DXP Enterprises, Inc. Reports Second Quarter 2024 Results

$49.9 million in cash
$445.6 million in sales, an 8.0 percent sequential and 4.1 percent year-over-year increase
GAAP diluted EPS of $1.00
$48.2 million in earnings before interest, taxes, depreciation & amortization and other non-cash charges ("Adjusted EBITDA")
Free Cash Flow of $30.0 million for the six months ended June 30, 2024
Completed four acquisitions through Q2; two water, and two industrial rotating equipment companies

DXP Enterprises, Inc. ("DXP" or the "Company") (NASDAQ: DXPE) today announced financial results for the second quarter ended June 30, 2024. The following are results for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, and March 31, 2024, where appropriate. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

Second Quarter 2024 Financial Highlights:

Sales increased 8.0 percent sequentially to $445.6 million, compared to $412.6 million for the first quarter of 2024 and increased 4.1 percent compared to $428.0 million for the second quarter of 2023.
Net income for the second quarter was $16.7 million, compared to $19.1 million for the second quarter of 2023 and $11.3 million for the first quarter of 2024.
Earnings per diluted share for the second quarter was $1.00 based upon 16.7 million diluted shares, compared to $1.06 earnings per diluted share in the second quarter of 2023, based on 18.1 million diluted shares. Adjusted diluted earnings per share was $1.02 for the second quarter compared to $1.06 in the second quarter of 2023.
Adjusted EBITDA for the second quarter was $48.2 million compared to $45.3 million for the second quarter of 2023. Adjusted EBITDA as a percentage of sales, or Adjusted EBITDA margin, was 10.8 percent and 10.6 percent, respectively.
Free Cash Flow (cash flow from operating activities less capital expenditures) for the second quarter was $5.9 million, compared to $(4.2) million for the second quarter of 2023.

David R. Little, Chairman and Chief Executive Officer commented, "Second quarter results reflect the execution of our growth strategy and the resilience and durability of DXP’s business. We are pleased with our sequential sales growth and strength in our gross profit margins. This resulted in operating leverage that produced earnings per share of $1.00. DXP’s second quarter 2024 sales were $445.6 million, or an 8.0 percent increase over the first quarter of 2024. Sequential organic sales for the quarter increased 5.3 percent or $21.3 million and acquisitions added another $23.4 million in sales during Q2. Adjusted EBITDA grew $7.9 million, or 19.5 percent over the first quarter of 2024. During the second quarter of 2024, sales were $306.5 million for Service Center, $73.4 million for Innovative Pumping Solutions, and $65.7 million for Supply Chain Services. Overall, we are very pleased with our performance and the progress DXP continues to make as a growth company.”

Kent Yee, Chief Financial Officer and Senior Vice President, remarked, “DXP achieved another high watermark quarter with an 8.0 percent sequential sales increase to $445.6 million in sales and 10.8 percent Adjusted EBITDA margins. We have closed four acquisitions through the second quarter, and we anticipate closing at least two more acquisitions during the second half of 2024. This quarters financial results reflect continued execution of our strategic goals and the impact of our diversification efforts, an overall reduced energy industry exposure, and a strong balance sheet to support our key initiatives. Total debt outstanding as of June 30, 2024, was $545.9 million. DXP’s secured leverage ratio or net debt to EBITDA ratio was 2.64:1.0 with a covenant EBITDA of $187.6 million for the last twelve months ending June 30, 2024.”

Conference Call Information

DXP Enterprises, Inc. management will host a conference call, August 9, 2024, at 10:30 a.m. Central Time, to discuss the Company’s financial results. The conference call may be accessed by going to https://ir.dxpe.com.

Interested investors and other parties can listen to a webcast of the live conference call by logging onto the Investor Relations section of the Company's website at https://ir.dxpe.com. The online replay will be available on the same website immediately following the call. A slide presentation highlighting the Company’s results and key performance indicators will also be available on the Investor Relations section of the Company’s website.

To learn more about DXP Enterprises, Inc., please visit the Company's website at https://www.dxpe.com

About DXP Enterprises, Inc.

DXP Enterprises, Inc. is a leading products and service distributor that adds value and total cost savings solutions to industrial customers throughout North America and Dubai. DXP provides innovative pumping solutions, supply chain services and maintenance, repair, operating and production ("MROP") services that emphasize and utilize DXP’s vast product knowledge and technical expertise in rotating equipment, bearings, power transmission, metal working, industrial supplies and safety products and services. DXP's breadth of MROP products and service solutions allows DXP to be flexible and customer-driven, creating competitive advantages for our customers. DXP’s business segments include Service Centers, Innovative Pumping Solutions and Supply Chain Services. For more information, go to www.dxpe.com.

Non-GAAP Financial Measures

DXP supplements reporting of net income with certain non-GAAP measurements, including EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, and Free Cash Flow. This supplemental information should not be considered in isolation or as a substitute for the unaudited GAAP measurements. Additional information regarding EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Free Cash Flow and net debt referred to in this press release are included below under "Unaudited Reconciliation of Non-GAAP Financial Information".

