Image source: The Motley Fool.
DMC Global Inc. (BOOM -0.30%)
Q3Â 2019 Earnings Call
Oct. 24, 2019, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, ladies and gentlemen and welcome to your DMC Global Third Quarter Earnings Call. [Operator Instructions]
At this time, it is my pleasure to turn the floor over to Geoff High, VP of Investor Relations. Sir, the floor is yours.
Geoff High -- Vice President, Investor Relations and Corporate Communications
Hello, and welcome to DMC's third 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 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. 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 will now turn the call over to Kevin Longe. Kevin?
Kevin Longe -- President, Chief Executive Officer and Director
Thanks, Geoff. Both of DMCs businesses delivered year-over-year sales growth and margin improvements during the third quarter, and this was achieved during an increasingly challenging environment for the energy industry. Consolidated sales for the third quarter were $100.1 million, up 14% versus the 2018 third quarter and down 10% sequentially. Sales at DynaEnergetics are oilfield products business were $77.4 million, up 17% from the 2018 third quarter, and down 13%, sequentially. Sales of NobelClad, our composite metals business, were $22.7 million, up 5% versus last year's third quarter and up 2%, sequentially.
NobelClad ended the third quarter with an order backlog of $33.2 million versus $38.8 million at the end of the second quarter. Trailing 12-month book-to-bill ratio at the end of the quarter for NobelClad is 0.97.
DMC reported third quarter adjusted gross margin of 37%, which excludes a writedown of inventory related to the planned closure of DanaEnergetics manufacturing facility in Tyumen, Siberia. Gross margin of last year's third quarter was 34% and it was 38% in this year's second quarter. DanaEnergetics reported adjusted gross margin up 40% versus 37% in the same quarter a year ago and 41% in this year's second quarter. NobelClad's gross margin was 26% up from 25% in the 2018 third quarter and flat versus this year's second quarter.
Consolidated adjusted operating income was $19.3 million versus $13.9 million in last year's third quarter. Adjusted operating income at DanaEnergetics was $21.4 million and adjusted operating income at NobelClad was $2.2 million. Consolidated adjusted net income was $13.4 million or $0.90 per diluted share versus adjusted net income of $10 million or $0.68 per diluted share in the 2018 third quarter.
Adjusted EBITDA was $23.2 million up from $17.2 million in last year's third quarter and down from $29 million in the second quarter. DynaEnergetics reported adjusted EBITDA of $23.2 million while NobelClad reported adjusted EBITDA of $3.1 million. From a commercial perspective, DynaEnergetics is taking advantage of a slowdown in well completion activity to onboard new service companies with the IS2 intrinsically safe initiating system in the DynStage DS factory-assembled performance-assured perforating systems.
Our sales team also is spending more time with exploration and production companies, which are seeking to improve safety, maximize efficiencies and drive down well completion costs. If the operators learn more about the benefits of DynaEnergetics perforating systems they are increasingly specifying them into their well completion programs.
We believe the recent commercialization of two new DS models will accelerate customer adoption rates. DS NLine which enables the pre-alignment of shaped charges at surface and then the orientation of the gun string once it's in the wellbore is already being specified by a growing number of operators. DS Trinity 3.5, which is the industry's most compact perforating system is now being shipped to customers. The system is 7 inches long and features three shaped charges on a single radial plane.
Recent studies show that in select formations this charge configuration can improve frac performance and reduce breakdown pressure by up to 25%. This could lead to a material reduction in horsepower requirements for hydraulic fracturing and decrease wear and tear on pressure pumping equipment. In addition, DS Trinity 3.5 enables operators to deploy a higher gun and charge counts within each stage. Customer reaction to the field trials is very positive and we are pleased the system is now commercially available.
In NobelClad, new composite metal applications are generating increased interest within a variety of end markets, including alternative energy, mining and aerospace. These emerging opportunities reflect the successful effort of NobleClad's expanded market development team, which is demonstrating the benefits of our composite metal solutions to end users around the world. Meanwhile, the NobleClad's sales organization is bidding on a number of large projects that are expected to be awarded in the coming months. Collectively, we believe these opportunities could result in meaningful sales growth at NobleClad during 2020.
The third quarter brought continued improvement in DMC's financial strength. Our net debt at the end of the quarter improved by 43% versus the end of the year and our trailing 12 month return on invested capital was 30%. Our strong financial position enabled the recent increase in our annual dividend which we raised to $0.50 a share from $0.08 a share. As Mike will discuss shortly, we are maintaining our 2019 sales guidance and have increased our full year adjusted EPS forecast to a range of $3.65 to $3.80. We also expect our full year results will establish new records for sales, income and return on invested capital. Our continued success would not be possible without the efforts of our employees around the world. I want to thank them for their dedication to the company. I also want to thank our customers for their continued support of DMC.
Now, I will turn the call over to Mike for further detail on our third quarter financial results and a look at our guidance. Mike?
