Hello, and welcome to DMC's second quarter conference call. Presenting today are President and CEO, Jim O'Leary; and Chief Financial Officer, Eric Walter. 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 certain risks 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. Today's earnings release and a related presentation on our second quarter performance are available on the Investors page of our website located at dmcglobal.com. A webcast replay of today's presentation will be available at our website shortly after the conclusion of this call. And with that, I'll now turn the call over to Jim O'Leary. Jim?

Thanks, Geoff, and thanks, everyone, for joining us for today's call. In a volatile environment marked by shifting tariff policies and highly challenged visibility, our businesses remain focused on their operating initiatives, helping us exceed our EBITDA guidance range of $10 million to $13 million for the second quarter. At the same time, we made progress on our most important overall objective, deleveraging our balance sheet. Second quarter consolidated sales were $155.5 million, while adjusted EBITDA attributable to DMC was $13.5 million. At Arcadia, our building products business, second quarter sales totaled $62 million, down 5% sequentially and 11% from the year-ago period. Last year's second quarter benefited from much stronger demand for high-end residential and commercial exterior products. As expected and previously discussed, this year's second quarter reflects nationwide weakness in the high-end residential market and in construction activity more broadly. Building activity in all segments continues to be challenged by persistently high interest rates. Management recently rightsized the cost structure of its residential offering to align with current market activity while refocusing on its core exterior operations, which generate approximately 75% of the segment sales. Arcadia's second quarter sales also reflect the anticipated and previously discussed drop in project billings following the completion of a large mixed-use development project in California that benefited the previous quarter. At DynaEnergetics, our energy products business, sales were $66.9 million, up 2% sequentially but down 12% year-over-year. That decline versus prior year reflects pricing pressure and weaker demand in our core U.S. unconventional market, where the number of rigs, well completions and active frac crews are at or near multiyear lows. At NobelClad, our composite metals business, second quarter sales were $26.6 million, down 5% sequentially and up 6% year-over-year. NobelClad's order backlog at quarter end was $37 million versus $41 million at the end of the first quarter. This decline reflects a sharp slowdown in bookings as customers await clarity on tariff actions or have settled on using alternative clad solutions from suppliers not impacted by tariffs. We believe we've lost some business in recent months to non-U.S. suppliers due to tariff-driven cost increases and a willingness by Canadian customers, in particular, to buy non-U.S. product. On a more positive note, during the second quarter, we drove a meaningful improvement in DMC's financial position. Total debt at the end of the quarter was $59 million, down 17% from the previous quarter as we focus on our most important objective, strengthening our balance sheet in advance of the unwinding of the Arcadia put call. I'll now turn the call over to Eric for a closer look at our second quarter financial results and our outlook for the third quarter. Eric?

Thank you, Jim. I'll start with a look at second quarter profitability. As Jim mentioned, consolidated adjusted EBITDA attributable to DMC was $13.5 million. Inclusive of the Arcadia noncontrolling interest, adjusted EBITDA was $16.2 million, while adjusted EBITDA margin was 10.4%, down from 11.4% in the first quarter and 14.3% in the second quarter last year. The year-over-year decline is largely attributable to lower absorption at Arcadia, where sales of residential and commercial exterior products declined from last year's second quarter, a period that benefited from materially stronger customer demand. Arcadia reported second quarter adjusted EBITDA attributable to DMC of $4 million. Before the noncontrolling interest allocation, adjusted EBITDA was $6.7 million or 10.9% of sales, down from 14.2% of sales in the first quarter and 17.8% in the prior year second quarter. Dyna delivered $9 million in adjusted EBITDA, while adjusted EBITDA margin was 13.4%, a sequential improvement of 210 basis points and a year-over-year increase of 190 basis points. The improvements primarily reflect lower material costs and a slightly improved sales mix. NobelClad reported second quarter adjusted EBITDA of $4.4 million with an adjusted EBITDA margin of 16.5%, down from 19.2% in the first quarter and 22.7% in the prior year second quarter. The declines were primarily due to a higher mix of international project sales, which typically carry a lower gross margin. Second quarter SG&A expense was $26.1 million, down sequentially from $28.3 million and $27.1 million in last year's second quarter. The decrease principally reflects lower expenses for professional services and bad debt. Second quarter adjusted net income attributable to DMC was $2.5 million, while adjusted EPS attributable to DMC was $0.12. With respect to liquidity, we ended the second quarter with cash and cash equivalents of approximately $12 million. As Jim mentioned, total debt, inclusive of debt issuance costs, was down 17% from the first quarter to approximately $59 million, and net debt was reduced to roughly $46 million. And now to guidance. We expect second quarter consolidated sales will be in a range of $142 million to $150 million, while adjusted EBITDA attributable to DMC is expected in a range of $8 million to $12 million. The wider-than-normal range on adjusted EBITDA reflects the increased uncertainty in our end markets. Arcadia expects conditions in the U.S. construction industry will remain challenging, and it's rightsized its residential cost structure to align with the current market while also refocusing on its core commercial operations. At DynaEnergetics, the industry is anticipating a sequential decline in well completion activity in our core U.S. onshore market, while NobelClad is continuing to be impacted by the deferral of orders by customers that continue to monitor the still evolving tariff policies. I should note that our guidance is heavily influenced by macroeconomic concerns, volatility and visibility issues created by current tariff policies and the current level of energy prices. It's subject to change either upward or downward as greater clarity emerges. Now I'll turn it back to Jim for some additional comments.

