Greetings, and welcome to DMC's Global Third Quarter Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Geoff High, VP of Investor Relations. Thank you, Geoff. You may begin.

Hello, and welcome to DMC's third 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 third 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?

Thank you, Geoff, and thank you to everyone joining us for today's call. While challenging market conditions continue to impact each of DMC's businesses during the third quarter, we made significant progress on the most important strategic objective within our control, the continued deleveraging of our balance sheet. By the end of the third quarter, our net debt had been reduced to $30.1 million, down 47% since the start of the year and the lowest level since we purchased the controlling interest in Arcadia at the end of 2021. DMC's consolidated third quarter sales were $151.5 million, down 1% versus the third quarter a year ago, while adjusted EBITDA attributable to DMC was $8.6 million, up 51% year-over-year. At Arcadia, our Building Products business, third quarter sales totaled $61.7 million, a 7% year-over-year increase, but down 1% from the second quarter. Adjusted EBITDA attributable to DMC more than doubled to $5.1 million from the year-ago quarter, reflecting improved operating performance and better absorption of fixed manufacturing overhead due to the sales increase. Adjusted EBITDA was up 27% sequentially. The efforts to stabilize Arcadia's business during the past year have helped mitigate the impact of stubbornly high interest rates and generally soft commercial construction activity in Arcadia's core Western region, where architectural billings have declined every month since May according to the Architectural Billing Index. At DynaEnergetics, our Energy Products business, third quarter sales were $68.9 million, down 1% year-over-year and up 3% sequentially. The third quarter was marked by declining activity in DynaEnergetics' core U.S. onshore market, where well completions were down 8% year-over-year and 6% sequentially. At the end of the quarter, active frac crews, a key indicator of demand, were down nearly 20% from the 2025 peak in March. DynaEnergetics reported third quarter adjusted EBITDA of $4.9 million, up from breakeven in the year-ago quarter, but down 46% sequentially. The sequential decline reflects lower product pricing and higher costs due to tariffs as well as certain receivable and inventory charges. At NobelClad, our composite metal business, third quarter sales were $20.9 million, down 16% year-over-year and down 21% sequentially. The declines reflect the delayed impact of lower U.S. bookings during the first and second quarters when customers moved to the sidelines as they monitored fluctuating U.S. and reciprocal tariff policies. Adjusted EBITDA was $2.1 million, down 64% from the prior year and 53% sequentially, reflecting lower absorption of fixed manufacturing overhead on reduced sales and a less favorable product mix. During the third quarter, NobelClad booked a $20 million order associated with a large international petrochemical project. After quarter end, we received an additional $5 million order related to that same project. Together, these bookings, which ship at the beginning of next year, reflect the largest order in the 60-year history of NobelClad. NobelClad's backlog at the end of the third quarter was $57 million, up 53% from the second quarter, not including the $5 million follow-on. I'll now turn the call over to Eric for a closer look at our third quarter results and our outlook for the fourth quarter.

Thank you, Jim. I'll start off with a closer look at third quarter profitability. As Jim mentioned, consolidated adjusted EBITDA attributable to DMC was $8.6 million. Inclusive of the Arcadia noncontrolling interest, adjusted EBITDA was $12 million or 7.9% of sales, up from 4.6% in the third quarter last year and down from 10.4% in the second quarter. The year-over-year increase in EBITDA margin principally reflects improved results at DynaEnergetics, which was impacted by $5 million in inventory and bad debt charges in last year's third quarter as well as price-driven top-line growth at Arcadia, leading to improved absorption of fixed manufacturing overhead. The sequential decline in adjusted EBITDA margin was primarily due to lower pricing and higher costs at DynaEnergetics as well as reduced activity levels at NobelClad. Arcadia's third quarter adjusted EBITDA margin before noncontrolling interest allocation improved to 13.8% from 5.8% in the year-ago quarter and 10.9% in the second quarter. Dyna's adjusted EBITDA margin improved to 7.1% in the third quarter compared to less than 1% in last year's third quarter. EBITDA margin was down from 13.4% in the second quarter for the reasons previously mentioned. NobelClad's third quarter adjusted EBITDA margin was approximately 10% and was impacted by the tariff-related bookings slowdown earlier in the year. Adjusted EBITDA margin was down from 23.2% in the third quarter last year and 16.5% in the second quarter. Third quarter SG&A expense was $26 million or 17.1% of sales versus $28.2 million or 18.5% of sales in the third quarter last year. Third quarter adjusted net loss attributable to DMC was $1.6 million, while adjusted loss per share attributable to DMC was $0.08. With respect to liquidity, we ended the third quarter with cash and cash equivalents of approximately $26.4 million. Total debt was $56.5 million, down 20% from the end of 2024. And as Jim mentioned, net debt was $30.1 million, down 47% from the end of last year. And now on to guidance. We expect fourth quarter sales to be in a range of $140 million to $150 million, while adjusted EBITDA attributable to DMC is expected in a range of $5 million to $8 million. Our guidance reflects the lag of converting recent record bookings at NobelClad into sales, which are expected in 2026. Our guidance range also anticipates continued headwinds in DynaEnergetics' core North American market, which has been significantly impacted by both tariffs and declining well completion activity and may experience a seasonal slowdown late in the quarter as has been the case in recent years. Although Arcadia is expected to experience a normal seasonal fourth quarter slowdown, it expects continued year-over-year improvement in profitability due to better operational execution. Our guidance is heavily influenced by macroeconomic concerns, volatility and visibility issues created by the current state of energy markets and tariff policies and is subject to change either upward or downward as market conditions evolve. With that, I'll turn it back to Jim for some additional comments.