Michael Kuta -- Chief Financial Officer
Thanks, Kevin. Starting with third quarter expenses, consolidated SG&A was $17.1 million or 17% of sales versus SG&A of $15.1 million or 17% of sales in last year's third quarter. Amortization expense was $394,000 or less than 1% of sales.
We ended the third quarter of cash and cash equivalents of $12.2 million. Net debt was $16 million, down from $28 million at December 31, 2018. We generated $35.1 million in cash from operating activities for the nine month period, which compares to $6.5 million generated during the nine month period last year.
Turning to guidance, we anticipate consolidated fourth quarter sales in the range of $92 million to $97 million, up from the $90.3 million we reported in last year's fourth quarter. We expect DynaEnergetics will report sales in a range of $72 million to $75 million versus $63.2 million in last year's fourth quarter. NobelClad sales should be in a range of $20 million to $22 million versus the $27.1 million reported in the year ago fourth quarter. Consolidated gross margin is expected in a range of 34% to 35% versus the 35% reported in 2018 fourth quarter. Pricing pressure North America's oilfield products and services sector coupled with a less favorable project mix at NobelClad are the primary reasons for the expected decline.
We expect SG&A will be approximately $17 million versus the $17.2 million in last year's fourth quarter. Amortization expense is expected to be approximately $400,000 and interest expenses also should be roughly $400,000. Fourth quarter adjusted EBITDA is expected in a range of $17.5 million to $20 million, up from the $16.9 million in last year's fourth quarter.
As Kevin noted, we now expect our full-year adjusted earnings per share will be in a range of $3.65 to $3.80 up from the $2.07 we reported last year and above our prior forecasted range of $3.55 to $3.70.
With that, we are ready to take any questions. Operator?
Questions and Answers:
Operator
Thank you. [Operator Instructions] And we will take our first question from Stephen Gengaro with Stifel.
Stephen Gengaro -- Stifel -- Analyst
Thanks. Good morning, gentlemen. Good afternoon, I should say.
Kevin Longe -- President, Chief Executive Officer and Director
Good afternoon, Stephen.
Stephen Gengaro -- Stifel -- Analyst
So, two things, the first thing, I would like start with, if you don't mind, you talked about on-boarding new customers and I always get the sense that in a slightly softer market on-boarding new customers with a premium product is harder not easier, but based on your gross margin performance, it seems like they have held up really well. So can you help with rest of that and how we should think about that?
Kevin Longe -- President, Chief Executive Officer and Director
Yeah. There is a lot of pricing pressure on the equipment suppliers that's coming from the service industry today. We chose in the quarter and in previous quarters not to chase volume at the expense of margin. And I think it's important to kind of share our point of view on that is that we're in an industry where demand is inelastic. We have differentiated products with a high value and use. And few well capitalized competitors. And we have high variable costs, low fixed costs, and with explosives a high barrier to entry. And with that kind of industry structure, it's really a fool's game to compete on price from a product standpoint. And often, once your prices go down, it's hard to get them back up. We feel our prices deserve the value that we create for our customers.
And so it's hard in this kind of environment, but we push back and not follow the same dynamics that existed on the service side of the industry. And it's important for I guess us to also note, and we feel for our service customers, they also deal with inelastic demand. Unfortunately, there's many poorly capitalized companies on the service side and because of their debt loads, they are more inclined to chase completions at a lower price. And we just feel for them, but it's just not the same economic environment on the product side of it.
Stephen Gengaro -- Stifel -- Analyst
Okay, great. Thank you. And then two others, one quick one, and that just is, when you look at your EPS guidance range, are you basing that off adjusted year-to-date EPS of about $3.07, so you're implying $0.58 to $0.73? Am I thinking of that right?
Kevin Longe -- President, Chief Executive Officer and Director
Yeah, the $3.65 to $3.80 is based on $3.11 year-to-date.
Stephen Gengaro -- Stifel -- Analyst
Perfect. Okay. Perfect. Thank you. And then just the final question is, the biggest thing we hear in talking to investors is when you look at particularly Halliburton and what they're doing internally versus I know they're a big customer of yours, but can you give us any details on how that relationship is and the importance of Hal to you, etc.? I mean can you address that at all, because it's clearly the biggest thing I hear from investors that creates some concern.
Kevin Longe -- President, Chief Executive Officer and Director
Yeah. I mean Hal was a very important company for the industry. I think it's important for us to not get into specifics on customer relationships and our business relationships with our customers. It's just not the place for it on the conference call.
Stephen Gengaro -- Stifel -- Analyst
Okay. That's fair. Thank you.
Operator
And our next question comes from Tommy Moll with Stephens, Inc.
Tommy Moll -- Stephens, Inc -- Analyst
Good afternoon and thanks for taking my questions.
Kevin Longe -- President, Chief Executive Officer and Director
Yeah. Hi, Tommy.