Great. Thanks, Eric. And to wrap up on a slightly more positive note, albeit very high level and anecdotal, despite ongoing challenges and continued uncertainty across both building products and the broader industrial markets, our businesses are steadily advancing against the key objectives we set earlier in the year. We exceeded our admittedly cautious EBITDA guidance by remaining focused on self-help initiatives within our control. At Arcadia, while business is subdued due to elevated interest rates and a slow start to the residential rebuild of Los Angeles, there are reasons to be optimistic. There's pent-up demand that will eventually be unleashed when interest rates moderate and local policies supporting the rebuilding initiative in L.A. pick up steam. In the meantime, we're focused on fixing some of the things that need fixing and believe we're making solid progress despite the market headwinds. At NobelClad, we believe there's pent-up demand and order volume, which should recover as the tariff situation settles down. In the meantime, we're focused on controlling costs and lowering our overall breakevens. At DynaEnergetics, things are a bit trickier due to the shifting animal spirits around global energy markets, which are impacting oilfield service companies and their suppliers. Again, maintaining tight cost controls is our principal focus as we watch for a recovery in energy prices and well completion activity. At the midyear mark of 2025, we've also made important progress deleveraging our balance sheet and improving our financial flexibility. We view these as important achievements as we continue to prepare for the possible acquisition of the remaining 40% stake in Arcadia late next year. The efforts of DMC associates across each of our 3 businesses have been critical to our continued progress, and I'd like to thank all of our employees for their hard work and commitment to DMC's future success. And with that, we're ready to take any questions.

Our first question is from Gerry Sweeney with ROTH Capital Partners.

I wanted to start with Arcadia. This multifaceted question, so I apologize in the beginning. But on the weakness or some of the headwinds there, how much of this is residential? And how much is sort of just end market across maybe the building products segment? And then the follow-up to that is, what is the roadmap? What should we be looking for as you rightsize the business there to fit demand as we go forward?

Gerry, this is Eric. I'll take the first part of that question. So the weakness that we've seen has been really split between the residential business. That's our high-end residential segment. But also, we've seen in the commercial exteriors part of the business that some of the projects are being deferred out a little ways. And so we think that's primarily the impact of tariffs on people, the end developers trying to wait and see how things are going to shake out. But just the persistence of the higher interest rate environment, which is not helpful from that standpoint.

Gerry, the rightsizing in our residential business is largely complete, with just one or two facilities adjusted. At the end of the second quarter last year, similar to others in the market, we downsized our workforce and support systems in response to reduced volume. We briefly considered more drastic measures, but much of our product is suitable for rebuilding in some of the higher-priced areas of Los Angeles, and we have an option there. However, estimates for homes needing rebuilding vary significantly – from 13,000 to as high as 20,000 – since many existing structures might never be habitable. We've seen 154 permits pulled so far, indicating we are lagging behind. We believe we are well-positioned in this market and want to capitalize on it. On the residential side, we think we've made necessary adjustments, largely due to higher interest rates. In the commercial sector, while tariffs have some impact, it's mainly about interest rates. Most commercial contractors have placed long-term orders but are hesitant to start construction until they have clarity on overall financing costs. Given the recent shifts in the Federal Reserve, there is a strong likelihood of significant interest rate cuts in the next 12 months, potentially even in the next 6 months. There is considerable pent-up demand, and any further reductions in the commercial sector, while still robust, will also support storefronts and low to mid-rise buildings affected by the fires. We need to be cautious not to undermine our position while making these adjustments.

