DXPE DXP Enterprises Inc

• $35.0 million in cash
• $472.9 million in sales, a 6.1 percent sequential and 12.8 percent year-over-year increase
• GAAP diluted EPS of $1.27
• $52.4 million in earnings before interest, taxes, depreciation & amortization and other non-cash charges ("Adjusted EBITDA")
• Free Cash Flow of $24.4 million for the quarter, and $54.4 million for the nine months ended September 30, 2024
• Completed five acquisitions through Q3; three water, and two industrial rotating equipment companies

 

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

Third Quarter 2024 Financial Highlights:

• Sales increased 6.1 percent sequentially to $472.9 million, compared to $445.6 million for the second quarter of 2024 and increased 12.8 percent compared to $419.2 million for the third quarter of 2023.

• Net income for the third quarter was $21.1 million, compared to $16.2 million for the third quarter of 2023 and $16.7 million for the second quarter of 2024.

• Earnings per diluted share for the third quarter was $1.27 based upon 16.6 million diluted shares, compared to $0.93 earnings per diluted share in the third quarter of 2023, based on 17.4 million diluted shares. Adjusted diluted earnings per share was $1.43 for the third quarter compared to $0.96 in the third quarter of 2023.

• Adjusted EBITDA for the third quarter was $52.4 million compared to $44.0 million for the third quarter of 2023 and $48.2 million for the second quarter of 2024. Adjusted EBITDA as a percentage of sales, or Adjusted EBITDA margin, was 11.1 percent, 10.5 percent, and 10.8 percent, respectively.

• Free Cash Flow (cash flow from operating activities less capital expenditures) for the third quarter was $24.4 million, compared to $38.3 million for the third quarter of 2023.

David R. Little, Chairman and Chief Executive Officer commented, "The Company posted excellent third quarter financial results in a lessening inflationary and varied spending by end market, delivering solid sales, adjusted EBITDA, earnings per share and free cash flow. Third quarter results reflect the continued execution of our growth strategy and the impact of our acquisition program. We continue to set new high watermarks as DXPeople. We are pleased with our sequential sales growth and strong adjusted EBITDA margins. This resulted in operating leverage that produced earnings per share of $1.27. DXP’s third quarter 2024 sales were $472.9 million, or a 6.1 percent increase over the second quarter of 2024 and a 12.8 percent growth over the same period in 2023. Adjusted EBITDA grew $4.2 million, or 8.7 percent over the second quarter of 2024 to $52.4 million. During the third quarter of 2024, sales were $316.8 million for Service Centers, $89.8 million for Innovative Pumping Solutions, and $66.3 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 yet another high watermark quarter with a 6.1 percent sequential sales increase to $472.9 million in sales and 11.1 percent Adjusted EBITDA margins. We have closed five acquisitions through the third quarter, and we have closed two acquisitions during the fourth quarter 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. Subsequent to the third quarter, we announced the successful completion of the repricing of our existing debt plus raising an incremental $105 million. DXP is saving one hundred basis points on existing debt, while raising incremental money to further drive anticipated acquisition growth. Total debt outstanding as of September 30, 2024, was $544.5 million. DXP’s secured leverage ratio or net debt to EBITDA ratio was 2.54:1.0 with a covenant EBITDA of $200.7 million for the last twelve months ending September 30, 2024. We expect to finish fiscal year 2024 strong with momentum going into fiscal year 2025."

Conference Call Information

DXP Enterprises, Inc. management will host a conference call, November 5, 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 September 30,

 

Nine Months Ended September 30,

 

 

2024

 

2023

 

2024

 

2023

 

 

 

 

 

 

 

 

 

Sales

 

$

472,935

 

$

419,249

 

 

$

1,331,126

 

 

$

1,271,556

 

Cost of sales

 

 

326,825

 

 

293,687

 

 

 

923,341

 

 

 

889,101

 

Gross profit

 

 

146,110

 

 

125,562

 

 

 

407,785

 

 

 

382,455

 

Selling, general and administrative expenses

 

 

106,502

 

 

89,706

 

 

 

301,694

 

 

 

273,720

 

Income from operations

 

 

39,608

 

 

35,856

 

 

 

106,091

 

 

 

108,735

 

Interest expense

 

 

15,716

 

 

12,684

 

 

 

46,644

 

 

 

36,068

 

Other expense (income), net

 

 

160

 

 

1,234

 

 

 

(2,844

)

 

 

522

 

Income before income taxes

 

 

23,732

 

 

21,938

 

 

 

62,291

 

 

 

72,145

 

Provision for income taxes

 

 

2,631

 

 

5,766

 

 

 

13,165

 

 

 

19,339

 

Net income

 

 

21,101

 

 

16,172

 

 

 

49,126

 

 

 

52,806

 

Preferred stock dividend

 

 

23

 

 

22

 

 

 

68

 

 

 

67

 

Net income attributable to common shareholders

 

$

21,078

 

$

16,150

 

 

$

49,058

 

 

$

52,739

 

