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0 Investor Presentation August 2010

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  • 1. Investor PresentationAugust 20100

2. Cautionary Statement Regarding Forward-looking InformationThis presentation contains, and the Company may from time to time make, written or oral "forward-looking statements" within the safe harbor provisions of the PrivateSecurities Litigations Reform Act of 1995. These statements include information with respect to our financial condition and its results of operations and businesses. Wordssuch as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will," "continue," "project" and similar expressions, as well as statementsin the future tense, identify forward-looking statements.These forward-looking statements are not guarantees of our future performance and are subject to risks and uncertainties that could cause actual results to differ materiallyfrom the results contemplated by the forward-looking statements. These risks and uncertainties include: The ability to obtain new contracts at attractive prices; The size and timing of customer orders; Fluctuations in customer demand; Competitive factors; The timely completion of contracts; The timing and size of expenditures; The timely receipt of government approvals and permits; The adequacy of local labor supplies at our facilities; The availability and cost of funds; General economic conditions, both domestically and abroad; The successful integration of acquisitions; and Fluctuations in foreign currencies.The effects of these factors are difficult to predict. New factors emerge from time to time and we cannot assess the potential impact of any such factor on the business or theextent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-lookingstatement speaks only as of its date and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of suchstatement or to reflect the occurrence of unanticipated events. In addition, see "Risk Factors" for a discussion of these and other factors.You are encouraged to read the SEC reports of DMC, particularly its Form 10-K for the Fiscal Year Ended December 31, 2009 for meaningful cautionary languagedisclosing why actual results may vary materially from those anticipated by management.1 3. Cautionary Statement Regarding Forward-looking Information Use of Non-GAAP Financial Measures Non-GAAP results used in this presentation are provided only as a supplement to the financial statements based on U.S. generally accepted accounting principles (GAAP). The non-GAAP financial information is provided to enhance the readers understanding of DMCs financial performance, but no non- GAAP measure should be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of the most directly comparable GAAP measures to non-GAAP measures are provided within the schedules attached to this release. EBITDA is defined as net income plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes stock-based compensation and, when appropriate, other items that management does not utilize in assessing DMCs operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. Management uses these non-GAAP measures in its operational and financial decision-making, believing that it is useful to eliminate certain items in order to focus on what it deems to be a more reliable indicator of ongoing operating performance and the companys ability to generate cash flow from operations. As a result, internal management reports used during monthly operating reviews feature the adjusted EBITDA. Management also believes that investors may find non-GAAP financial measures useful for the same reasons, although investors are cautioned that non-GAAP financial measures are not a substitute for GAAP disclosures. EBITDA and adjusted EBITDA are also used by research analysts, investment bankers, and lenders to assess operating performance. For example, a measure similar to EBITDA is required by the lenders under DMCs credit facility. Because not all companies use identical calculations, DMCs presentation of non-GAAP financial measures may not be comparable to other similarly-titled measures of other companies. However, these measures can still be useful in evaluating the companys performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures. For example, a company with greater GAAP net income may not be as appealing to investors if its net income is more heavily comprised of gains on asset sales. Likewise, eliminating the effects of interest income and expense moderates the impact of a companys capital structure on its performance. All of the items included in the reconciliation from net income to EBITDA and adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles and stock-based compensation) or (ii) items that management does not consider to be useful in assessing DMCs operating performance (e.g., income taxes and gain on sale of assets). In the case of the non-cash items, management believes that investors can better assess the companys operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect DMC ability to generate free cash flow or invest in its business. For example, by adjusting for depreciation and amortization in computing EBITDA, users can compare operating performance without regard to different accounting determinations such as useful life. In the case of the other items, management believes that investors can better assess operating performance if the measures are presented without these items because their financial impact does not reflect ongoing operating performance. 