Good afternoon, ladies and gentlemen, and welcome to the DMC Global Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode, and the floor will be opened for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Geoff High, VP of Investor Relations. The floor is yours.

Hello, and welcome to DMC's fourth quarter conference call. Presenting today are President and CEO, Kevin Longe; and CFO, Mike Kuta. I'd like to remind everyone that matters discussed during this call may include forward-looking statements that are based on our estimates, projections and assumptions as of today's date and are subject to risks and uncertainties that are disclosed in our filings with the SEC. Our business is subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements. DMC assumes no obligation to update forward-looking statements that become untrue because of subsequent events. A webcast replay of today's call will be available at dmcglobal.com after the call. In addition, a telephone replay will be available approximately two hours after the call. Details for listening to the replay are available in today's news release. And with that, I'll turn the call over to Kevin Longe.

Good afternoon, and thank you for joining us for today's call. 2021 was a transformational year for DMC and was marked by both an important acquisition and the continued resiliency of our DynaEnergetics and NobelClad businesses, each of which navigated a second consecutive year of challenging market conditions in their core energy markets. Despite the difficult market conditions, our accomplishments were made possible by the expertise and determination of DMC's employees, and I'm extremely grateful for their efforts. On December 23, 2021, DMC acquired a 60% controlling interest in privately held Arcadia, a leading provider of architectural building products. The transaction doubled DMC's 2021 pro forma sales to $500 million and strengthened our pro forma consolidated gross margin. It also more than tripled the size of our addressable market which is now approximately $7 billion. Arcadia is headquartered in Vernon, California, and serves both the commercial building and high-end residential markets. The commercial business provides exterior and interior architectural framing systems, curtain and window walls, doors and entrance systems. It serves a broad range of end markets that include commercial offices, health care, higher education, retail and civic facilities. Arcadia's commercial business serves the Western and Southwestern United States, where it has captured approximately 10% market share and serves a loyal customer base that includes more than 2,000 commercial construction businesses and general contractors. The Arcadia Custom division serves the nation's high-end residential real estate markets. Based in Tucson, Arizona, Arcadia Custom manufactures highly engineered steel, aluminum and wood windows and doors, which it sells through a national network of premium window and door dealers. The business also works closely with architects and custom homebuilders who specify Arcadia Custom's products. For the past three years, Arcadia and Arcadia Custom have been operating at full capacity to address customer demand. DMC is supporting Arcadia's efforts to improve its operating efficiencies and increase its manufacturing capacity. These programs include implementation of a new enterprise resource planning system, which will help streamline operations and enhance the buying experience for customers. Arcadia is also designing and procuring equipment for a new anodizing and painting facility that will add production capacity at the primary manufacturing center in Southern California. The building products industry is forecasting growth in commercial and residential construction, particularly in Arcadia's geographic regions and end markets. The investments they are making today will ensure Arcadia is positioned to capitalize on strong customer demand and compelling market dynamics going forward. During the fourth quarter of 2021, DMC's consolidated sales increased 7% sequentially to $71.8 million. DMC did not begin reporting sales from Arcadia until January 1, 2022. The fourth quarter sales at DynaEnergetics, our Energy Products business, increased 15% sequentially to $50.7 million. DynaEnergetics International sales grew 75% to $8.1 million and included a large order in Eastern Europe. DynaEnergetics sales in North America increased 7% to $42.6 million and exceeded the 4% fourth quarter increase in U.S. well completions as reported by the Energy Information Administration. Fourth quarter sales at NobelClad, our Composite Metals business, declined 8% sequentially to $21.2 million. The decline was a result of delays in receiving metals at our U.S. and European manufacturing plants. Fourth quarter consolidated gross margin was 18%, down from 25% in the third quarter. The decline resulted from a $1.1 million inventory reserve adjustment at DynaEnergetics, a less favorable project mix at NobelClad and approximately $1 million in post-acquisition expenses that were reported in cost of goods sold at Arcadia. DynaEnergetics gross margin was 20%, a disappointing result and below our expectations. DynaEnergetics announced a 5% global price increase that went into effect on November 22. However, its impact was offset by higher-than-anticipated inflation and the expiration of the CARES Act. DynaEnergetics recently implemented an additional price increase to begin restoring margins and the full effect of the increase should be evident during DynaEnergetics' second quarter. Fourth quarter adjusted EBITDA was $2.8 million, down from $5.8 million in the third quarter. For the full year, consolidated sales were $260.1 million, up 14% from 2020. Gross margin was 23% versus 25% in the prior year. Adjusted EBITDA was $20.2 million versus $19.1 million in 2020. On a pro forma basis, which includes contributions from Arcadia, 2021 sales were $500.5 million, while pro forma gross margin was 28%. Pro forma adjusted EBITDA attributable to DMC was $50.1 million. As we enter 2022, we are encouraged by the strengthening of our end markets and our ability to meet demand. While completion activity is increasing as oil and gas prices are at multiyear highs, DynaEnergetics continues to sell the safest and most reliable well-perforating systems on the market and it takes total responsibility for the performance of its systems. Our DS systems are delivered fully assembled just in time to the well site, and they tie up less working capital and fewer people on location. In the first quarter, DynaEnergetics introduced a mobile version of its digital app, which enables customers to configure and purchase products from any location in real time. An overview of the app is available on DynaEnergetics' website. We believe DynaEnergetics margin performance will improve significantly beginning in this year's second quarter and will benefit from additional price increases, greater well completion activity in North America and increased international demand. NobelClad remains well positioned in its markets. And at a higher price commodity environment, it is very effective at passing through higher material costs and maintaining its contribution margins. NobelClad is the strongest company in its industry and benefits from a global application engineering team and a global manufacturing footprint. We believe NobelClad's bookings and financial performance will improve once supply chain disruptions ease and customer order activity accelerates in current as well as new end-use applications. As I noted, Arcadia and Arcadia Custom both have developed innovative product portfolios, strong brands and have a strong leadership and employee base. Their markets are healthy and expected to grow over the next several years. We have strengthened DMC's portfolio of innovative asset-light businesses serving the energy, industrial and building products markets. And I'm confident in our prospects for margin improvement and long-term revenue growth. With that, I'll turn the call over to Mike for a review of our fourth quarter financial results and a look at first quarter guidance.