The Company believes EBITDA provides additional information about: (i) operating performance, because it assists in comparing the operating performance of the business, as it removes the impact of non-cash depreciation and amortization expense as well as items not directly resulting from core operations such as interest expense and income taxes and (ii) the performance and the effectiveness of operational strategies. Additionally, EBITDA performance is a component of a measure of the Company’s financial covenants under its credit facilities. Furthermore, some investors use EBITDA as a supplemental measure to evaluate the overall operating performance of companies in the industry. Management believes that some investors’ understanding of performance is enhanced by including this non-GAAP financial measure as a reasonable basis for comparing ongoing results of operations. By providing this non-GAAP financial measure, together with a reconciliation to its most directly comparable GAAP financial measure, the Company believes it is enhancing investors’ understanding of the business and results of operations, as well as assisting investors in evaluating how well the Company is executing strategic initiatives. Free Cash Flow reconciles to the most directly comparable GAAP financial measure of cash flows from operations as provided below. We believe Free Cash Flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to fund acquisitions, make investments, repay debt obligations, repurchase shares of the Company's common stock, and for certain other activities.

Information Related to Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe-harbor” for forward-looking statements. Certain information included in this press release (as well as information included in oral statements or other written statements made by or to be made by the Company) contains statements that are forward-looking. These forward-looking statements include, without limitation, those about the Company’s expectations regarding the Company's expectations regarding the filing of the Form 10-Q; the description of the anticipated changes in the Company's consolidated balance sheet and the results of operations and the Company's assessment of the impact of such anticipated changes; the Company’s business, the Company’s future profitability, cash flow, liquidity, and growth. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future; and accordingly, such results may differ from those expressed in any forward-looking statement made by or on behalf of the Company. These risks and uncertainties include, but are not limited to: the effectiveness of management’s strategies and decisions; our ability to implement our internal growth and acquisition growth strategies; general economic and business conditions specific to our primary customers; changes in government regulations; our ability to effectively integrate businesses we may acquire; new or modified statutory or regulatory requirements; availability of materials and labor; inability to obtain or delay in obtaining government or third-party approvals and permits; non-performance by third parties of their contractual obligations; unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response thereto; cyber-attacks adversely affecting our operations; other geological, operating and economic considerations and declining prices and market conditions, including supply or demand for maintenance, repair and operating products, equipment and service; inability of the Company or its independent auditors to complete the work necessary in order to file the Form 10-Q in the expected time frame; unanticipated changes to the Company's operating results in the Form 10-Q as filed or in relation to prior periods, including as compared to the anticipated changes stated here; unanticipated impact of such changes and its materiality; ability to obtain needed capital, dependence on existing management, leverage and debt service, domestic or global economic conditions, ability to manage changes and the continued health or availability of management personnel and changes in customer preferences and attitudes. In some cases, you can identify forward-looking statements by terminology such as, but not limited to, “may,” “will,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “goal,” or “continue” or the negative of such terms or other comparable terminology. More information on these risks and other potential factors that could affect the Company’s business and financial results is included in the Company’s filings with the Securities and Exchange Commission, including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ thousands, except share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Sales

445,556

428,040

858,191

852,307

Cost of sales

307,763

296,188

596,516

595,414

Gross profit

137,793

131,852

261,675

256,893

Selling, general and administrative expenses

100,441

94,372

195,192

184,014

Income from operations

37,352

37,480

66,483

72,879

Other income, net

(1,035

)

(242

)

(3,004

)

(712

)

Interest expense

15,384

11,863

30,928

23,384

Income before income taxes

23,003

25,859

38,559

50,207

Provision for income taxes

6,310

6,805

10,534

13,573

Net income

16,693

19,054

28,025

36,634

Preferred stock dividend

Net income attributable to common shareholders

16,671

19,032

27,980

36,589

Net income

16,693

19,054

28,025

36,634

Foreign currency translation adjustments

659

(521

)

757

Comprehensive income

16,786

19,713

27,504

37,391

Earnings per share:

Basic

1.05

1.11

1.75

2.10

Diluted

1.00

1.06

1.66

2.01

Weighted average common shares outstanding:

Basic

15,868

17,211

15,998

17,402

Diluted

16,708

18,051

16,838

18,242

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ thousands, except share amounts)

June 30, 2024

December 31, 2023

ASSETS

Current assets:

Cash

49,936

173,120

Restricted cash

Accounts receivable, net of allowance of $5,511 and $5,584, respectively

326,583

311,171

Inventories

107,483

103,805

Costs and estimated profits in excess of billings

36,741

42,323

Prepaid expenses and other current assets

23,262

18,044

Total current assets

544,095

648,554

Property and equipment, net

68,407

61,618

Goodwill

426,821

343,991

Other intangible assets, net

85,895

63,895

Operating lease right of use assets, net

50,520

48,729

Other long-term assets

13,408

10,649

Total assets

1,189,146

1,177,436

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of debt

5,500

Trade accounts payable

101,185

96,469

Accrued wages and benefits

32,987

36,238

Customer advances

13,286

12,160

Billings in excess of costs and estimated profits

12,080

9,506

Short-term operating lease liabilities

15,218

15,438

Other current liabilities

47,447

48,854

Total current liabilities

227,703

224,165

Long-term debt, net of unamortized debt issuance costs and discounts

519,735

520,697

Long-term operating lease liabilities

36,617

34,336

Other long-term liabilities

20,410

17,359

Total long-term liabilities

576,762

572,392

Total liabilities

804,465

796,557

Commitments and Contingencies

Shareholders' equity:

