DXP Enterprises, Inc. Reports Third Quarter 2024 Results

Rhea-AI Summary

DXP Enterprises reported strong Q3 2024 results with sales of $472.9 million, up 6.1% sequentially and 12.8% year-over-year. Net income reached $21.1 million with diluted EPS of $1.27. The company achieved Adjusted EBITDA of $52.4 million and Free Cash Flow of $24.4 million. Sales breakdown included $316.8 million for Service Centers, $89.8 million for Innovative Pumping Solutions, and $66.3 million for Supply Chain Services. The company completed five acquisitions through Q3 and maintained a secured leverage ratio of 2.54:1.0.

Positive

• Sales increased 12.8% YoY to $472.9 million
• Net income grew to $21.1 million from $16.2 million YoY
• Adjusted EBITDA increased to $52.4 million from $44.0 million YoY
• Adjusted EBITDA margin improved to 11.1% from 10.5% YoY
• Successfully completed five strategic acquisitions through Q3

Negative

• Total debt outstanding reached $544.5 million
• Diluted shares decreased from 17.4 million to 16.6 million YoY

Insights

Financial Analyst

Strong Q3 results demonstrate robust operational execution with $472.9M in sales, up 12.8% YoY and 6.1% sequentially. Notable improvements in profitability metrics with Adjusted EBITDA reaching $52.4M at an 11.1% margin. The completion of 5 acquisitions through Q3 shows aggressive expansion strategy, while maintaining healthy leverage with a 2.54x net debt to EBITDA ratio.

Key positives include improved operating leverage resulting in $1.27 EPS, strong free cash flow generation of $24.4M and successful debt repricing saving 100 basis points while securing additional $105M for growth. The company's diversification away from energy exposure and strategic acquisitions in water and industrial equipment segments position it well for sustainable growth.

Market Research Analyst

The company's segment performance shows strong diversification with Service Centers leading at $316.8M in sales, followed by Innovative Pumping Solutions at $89.8M and Supply Chain Services at $66.3M. The successful integration of acquisitions and reduced energy industry exposure demonstrate effective risk management and market positioning strategy.

The additional $105M in funding secured through debt repricing provides significant dry powder for future acquisitions, suggesting continued aggressive expansion. With seven acquisitions completed through Q4, DXP is effectively executing its inorganic growth strategy while maintaining healthy margins and cash flow generation.

• $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

 

HOUSTON--(BUSINESS WIRE)-- 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

Source: DXP Enterprises, Inc.

FAQ

What was DXP Enterprises (DXPE) revenue in Q3 2024?

DXP Enterprises reported revenue of $472.9 million in Q3 2024, representing a 6.1% increase from Q2 2024 and a 12.8% increase year-over-year.

What was DXPE's earnings per share in Q3 2024?

DXPE reported diluted earnings per share of $1.27 in Q3 2024, compared to $0.93 in Q3 2023.

How many acquisitions did DXPE complete in Q3 2024?

DXPE completed five acquisitions through Q3 2024, including three water companies and two industrial rotating equipment companies.

What was DXPE's Adjusted EBITDA margin in Q3 2024?

DXPE's Adjusted EBITDA margin was 11.1% in Q3 2024, compared to 10.5% in Q3 2023.