Thanks, Kevin. Looking at fourth quarter expenses, consolidated SG&A at $16.3 million increased 6% versus the third quarter and 30% versus the year ago fourth quarter. The sequential increase primarily relates to a step-up in patent litigation expenses at DynaEnergetics. Fourth quarter operating loss was $5.5 million. Adjusted operating loss was $1.9 million and excludes $1.6 million in acquisition expenses and $2 million in sub-period operating expenses at Arcadia between December 23, 2021 and December 31, 2021. Adjusted operating loss in last year's fourth quarter was $736,000. Fourth quarter net loss attributable to DMC was $2.8 million. Following the acquisition of the 60% controlling interest from Arcadia, the calculation for net earnings per diluted share must account for the change in redemption value of the 40% redeemable noncontrolling interest in Arcadia. Redemption value is estimated at the end of each quarter based on the formula used to calculate a put and call option in the operating agreement. During the fourth quarter, the adjustment was $4.4 million. When added to the $2.8 million net loss attributable to DMC stockholders, the resulting net loss were $7.2 million or $0.38 per diluted share based on 18.8 million diluted shares outstanding. Fourth quarter adjusted net income attributable to DMC was $840,000 or $0.05 per diluted share versus adjusted net loss of $825,000 or $0.05 per diluted share in last year's fourth quarter. Adjusted EBITDA was $2.8 million versus $3.6 million in last year's fourth quarter. DynaEnergetics reported fourth quarter adjusted EBITDA of $4 million, while NobelClad reported adjusted EBITDA of $2.1 million. Debt to adjusted EBITDA leverage ratio at December 31, 2021 was 3.0. The Company's debt to adjusted EBITDA leverage ratio covenant at the end of the quarter was 3.50. DMC's net debt to adjusted EBITDA at the end of the fourth quarter was 2.3. Our total outstanding share count is now 19.3 million. Looking at guidance. First quarter 2022 consolidated sales are expected to be in the range of $125 million to $135 million. At the business level, Arcadia is expected to report sales of $57 million to $62 million, while DynaEnergetics is expected to report sales in a range of $48 million to $52 million, and NobelClad sales are expected in a range of $20 million to $21 million. Consolidated gross margin is expected to be in the range of 25% to 27%. First quarter selling, general and administrative expense is expected in the range of $25.5 million to $26.5 million. First quarter amortization expense is expected to be approximately $13.5 million and relates principally to the acquired trade names, customer relationships and backlog of Arcadia. Amortization expense is expected to decline significantly once the value assigned to Arcadia's backlog has been amortized, which is expected in the third quarter. For the balance of 2022, amortization expense is expected to be approximately $13.5 million in the second quarter, $7 million in the third quarter and $4 million in the fourth quarter. After amortizing the backlog value, 2023 quarterly amortization expense is expected to be approximately $4 million. First quarter 2022 depreciation expense is expected to be approximately $4 million, and interest expense is expected to be $1 million. First quarter adjusted EBITDA attributable to DMC after deducting the 40% noncontrolling interest in Arcadia is expected to be $8 million to $10 million. Capital expenditures are expected to be $2 million to $4 million. With that, we're ready to take any questions. Operator?