Tommy Moll -- Stephens, Inc -- Analyst
So for DynaEnergetics revenue, in the third quarter it appears to have declined more rapidly than the broader industry. But then conversely, your 4Q guide appears to be declining not as rapidly as the industry if you use the few bogeys thrown out by some of the service companies in recent days. Unfortunately, those are the best bogeys that we have to figure out if you're beating, tracking or trailing the industry. But for you guys, as you think about your 4Q guide, what are the observations and assumptions that you guys use to build it? And maybe that will help us get a better understanding. And then similarly on the margin side, you called out cost absorption as one driver of margin compression for Dyna in the fourth quarter, but anything else you could offer to help us understand those dynamics would be helpful. Thank you.
Kevin Longe -- President, Chief Executive Officer and Director
Yeah. I'll tackle that last one first. DynaEnergetics had a 40% gross margin, I think it was 41% last quarter. And so they've done a good job maintaining their gross margin in a very difficult environment. In that gross margin and in our cost of goods sold is legal. And legal has picked up, excuse me, not legal but R&D. And our R&D as a percent of revenues is slightly higher in the quarter. But we were actually very pleased with the 40% gross margin and what essentially was a just under 28% operating income for DynaEnergetics in the quarter. Regarding volume, in the second quarter conference call we anticipated a slowdown in the second half of this year. And I think we could see it coming, I think others could see it coming. A lot of that hit in the third quarter. We think that the drop in the fourth quarter is going to be less. A big part of that hit was in the third quarter of this year. And we're hoping that some of the development things that we're working on will help us to mitigate a volume slide back in the fourth quarter. I do think it's important to note that 2018 was a very good year, 2019 was a better year for us than 2018, and we expect 2020 to be a better year than 2019. It was just the second half of the year was weaker than the first half of the year.
Michael Kuta -- Chief Financial Officer
And Tommy, just on the 4Q guide and the absorption, we also have NobelClad is going to be softer in terms of sales and margins in the fourth quarter. They've performed very well from a margin standpoint in the first three quarters of the year and just have a less favorable project mix in Q4, so that's an aspect that we're picking up in the guide as well. And as Kevin said, just like DynaEnergetics, NobelClad we're expecting to be very strong in 2020.
Kevin Longe -- President, Chief Executive Officer and Director
We'd also, if I could add too, because I think the comment was made that we'd declined further than the industry. And we don't think that's the case. You know, I know some other companies have reported their earnings already and it's like an apple and an orange in the sense that in our revenues, the switch revenues, the addressable switch revenue, and the energetics. And one of our competitors had a very good quarter and that quarter included a switch company that they acquired at the end of the third quarter last year. So we were impressed with their performance and we believed that their switch revenue was growing. And that's actually a benefit to DynaEnergetics and to DMC.
In 2017, the addressable switch market was estimated to be about 48% of the perforating market and it's expected to grow to 72% of the market in 2020. We've been out in front with our addressable switch and we're glad to see that other companies are coming out with their product and helping to grow the higher end in the value-added part of this marketplace. And so -- and then when you compare revenues, product revenues with energetics and addressable switches, I think you'd see that we're kind of growing nicely.
Tommy Moll -- Stephens, Inc -- Analyst
Thank you for all the detail there. And if I could shift gears to capital expenditures and more broadly capital allocation philosophy, understanding that you may not have your 2020 budget set for capex, but my sense is you probably don't need any more roofline expansion for the DynaEnergetics segment, so some of this year's budget I would think should fall away. Is there any range you can even give us for preliminary thoughts for next year? Or if not a range, anything you can do to help us understand maybe the things...
Kevin Longe -- President, Chief Executive Officer and Director
Okay. I'll --
Tommy Moll -- Stephens, Inc -- Analyst
That we may not see recur?
Kevin Longe -- President, Chief Executive Officer and Director
Yeah. We're actually pleased we have come off of this year, I think our guidance was $30 million in terms of capex, and that's following $46 million in capex in 2018. When we put the capacity in place for factory assembled systems, we expect our capex to be in the $15 million to $20 million range next year. And we haven't gone into our planning and budgeting yet, but we do expect the capex to be significantly lower than it has been the last two years.
Tommy Moll -- Stephens, Inc -- Analyst
Okay. Thank you for that. And I will turn it back.
Operator
And our next question comes from Gerry Sweeney with ROTH Capital.
Gerry Sweeney -- ROTH Capital -- Analyst
Hey. Good afternoon Kevin, Mike and Geoff.
Kevin Longe -- President, Chief Executive Officer and Director
Yeah. Hi.
Michael Kuta -- Chief Financial Officer
Yeah. Hi Gerry.
Gerry Sweeney -- ROTH Capital -- Analyst
Question on the energetics side. And Kevin, I know you go out and do some of these sales calls or you're very active in meeting with customers. How -- I'm going to try and phrase it where it makes sense, but when you're talking to customers, where does shaped charge technology come into the equation? I mean when you're talking to them, does the efficiency and everything that DynaStage brings to the table more than outweigh a lot of talk around shaped charged technology or another way to phrase it, is your shaped charge technology as good as anyone else's in the industry and it's really not a real component on the sales portion when you're out there with DynaStage?
