DXP Enterprises(DXPE) - 2025 Q1 - Quarterly Results

First Quarter 2025 Results Overview DXP Enterprises, Inc. reported strong financial performance in Q1 2025, driven by significant sales and net income growth, alongside strategic acquisition and positive management outlook Financial Highlights DXP Enterprises, Inc. achieved significant financial growth in Q1 2025, with double-digit year-over-year increases in sales and net income, alongside substantial improvements in adjusted EBITDA and diluted EPS, reflecting the company's business resilience Financial Performance Overview | Metric | Q1 2025 | Q1 2024 | Y-o-Y Change | Q4 2024 | Q-o-Q Change | | :-------------------------------- | :------------- | :------------- | :--------- | :------------- | :--------- | | Sales ($ millions) | $476.6 | $412.6 | 15.5% | - | - | | Organic Sales ($ millions) | - | - | 11.1% | - | - | | Net Income ($ millions) | $20.6 | $11.3 | 82.3% | $21.4 | -3.7% | | GAAP Diluted EPS ($) | $1.25 | $0.67 | 86.6% | - | - | | Adjusted Diluted EPS ($) | $1.26 | $0.70 | 80.0% | - | - | | Adjusted EBITDA ($ millions) | $52.5 | $40.3 | 30.3% | $50.3 | 4.4% | | Adjusted EBITDA Margin (%) | 11.0% | 9.8% | 1.2 ppt | 10.7% | 0.3 ppt | | Ending Cash ($ millions) | $114.3 | - | - | - | - | | Total Debt ($ millions) | $647.3 | - | - | - | - | | Net Debt to EBITDA Ratio | 2.50:1.0 | - | - | - | - | - The company completed the acquisition of Arroyo Process Equipment, further expanding its business scope[5] Management Commentary Management expressed satisfaction with Q1 results, highlighting business resilience and continuous sales growth, anticipating increased project backlog and diversified end markets to drive H2 growth, supported by a strong balance sheet - Chairman and CEO David R. Little stated that Q1 results reflect the resilience and durability of DXP's business, expressing satisfaction with continuous sales growth and strong gross margins, and expecting sustained sales and profit growth for the remainder of 2025[4] - CFO Kent Yee noted market bright spots and anticipated H2 growth driven by increased project backlog and diversified end markets, with a strong balance balance sheet including $114.3 million in cash and a 2.50:1.0 net debt to EBITDA ratio[4] Company Information This section provides an overview of DXP Enterprises, Inc.'s business model, service offerings, and details for the upcoming investor conference call About DXP Enterprises, Inc. DXP Enterprises, Inc. is a leading distributor of products and services, providing value-added and total cost savings solutions to industrial customers across North America and Dubai, specializing in innovative pumping solutions, supply chain services, and MROP services - DXP Enterprises, Inc. is a leading distributor of products and services, providing value-added and total cost savings solutions to industrial customers across North America and Dubai[9] - The company offers innovative pumping solutions, supply chain services, and maintenance, repair, operating, and production (MROP) services, leveraging extensive product knowledge and technical expertise in rotating equipment, bearings, power transmission, metalworking, industrial supplies, and safety products[9] - DXP's business segments include Service Centers, Innovative Pumping Solutions, and Supply Chain Services[9] Conference Call Details DXP Enterprises, Inc. management will host a conference call on May 8, 2025, to discuss financial results, with investors able to access the webcast and slide presentation via the company's investor relations website - DXP management will host a conference call on May 8, 2025, at 10:30 AM CT to discuss the company's financial results[7] - Investors can listen to the webcast and access the slide presentation through the investor relations section of the company's website at https://ir.dxpe.com[7](index=7&type=chunk)[8] Unaudited Condensed Consolidated Financial Statements This section presents DXP's Q1 2025 unaudited financial statements, including detailed operating results and balance sheet information, reflecting significant year-over-year growth Statements of Operations In Q1 2025, DXP saw significant growth in sales and net income, with increased cost of sales and SG&A expenses, but a larger rise in operating income and income before taxes, leading to a substantial year-over-year increase in net income Condensed Consolidated Statements of Operations | Metric ($ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Y-o-Y Change | | :--------------------------------- | :-------------------- | :-------------------- | :------- | | Sales | 476,569 | 412,635 | 15.5% | | Cost of Sales | 326,304 | 288,753 | 13.0% | | Gross Profit | 150,265 | 123,882 | 21.3% | | Selling, General and Administrative Expenses | 109,750 | 94,751 | 15.8% | | Operating Income | 