The first question is coming from Cameron Lochridge from Stephens.

So Kevin, I was hoping we could start at a high level, talking about Arcadia. It looks like CapEx this quarter is going to come in around $2 million to $4 million. One of the things, if I'm remembering correctly, you all highlighted that you would bring to the table when you acquired Arcadia was capital and investment in the business. So just wondering if you could speak a little bit to what you expect that to look like this year, specifically around Arcadia? Any incremental detail you could give us there would be helpful.

Yes. So, first of all, we plan in the range of $8 million to $10 million this year in capital expenditures for Arcadia. We've already released a purchase order to support their installation of a Microsoft D365 system and all the associated hardware, software and consulting services. That will range in the $3 million to $5 million expenditure over a two-year period of time. And we also are in the early stages of designing a new anodizing and painting facility that will be in the $7 million to $10 million range also over a two-year period of time. And then we have some associated positions that we're putting into the organization which will show up as operating expenses. But from a capital standpoint, they were in pretty good shape to begin with. We are adding these systems, which will add both operating efficiency as well as manufacturing capacity to the company.

Great. That's very helpful. On the top line for Arcadia. So 2021 down a little bit. If I'm looking at the right numbers here, we'd see $240 million was the number, $240 million for 2021, if I'm correct. It looks like 1Q will be up slightly versus 4Q. If you could just talk a little bit to the seasonality in the business. And just directionally, what we can expect going forward as the year progresses, that would be helpful.

Yes. There's very little seasonality to it, primarily based on the markets that they serve. Right now, I think the way to look at the revenues, if you look at the revenues over the last two to three years, they've been in the $240 million to $250 million range. They are capacity constrained by the lack of anodizing and painting and also supply chain access to extrusions. The extrusion market is loosening up, but we do need to add anodizing and painting. As well, on the Arcadia Custom side, they've done a great job building that company. Now we need to add some people resources to it, which we will begin to see some of their expansions later in the year and into next year. You'd probably anticipate it being fairly constant this year based on recent historical performance, with the exception of price increases. They're very good at managing selling prices. Jim Schladen in particular leads the organization to make sure that the cost inflation that we have is being passed on, and he does that very effectively. As you might expect, aluminum costs are going up, and that's probably going to drive most of the revenue increase over the next year.

Got it. That's helpful. If I can maybe just squeeze in one more, switching to Dyna. It looks like a $1.15 billion in funding the Biden administration is going to pass on to clean up some orphan wells in the U.S., I was wondering just if you could speak to the potential opportunity that might provide for Dyna and what you could expect to see there?

Cameron, the states have all been allocated a certain amount, typically in the $25 million range, I believe, for this initial allocation. But those funds have not yet been distributed to state agencies, which will then work with operators or the wireline companies to address these wells. So we're still waiting to see what the specific opportunity is, but the fact that the money has been allocated is an encouraging step forward.