Kevin Longe -- President, Chief Executive Officer and Director
It's a huge component on the sales portion. This is all about, perforating is all about shaped charge. Without the energetics and quality energetics, the packaging options really don't matter. And so we have a section four lab, we tailor a lot of our discussions for rock optimized charges, we have as broad if not a broader shaped charge line than any other company in the industry. And at times we even sell shaped charges to companies who make shaped charges because they don't have the breadth of product line that we have.
And so there has been a lot of focus on our initiating systems and the safety and reliability and the convenience that that's brought to a completion program. We have to equally be strong in shaped charges in order to be successful. And our shaped charges are up significantly year-over-year, not just with our gun volume.
Gerry Sweeney -- ROTH Capital -- Analyst
Got it. So suffice to say you're very competitive in the energetics market?
Kevin Longe -- President, Chief Executive Officer and Director
Yeah. I mean, the -- without a doubt. I mean the energetics market itself, according to Spears, 2019 versus 2018, stages are comparable, but the energetics is up 11%, 12% and we're up twice to almost 3 times that.
Gerry Sweeney -- ROTH Capital -- Analyst
Got it. Another question here. So essentially with DynaStage in some ways you are -- the technology helps eliminate some of the assembly crews and in some ways, you almost bake your technology or your product into your client's supply chain. Two things. One, I would assume that makes your product more sticky than buying components. And two, at some point do you get a little bit more insight into the clients' activity because you are part of that supply chain? And are they giving you a little bit of information as to what they're seeing for a quarter or two out?
Kevin Longe -- President, Chief Executive Officer and Director
I think we are not trying to be all things to all people in the marketplace and we like to partner with customers and work together to had solid completion programs and have it be efficient for all parties. And the only way to do that is to have trusted and respected relationships and dialogues. So we feel that for the customers that we're working with, that we've got a good insight into the types of things that they're working on and that's very important.
Gerry Sweeney -- ROTH Capital -- Analyst
Got it.
Kevin Longe -- President, Chief Executive Officer and Director
The...
Gerry Sweeney -- ROTH Capital -- Analyst
Sorry, go ahead.
Kevin Longe -- President, Chief Executive Officer and Director
No. Go ahead.
Gerry Sweeney -- ROTH Capital -- Analyst
I was just going to ask one short follow-up question and then jump back in line. Any idea what percent of revenue you think the perforating market or what percentage of the market will go to factory assembled versus maybe component sales?
Kevin Longe -- President, Chief Executive Officer and Director
I think it's very hard, it's a very difficult value proposition for the service company to be the assembler integrator of a perforating system when they're not basic in the components, and it puts a burden on them in terms of staffing, capital expenditures, working capital. And I think a large part of the industry is starting to move toward factory assembled systems. And it's natural, I mean the major companies, Core, Hunning, Titan, oil states, ourselves in the merchant market, I mean we're basic in the energetics and the technologies to assemble these guns and we have a more controlled environment for doing that.
So I would see the industry, 75% to 80% of the industry if not the majority of the land based, going to factory assembled guns. In times like this, there's a lot of scrappy component guys out there that are trying to put together guns to compete with the majors, but it's not a sustainable business model. They don't deploy it and they're not basic in the manufacturing of it. So I think that there's a lot of noise around other component manufacturers getting into the space, but they don't have the resources or the skillset in order to compete against the majors. I don't want to underestimate them, but I also don't want to overestimate them.
Gerry Sweeney -- ROTH Capital -- Analyst
Got it.
Kevin Longe -- President, Chief Executive Officer and Director
I don't want to underestimate them, but I also don't want to overestimate them.
Gerry Sweeney -- ROTH Capital -- Analyst
Yeah. I got you. So I appreciate it. Thanks. I will jump back in line.
Operator
And our next question comes from Edward Marshall with Sidoti.
Edward Marshall -- Sidoti -- Analyst
Hello, there. How are you, guys?
Kevin Longe -- President, Chief Executive Officer and Director
Good. Fine, Ed. How are you?
Edward Marshall -- Sidoti -- Analyst
I am doing great. So, there's been a lot of chatter about competition on this call and past calls. I'm just curious, I mean we took a look at I guess the merchant market and the comparisons there, but I don't think that's a fair, necessarily a fair comparison. I'm wondering if you have kind of any updates on maybe your share in the market and how that's been trending? And then secondly, I think in years past you've talked about how customers are sitting on the sidelines because you just couldn't get the product to them. Does that dynamic still exist?
Kevin Longe -- President, Chief Executive Officer and Director
Right now, we have additional capacity to serve the marketplace. And we've chosen, I mentioned earlier, not to chase volume at the expense of margins. Again, we've got a market with inelastic demand and differentiated products [Indecipherable]. So we're focused on getting the value for our products. So we see some competitors unfortunately competing on price.