I got you. I understand that. Besides maybe reductions in force and rightsizing, are there other opportunities within Arcadia to drive profitability or other initiatives? Any update on that front?

The key initiatives involve Jim Schladen, who returned earlier this year and is focusing on customer service, reducing lead times, and improving quality to meet the organization's previous standards. Our business is fundamentally customer service-driven, and Jim is concentrating on restoring that focus across all divisions, not just in Arcadia. We have very few headcount additions unless they are for specific initiatives and no variable cost increases until we see a return in volume, which has been less of an issue for Arcadia compared to other businesses facing significant volume declines. Jim was instrumental in reducing headcount in the residential division when backlogs were low at the end of last year. On the discretionary side, we've made necessary adjustments without compromising our position. In NobelClad, our most tariff-affected business, while we can pass through raw material increases, the impact of demand loss remains unclear due to tariffs. This business has experienced the most significant drop in performance, evident in backlogs and quarterly results, as project business and recent government CapEx figures have been extremely poor. This trend indicates companies are deferring or canceling orders until they have more visibility on the economy and project costs. The NobelClad team has not only reduced variable costs but has also made deeper cuts in various areas like travel and discretionary headcount, responding appropriately to the downturn caused by external factors. In Dyna, we are continuing with the initiatives we started last year, after a steep drop-off in business. Our automation initiative is progressing well but is still only about 50% implemented. The value engineering product we've introduced has effectively reduced material costs and mitigated the negative effects of tariffs on our already challenged oil service market. Other than these efforts, there is not much more we can do at this time. However, if the economy declines further, we will consider additional measures, but we believe we are currently at an appropriate level given the volume we are experiencing.

No, I wouldn't disagree. I tell you guys executed very well in the quarter and not surprised guidance is probably a little bit lower than my numbers, but that's not a surprise to me. One other quick follow-up question. I know there's other people...

Gerry, we have the unfortunate benefit by releasing today. We got to see a lot of the people you cover and a lot of the commentary from customers, peers, the whole oilfield space. So I think we were appropriately prudent.

Yes, the balance sheet shows a nice reduction in debt this quarter. Eric, is there anything on the balance sheet that you can continue to improve? I'm not sure about the status of inventories, payables, or receivables. I didn't have a chance to review everything, but it seems to be progressing in a positive direction and at a good pace.

Yes. I think from a net working capital standpoint, I think the business has performed reasonably well during the quarter. And there's always more that can be done, so we'll continue to push there. The free cash flow performance we had was really strong in the second quarter. I'd say looking out over the next several quarters, we would expect that we would be converting EBITDA into free cash flow 40% to 45% similar to where we were in the first half of the year. And if you look back at the prior couple of years, we were kind of in that ballpark, 40% to 45%. So the net working capital performance is part of it. Obviously, generating cash earnings as we head into the second half of this year will be another critical aspect of it as well.

Our next question is from Ken Newman with KeyBanc Capital Markets.

Jim and Eric, I want to revisit Arcadia. I appreciate your assistance with the cost-reduction initiatives. Given the work you’ve done recently to adjust costs in Arcadia, could you share your expectations for gross margins in that segment at the midpoint of the third quarter guidance? I'm trying to understand what you believe the volumes need to be to return to that high 20% to low 30% range.

Yes. I think with this business, Ken, there's a fair amount of fixed costs in our COGS area. So when you look at the revenue that we've generated over the past couple of quarters, to the extent that we increase that, we have much better fixed cost absorption. So going into the third quarter, we've caveated what we think the performance is going to be for Arcadia just given what the overall environment looks like. And there's going to be some softness in the fourth quarter that's just seasonal in nature. But really, for Arcadia, trying to get the volume pick back up to levels that we had in prior years. And to the extent that we do that, we get a disproportionate amount of impact at the EBITDA level and can push the EBITDA margins up closer to where you saw them in prior years. But for the next, I'd call it, 2, 3 quarters, it's still going to be touch and go given how the environment is operating.