The next question is coming from Stephen Gengaro from Stifel.

A couple of things. Just to start with, the DynaEnergetics 1Q guide seems light to me. But I'm curious if that is international versus U.S. mix. And any sense for the U.S. piece of that?

The international is pulling back a little bit in the quarter and the U.S. is about constant to slightly up. We're reading about some sand constraints and activity constraints. We don't expect that to last very long. The well economics are increasing faster than well cost and inflation despite some of the things that are going up in the marketplace. We actually think the activity is going to start picking up but it's going to be more in the second quarter rather than the first.

Yes, Stephen, just real quick. You're absolutely correct. There is a step down of about $2.5 million in international from Q4 to Q1. And then we see international stepping up significantly Q2 through Q4. But we do see North America up sequentially Q4 to Q1 in the order of 10%. So we see that stepping up, but it's really being masked by lumpy sales in international.

And Mike, was international $13 million in the fourth quarter? Are you including Canada in the U.S. number?

Yes. We do. We go by North America and international, so everything other than North America, correct. So we had 8.1% for international.

Okay, okay. That's helpful. When we think about the Arcadia business, I think based on their initial presentation, the depreciation and amortization was like $2 million for a full year or something like that. Can you give us guidance on how to think about the all-in EBITDA margins for Arcadia?

Yes, absolutely. So the all-in margins, they've been at a run rate of around $60 million in sales. They've been in a run rate somewhere between $11 million and $13 million in EBITDA. So that's about a 20% adjusted EBITDA business all in, and we obviously own 60% of that.

Got you. And that depreciation number I threw out is right, right? It's about $1.8 million to $2 million a year?

Yes. Right now, the depreciation number is a couple of million bucks a year as it stands. So they're a very capital-light business. The amortization number, as I mentioned in my commentary, we're going to have significant step-up amortization for the trade names and intangibles, customer relationships and backlog. So amortization for the first couple of quarters is going to be in the $13 million range. The longer-term run rate on amortization will be $4 million. So depreciation and amortization on a longer-term basis will be about $6 million. And as we put capital into the business, you'll see the depreciation number go up.

Okay. But just so I make sure I got it. Your first quarter, just making this up, if you did $13 million of EBITDA from Arcadia, you do zero on operating income because of that amortization step-up?

Yes, correct. Right.

Okay. Just want to make sure I was understanding that, that step-up in amortization was, in fact, part of the guidance numbers that you gave, right?

Yes, correct. When we talk adjusted EBITDA, $8 million to $10 million on the guide, we're adding back that amortization. And so when we talk adjusted EBITDA attributable to DMC, that eliminates the 40% that's attributable to the noncontrolling interest.

So the $8 million to $10 million would be representative of a full $11 million or $12 million from Arcadia? Or does it exclude the amortization?

Excluding the amortization. Hypothetically, if we're forecasting $10 million consolidated 100% Arcadia EBITDA, when we roll up our $8 million to $10 million, we're giving ourselves credit for $6 million of their $10 million after eliminating the 40% noncontrolling interest.

Okay. So you're guiding your DynaEnergetics and your NobelClad EBITDA to what range in the first quarter?

DynaEnergetics is in that $4 million to $5 million range. NobelClad is in the $2 million range. Arcadia is in the $10 million range on a 100% basis, you eliminate $4 million for noncontrolling interest and you've got about $3 million in corporate expense. Walk that across and you get to about $9 million, which is the midpoint of the $8 million to $10 million.

Great. That helps a lot. And the only other quick one is, maybe it's not quick depending on how much detail Kevin wants to give. But what are you seeing on the pricing side in Dyna and the competitive behavior?