And as I mentioned, it's kind of a tough game to play if you're in a market that has inelastic demand, your volume is down because the market overall is down, and you're going to take yourself down further on price, it's well good luck with that. We've got capacity, which kind of ties with the question that Tommy asked, of we don't need a lot of capex for next year. And we're happy with where we sit right now.
Edward Marshall -- Sidoti -- Analyst
So, do you have an update on share?
Michael Kuta -- Chief Financial Officer
Share, we're in the low 20%s.
Edward Marshall -- Sidoti -- Analyst
Has that...
Michael Kuta -- Chief Financial Officer
[Indecipherable]
Edward Marshall -- Sidoti -- Analyst
Has that grown or shrunk?
Michael Kuta -- Chief Financial Officer
It's grown. I mean last year, 2018, we were in the high teens, now we're in the low 20%s.
Edward Marshall -- Sidoti -- Analyst
Up from the first half of this year?
Michael Kuta -- Chief Financial Officer
We think it's stable. Stable to growing.
Edward Marshall -- Sidoti -- Analyst
Okay. Okay.
Kevin Longe -- President, Chief Executive Officer and Director
I think the market is in positive -- what is reflected -- and again, there's four quarters in this game and we focus on the year. And we know that shaped charges are up roughly 12% year-over-year and we're up significantly higher than that. DynaEnergetics revenues are up 40% plus and our operating income is up 84% year-over-year at healthy margins. And I'd like to emphasize the margins because I think that business, we target mid to upper 20s operating income margins. And I think that's probably the strongest reflection of the technology that we're deploying.
Edward Marshall -- Sidoti -- Analyst
That's good to hear. You talked about it earlier, you said Trinity is now commercially available. I'm curious if you have any data, how many you've shipped, and I think that's a better margin product than even the existing gun system. Any comments or any further discussion we could have regarding Trinity?
Kevin Longe -- President, Chief Executive Officer and Director
Yeah, it's just starting to ship, so year-to-date has been insignificant in results. It's one of a family of products and so we need to see over the next few quarters how applications from Trinity take hold. It's not an answer to everything but it's an answer to some applications. And of course, that's happening in a [Indecipherable]. But we'll have more information in our next conference call.
Edward Marshall -- Sidoti -- Analyst
You and I have known each other for a long time, you'll probably appreciate the full circle of this question. But you guys are, the balance sheet looks under levered at this point. As we kind of look forward, I know acquisitions and maybe another leg to your stool here is something that is key to you. What's your tolerance for future acquisitions and timing of those acquisitions given the current environment, etc.?
Kevin Longe -- President, Chief Executive Officer and Director
We have -- two things. We are looking at things. We don't need to acquire anybody. We're happy with where we are in some of the investment opportunities we have in our two businesses, and they take priority over an acquisition. Mike won't let me have any capital for capex, so he's [Indecipherable]. It's very hard to predict. We're not out in a market competing for auctions kind of properties. If we do anything, it's going to be negotiated, it's going to be quiet, it's going to take some time. And we're not in a position right now to even talk about anything that we're working on.
Edward Marshall -- Sidoti -- Analyst
Okay, but if I'm hearing you correctly, you're prepared for when, you're prepared today, the market wouldn't deter you, you just need to find the right opportunity?
Kevin Longe -- President, Chief Executive Officer and Director
The right opportunity. And also, what will deter us is ourselves. We do not want to leverage our company, not in the type of market that we're in. We -- and we don't view growth [Indecipherable] going after acquisitions, or excuse me, acquisitions and growth inconsistent with dividends. We raised our dividend. We want to build cash and we don't want to do a highly leveraged acquisition and risk our company. And so right now, for us patience is a virtue. We need to get out of the banks and start building cash and that's really what we're focused on.
Edward Marshall -- Sidoti -- Analyst
It sounds to me, and some of the questions were probably phrased this way, but it sounds like to me that there's several avenues to continue growing both the topline and earnings power for this business as we move forward. Whether it's R&D investments, whether it's other organic investments, the under-utilization of the facilities and maybe the under levered balance sheet, there's plenty of opportunity for growth ahead of you?
Kevin Longe -- President, Chief Executive Officer and Director
We believe so. It's limited by our goal not to corner any one of these markets, it's to carve out the higher technology, higher value-added area and be a solid industry contributor. And so we've got a number of things that we're working on [Indecipherable] and some of the other products that we're coming out with on the energetics side of it.
DynaEnergetics is a product and technology company with some things that they can do to bolt around perforating and NobelClad is an application engineering company for composite metals. And our President there, John Scheatzle, has done a great job of building, putting in place a strong application development team and we expect that to start contributing going forward. So with a clean balance sheet and with the things that we have in front of us, we're looking forward to next year and the next couple of years.