2 4. Key Data (As of 8/4/10)Symbol: NASDAQ GS: BOOM52-week range:$14.02 - $22.40Average daily trading volume (3 mo.): 132,000Approx. market capitalization:$194 millionShares outstanding: 13 millionApproximate float:12.3 millionFiscal year end:December 312009 revenue: $164.9 million2009 EPS: $0.662009 EBITDA:$26.8 million2009 operating cash flow: $29.5 millionCash (6/30/10): $9.8 millionQuarterly dividend: $0.043 5. Executive Management ! Yvon Pierre Cariou - President and CEO ! Richard A. Santa - Sr. Vice President, CFO and Secretary ! John G. Banker - Sr. Vice President, Customers and Technology ! Rolf Rospek - CEO, DYNAenergetics and Oilfield Products segment4 6. Company Overview Worlds dominant provider of explosion-welded clad metal plates - Diversified base of customers in 8 primary end markets - Significant barriers to entry - International network of production and sales facilities - $40 million order backlog at end of Q2 2010 Three business segments provide diversified revenue streams Strong operating cash flow and balance sheet Low Cap Ex business model facilitates strong free cash flow Talented management with deep industry experience Long-term growth strategy5 7. Financial HighlightsNet SalesOperating IncomeIn millionsIn millions6 8. Financial HighlightsNet Income Diluted EPSIn millions 7 9. Business Segments 2009 Revenue by SegmentExplosive MetalworkingOilfield ProductsAMK Welding $134.1 Million$ 21.8 Million$ 9.0 Million 8 10. DMCs Global PresenceCorporate Headquarters Oilfield Products HeadquartersExplosion Welding production centers Oilfield Products subsidiariesExplosion Welding sales offices and agents Oilfield Products sales agents9 11. DMC 2009 Revenue by RegionRussia North America5% Europe47% 23% Asia 17%Australia2% Other Countries - 6%1 0 12. Competing Cladding TechnologiesExplosion Weld Rollbond Weld Overlay Performed by small field of international Performed by small group competitors led by Dynamic Materials Arc-welding process of international hot rolling Corporationtypically performed by steel mills Most versatile cladding technologymetal fabricators Thickness niche is Only cladding process that can address Thickness niche is generally 2 and lessboth compatible and non-compatiblegenerally 6 and greater Compatible metals only metals Compatible metals only Thickness sweet-spot is 1 to 6Explosive Metalworking 1 1 13. Key Demand Drivers for Explosion Welded Plates CorrosionIndustrial CAPEXExplosive Metalworking1 2 14. Explosion Clad - a Critical Weapon in the Battle Against Rust! a major industry challenge is therust crisis in the global energyinfrastructure! Worldwide energy infrastructuretoo old! Most infrastructure far beyondoriginal design lifeFrom presentation at 2009 Offshore Technology Conference Matthew Simmons,Chairman - Simmons & Company InternationalExplosive Metalworking1 3 15. Explosion Welding a Key Step in Pre-fabrication ProcessExplosion Metal Suppliers Welding Fabricators MILLS & SERVICE CENTERS Sourced MetalsEnd Users Carbon Steel Nickel Alloys Titanium ZirconiumExplosive Metalworking 1 4 16. Selected End Markets Served by Explosion Welding Corrosion Oil & Gas industry Power generation Petrochemicals / chemicals Hydrometallurgy Alternative energy Industrial refrigerationTransition Joints Aluminum production ShipbuildingAbove are several of the many industries that utilize explosion welded products.Explosive Metalworking 1 5 17. End Users Include Leading Players in Respective FieldsFabricatorsMorimatsu Group ChinaEnd Users Chemicals RefineryMining EngineeringExplosive Metalworking1 6 18. DMCs Dominant Industry Position Protected by SignificantBarriers to Entry" Global network of specialty-metals suppliers" Permits and shooting sites in U.S., France, Sweden & Germany" Mastery of explosion-welding process in large-scale production" Strong working relationships with end-market customersExplosive Metalworking 1 7 19. Oilfield Products Segment Manufactures explosive perforating systemsand seismic devices for the international oil &gas services industry Growing presence in critical internationalenergy markets Recognized within industry for product andtechnology innovation Extension of DMCs expertise in specializedexplosive manufacturing processes Generated 13% of DMC sales in 2009Oilfield Products 1 8 20. Explosive Perforating The Perforation Process1. After a wellbore is drilled and the cement casing is in place, a perforating gun is deployed into the well2. The gun is fired, sending steel projectiles through the casing and into the surrounding formation creating perforation tunnels3. Oil or gas flows through perforation tunnels and into the wellOilfield Products1 9 21. Financial Performance Review ($mm) 2007 20082009Q2 2009Q2 2010 Sales$165.2 $232.6 $164.9$37.8$38.3% growth46%41% (31%)(40%) (1%) Gross profit$55.0$70.8$43.1 $9.2 $9.3 % margin 33%30%26%24%24% Operating profit$38.9$38.1$16.2 $3.0 $2.1 % margin 24%16%10% 8% 5% Adjusted EBITDA $43.5$53.2$26.8$6.4 $5.5 % growth 36%22% (47%)(56%)(14%) Net income$24.6$24.1$8.5 $1.5$3.0% growth28%(2%)(65%)(76%)100% EPS ($) $2.00$1.91$0.66$0.12$0.23 % growth 27%(5%)(65%)(76%) 92%2 0 22. Balance Sheet Highlights (In thousands)Assets 20082009Q2 2010Cash, cash equivalents & restricted cash $14,360 $22,411 $ 9,794Accounts receivables, net of allowance $34,719 $25,807 $23,108Total current assets $91,049 $87,974 $75,446Total assets $ 229,586 $ 225,176 $ 206,131LiabilitiesTotal current liabilities$45,747 $42,135 $39,976Long-term debt $46,178 $34,120 $23,701Total liabilities$ 111,084 $93,065 $82,697Total stockholders equity $ 118,502 $ 132,111 $ 123,434Total liabilities and stockholders equity $ 229,586 $ 225,176 $ 206,131 2 1 23. Thank you. 2 2 24. Supplemental Information 2 3 25. Sales and Explosion Welding Backlog Progression:Q2 2004 Q2 2010 In millions 2 4 26. Capital Expenditures(in millions)Actual ForecastExplosive Metalworking2 5 27. Progression of Adjusted EBITDA & Net Income (In millions)2 6