So I can tell you what we're planning. We implemented a 5% price increase in late November. Part of that took place in December. We'll see that 5% in our income statement in Q1. However, our margins declined for two reasons. We had an inventory reserve in the fourth quarter, which was a couple of percentage points, and then we had the expiration of the CARES Act and inflation. Together those totaled roughly a six-percentage-point degradation. The price increase in Q4 only offset that very slightly. We are implementing another price increase in the quarter that we've announced and we're informing customers of this; that will take effect in Q2. We fully expect to achieve both price increases. Many competitors are experiencing similar cost pressures, probably even higher because they are not as vertically integrated as we are. We expect they will make decisions to implement their own price increases. We're less focused on the competition at this point. Our systems are delivered just in time to the well site. We manage the supply chain, and they require fewer people and less working capital and they perform better. The cumulative price increases we're targeting in the first half of the year are in the 12% to 15% range. On the cost of completing a well, that's relatively insignificant — $15,000 to $20,000 per well completion. Our primary objective this year is to cover inflation in all three businesses and restore margin in DynaEnergetics, and we firmly believe we'll see that happen.

The next question is coming from Taylor Zurcher from Tudor, Pickering & Holt.

I wanted to circle back on the margin profile at Arcadia. If I heard you correctly, roughly $10 million of EBITDA for Q1 on a 100% allocated basis at Arcadia, which implies about 17% EBITDA margin relative to 14% in Q4 but relative to 21% for the full year of 2021. So I'm curious what's driving the downtick in margins at the EBITDA line for Arcadia in the year-end and into Q1? And should we get back to that 20% margin profile at the EBITDA line over the back half of 2022?

I think we will get back to that. We believe the business will run at an $11 million to $13 million EBITDA run rate on roughly $60 million in sales. We do expect some top-line improvement from pricing, but you could see some denominator effect of margin compression due to increasing aluminum prices. So we expect to be in a healthy range and by the end of 2022 be similar to the 2021 full year profile with perhaps slightly higher top line and small compression in percentage margins.

Okay. That's helpful. Following up on the top line: if I understand correctly, 2022 top-line growth for Arcadia that you're forecasting today is primarily price-driven. At the same time, you're spending CapEx of $8 million to $10 million to alleviate capacity constraints. How much incremental revenue do you think you can generate with that capacity expansion via CapEx, perhaps in 2023?

You'll see more of the impact in 2023 than 2022. We feel this business has an opportunity to grow at GDP or higher as construction spending increases. The Custom business is a national business, and Arcadia's regional commercial business has room to grow. Over the next three to five years, our objective is to double the size of this company. We're working with the leadership team to implement systems and go-to-market plans so the company can grow in '23, '24 and '25. We're not giving guidance for '23 yet, but our intent is to double the size of Arcadia over the next three to five years. We also expect healthy growth in DynaEnergetics and margin recovery, and improvement in NobelClad with application development.

Makes sense. One last on capital allocation, free cash flow and debt management for 2022. You're adding Arcadia, which is more capital-light. On a through-cycle basis, what might the capital intensity of the business look like as a percentage of revenue, and what are your free cash flow targets for 2022? Do you plan to use cash to pay down the debt you incurred as part of this transaction over the course of 2022?

From a leverage perspective, we expect through EBITDA growth and debt repayment to be in the sub-2x range by the end of 2022 on a debt-to-adjusted-EBITDA basis and in the 1.5x range on net debt to adjusted EBITDA. We expect to pay down debt fairly rapidly with EBITDA growth and reduce our leverage profile. From a capital intensity standpoint, collectively these businesses are in the 3% to 4% of sales range long term. On a longer-term basis, we see consolidated CapEx of about $15 million to $20 million. Early on, we'll focus on the key projects at Arcadia and repaying debt.

I would add that over the last three to five years, we've modernized and consolidated our European manufacturing for NobelClad. We have an efficient facility in Liebenscheid, Germany. We've also expanded capacity for our intrinsically safe integrated switch detonator and built modern assembly and integration capabilities. We have upgraded our businesses and are well positioned to serve markets going forward with reduced capital spend relative to historically because we already made substantial investments.

Okay. Next, we have Gerry Sweeney from Roth Capital.

Obviously, DynaEnergetics and the gross margins have been a point of conversation. Curious as to the legal side of that equation. Do the legal issues need to be rectified or completed before we get back to a margin level that you think the business deserves?