Thanks, Eric. In an environment marked by volatile and declining energy prices, elevated interest rates and shifting tariff policies, we continue to focus on what's in our control. DynaEnergetics is containing its costs while pursuing international opportunities and navigating an extremely challenging North American oil and gas market. As discussed and based on direct customer feedback, we expect the oilfield services market to face continued headwinds during the fourth quarter. Accordingly, we remain focused on the self-help measures within our control. As mentioned earlier, NobelClad secured a record order that its commercial team worked nearly 5 years to win while it rebuilds its order book and looks globally for new business opportunities. And finally, at Arcadia, we've stabilized operations after a challenging 2024 and are positioning the business for an eventual recovery in its commercial and residential markets. Arcadia has now had several quarters of stability since we brought Jim Shladen back, and we believe we've successfully reset the business while we wait for market conditions to improve. Collectively, we've made substantial progress on our most important initiative, deleveraging our business. This remains our principal corporate objective as we work through generally challenging markets for each one of our operating companies. Our progress would not be possible without the hard work of our DMC associates, and I want to thank them for their continued contributions. And with that, we're ready to take any questions.

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

Start off with Arcadia. I know you mentioned the ABI was down in the West, but I have two questions on that front. First, are you seeing any signs of improvement? Second, are there opportunities for further operational enhancements at Arcadia, or is the current status established for now?

We're observing some positive signs unique to our situation. While the industry is performing adequately overall, we've faced challenges in the past few years post-acquisition. Much of our recent improvement, both year-over-year and month-over-month, stems from restoring stability, re-engaging with employees who left, and mending relationships with suppliers and customers. These green shoots are specific to Arcadia, so I caution against overinterpreting them. Looking at our competitors, we see similar struggles with high interest rates and affordability challenges affecting everyone, including residential-focused companies like JELD-WEN. On a broader scale, I can't pinpoint specific metropolitan areas that are thriving, maybe only a couple in the Carolinas. Our improvements are mainly due to local efforts to enhance stability and self-initiated strategies. In terms of what we can do next, we've focused on stabilizing our operations and bringing back key individuals, which has been vital. Jim excels at fostering relationships and has a detailed plan for our next steps, including professionalizing our approaches and potentially incorporating new skills. We've been under-investing in capital expenditure, and we need to consider the timing of future investments carefully. There’s a long list of areas we can enhance, including improvements in our ERP implementation and data quality. However, we need to be cautious about when to expand our capacity if the market isn't ready to absorb new production capabilities.

Yes. Understood. Yes. Got it. Switching gears, NobleClad large order. It sounded like it was going to ship in my words, first quarter, but I'm not sure how you exactly characterized it. But what would be the cadence of the shipping of that order? And over how many quarters, if more than one would this sort of take place?

Yes. So I said 2026, but Eric will give you the particulars. It's more back-end loaded than first quarter.

I don't have much to add to that other than, like Jim said, it will be second half of 2026 is where you're going to see the bulk of the revenue from that order.

Got it. And just sticking with NobelClad, obviously, that's a large international order. U.S. is facing some headwinds, but I think there's a lot of opportunity in the Gulf at some point for some of this petrochemical stuff, but I'm just curious if you're seeing any additional orders unlock? Or are they still tied up because of tariffs and other issues and just uncertainties?

We share your view and hope for more petrochemical orders. Currently, if you were to ask the division President how he views the situation, he would tell you that after reviewing his budget multiple times recently, people are opting to wait rather than place orders. Tariffs significantly affected us, especially on one or two major projects that we likely missed out on due to these tariffs. At present, there is a general sense of economic uncertainty. Unless you’re in the tech sector or a few other favored areas, industries that are capital intensive or heavily consumer-driven, which includes sectors like automotive, aren't rushing into capital projects. Many are delaying their orders until there’s more confidence in the overall economy.

Our next question comes from the line of Katie Fleischer with KeyBanc Capital Markets.

I wanted to dig into the tariff impacts in Dyna a little bit. How should we think about that impact in coming quarters? And is there any opportunity to push price within that market?

