DXP Enterprises, Inc. (NASDAQ:DXPE) Q4 2020 Results Earnings Conference Call March 9, 2021 11:30 AM ET Company Participants Kent Yee - Senior Vice President, Chief Financial Officer David Little - Chairman of the Board, President, Chief Executive Officer Conference Call Participants Tommy Moll - Stephens Operator Ladies and gentlemen, thank you for standing by and welcome to DXP Enterprises, Inc. fourth quarter 2020 earnings call. At this time, participants are in a listen-only mode. After the speakers' pre ...

Part I: Financial Information [Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) The company reported a significant net loss in Q3 and first nine months of 2020, driven by sales decline and a $48.4 million impairment charge, despite increased operating cash flow [Statements of Operations and Comprehensive Income](index=4&type=section&id=a)%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) DXP reported a net loss of **$34.8 million** in Q3 2020 and **$27.0 million** for the nine months, driven by a **32.7% sales decrease** and a **$48.4 million impairment charge** Q3 and Nine Months 2020 vs 2019 Performance (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | **Sales** | $220,193 | $327,178 | $772,577 | $971,721 | | **Gross Profit** | $61,301 | $92,704 | $214,982 | $268,891 | | **Impairment & Other Charges** | $48,401 | $0 | $48,401 | $0 | | **Income (Loss) from Operations** | ($40,846) | $21,717 | ($23,178) | $59,380 | | **Net Income (Loss)** | ($34,775) | $13,150 | ($27,047) | $33,687 | | **Diluted EPS** | ($1.95) | $0.71 | ($1.52) | $1.84 | [Balance Sheets](index=5&type=section&id=b)%20Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$736.7 million** as of Sep 30, 2020, primarily due to a **$27.7 million goodwill reduction**, while cash increased to **$97.3 million** Balance Sheet Comparison (in thousands) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Cash** | $97,287 | $54,203 | | **Goodwill** | $166,375 | $194,052 | | **Total Assets** | $736,718 | $788,220 | | **Total Liabilities** | $413,164 | $443,272 | | **Total Equity** | $323,554 | $344,948 | [Statements of Cash Flows](index=6&type=section&id=c)%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly increased to **$92.2 million** for the first nine months of 2020, driven by working capital management Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $92,240 | $7,485 | | **Net Cash used in Investing Activities** | ($20,525) | ($14,212) | | **Net Cash used in Financing Activities** | ($27,942) | ($5,444) | | **Net Change in Cash** | $43,052 | ($11,958) | [Notes to Financial Statements](index=7&type=section&id=e)%20Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the **$48.4 million impairment charge** due to COVID-19 and oil price collapse, segment performance, debt structure, and recent acquisitions, including increased ABL revolver capacity - The company performed an interim goodwill impairment test during Q3 2020 due to a significant decline in its market capitalization, driven by the collapse of oil prices and the COVID-19 pandemic[30](index=30&type=chunk) Impairment and Other Charges - Q3 2020 (in thousands) | Charge Type | Amount | | :--- | :--- | | Long-lived asset impairments | $4,775 | | Goodwill impairments | $36,435 | | Inventory and work-in-progress costs | $7,191 | | **Total** | **$48,401** | - Goodwill impairment of **$36.4 million** was recorded, with **$16.0 million** for the Innovative Pumping Solutions unit and **$20.5 million** for the Canadian reporting unit[31](index=31&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - In March 2020, the company increased its asset-backed revolving line of credit (ABL Revolver) by **$50 million** to a total of **$135 million**. As of September 30, 2020, borrowing capacity was **$114.3 million**[59](index=59&type=chunk) - The company completed two acquisitions in early 2020: Pumping Systems, Inc. ("PSI") and Turbo Machinery Repair ("Turbo") for a total consideration of **$16.2 million** in cash and stock[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) [Management's Discussion and Analysis (MD&A)](index=18&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **32.7% Q3 sales decline** to COVID-19 and oil price collapse, implementing cost cuts and enhancing liquidity, while generating strong operating cash flow despite net loss [Current Market Conditions and Outlook](index=19&type=section&id=Current%20Market%20Conditions%20and%20Outlook) The business faced significant impacts from COVID-19 and oil price declines, leading to capital spending cuts, with DXP implementing mitigation efforts and maintaining an essential business status - The COVID-19 outbreak drove a sharp erosion in demand for crude oil, and a failure by OPEC+ to agree on production cuts in March decimated oil prices, leading to severe capital spending budget cuts by customers[84](index=84&type=chunk) - Mitigation efforts include increasing the ABL revolver to **$135 million**, reducing discretionary expenditures, and suspending the company's matching contributions to retirement plans[85](index=85&type=chunk) - DXP has been exempted as an 'essential' business under various government orders, allowing warehouses and regional distribution centers to remain open with enhanced safety measures[86](index=86&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Q3 2020 sales fell **32.7%** to **$220.2 million**, with Innovative Pumping Solutions down **73.4%**, leading to a **$40.8 million operating loss** due to sales decline and a **$48.4 million impairment charge** Sales by Business Segment - Q3 2020 vs Q3 2019 (in thousands) | Segment | Q3 2020 | Q3 2019 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Service Centers | $164,900 | $193,727 | ($28,827) | (14.9)% | | Innovative Pumping Solutions | $21,876 | $82,169 | ($60,293) | (73.4)% | | Supply Chain Services | $33,417 | $51,282 | ($17,865) | (34.8)% | | **Total DXP Sales** | **$220,193** | **$327,178** | **($106,985)** | **(32.7)%** | - The sales decrease in the Service Centers segment was primarily due to reduced demand for metal working, safety supply products, and bearings from customers in the OEM oil and gas markets[93](index=93&type=chunk) - Selling, General & Administrative (SG&A) expenses decreased by **$17.2 million (24.3%)** due to lower payroll, incentive compensation, and other cost reduction actions[100](index=100&type=chunk) - Operating income decreased by **$62.6 million** to a loss of **$40.8 million**, primarily due to the decline in sales and the **$48.4 million impairment charge**[104](index=104&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) As of Sep 30, 2020, the company maintained strong liquidity with **$97.4 million** cash and **$114.3 million** ABL facility availability, with operating cash flow reaching **$92.2 million** for the nine months - As of September 30, 2020, the company had cash and cash equivalents of **$97.4 million** and credit facility availability of **$114.3 million**[123](index=123&type=chunk) Net Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Operating Activities | $92,240 | $7,485 | | Investing Activities | ($20,525) | ($14,212) | | Financing Activities | ($27,942) | ($5,444) | - The **$84.8 million** year-over-year increase in cash from operations was primarily driven by collections of trade accounts receivables and decreased inventory purchases[127](index=127&type=chunk) - In May 2020, the company entered into an "at the market" equity distribution agreement to sell up to **$37.5 million** in common stock, raising net proceeds of approximately **$1.1 million** during the nine-month period[130](index=130&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=28&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's exposures to market risk have not materially changed since December 31, 2019 - The company's exposures to market risk have not changed materially since December 31, 2019[140](index=140&type=chunk) [Controls and Procedures](index=28&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[142](index=142&type=chunk) - There were no changes in internal control over financial reporting during the nine months ended September 30, 2020, that materially affected, or are reasonably likely to materially affect, internal controls[143](index=143&type=chunk) Part II: Other Information [Legal Proceedings](index=29&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in various legal proceedings but believes their resolution will not materially adversely affect its financial position, cash flows, or operations - While unable to predict the outcome of various legal proceedings, DXP believes the ultimate resolution will not have a material adverse effect on its consolidated financial position, cash flows, or results of operations[147](index=147&type=chunk) [Risk Factors](index=29&type=section&id=ITEM%201A.%20Risk%20Factors) Key risks include business disruptions from the COVID-19 pandemic, a cyber-attack in August 2020, vulnerability to sustained low oil prices, and potential loss of key personnel - The COVID-19 pandemic has caused and could continue to cause supply chain disruptions, decreased customer demand, and lower oil prices, negatively impacting the business[150](index=150&type=chunk)[151](index=151&type=chunk) - The company's computer network was the target of a cyber-attack in August 2020. While the costs to remedy were not material, it highlights the vulnerability to such threats[149](index=149&type=chunk) - A significant portion of revenue depends on expenditures in the oil and gas industry; sustained low oil prices could continue to adversely affect revenues[157](index=157&type=chunk) - The unexpected loss of the executive management team or other key employees, with risk heightened by the COVID-19 pandemic, could adversely impact the company[153](index=153&type=chunk)[155](index=155&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q3 2020, the company repurchased common stock shares solely to satisfy tax withholding obligations for employee equity awards, not as part of a public program - In Q3 2020, the company withheld **1,202 shares** of common stock, at an average price of **$19.14**, to satisfy tax withholding obligations for employee equity awards[159](index=159&type=chunk) [Default upon Senior Securities](index=30&type=section&id=ITEM%203.%20Default%20upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[161](index=161&type=chunk) [Mine Safety Disclosures](index=30&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures for the period - None[162](index=162&type=chunk) [Other Information](index=30&type=section&id=ITEM%205.%20Other%20Information) The company reported no other information for the period - None[164](index=164&type=chunk) [Exhibits](index=31&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, CEO and CFO certifications, and financial data in iXBRL format - Exhibits filed include CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[167](index=167&type=chunk)[168](index=168&type=chunk) - Financial statements and notes were submitted in Inline eXtensible Business Reporting Language (iXBRL) format[169](index=169&type=chunk)