 

 

 

 

 

 

 

 

 

Net income

 

$

21,101

 

$

16,172

 

 

$

49,126

 

 

$

52,806

 

Foreign currency translation adjustments

 

 

380

 

 

(844

)

 

 

(141

)

 

 

(87

)

Comprehensive income

 

$

21,481

 

$

15,328

 

 

$

48,985

 

 

$

52,719

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

1.34

 

$

0.98

 

 

$

3.08

 

 

$

3.08

 

Diluted

 

$

1.27

 

$

0.93

 

 

$

2.93

 

 

$

2.94

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

15,750

 

 

16,516

 

 

 

15,915

 

 

 

17,104

 

Diluted

 

 

16,590

 

 

17,356

 

 

 

16,755

 

 

 

17,944

 

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ thousands, except share amounts)

 

 

 

September 30, 2024

 

December 31, 2023

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash

 

$

35,000

 

 

$

173,120

 

Restricted cash

 

 

91

 

 

 

91

 

Accounts receivable, net of allowance of $5,316 and $5,584, respectively

 

 

337,722

 

 

 

311,171

 

Inventories

 

 

109,787

 

 

 

103,805

 

Costs and estimated profits in excess of billings

 

 

49,707

 

 

 

42,323

 

Prepaid expenses and other current assets

 

 

26,637

 

 

 

18,044

 

Total current assets

 

 

558,944

 

 

 

648,554

 

Property and equipment, net

 

 

73,050

 

 

 

61,618

 

Goodwill

 

 

448,103

 

 

 

343,991

 

Other intangible assets, net

 

 

89,356

 

 

 

63,895

 

Operating lease right of use assets, net

 

 

48,498

 

 

 

48,729

 

Other long-term assets

 

 

10,263

 

 

 

10,649

 

Total assets

 

$

1,228,214

 

 

$

1,177,436

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of debt

 

$

5,500

 

 

$

5,500

 

Trade accounts payable

 

 

106,802

 

 

 

96,469

 

Accrued wages and benefits

 

 

41,230

 

 

 

36,238

 

Customer advances

 

 

12,656

 

 

 

12,160

 

Billings in excess of costs and estimated profits

 

 

11,911

 

 

 

9,506

 

Short-term operating lease liabilities

 

 

14,928

 

 

 

15,438

 

Other current liabilities

 

 

52,618

 

 

 

48,854

 

Total current liabilities

 

 

245,645

 

 

 

224,165

 

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

 

 

519,250

 

 

 

520,697

 

Long-term operating lease liabilities

 

 

34,922

 

 

 

34,336

 

Other long-term liabilities

 

 

26,029

 

 

 

17,359

 

Total long-term liabilities

 

 

580,201

 

 

 

572,392

 

Total liabilities

 

 

825,846

 

 

 

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; 15,694,883 and 16,177,237 outstanding, respectively

 

 

345

 

 

 

345

 

Additional paid-in capital

 

 

218,062

 

 

 

216,482

 

Retained earnings

 

 

368,329

 

 

 

319,271

 

Accumulated other comprehensive loss

 

 

(31,381

)

 

 

(31,240

)

Treasury stock, at cost 4,707,773 and 4,141,989 shares, respectively

 

 

(153,003

)

 

 

(123,995

)

Total DXP Enterprises, Inc. equity

 

 

402,368

 

 

 

380,879

 

Total liabilities and equity

 

$

1,228,214

 

 

$

1,177,436

 

Business segment financial highlights:

• Service Centers’ revenue for the third quarter was $316.8 million, an increase of 7.6 percent year-over-year, with a 14.6 percent operating income margin.

• Innovative Pumping Solutions’ revenue for the third quarter was $89.8 million, an increase of 52.3 percent year-over-year, with a 20.3 percent operating income margin.

• Supply Chain Services’ revenue for the third quarter was $66.3 million, an increase of 0.7 percent year-over-year, with a 8.4 percent operating income margin.

SEGMENT DATA

($ thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

Sales

 

2024

 

2023

 

2024

 

2023

Service Centers

 

$

316,831

 

$

294,459

 

$

911,783

 

$

914,078

Innovative Pumping Solutions

 

 

89,825

 

 

58,962

 

 

225,417

 

 

158,440

Supply Chain Services

 

 

66,279

 

 

65,828

 

 

193,926

 

 

199,038

Total Sales

 

$

472,935

 

$

419,249

 

$

1,331,126

 

$

1,271,556

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

Operating Income

 

2024

 

2023

 

2024

 

2023

Service Centers

 

$

46,154

 

$

41,912

 

$

130,329

 

$

134,549

Innovative Pumping Solutions

 

 

18,207

 

 

10,599

 

 

38,543

 

 

26,555

Supply Chain Services

 

 

5,568

 

 

5,589

 

 

16,653

 

 

16,519

Total Segments Operating Income

 

$

69,929

 

$

58,100

 

$

185,525

 

