DXPE DXP Enterprises Inc

• $139.7 million in cash
• $412.6 million in sales
• GAAP diluted EPS of $0.67
• Non-GAAP diluted EPS of $0.74
• $40.3 million in earnings before interest, taxes, depreciation & amortization and other non-cash charges ("Adjusted EBITDA")
• Free Cash Flow of $24.1 million, a 6.4 percent year-over-year increase
• Completed the acquisitions of Hennesy Mechanical Sales, Kappe Associates, and Pro-Seal, Inc.

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

First Quarter 2024 Financial Highlights:

• Sales increased 1.4 percent sequentially to $412.6 million, compared to $407.0 million for the fourth quarter of 2023 and decreased 2.7 percent compared to $424.3 million for the first quarter of 2023.
• Net income for the first quarter of 2024 was $11.3 million, compared to $17.6 million for the first quarter of 2023.
• Earnings per diluted share for the first quarter of 2024 was $0.67 based upon 17.0 million diluted shares, compared to $0.95 earnings per diluted share in the first quarter of 2023, based on 18.4 million diluted shares. Adjusted diluted earnings per share was $0.74 compared to $0.95 in the first quarter of 2023.
• Adjusted EBITDA for the first quarter of 2024 was $40.3 million compared to $43.1 million for the first quarter of 2023. Adjusted EBITDA as a percentage of sales, or Adjusted EBITDA margin, was 9.8 percent and 10.2 percent, respectively.
• Free Cash Flow (cash flow from operating activities less capital expenditures) for the first quarter of 2024 was $24.1 million, compared to $22.6 million for the first quarter of 2023.

David R. Little, Chairman and Chief Executive Officer commented, “Our first quarter results reflect sequential sales growth driven by acquisitions, strong free cash flow, and continued efforts to expand and grow our business. We are encouraged by the sequential increases and the start to the year. As we look ahead to the rest of 2024, we remain optimistic around market conditions, our ability to execute our growth initiatives and the diversity of our end markets to deliver growth in 2024. DXP’s first quarter 2024 sales were $412.6 million. In terms of our business segments for the first quarter of 2024, sales were $288.4 million for Service Centers, $62.2 million for Innovative Pumping Solutions, and $62.0 million for Supply Chain Services. We believe we are well positioned to outgrow the market and to generate improved operating margins and returns for the benefit of our shareholders as we move further into 2024.”

Kent Yee, Chief Financial Officer and Senior Vice President, remarked, “Our first quarter sequential increase of 1.4 percent was great to see in addition to the $24.1 million of free cash flow along with the closing of three acquisitions. We continue to see bright spots in the market and we currently anticipate the second half of the year to drive growth as we benefit from increases in our project backlog and the diversification of our end markets. We had a strong quarter of free cash flow generation, producing $24.1 million in free cash flow during the first quarter in the midst of closing three acquisitions. DXP ended the quarter with $139.7 million in cash on the balance sheet and net debt of $407.6 million. DXP’s secured leverage ratio or net debt to EBITDA ratio was 2.3:1.0 with a covenant EBITDA of $179.3 million for the last twelve-months ending March 31, 2024. We expect to drive organic and acquisition driven growth as we move through fiscal 2024.”

Conference Call Information

DXP Enterprises, Inc. management will host a conference call, May 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)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

 

2023

 

 

 

 

 

 

Sales

 

$

412,635

 

 

$

424,267

 

Cost of sales

 

 

288,753

 

 

 

299,226

 

Gross profit

 

 

123,882

 

 

 

125,041

 

Selling, general and administrative expenses

 

 

94,751

 

 

 

89,642

 

Income from operations

 

 

29,131

 

 

 

35,399

 

Other income, net

 

 

(1,968

)

 

 

(469

)

Interest expense

 

 

15,544

 

 

 

11,521

 

Income before income taxes

 

 

15,555

 

 

 

24,347

 

Provision for income taxes

 

 

4,223

 

 

 

6,767

 

Net income

 

 

11,332

 

 

 

17,580

 

Preferred stock dividend

 

 

23

 

 

 

23

 

Net income attributable to common shareholders

 

$

11,309

 

 

$

17,557

 

 

 

 

 

 

Diluted earnings per share attributable to DXP Enterprises, Inc.

 

$

0.67

 

 

$

0.95

 

 

 

 

 

 

Weighted average common shares and common equivalent shares outstanding

 

 

16,968

 

 

 

18,436

 

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ thousands, except share amounts)

 

 

March 31, 2024

 

December 31, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash

$

139,697

 

 

$

173,120

 

Restricted cash

 

91

 

 

 

91

 

Accounts receivable, net of allowance of $4,946 and $5,584, respectively

 

313,791

 

 

 

311,171

 

Inventories

 

108,186

 

 

 

103,805

 

Costs and estimated profits in excess of billings

 

35,259

 

 

 

42,323

 

Prepaid expenses and other current assets

 

19,808

 

 

 

18,044

 

Total current assets

 

616,832

 

 

 

648,554

 

Property and equipment, net

 

64,039

 

 

 

61,618

 

Goodwill

 

370,949

 

 

 

343,991

 

Other intangible assets, net

 

67,675

 

 

 

63,895

 

Operating lease right of use assets, net

 

53,443

 

 

 

48,729

 

Other long-term assets

 

11,217

 

 

 

10,649

 

Total assets

$

1,184,155

 

 

$

1,177,436

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Current maturities of debt

$

5,500

 

 

$

5,500

 

Trade accounts payable

 

97,324

 

 

 

96,469

 

Accrued wages and benefits

 

31,655

 

 

 

36,238

 

Customer advances

 

12,619

 

 

 

12,160

 

Billings in excess of costs and estimated profits

 