And Ken, just one slight addition. The difference between this company at $240 million to $250 million and $300 million, if you look at the history going back even before we acquired it, because you've got 11-ish or give or take, a number of distribution sites around the hub-and-spoke model, you've got all your manufacturing in one place, you effectively got your operating leverage as good as it can be. The difference between $240 million and $300 million, that's the difference between the consistent $40 million to $50 million years this company was doing right up until 2023 going into 2024. And the drop-off in volume, $5 million to $10 million a month, that's really where all the tremendous operating leverage is. That's why we want to be really careful about doing anything that impacts service lead times or our ability to meet demand because if interest rates come down and if L.A. were to really jump-start the permitting process, there's just a ton of business and a ton of leverage there. But as Eric pointed out, on the fixed cost structure, it really shows pronounced differences in the difference between $240 million and higher.

Yes. No, that makes a lot of sense. Jim, you kind of touched on it there a little bit, but you did talk about interest rates kind of remaining stubbornly high. That's not too surprising from some of the other non-res construction guys that we cover. What do you think is the lag time between hopefully an eventual cut versus when that starts to pull through in orders?

For residential, the process is usually quite swift. Our situation isn't as directly affected as companies like JELD-WEN that focus on first-time step-up sales. The transmission mechanism is fast, especially when there are numerous projects in progress. Builders and construction teams can quickly stimulate demand, although this is primarily influenced by labor availability. The construction market is currently somewhat untested due to fluctuations in labor markets across the country. I don't want to complicate things, but issues affecting the workforce, such as disruptions from recent events in L.A., can slow down the response time. While commercial contractors may take a bit longer to mobilize, I anticipate any delays would last around one to two quarters, not more than that.

Okay. And then maybe one more if I could just squeeze it in. Look, I understand that there's a few problems that better volumes can't fix. But maybe just kind of going around each of the segments and talking a little bit about what you saw from a price/cost perspective, just given some of the moving pieces on tariffs, how has realization been this quarter, just given the tariff environment? And what are you kind of expecting here in the third quarter?

We'll provide some general insights. If Eric has specifics, he can share. Arcadia is performing well, and our competitors have been effective in passing on tariff-related increases, especially with aluminum since most of our products are aluminum. The situation largely depends on market health and competitive responses. There is no long-term competitive threat, and it's primarily a matter of demand. Whenever I speak with Mr. Schladen, he emphasizes the need for sales. Therefore, once demand returns, we will be in a good position. NobelClad faces more challenges because we are transferring metal costs and dealing with fluctuating demand, which affects project initiation since it's a project-based tariff business. While the margin structure should remain intact, volume is an issue. We are waiting for more clarity regarding our standing compared to competitors. Additionally, Canadian buyers seem less inclined to favor U.S. suppliers than they used to, which is purely a volume matter. I don't foresee any lasting margin impairment. Dyna is also facing challenges, but they have executed well on several projects. However, all companies in oilfield services are feeling the impact of tariffs. Our customers and competitors have mentioned having to absorb some margin losses. Eric, do we estimate around 100 to 100-plus basis points to recover? There is definitely an impact, but quantifying it is difficult due to the volatility in energy markets, which, to be honest, is quite bad.

Our next question is from Jawad Bhuiyan with Stifel.

I guess could you just talk a little bit about your second half sales expectations for Dyna? And I guess, how do you expect your sales to perform relative to the market that you're seeing right now? And then I do have a quick follow-up after that.

Yes. So I think we said in our prepared remarks, but for the second half of the year, we're expecting the activity in Dyna's primary U.S. markets to be down. I think that's consistent with what you'll see with other players in the OFS space. There could be some opportunity for higher international sales relative to the first half of the year. But most of the sales, as you know, that Dyna generates would come from the North American market. And so we just expect that to be trending lower, just given where the completion activity is in frac crews and all other metrics you would see out there for the market.

Got it. We're observing some data that suggests oriented perforating guns are contributing to improved recovery rates and better fracturing results. Are you noticing this as well? How should we consider its impact on your business moving forward?

It's a trend in the market. We have a product that competes well with others, and we're experiencing similar benefits as everyone else. I don't believe it has significantly altered anyone's performance compared to peers. There is a product available that targets non-Dyna customers, but I don't think it shifts the situation in the way you're suggesting. It won't enhance the oil and gas market beyond what energy prices can support.

There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.

Well, to the shareholders and the analysts who cover us, we appreciate your time this afternoon. And to any employees or others listening, again, we appreciate your hard work during the quarter. I appreciate you hanging in there during a very difficult environment with some challenging visibility. And back to shareholders and investors, we're working as hard as we can for you. We'll be there to participate in the recovery when it's here, and we appreciate your patience. So thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.