DXP Enterprises, Inc. Reports First Quarter 2024 Results
DXP Enterprises, Inc. reported strong first quarter 2024 results with $412.6 million in sales, $0.67 GAAP diluted EPS, and $0.74 non-GAAP diluted EPS. The company saw a 1.4% sequential sales increase, completed multiple acquisitions, and generated $24.1 million in free cash flow. While net income decreased to $11.3 million, DXP remains optimistic about market conditions and growth initiatives for 2024.
Strong sales performance with $412.6 million in sales for the first quarter of 2024.
Sequential sales growth of 1.4% compared to the fourth quarter of 2023.
Completed acquisitions of Hennesy Mechanical Sales, Kappe Associates, and Pro-Seal, Inc.
Generated $24.1 million in free cash flow, a 6.4% year-over-year increase.
Optimistic outlook for market conditions and growth initiatives for the rest of 2024.
Net income decreased to $11.3 million for the first quarter of 2024, down from $17.6 million in the same period in 2023.
Adjusted EBITDA decreased to $40.3 million from $43.1 million for the first quarter of 2023.
Adjusted EBITDA margin decreased to 9.8% from 10.2% for the same period in 2023.
Net income per diluted share dropped to $0.67 from $0.95 in the first quarter of 2023.
Sales decreased by 2.7% compared to the first quarter of 2023, totaling $424.3 million.
Insights
DXP Enterprises, Inc's quarterly financial results showcase a modest sequential sales growth of
Moreover, with a reported Adjusted EBITDA margin of
Considering the acquisitions of Hennesy Mechanical Sales, Kappe Associates and Pro-Seal, Inc., investors might expect future revenue growth and market expansion. However, the actual benefits will depend on how well DXP integrates these new assets and achieves synergies.
Examining DXP Enterprises, Inc's performance from a market perspective, the incremental growth post-acquisitions indicates an aggressive strategy to capture more market share. However, the decline in sales on a year-over-year basis requires critical assessment on whether this is due to market saturation, economic downturns, or loss of competitive edge.
The diversification of end markets, as the management suggests, is a strategy that could potentially mitigate sector-specific risks and stabilize future revenue streams. However, investors should scrutinize the company's ability to effectively penetrate these new sectors and the potential return on investment from these ventures. The commitment to driving both organic and acquisition-driven growth could be a double-edged sword if not managed cautiously, especially in a volatile market environment.
The financial results of DXP Enterprises, Inc suggest a nuanced picture for potential investors. While the increase in free cash flow and the strategic acquisitions point towards a proactive management team focused on growth, the decline in year-over-year sales and net income may raise some flags. The debt-to-EBITDA ratio will be an important metric for investors to watch, particularly in relation to the company's future debt servicing capabilities and investment opportunities.
The acquisitions, though potentially accretive to the company's earnings in the long term, come with integration risks that could affect operational efficiency and profitability in the short term. Investors would do well to keep an eye on how these acquisitions contribute to future earnings before considering any portfolio adjustments.
-
$139.7 million -
$412.6 million -
GAAP diluted EPS of
$0.67 -
Non-GAAP diluted EPS of
$0.74 -
$40.3 million -
Free Cash Flow of
$24.1 million - Completed the acquisitions of Hennesy Mechanical Sales, Kappe Associates, and Pro-Seal, Inc.
First Quarter 2024 Financial Highlights:
-
Sales increased 1.4 percent sequentially to
$412.6 million $407.0 million $424.3 million -
Net income for the first quarter of 2024 was
$11.3 million $17.6 million -
Earnings per diluted share for the first quarter of 2024 was
$0.67 $0.95 $0.74 $0.95 -
Adjusted EBITDA for the first quarter of 2024 was
$40.3 million $43.1 million -
Free Cash Flow (cash flow from operating activities less capital expenditures) for the first quarter of 2024 was
$24.1 million $22.6 million
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
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
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
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 |
|
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 |
|
|
|
1 |
|
Series B preferred stock, |
|
15 |
|
|
|
15 |
|
Common stock, |
|
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 -
Innovative Pumping Solutions’ revenue for the first quarter was
$62.2 million -
Supply Chain Services’ revenue for the first quarter was
$62.0 million
SEGMENT DATA ($ 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
|
|
|
|
||||
|
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
|
|
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
|
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
Source: DXP Enterprises, Inc.
FAQ
<p>What were DXP Enterprises, Inc.'s sales for the first quarter of 2024?</p>
DXP Enterprises, Inc. reported sales of $412.6 million for the first quarter of 2024.
<p>How much free cash flow did DXP Enterprises, Inc. generate in the first quarter of 2024?</p>
DXP Enterprises, Inc. generated $24.1 million in free cash flow for the first quarter of 2024, showing a 6.4% year-over-year increase.
<p>What acquisitions did DXP Enterprises, Inc. complete in the first quarter of 2024?</p>
DXP Enterprises, Inc. completed the acquisitions of Hennesy Mechanical Sales, Kappe Associates, and Pro-Seal, Inc. in the first quarter of 2024.
<p>How did DXP Enterprises, Inc.'s net income perform in the first quarter of 2024?</p>
DXP Enterprises, Inc.'s net income decreased to $11.3 million in the first quarter of 2024, down from $17.6 million in the same period in 2023.
<p>What was DXP Enterprises, Inc.'s Adjusted EBITDA for the first quarter of 2024?</p>
DXP Enterprises, Inc.'s Adjusted EBITDA for the first quarter of 2024 was $40.3 million, a decrease from $43.1 million in the first quarter of 2023.