Edward Marshall -- Sidoti -- Analyst
Perfect. I appreciate your comments. Have a good evening.
Kevin Longe -- President, Chief Executive Officer and Director
Yeah. Thanks, Ed.
Operator
And next we will move to Stephen Gengaro with Stifel.
Stephen Gengaro -- Stifel -- Analyst
Thanks. Two quick follow-ups. One, Kevin, can you talk a little bit about NobelClad and sort of the opportunities you see there going forward? And any way you could kind of bracket potential growth opportunities there as you look out to 2020?
Kevin Longe -- President, Chief Executive Officer and Director
Yeah, I mean we're not in a position yet to give guidance for 2020, but they deal with the downstream petrochemical industry for 60% plus of their business and industrial processing for the other. And they deal with major capital projects primarily. So those are long gestation period projects and the business that we're going to be doing next year, the year after, is really stuff that we started working on two, possibly three years ago. In my tenure with DMC I was probably slow in terms of adding application engineering people because of the long time that it takes. But we were also consolidating the manufacturing footprint. And they are rightsized for their manufacturing and they've got modern and efficient facilities and a lower operating cost than they had at this time last year. And they have quite a bit of application development capability.
So we -- they are feeling a little bit like a second cousin with the growth of DynaEnergetics and we don't want them to feel that way any longer and we're hoping that they will start growing with some of these new applications that they're going after. We just, we're excited about that business going forward. The applications, there are a whole host of kind of unique processing applications and I've been -- I don't have the best record of predicting on when those are going to land. So we need to demonstrate this to all of you that we're going to build and grow that business.
Stephen Gengaro -- Stifel -- Analyst
Great. Thank you. Then I guess as a follow-up, when you look at your -- I'm trying to triangulate your guidance a little bit for the fourth quarter, especially for the DynaEnergetics business. And when you look at kind of what some of the others have said, I mean you're looking at a fairly small drop-off in revenue. Seems like others have guided down mid double digits, 12% to 15% range in general. And I'm just trying to think about how, what your comfort level is with DynaEnergetics topline guidance for the fourth quarter.
Kevin Longe -- President, Chief Executive Officer and Director
Well, We kind of took the hit -- we kind of look at it as the second half of this year compared to the first half. And there's I guess a financial seasonality that's entered into this marketplace that, as well as a lot of undercapitalized companies, to focus on balance sheet. And so we could see that coming, we anticipated it. We've raised our EPS guidance, so I think we're hopeful that we can keep growing our market and the prices for our products.
Stephen Gengaro -- Stifel -- Analyst
Okay, then when I think about -- I guess the other thing I was sort of thinking about when I look at the business on the DynaEnergetics side, is there's well frac, there's frac stages and then there's perf guns per stage and that has been trending higher over the last several years. I think with the Trinity guns maybe it continues to trend higher. What are you seeing as far as that dynamic is concerned? Both currently and kind of how do you expect it to play out?
Kevin Longe -- President, Chief Executive Officer and Director
I think we referenced Spears earlier in some of the statistics. I think they've recently come out with an assessment of the market and they brought down their forecast for 2020 with completions being relatively stable. I think they were up 1% or so. Stages. But the perforating intensity per stage is going to increase yet again. And so we see our market from a unit buy-in standpoint going up another 10%, 12% in 2020. And we're hopeful that the pricing can hold on and that we see that in terms of revenue growth also. For the industry.
Stephen Gengaro -- Stifel -- Analyst
Okay. Great, that's helpful. I'll take more offline, but I appreciate the comments.
Operator
And our next question comes from Tommy Moll with Stephens, Inc.
Tommy Moll -- Stephens, Inc -- Analyst
Thanks for letting me back in. I just had a couple of housekeeping items. On the Russia facility that you've shuttered, can you quantify the depreciation benefit from that? And then also the pending charge that you mentioned in the release today, can you quantify that and give us your best guess on timing?
Kevin Longe -- President, Chief Executive Officer and Director
Yeah. The depreciation was nominal in terms of the impact to DMC's results. And in terms of the foreign currency translation sitting in equity, that balance is about $8 million. And we'll charge that through restructuring through the income statement when the entity is substantially liquidated through sale of the assets. We expect that to occur either late fourth quarter or early first quarter and that's when you'll see that charge. Non-cash and part of our restructuring.
Tommy Moll -- Stephens, Inc -- Analyst
Perfect. Then last one for me, Mike, if you could clarify the share count you're using for the full year EPS range?
Michael Kuta -- Chief Financial Officer
I'm using roughly 15 million.
Tommy Moll -- Stephens, Inc -- Analyst
Okay. Thank you very much.
Operator
And next we will go to Jim Brilliant with Century Management.
Jim Brilliant -- Century Management -- Analyst
Good afternoon, guys. How are you doing?
Kevin Longe -- President, Chief Executive Officer and Director
Yeah. Hi, Jim. How are you?