Yes. So the impact to Dyna in the quarter was roughly $3 million. And to answer your question, to try to push price in the market, that's extremely challenging right now. All of the players in the market are pretty much going through the same type of issues with importing steel and some other components that are used in their perforating systems. So what we're doing right now is trying to figure out ways we can be more efficient with how we manufacture our products and being smart about the automation that we put into our manufacturing line. But to increase price is very difficult in the market right now.

Yes, makes sense. Just any other details that you could give around the margin progression within Dyna and NobelClad for next quarter? Like does the midpoint of guidance assume that both of those are going to see a sequential decline?

I think it's important to consider each company individually. Dyna will continue to experience pricing pressures, which may lead to a seasonal slowdown. If that occurs, it adds strain on margins due to lower sales volumes, making it harder to cover fixed manufacturing costs. The same applies to NobelClad. The significant order we discussed will not be shipped until 2026, so we won't see much benefit in the upcoming quarters. If sales are softer in the next quarter, it will similarly affect their ability to manage overhead costs. This should be reflected in your forecasts, indicating that margins will likely decline from one quarter to the next.

I would like to add that if your expectations regarding end markets are accurate, they will likely lead us by a couple of months or a quarter, and this will be reflected in our margin improvement. Most of our performance at NobelClad has been driven by absorption. Aside from the tariffs that Eric mentioned, there’s a small mix issue, but the core challenge lies in pricing and the current difficulties in the Permian market. Once those end markets improve, we should see a noticeable rise in our margins. I believe we have some operational leverage, though it will depend heavily on the end markets. We've implemented our self-help measures early, but it's worth noting that in NobelClad’s case, we have experienced a decline of $5 million in sales, which is entirely due to throughput affecting our overhead absorption.

Got it. And then just one last question here. I know visibility is very limited. But just looking ahead, when you think about the recovery of these end markets, how much more downside is there from here? And what would you really need to see to give you some confidence that some of these demand trends are starting to pick up?

Well, the first thing we need is stability. I'm encouraged by the stability in the order book at NobelClad, which I believe is a good sign for the future. It may take a quarter or two to see significant impacts since it's mostly back-end weighted. The fact that our order book has picked up, including our largest order in history, is very positive. In the building industry, stability offers us opportunities for improvement, but the market is still really challenging. The Fed's recent interest rate cuts have raised some concerns about what their next move might be after Powell's recent comments. There's a Fed that seems more favorable now, particularly with new appointees. However, expectations of three or four more cuts, which some people had a month or two ago, may not materialize, and we might experience a prolonged wait for them. I hope to see some positive developments soon, but currently, only 20 permits have been issued in parts of Southern California where we have long-term optimism, yet activity is still limited. They are keeping a tight control on permits, and the level of activity isn’t meeting the needs of homeowners. If things start to loosen up, it may be somewhat independent of interest rates, but if we have two or three cuts, building might pick up in the latter half of next year. From listening to homebuilder calls and larger distributors like Builders FirstSource and Beacon, it's clear that while they haven't given up on next year, they are being very conservative due to past disappointments. So, I would suggest a more optimistic view on housing would be mid-next year at the earliest, though we have specific factors that are unique to Arcadia. On a side note, I feel least knowledgeable about Dyna given my background, but it seems their volumes have remained steady. Some industry analysts have pointed out how consolidated our customer base has become. We've likely already faced the full impact of the tariffs. Once the market rebounds and we can showcase the value we offer, we should be able to regain some margin and pricing, though this could still be a few quarters away. However, a sudden change, such as Saudi Arabia altering its oil supply, could shift the situation overnight.

Our next question comes from the line of Jawad Bhuiyan with Stifel.

Based on what we've been hearing about many U.S. pressure pumping companies, it appears that activity levels are nearing their lowest point, and that's the direction we're heading. Specifically, can you discuss your expectations for 2026, particularly regarding the perforating gun business, and what the current pricing looks like in that sector? I also have a quick follow-up.

Too early to talk about 2026. We're one quarter at a time for good reason. The visibility is terrible. And we don't comment on pricing other than if the market picks up and it's a little less competitive, we should see some relief, but we're nowhere near there right now.

Got it. And I guess just more specifically for oriented perforating guns. We've kind of heard that it's been having a positive impact on production levels. I guess, could you maybe talk about what you're seeing in the field?

That's correct. We have a self-perforating gun product available. Technology has significantly contributed to the remarkable production increases in the Permian over the past decade. We have maintained our leadership in that area and will continue to do so.

There are no further questions at this time. I'd like to pass the call back over to James O'Leary for any closing remarks.

We appreciate your patience. We are doing everything we can under the category of self-help and positioning ourselves for the eventual recovery. We didn't get a chance to talk about except in the prepared remarks, but getting the balance sheet in shape, having your cost structure in shape, being ready for whether it's opportunities or just the things we got to deal with next year and having a clean balance sheet, plenty of cash flow and a cost structure that will accommodate us are the things we're working on. So we appreciate your patience. And for any employees listening, we appreciate your hard work and dedication. So thank you.

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