$

177,623

RECONCILIATION OF OPERATING INCOME FOR REPORTABLE SEGMENTS

($ thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2024

 

2023

 

2024

 

2023

Income from operations for reportable segments

 

$

69,929

 

$

58,100

 

$

185,525

 

 

$

177,623

Adjustment for:

 

 

 

 

 

 

 

 

Amortization of intangibles

 

 

5,245

 

 

5,866

 

 

14,333

 

 

 

15,206

Corporate expenses

 

 

25,076

 

 

16,378

 

 

65,101

 

 

 

53,682

Income from operations

 

$

39,608

 

$

35,856

 

$

106,091

 

 

$

108,735

Interest expense

 

 

15,716

 

 

12,684

 

 

46,644

 

 

 

36,068

Other expense (income), net

 

 

160

 

 

1,234

 

 

(2,844

)

 

 

522

Income before income taxes

 

$

23,732

 

$

21,938

 

$

62,291

 

 

$

72,145

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 September 30,

 

Nine Months Ended September 30,

 

 

2024

 

2023

 

2024

 

2023

Income before income taxes

 

$

23,732

 

 

$

21,938

 

 

$

62,291

 

 

$

72,145

 

Plus: Interest expense

 

 

15,716

 

 

 

12,684

 

 

 

46,644

 

 

 

36,068

 

Plus: Depreciation and amortization

 

 

8,720

 

 

 

7,983

 

 

 

24,385

 

 

 

21,468

 

EBITDA

 

$

48,168

 

 

$

42,605

 

 

$

133,320

 

 

$

129,681

 

Plus: other non-recurring items(1)

 

 

2,950

 

 

 

551

 

 

 

4,292

 

 

 

551

 

Plus: stock compensation expense

 

 

1,322

 

 

 

864

 

 

 

3,398

 

 

 

2,211

 

Adjusted EBITDA

 

$

52,440

 

 

$

44,020

 

 

$

141,010

 

 

$

132,443

 

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

 

8.4

%

 

 

8.6

%

 

 

8.0

%

 

 

8.6

%

EBITDA Margin

 

 

10.2

%

 

 

10.2

%

 

 

10.0

%

 

 

10.2

%

Adjusted EBITDA Margin

 

 

11.1

%

 

 

10.5

%

 

 

10.6

%

 

 

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 September 30,

 

Nine Months Ended September 30,

 

 

2024

 

2023

 

2024

 

2023

Sales by Business Segment

 

 

 

 

 

 

 

 

Service Centers

 

$

316,831

 

$

294,459

 

$

911,783

 

$

914,078

Innovative Pumping Solutions

 

 

89,825

 

 

58,962

 

 

225,417

 

 

158,440

Supply Chain Services

 

 

66,279

 

 

65,828

 

 

193,926

 

 

199,038

Total DXP Sales

 

$

472,935

 

$

419,249

 

$

1,331,126

 

$

1,271,556

Acquisition Sales

 

 

28,535

 

 

3,868

 

 

63,713

 

 

30,266

Organic Sales

 

$

444,400

 

$

415,381

 

$

1,267,413

 

$

1,241,290

 

 

 

 

 

 

 

 

 

Business Days

 

 

64

 

 

63

 

 

191

 

 

191

Sales per Business Day

 

$

7,390

 

$

6,655

 

$

6,969

 

$

6,657

Organic Sales per Business Day

 

$

6,944

 

$

6,593

 

$

6,636

 

$

6,499

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 September 30,

 

Nine Months Ended September 30,

 

 

2024

 

2023

 

2024

 

2023

Net cash from operating activities

 

$

28,344

 

 

$

39,758

 

 

$

70,068

 

 

$

63,775

 

Less: purchases of property and equipment

 

 

(3,954

)

 

 

(1,486

)

 

 

(15,673

)

 

 

(7,103

)

Free Cash Flow

 

$

24,390

 

 

$

38,272

 

 

$

54,395

 

 

$

56,672

 

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 September 30,

 

Nine Months Ended September 30,

 

 

2024

 

2023

 

2024

 

2023

Net Income

 

$

21,101

 

 

$

16,172

 

 

$

49,126

 

 

$

52,806

 

One-time non-cash items

 

 

2,950

 

 

 

551

 

 

 

4,292

 

 

 

551

 

Adjustment for taxes

 

 

(327

)

 

 

(145

)

 

 

(907

)

 

 

(145

)

Adjusted Net Income

 

$

23,724

 

 

$

16,578

 

 

$

52,511

 

 

$

53,212

 

 

 

 

 

 

 

 

 

 

Weighted average common shares and common equivalent shares outstanding

 

 

 

 

 

 

 

 

Diluted

 

 

16,590

 

 

 

17,356

 

 

 

16,755

 

 

 

17,944

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share

 

$

1.27

 

 

$

0.93

 

 

$

2.93

 

 

$

2.94

 

Adjusted Diluted Earnings per Share

 

$

1.43

 

 

$

0.96

 

 

$

3.13

 

 

$

2.97

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241104403504/en/

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