Jim Brilliant -- Century Management -- Analyst
Pretty good. Kind of on the NobelClad, I know you're not ready to make any kind of projections in the next year, but could you size the size of the contracts you're bidding on? Kind of a range? Are we talking about some of the new markets you're entering or is it also a combination of the chemical businesses starting to pick up?
Kevin Longe -- President, Chief Executive Officer and Director
So, they're trailing 12-month bookings and it's right about $90 million. And they're working on some fairly sizable projects that are in the $5 million to $15 million range, and it's a handful of them. And we're hoping that we get a couple of those. And that, as you can see for a company that's been in the $80 million to $90 million, it really will move the needle in terms of their performance next year. If those projects fall, and we'll know more about the timing of those when we give our guidance in -- when do we give our guidance, is that February?
Michael Kuta -- Chief Financial Officer
February. Yeah.
Kevin Longe -- President, Chief Executive Officer and Director
February. Yeah.
Jim Brilliant -- Century Management -- Analyst
Okay. Then can you expand a little bit on the new product offerings? So you mentioned something kind of interesting on the Trinities. If we look at when you introduced the factory assembled gun system, you provided an efficiency you the well site in terms of the assembly at wire line. But now you're talking about adding efficiencies in the pressure pumping market. Can you expand on that? That's a whole other avenue.
Kevin Longe -- President, Chief Executive Officer and Director
Yeah, and I think the efficiencies have been there also in the pressure pumping over the last few years with our equal hole which is our halo frac and our FracTune shaped charges and our big hole shaped charges. In some respects, the advancements that we've had on our shaped charge development has been overshadowed by our own discussing of the packaging options. And it's not just the packaging options, it's the nervous system, the integrated switch detonator that controls the perforations. And we're coming out with a whole host of different ways of packaging the shaped charges so that you can mix and match shaped charges with packaging designs. And they're designed for not just the shaped charge capacity and chemistry and physics behind the channel development that they do, but it's also how they're oriented, where they're positioned, and they are rock optimized if you fill, formation optimized designs that we want to partner and work with the exploration and production companies to help them to design their completion systems for where these wells are being drilled and operated. And so there's a limit to how far you can go in this industry or any industry on the cost side of it and particularly an industry that has very low oil recovery rates. So it's not that we -- we're actually focused on oil recovery going forward through our shaped charge and our packaging design.
Jim Brilliant -- Century Management -- Analyst
Okay, so let me just clarify, so your new designs are focusing on oil, improved oil recovery?
Kevin Longe -- President, Chief Executive Officer and Director
Yeah. Yeah.
Jim Brilliant -- Century Management -- Analyst
Okay.
Kevin Longe -- President, Chief Executive Officer and Director
Whether it's in new wells or in refracked wells.
Jim Brilliant -- Century Management -- Analyst
Okay. So you just led into the next question. I've heard a lot about refracking. Obviously, it's an important part to the industry. Where do you guys, where are you with that? And are you seeing an increase in refracks?
Kevin Longe -- President, Chief Executive Officer and Director
Re-fracks are maybe 3%, 4% of well completion programs today. Growing, but from a very small base. We historically haven't differentiated between perforating a new well or perforating an existing well. We have a product line for that area that's a smaller diameter gun with a larger shaped charge, equal hole design so that it can go through the various tubulars in order to refrack an existing well. We call that product line our DS Echo if you will. And that's -- we haven't put it together in terms of a piece of literature because it's just part of our standard completion program and perforating programs. But we think that we'll probably do more of that going forward, more marketing on that, because it's with less drilling in some basins, refracking is increasing in certain basins.
Jim Brilliant -- Century Management -- Analyst
Okay. And then I just wanted to clarify what I thought I heard earlier. We know 2018 was better than 2017 and 2019 was better than 2018 and I think you said 2020 is going to be better that 2019. And your capex next year is $15 million to $20 million?
Michael Kuta -- Chief Financial Officer
Correct.
Jim Brilliant -- Century Management -- Analyst
Okay, so substantial free cash flow. And have you thought about share repurchase?
Michael Kuta -- Chief Financial Officer
No. We'd like to build some cash.
Jim Brilliant -- Century Management -- Analyst
Fair enough.
Kevin Longe -- President, Chief Executive Officer and Director
I'd say that we want to do share repurchases, but answering your question, we haven't thought about it.
Jim Brilliant -- Century Management -- Analyst
All right. I guess one last thing. So you just came out with the Trinity, it's been in pilot and now you're shipping. When did you begin shipping that?
Kevin Longe -- President, Chief Executive Officer and Director
Within the last 10 days.
Jim Brilliant -- Century Management -- Analyst
Okay, so it's a little bit too early to tell, but any kind of additional color on the pilots and how it's being utilized?
Kevin Longe -- President, Chief Executive Officer and Director
Just what we mentioned in the earnings release. And we're hoping to -- we're just gaining more information from that so we have four E&P companies that we're working with and a handful of service companies and we're just gathering information on how it works.