The legal expenses are more SG&A than gross margin, and they are stepping down in 2022 compared to 2021. We spent about $7 million to $8 million in litigation in 2021 and expect 2022 to be about half that. A process called Post Grant Review at the Patent Office has stayed some trials, and the court system remains slow. This is a marathon, not a sprint, and expenses will ebb and flow year-over-year. We believe we are in a good position and will manage expenses in 2022 while EBITDA increases over the next couple of years.

I apologize, I probably didn't ask it the right way. I meant the infringement on some of your form factors and products is putting pressure on pricing, etc. Do these cases need to be resolved to help improve pricing to get you back to margins you thought?

No. Pricing pressure has been more a function of industry oversupply rather than legal outcomes. There are systems that we believe infringe on our intellectual property, but there's not an apple-to-apple comparison of these systems. The heart of DynaEnergetics' strategy is an integrated system with an intrinsically safe detonator where the combined system provides safety, performance and lower working capital. We've had two years of very low industry volume and a lot of competition. It will be harder for competitors to make integrated systems and meet demand as volume picks up. We're committed to restoring margins through price recovery. Litigation may help by reducing some infringing offerings, but no single competitor matches the full feature set of our DynaStage system.

The next question is coming from Marisa Hernandez from Sidoti.

A couple of questions on Dyna and NobelClad. First, I wanted to confirm if the 5% price increase that you implemented in November was taken across the board by all customers of Dyna or not really?

That increase was announced on November 22. We have supply agreements with certain customers that delayed implementation based on notice periods. In the fourth quarter, there was less than one percentage point improvement of margin associated with the price increase. We expect by the end of the first quarter all of that 5% to be in our revenues and margins. We're also putting in an additional price increase on top of that. Implementation layers in because of contractual terms, but by midyear we expect to see both price increases fully implemented.

The second price increase you plan to push through in the second quarter — earlier you mentioned 12% to 15% increase in total that you're looking to offset with pricing. Could you confirm that?

To clarify: we're seeing four to five percentage points of inflation year-over-year, including the effect of the CARES Act expiration. We expect to implement cumulative net pricing by the end of the year in the 12% to 15% range, which includes the 5% in November plus an additional 8% to 10% that will be implemented between April 1 and later in the year. That is net pricing, and we expect it to cover inflation that we're forecasting.

Of the different drivers weighing on the gross margin during the quarter, how much of the decline was due to cost inflation? Where are you seeing that — metal side, labor, transportation costs? Could you elaborate?

Compared to earlier expectations, we took an inventory reserve in Q4 because some inventory was approaching born-on-date limitations after lower activity in 2020 and 2021. That reserve was roughly a two-percentage-point reduction. There's also about a one- to two-percentage-point impact from the CARES Act expiring and additional inflation from wages, materials and logistics. Labor costs are rising and travel is increasing as we return to more normal activity. DynaEnergetics was also impacted by margin erosion from price declines over the last 18 to 24 months and oversupply dynamics. The market is moving from oversupply toward tighter availability, and price increases we're pursuing are modest relative to the value we create for customers.

Is it fair to say lead times have come in? How would you characterize the market: still oversupplied, balanced, or getting tight?

Lead times for perforating equipment are short. Manufacturers, including us and some competitors, respond to short lead times because inventory is managed tightly. For us, response times are improving relative to competitors because of our vertical integration and control of components. We see some competitors focus on shaped charge manufacturing while machine shops assemble perforating guns; they are not vertically integrated and that will be challenged as demand increases. A perforating gun on a completion is less than $100,000 and our targeted price increases of $15,000 to $20,000 are modest relative to total well costs. Ultimately, it's about the value we create, not just price.

To finish on margins: when you talk about margin recovery in 2022 for Dyna, historically you had as high as 40% gross margin in 2019. What are we talking about in terms of target gross margin recovery in 2022?

Historically, peak gross margins in 2019 were about 40%, but that included sales of higher-margin components like the integrated switch detonator sold separately. Today, we're selling more integrated systems so revenues per system are higher but the blended percentage margin is lower because some metal components have lower margins. If we get back to the mid-30% gross margin range, say 34% to 35%, we'd be very satisfied. We expect to move into the mid- to upper-20s earlier in the year and into the 30-plus percent range by the end of the year as prices are realized and activity increases.

