else that outside of the core operations that we should be aware of from 4Q to 1Q? And then also maybe a little bit of help on, from a gross margin perspective across those segments as we think about the sequential moves there?

Eric V. Walter: Yes. So not aware of any type of carryover write-downs that we would have from Q4 going into, to answer your first question. And I think the second one, in terms of gross margins, as we talk about earlier in the prepared remarks, the margins are pressured at both Arcadia and also at Dyna. So the input costs that are coming through for Arcadia, the aluminum costs, they continue to increase. And through just yesterday, or sorry, Friday, aluminum cost had gone up another 10% on a quarter-over-quarter basis. So what Arcadia is seeing is a very difficult, you know, it is very difficult for them to pass through all of those costs onto their customers.

And the other piece of it is that some of the projects that they bid on are starting to get delayed. And so there is an increased level of price competition that is also impacting them. So in terms of gross margin for Arcadia, I think there is nothing that is going to necessarily return or recover to historical levels in the first quarter, at least from what we see right now. And then James, in answering some of the previous questions, had talked about some of the challenges for Dyna. They also have some of the similar challenges from a tariff standpoint.

There is no reason to think that the tariff exposure is going to dramatically change from this point through the end of the quarter. And the pricing pressures that they had in 2025 are going to continue into the first quarter as well. So both of those businesses, they are getting an impact, whether it is pricing to customers, whether it is the input costs, are going to put pressure on margins. And then I guess the last thing that I would say across them as well as NobelClad is to the extent that they have less volume flowing through their plants, they obviously have pressure coming from fixed cost or operating, whichever you want to think about it.

I think, you know, for your second question, I think the pressures that we had in Q4, they are going to continue into Q1. At the gross margin level.

Ken Newman: Yep. Okay. That is very helpful. And then for my follow-up here, you know, James, you gave a lot of great color. It sounds like there is more blood that could be squeezed from the stone here from a cost-out and efficiency perspective, if the demand remains weak?

I know you talked a bit to the opportunities for when that demand recovers, but as you think about this from a higher level, how much of this story you view it as, you know, one of just hoping that the end markets improve versus something that you can actively do today to kind of drive that incremental demand and how much you have to spend in order to kind of go after those opportunities?

James O'Leary: We would not have to spend anything. I mean there is no big capital project. There is nothing that is transformative on a technology front. We talked in the past about automation in DynaEnergetics. We have talked about some CapEx projects on a one-off basis here and there on Arcadia. There is no money that has to be spent, but Ken, we did go into, and it was intentional, that discussion on the cyclical businesses. I would not say there is blood to squeeze out of the stone because we are diligent and we continue to look at certain things, just adjust with volume. Over time, temporary labor, traffic, meaning mileage, and things that are purely variable.

When those do not adjust, you know, even if you are a quarter or two late, you jump all over them, and we have been jumping all over them now. Are there things that we can be a little bit more diligent on and push on a little bit harder? Yes. But I will see the difference. It will probably be difficult for you to see the difference.

The reference in we are looking at other plans and considering other things we can do, listen, if there is a step function down, and I lived through 2007 through 2011 in the building industry, was the CEO of another industrial company during the Great Financial Crisis, you do have to be diligent about another step function down where you are laying off substantial numbers of people, you are cutting heads, certainly not indiscriminately, but you are cutting heads at a level that you would not do if you did not have to. I mean, right now, the drop down over the last four quarters, I would categorize as measured, and it has not been a slow drip.

But, again, if you look at our peers, if you look at the building industry more broadly, if you take, you know, one of the guys who preceded you's question on is it secular, is it cyclical in onshore unconventional? It has been kind of a slow drip and a steady march downward. What I am talking about is if there is another drop down and it is precipitous and a step function, you know, we will be ready. There are other things we can do. But right now, part of this is maximizing operating leverage and being ready if there is a step function up.

At some point, and I have lived through this too, the building industry takes off and we get monthly sales above $20,000,000. Going from $20,000,000 to $25,000,000, the drop-through in operating margins, the drop-through on gross margins is significant. It is noticeable not just to me, you guys will see it right away. So that is, it is kind of making sure we are in a position to match and harvest all of that. And we also intentionally in the comments said, we are hoping this is the trough, but you can never get complacent about that.

And I think we have had little bits of complacency over the last couple of years, which we have rung all the complacency out. I think people are paying attention to all the variable costs. We are looking at avenues where if there is a step function down, we are prepared to take the actions that would be necessary. But the flip side of that is if the building industry takes off, you do not want to be the person who cannot meet demand. You do not want to be the person who cannot be staffed up and in a position to maximize. I think we are right in that point of balance now.

And again, I am keeping my fingers crossed that it is a leg up at some point this year. It will not be next quarter. And if it is a step down, we will be prepared, which is, hope that is not what it comes to.

Operator: Thank you. This concludes the question and answer session. I will turn the call back over to James O'Leary for closing remarks.

James O'Leary: Operator, thank you. And for anyone listening on the call, including the fellows who asked questions, thank you. All good questions, all provided the color we want you to leave with. And again, to repeat something, cyclical end markets, we do not see anything that is specific to us that is in desperate need of help. We are trying to maximize the operating leverage on the other side. We are prepared if there is another leg down, which hopefully there will not be. Tariffs and the general level of interest rates have not been kind to us. But they have not been kind to anybody.

And not just maximizing the operating leverage, but looking for avenues of growth, which would be geothermal and international with Dyna, certainly the Naval Readiness Initiative at NobelClad, amongst getting back in the game with some of the larger projects that we think now that there is a little bit more stability on the demand front, we should avail ourselves of. We are looking at all the right things. We appreciate your patience. And we are trying like heck to do a better job for you. So with that, thank you and we are looking forward to talking to you in a couple of quarters.

Operator: This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.

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