8,195

 

 

 

9,506

 

Short-term operating lease liabilities

 

15,796

 

 

 

15,438

 

Other current liabilities

 

58,313

 

 

 

48,854

 

Total current liabilities

 

229,402

 

 

 

224,165

 

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

 

520,217

 

 

 

520,697

 

Long-term operating lease liabilities

 

38,914

 

 

 

34,336

 

Other long-term liabilities

 

20,158

 

 

 

17,359

 

Total long-term liabilities

 

579,289

 

 

 

572,392

 

Total liabilities

 

808,691

 

 

 

796,557

 

Commitments and Contingencies

 

 

 

Shareholders' equity:

 

 

 

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

 

1

 

 

 

1

 

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

 

15

 

 

 

15

 

Common stock, $0.01 par value, 100,000,000 shares authorized; 15,928,305 and 16,177,237 outstanding, respectively

 

345

 

 

 

345

 

Additional paid-in capital

 

217,292

 

 

 

216,482

 

Retained earnings

 

330,580

 

 

 

319,271

 

Accumulated other comprehensive loss

 

(31,854

)

 

 

(31,240

)

Treasury stock, at cost 4,468,354 and 4,141,989 shares, respectively

 

(140,915

)

 

 

(123,995

)

Total DXP Enterprises, Inc. equity

 

375,464

 

 

 

380,879

 

Total liabilities and equity

$

1,184,155

 

 

$

1,177,436

 

Business segment financial highlights:

• Service Centers’ revenue for the first quarter was $288.4 million, a decrease of 5.7 percent year-over-year with a 14.0 percent operating income margin.
• Innovative Pumping Solutions’ revenue for the first quarter was $62.2 million, an increase of 21.0 percent year-over-year with a 11.2 percent operating income margin.
• Supply Chain Services’ revenue for the first quarter was $62.0 million, a decrease of 7.5 percent year-over-year with a 8.5 percent operating income margin.

SEGMENT DATA

($ thousands, unaudited)

 

 

 

 

 

 

Three Months Ended March 31,

Sales

2024

 

2023

Service Centers

$

288,435

 

$

305,813

Innovative Pumping Solutions

 

62,216

 

 

51,411

Supply Chain Services

 

61,984

 

 

67,043

Total Sales

$

412,635

 

$

424,267

 

 

 

 

 

Three Months Ended March 31,

Operating Income

2024

 

2023

Service Centers

$

40,320

 

$

45,820

Innovative Pumping Solutions

 

6,970

 

 

9,190

Supply Chain Services

 

5,262

 

 

5,514

Total Segments Operating Income

$

52,552

 

$

60,524

RECONCILIATION OF OPERATING INCOME FOR REPORTABLE SEGMENTS

($ thousands, unaudited)

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2024

 

 

 

2023

 

Income from operations for reportable segments

$

52,552

 

 

$

60,524

 

Adjustment for:

 

 

 

Amortization of intangibles

 

4,369

 

 

 

4,758

 

Corporate expenses

 

19,052

 

 

 

20,367

 

Income from operations

$

29,131

 

 

$

35,399

 

Interest expense

 

15,544

 

 

 

11,521

 

Other income, net

 

(1,968

)

 

 

(469

)

Income before income taxes

$

15,555

 

 

$

24,347

 

 

 

 

 

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION ($ thousands)

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 March 31,

 

 

2024

 

 

 

2023

 

Income before income taxes

$

15,555

 

 

$

24,347

 

Plus: Interest expense

 

15,544

 

 

 

11,521

 

Plus: Depreciation and amortization

 

7,538

 

 

 

6,782

 

EBITDA

$

38,637

 

 

$

42,650

 

Plus: other non-recurring items(1)

 

842

 

 

 

—

 

Plus: stock compensation expense

 

864

 

 

 

476

 

Adjusted EBITDA

$

40,343

 

 

$

43,126

 

 

 

 

 

Operating Income Margin

 

7.1

%

 

 

8.3

%

EBITDA Margin

 

9.4

%

 

 

10.1

%

Adjusted EBITDA Margin

 

9.8

%

 

 

10.2

%

(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 March 31,

 

 

2024

 

2023

Sales by Business Segment

 

 

 

 

Service Centers

 

$

288,435

 

$

305,813

Innovative Pumping Solutions

 

 

62,216

 

 

51,411

Supply Chain Services

 

 

61,984

 

 

67,043

Total DXP Sales

 

$

412,635

 

$

424,267

Acquisition Sales

 

 

11,775

 

 

19,133

Organic Sales

 

$

400,860

 

$

405,134

 

 

 

 

 

Business Days

 

 

63

 

 

64

Sales per Business Day

 

$

6,550

 

$

6,629

Organic Sales per Business Day

 

$

6,363

 

$

6,330

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

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

 

2023

 

Net cash from operating activities

 

$

26,989

 

 

$

26,449

 

Less: purchases of property and equipment

 

 

(2,894

)

 

 

(3,804

)

Free Cash Flow

 

$

24,095

 

 

$

22,645

 

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.

 

Three Months Ended March 31,

 

2024

 

2023

Net Income

$

11,332

 

$

17,580

One-time non-cash items

 

942

 

 

—

Adjustment for taxes

 

256

 

 

—

Adjusted Net Income

$

12,530

 

$

17,580

 

 

 

 

Weighted average common shares and common equivalent shares outstanding

 

 

 

Diluted

 

16,968

 

 

18,436

 

 

 

 

Diluted Earnings per Share

$

0.67

 

$

0.95

Adjusted Diluted Earnings per Share

$

0.74

 

$

0.95

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240508821944/en/

Kent Yee, 713-996-4700 Senior Vice President, CFO www.dxpe.com