Jim Brilliant -- Century Management -- Analyst
I am sorry, did you say four E&P companies?
Kevin Longe -- President, Chief Executive Officer and Director
Yeah.
Jim Brilliant -- Century Management -- Analyst
Okay.
Kevin Longe -- President, Chief Executive Officer and Director
Starting. And...
Jim Brilliant -- Century Management -- Analyst
Yeah.
Kevin Longe -- President, Chief Executive Officer and Director
And so we're just gathering this information but we're very encouraged with what, the information that's coming in. Obviously as we build a strong database, we'll share that database with the market to help move that product.
Jim Brilliant -- Century Management -- Analyst
So Kevin, if you guys look out two, three years, and so if the I think you said earlier that switchers were about 48% and they're now at 72% and preassembled --
Kevin Longe -- President, Chief Executive Officer and Director
Going. Going to the low 70%s.
Jim Brilliant -- Century Management -- Analyst
Going to low 70%s I guess, next year. But the factory assembled is going to follow that too. So as the industry moves toward factory assembled, what happens to those that aren't doing it that way currently? I mean you've spent $70 million over the last couple of years adding capacity and adding the technology behind it. It's not all that easy for the industry to just flip a switch in order to go from a component assembler to an integrated factory assembly. How does that happen for the industry and what do you think the implications are for the industry because of the demand if you will from that factory assembled E&P customer?
Kevin Longe -- President, Chief Executive Officer and Director
I mean, the value aspect of the factory assembled is that particularly in ourselves where we're basic in all the components, meaning we manufacture integrated switch detonators, core Swedish shaped charges, we've got all the mechanical processing on the gun bodies and the subs. You know, to me it's kind of crazy to send all of that as a bucket of bolts to our customer and ask them to assemble it. And it's inefficient. So the rationale for the factory assembled, and performance assured is a big part of that, is that it is the most efficient way of manufacturing, assembling a quality gun and getting it to the field and down the well. And you take people off the well site, which makes that more efficient.
And so people who are, or companies that are assembling guns that aren't basic in the manufacture of them, they really don't, their market is a small market and it's more the commodity market. And they are having to sell to the service companies that have more people on the well sites than those who are using a factory assembled gun. So I don't think the economics are going to play out favorably for land based unconventional people assembling this at the well site. And to me, it's just common sense. Some of these completion programs are more expensive than a car and the parts companies don't send all the components to a customer to assemble their own car. Why would they do that with perforating gun?
Jim Brilliant -- Century Management -- Analyst
Right. Okay. That's all for me. Thanks guys.
Operator
And our last question comes from Ed Marshall with Sidoti.
Edward Marshall -- Sidoti -- Analyst
Hey, Kevin, just a quick follow-up. I look at Dyna, each quarter this year saw improving incremental margins. I think in the third quarter over 50%, close to 55%. Obviously, that's a testament for pricing and how well that's been holding up. But I'm curious, you're carrying higher fixed costs now because of the under absorbed capacity. Is there a mix that might be helping that incremental or something else that we might be missing there? And then secondly, is there any idea on the sustainable incremental margin for Dyna as we move forward?
Kevin Longe -- President, Chief Executive Officer and Director
Well, I mean, we -- our objective is in the low 40s [Indecipherable]. And to keep innovating on the products in order to keep healthy margins and be competitive in the marketplace. And we feel with being a technology company comes legal expense, both on the defense side which we had historically, but also on the offense side with our growing patent portfolio. And so we have -- we don't have high fixed costs, we have investments we're making for future growth. And we feel pretty comfortable that as that company, as that business grows, that those margins will follow. Probably right in the ranges they're at today because I think that they are operating and they are very well-balanced today.
Edward Marshall -- Sidoti -- Analyst
Got it. Appreciate your comments. Thank you.
Operator
And that does conclude our Q&A session for today. I'll turn it back over to Kevin Longe for any closing remarks.
Kevin Longe -- President, Chief Executive Officer and Director
Yeah. First of all, I'd like to thank everybody for joining this call and I'd like to highlight DMC, DynaEnergetics, NobelClad's employees and I want to thank everybody, our employees, for their considerable efforts. You have enabled now 10 straight quarters of year-over-year revenue and adjusted EBITDA growth. And I think that's pretty significant. And we look forward to the future and also our future call in February. So, thank you, everybody.
Operator
[Operator Closing Remarks]
Duration: 64 minutes
Call participants:
Geoff High -- Vice President, Investor Relations and Corporate Communications
Kevin Longe -- President, Chief Executive Officer and Director
Michael Kuta -- Chief Financial Officer
Stephen Gengaro -- Stifel -- Analyst
Tommy Moll -- Stephens, Inc -- Analyst
Gerry Sweeney -- ROTH Capital -- Analyst
Edward Marshall -- Sidoti -- Analyst
Jim Brilliant -- Century Management -- Analyst
Transcript powered by AlphaStreet
This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