The next question is coming from Ken Newman from KeyBanc Capital Markets.

I wanted to go back to the comment about doubling the size of Arcadia over the next five years. Can you build that out a little bit in terms of cadence of growth and how you plan to achieve that? Given difficult comps on residential housing starts and potential rising interest rates, how do you balance cyclical inflation versus Arcadia's ability to grow?

On the residential side, Arcadia Custom focuses on high-end, highly custom homes which are less sensitive to overall housing-start cycles. Their residential business is small relative to Arcadia's total and focuses on premium markets. The commercial exterior business is regional and has room to grow market share; their commercial interiors (Wilson Partition) is more stable and somewhat countercyclical to new construction. We see opportunities across geographies and product lines. Our plan is primarily organic growth supported by investments in systems, capacity and people. We will support Arcadia to achieve growth rather than relying primarily on additional acquisitions at this time.

One more: I know it's fluid and a small part of NobelClad, but I think you have some revenue exposure to Russia. Given supply chain tightness in Europe and geopolitical risk, what's embedded in the Q1 guide for NobelClad regarding Russia exposure? How do you think about supply chain risk in Europe given recent geopolitical developments?

We exited a larger presence in that region over the past several years. Today our presence is much more limited. NobelClad exports into Russia and Ukraine on occasion; historically we had $2.5 million to $3 million of sales into Ukraine and had a couple-million-dollar order into Russia in 2021 that could be at risk. We expect some near-term misses in that region, but NobelClad's value proposition in clad plates becomes stronger in higher commodity price environments. Overall, we expect the business to grow and that growth in applications and value will offset regional risks over time.

The next question is coming from Samir Patel from Askeladden Capital.

Can you hear me? Sorry, it was just cut off for a second. My first question is on Arcadia. In the deal materials you talked about exposure to hospitals and education and repair and remodel. Do you have more specific statistics in terms of categories like multifamily versus office, or how much goes into new builds versus repair and remodel?

I don't have the full mix at my fingertips right now, but Arcadia's commercial business represents the majority of their overall business — roughly around 70% — primarily commercial exteriors and interiors. Their focus on low- to mid-rise commercial buildings has served them well over the last two years compared to high-rise projects. I can follow up with a more detailed end-market breakdown and the new build versus repair and remodel split.

Okay. On new versus repair and remodel, I assume repair and remodel would be more on the interiors than the exterior?

There is repair and replacement activity on exteriors and significant remodel work as well. The installed base of buildings is large and remodeling or retrofitting facades and interiors happens regularly, so the addressable market includes both new construction and renovation activity.

Got you. That makes sense. Two on Dyna quickly. First, are you saying that for the same number of units sold, the margin percentage will be lower because you're selling the full system, but margin dollars will be higher because you're selling additional components so per unit you get more revenue and margin dollars, but a lower blended percentage?

Correct. Historically, margins were highest on the integrated switch detonator when sold as a component. As we move to selling the full perforating system, some components like machined metal parts have lower margins than detonators and shaped charges. So blended percentage margins decline, but total revenue and total margin dollars per system can be higher. Our integrated systems deliver safety, performance and lower working capital, which is why we focus on them. Market activity and competitor behavior have shifted in recent years, with some competitors focusing on components or machine-shop assembly rather than full integrated systems.

Got you. And final, how do you expect completions to trend over the course of 2022?

Up. We are expecting completions to increase roughly 10% to 15% over the course of 2022, and we expect to realize roughly 12% to 15% in net pricing this year.

Okay. The next question is coming from Jim Brilliant from Century. It looks like we're getting no audio from Jim's line. I'd now like to turn the floor back to Kevin Longe for closing remarks.

Okay. Thank you, everybody, for joining us for this call. We appreciate the complexity of the earnings release. Mike, Geoff and I are available for analysts and others who would like to understand more of the details over the next couple of days — please reach out to Geoff. To our Arcadia employees and partners who are on the line, we're glad to have you on board and we look forward to working with you and helping achieve the aggressive growth objectives we've discussed. Thank you, everybody, for your interest, and we look forward to talking with you in the second quarter.