Series A preferred stock, $1.00 par value; 1,000,000 shares authorized

Series B preferred stock, $1.00 par value; 1,000,000 shares authorized

Common stock, $0.01 par value, 100,000,000 shares authorized; 15,788,714 and 16,177,237 outstanding, respectively

345

Additional paid-in capital

216,803

216,482

Retained earnings

347,251

319,271

Accumulated other comprehensive loss

(31,761

)

(31,240

)

Treasury stock, at cost 4,607,773 and 4,141,989 shares, respectively

(147,973

)

(123,995

)

Total DXP Enterprises, Inc. equity

384,681

380,879

Total liabilities and equity

1,189,146

1,177,436

Business segment financial highlights:

Service Centers’ revenue for the second quarter was $306.5 million, a decrease of 2.3 percent year-over-year, with a 14.3 percent operating income margin.

Innovative Pumping Solutions’ revenue for the second quarter was $73.4 million, an increase of 52.7 percent year-over-year, with a 18.2 percent operating income margin.

Supply Chain Services’ revenue for the second quarter was $65.7 million, a decrease of 0.8 percent year-over-year, with a 8.9 percent operating income margin.

SEGMENT DATA

($ thousands, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

Sales

2024

2023

2024

2023

Service Centers

306,516

313,806

594,952

619,619

Innovative Pumping Solutions

73,377

48,067

135,592

99,478

Supply Chain Services

65,663

66,167

127,647

133,210

Total Sales

445,556

428,040

858,191

852,307

Three Months Ended June 30,

Six Months Ended June 30,

Operating Income

2024

2023

2024

2023

Service Centers

43,855

46,823

84,175

92,637

Innovative Pumping Solutions

13,366

6,760

20,336

15,956

Supply Chain Services

5,823

5,416

11,085

10,930

Total Segments Operating Income

63,044

58,999

115,596

119,523

RECONCILIATION OF OPERATING INCOME FOR REPORTABLE SEGMENTS

($ thousands, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Income from operations for reportable segments

63,044

58,999

115,596

119,523

Adjustment for:

Amortization of intangibles

4,719

4,582

9,088

9,340

Corporate expenses

20,973

16,937

40,025

37,304

Income from operations

37,352

37,480

66,483

72,879

Interest expense

15,384

11,863

30,928

23,384

Other income, net

(1,035

)

(242

)

(3,004

)

(712

)

Income before income taxes

23,003

25,859

38,559

50,207

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION ($ thousands, unaudited)

The following table sets forth the reconciliation of EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin to the most comparable U.S. GAAP financial measure (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Income before income taxes

23,003

25,859

38,559

50,207

Plus: Interest expense

15,384

11,863

30,928

23,384

Plus: Depreciation and amortization

8,127

6,703

15,665

13,485

EBITDA

46,514

44,425

85,152

87,076

Plus: other non-recurring items(1)

500

—

1,342

—

Plus: stock compensation expense

1,212

871

2,076

1,347

Adjusted EBITDA

48,226

45,296

88,570

88,423

Operating Income Margin

8.4

8.8

7.7

8.6

EBITDA Margin

10.4

9.9

10.2

Adjusted EBITDA Margin

10.8

10.6

10.3

10.4

(1) Other non-recurring items includes unique acquisition integration costs and other non-cash, non-recurring costs not related to continuing business operations.

The following table sets forth the reconciliation of Organic Sales and Organic Sales per Business Day to the most comparable U.S. GAAP financial measure (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Sales by Business Segment

Service Centers

306,516

313,806

594,952

619,619

Innovative Pumping Solutions

73,377

48,067

135,592

99,478

Supply Chain Services

65,663

66,167

127,647

133,210

Total DXP Sales

445,556

428,040

858,191

852,307

Acquisition Sales

23,403

7,265

35,178

26,398

Organic Sales

422,153

420,775

823,013

825,909

Business Days

127

128

Sales per Business Day

6,962

6,688

6,757

6,659

Organic Sales per Business Day

6,596

6,575

6,480

6,452

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION CONTINUED ($ thousands, unaudited)

The following table sets forth the reconciliation of Free Cash Flow to the most comparable GAAP financial measure (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Net cash from operating activities

14,735

(2,430

)

41,724

24,017

Less: purchases of property and equipment

(8,825

)

(1,813

)

(11,719

)

(5,617

)

Free Cash Flow

5,910

(4,243

)

30,005

18,400

The following table is a reconciliation of adjusted net income attributable to DXP Enterprises, Inc., a non-GAAP financial measure, to net income, calculated and reported in accordance with U.S. GAAP (in thousands).

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Net Income

16,693

19,054

28,025

36,634

One-time non-cash items