DXP Enterprises, Inc. (NASDAQ:DXPE) Q3 2020 Earnings Conference Call November 6, 2020 11:30 AM ET Company Participants Kent Yee - SVP, Finance, CFO & Secretary David Little - Chairman, President & CEO Conference Call Participants Operator Ladies and gentlemen, thank you for standing by, and welcome to the DXP Enterprise Inc. 2020 Third Quarter Earnings Call. At this time all participants are in a listen-only mode. [Operator Instructions]. I would now like to hand the conference over to your speaker today, K ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [ ☒ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2020 or [ ☐ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission file number 0-21513 DXP Enterprises, Inc. (Exact name of registrant as specified in its charter) Texas 76-0509661 | --- | --- | |------ ...

DXP Enterprises, Inc. (NASDAQ:DXPE) Q2 2020 Earnings Conference Call August 6, 2020 11:30 AM ET Company Participants Kent Yee - SVP, Finance, CFO & Secretary David Little - Chairman, President & CEO Conference Call Participants Joseph Mondillo - Sidoti & Company Operator Ladies and gentlemen, thank you for standing by, and welcome to the DXP Enterprises, Inc. 2020 Second Quarter Earnings Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Kent Yee, Chief Financ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) Form 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2020 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the transition period from to Commission file number 0-21513 DXP Enterprises, Inc. (Exact name of registrant as specified in its charter) Texas 76-0509661 (State or other jurisdict ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission file number 0-21513 DXP Enterprises, Inc. (Exact name of registrant as specified in its charter) Texas 76-0509661 | --- | --- | --- | |------------ ...

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) Form 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2019 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the transition period from to Commission file number 0-21513 DXP Enterprises, Inc. (Exact name of registrant as specified in its charter) Texas 76-0509661 (State or other juris ...