40,515 | 29,131 | 39.1% | | Interest Expense | 14,660 | 15,544 | -5.7% | | Income Before Income Taxes | 27,173 | 15,555 | 74.7% | | Provision for Income Taxes | 6,584 | 4,223 | 55.9% | | Net Income | 20,589 | 11,332 | 81.7% | | Diluted Earnings Per Share | 1.25 | 0.67 | 86.6% | | Diluted Weighted Average Common Shares | 16,538 | 16,968 | -2.5% | Balance Sheets As of March 31, 2025, DXP's total assets increased from December 31, 2024, primarily due to higher accounts receivable, inventory, and net property and equipment, while cash balances decreased, and total liabilities and equity both rose Condensed Consolidated Balance Sheets | Metric ($ thousands) | March 31, 2025 | December 31, 2024 | Q-o-Q Change | | :--------------------------------- | :------------- | :------------- | :------- | | Assets | | | | | Cash | 114,283 | 148,320 | -22.9% | | Accounts Receivable, Net | 357,764 | 339,365 | 5.4% | | Inventory | 109,876 | 103,113 | 6.6% | | Total Current Assets | 661,756 | 661,874 | 0.0% | | Property and Equipment, Net | 97,658 | 81,556 | 19.7% | | Goodwill | 459,963 | 452,343 | 1.7% | | Total Assets | 1,382,512 | 1,349,494 | 2.4% | | Liabilities and Equity | | | | | Total Current Liabilities | 245,417 | 243,984 | 0.6% | | Long-Term Debt, Net | 620,901 | 621,684 | -0.1% | | Total Liabilities | 937,853 | 926,706 | 1.2% | | Total DXP Enterprises, Inc. Equity | 444,659 | 422,788 | 5.2% | | Total Liabilities and Equity | 1,382,512 | 1,349,494 | 2.4% | Segment Performance DXP's Q1 2025 segment performance shows robust sales and operating income growth across all business units, particularly in Innovative Pumping Solutions Sales by Business Segment In Q1 2025, all business segments achieved year-over-year sales growth, with the Innovative Pumping Solutions segment showing the strongest increase and Service Centers contributing the largest sales volume Sales by Business Segment | Business Segment ($ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Y-o-Y Change | | :--------------------- | :-------------------- | :-------------------- | :------- | | Service Centers | 327,075 | 288,435 | 13.4% | | Innovative Pumping Solutions | 86,182 | 62,216 | 38.5% | | Supply Chain Services | 63,312 | 61,984 | 2.1% | | Total Sales | 476,569 | 412,635 | 15.5% | Operating Income by Business Segment In Q1 2025, all business segments reported year-over-year operating income growth, with the Innovative Pumping Solutions segment achieving the highest growth rate and Service Centers contributing the largest operating income Operating Income by Business Segment | Business Segment ($ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Y-o-Y Change | | :--------------------- | :-------------------- | :-------------------- | :------- | | Service Centers | 47,045 | 40,320 | 16.7% | | Innovative Pumping Solutions | 13,406 | 6,970 | 92.3% | | Supply Chain Services | 5,564 | 5,262 | 5.7% | | Total Segment Operating Income | 66,015 | 52,552 | 25.6% | Reconciliation of Operating Income for Reportable Segments The company reconciles total operating income from reportable segments to consolidated operating income by deducting intangible asset amortization and corporate expenses, further adjusting for interest expense and other income to arrive at income before taxes Reconciliation of Operating Income for Reportable Segments | Metric ($ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--------------------------------- | :-------------------- | :-------------------- | | Reportable Segment Operating Income | 66,015 | 52,552 | | Less: Amortization of Intangible Assets | 5,355 | 4,369 | | Less: Corporate Expenses | 20,145 | 19,052 | | Operating Income | 40,515 | 29,131 | | Less: Interest Expense | 14,660 | 15,544 | | Plus: Other Income, Net | (1,318) | (1,968) | | Income Before Income Taxes | 27,173 | 15,555 | Non-GAAP Financial Measures This section defines and reconciles DXP's non-GAAP financial metrics, including EBITDA, Adjusted EBITDA, Organic Sales, Free Cash Flow, and Adjusted Net Income, providing additional insights into operational performance Definitions and Rationale DXP uses non-GAAP metrics like EBITDA, Adjusted EBITDA, Free Cash Flow, Organic Sales, and Adjusted Net Income to supplement GAAP reporting, providing a clearer view of operational performance, liquidity, and strategic execution by excluding non-cash and non-recurring items - EBITDA is defined as net income attributable to DXP Enterprises, Inc. plus interest, taxes, depreciation, and amortization; Adjusted EBITDA further subtracts stock-based compensation expense and all other non-cash expenses, adjustments, and non-recurring items[22] - The company believes EBITDA provides additional information regarding operating performance and the effectiveness of operating strategies by eliminating the impact of non-cash depreciation and amortization expenses, and non-core operating items such as interest expense and income taxes[11] - Free Cash Flow is defined as net cash provided by operating activities less purchases of property and equipment; the company considers Free Cash Flow an important liquidity measure, indicating cash available for acquisitions, investments, debt repayment, and stock repurchases[11][26] - Organic Sales include sales from locations and acquired businesses owned for at least twelve months, excluding sales from acquisitions owned for less than twelve months[24] EBITDA and Adjusted EBITDA Reconciliation In Q1 2025, DXP's EBITDA and Adjusted EBITDA both saw significant growth, with Adjusted EBITDA margin also improving year-over-year, indicating an enhancement in the company's core profitability Reconciliation of EBITDA and Adjusted EBITDA | Metric ($ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Y-o-Y Change | | :--------------------- | :-------------------- | :-------------------- | :------- | | Income Before Income Taxes | 27,173 | 15,555 | 74.7% | | Plus: Interest Expense | 14,660 | 15,544 | -5.7% | | Plus: Depreciation and Amortization | 9,134 | 7,538 | 21.2% | | EBITDA | 50,967 | 38,637 | 31.9% | | Plus: Other Non-Recurring Items | 235 | 842 | -72.1% | | Plus: Stock-Based Compensation Expense | 1,317 | 864 | 52.4% | | Adjusted EBITDA | 52,519 | 40,343 | 30.2% | | Operating Income Margin (%) | 8.5% | 7.1% | 1.4 ppt | | EBITDA Margin (%) | 10.7% | 9.4% | 1.3 ppt | | Adjusted EBITDA Margin (%) | 11.0% | 9.8% | 1.2 ppt | Organic Sales Reconciliation In Q1 2025, DXP's total sales and organic sales both increased, with acquisitions contributing $31.112 million in sales, and organic sales growing by 11.1% year-over-year Organic Sales Reconciliation | Metric ($ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Y-o-Y Change | | :--------------------- | :-------------------- | :-------------------- | :------- | | Service Centers Sales | 327,075 | 288,435 | 13.4% | | Innovative Pumping Solutions Sales | 86,182 | 62,216 | 38.5% | | Supply Chain Services Sales | 63,312 | 61,984 | 2.1% | | DXP Total Sales | 476,569 | 412,635 | 15.5% | | Acquisition Sales | 31,112 | 11,775 | 164.2% | | Organic Sales | 445,457 | 400,860 | 11.1% | | Business Days | 63 | 63 | 0.0% | | Sales Per Business Day | 7,565 | 6,550 | 15.5% | | Organic Sales Per Business Day | 7,071 | 6,363 | 11.1% | Free Cash Flow Reconciliation In Q1 2025, DXP's Free Cash Flow was negative $16.941 million, primarily due to a significant decrease in cash flow from operating activities and increased purchases of property and equipment Free Cash Flow Reconciliation | Metric ($ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Y-o-Y Change | | :--------------------- | :-------------------- | :-------------------- | :------- | | Net Cash Provided by Operating Activities | 2,973 | 26,989 | -89.0% | | Less: Purchases of Property and Equipment | (19,914) | (2,894) | 588.1% | | Free Cash Flow | (16,941) | 24,095 | -170.3% | Adjusted Net Income and EPS Reconciliation In Q1 2025, DXP's Adjusted Net Income and Adjusted Diluted EPS were higher than GAAP reported net income and diluted EPS, primarily due to adjustments for non-recurring items and tax impacts Reconciliation of Adjusted Net Income and Adjusted Diluted EPS | Metric ($ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Y-o-Y Change | | :--------------------------------- | :-------------------- | :-------------------- | :------- | | Net Income | 20,589 | 11,332 | 81.7% | | Other Non-Recurring Items | 235 | 842 | -72.1% | | Tax Adjustment | (57) | (256) | -77.8% | | Adjusted Net Income | 20,767 | 11,918 | 74.2% | | Diluted Weighted Average Common Shares | 16,538 | 16,968 | -2.5% | | Diluted Earnings Per Share | $1.25 | $0.67 | 86.6% | | Adjusted Diluted Earnings Per Share | $1.26 | $0.70 | 80.0% | Additional Information This section includes important forward-looking statements, outlining potential risks and uncertainties that could impact DXP's future financial results and operational strategies Forward-Looking Statements This report contains forward-looking statements protected by the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, concerning expectations for future performance, cash flow, liquidity, and growth, but these are subject to significant risks and uncertainties that could cause actual results to differ materially - Certain information in this press release contains forward-looking statements protected by the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995[12] - Forward-looking statements involve the company's expectations regarding future profitability, cash flow, liquidity, and growth, as well as descriptions of anticipated changes in Form 10-Q filings, consolidated balance sheets, and operating results[12] - These forward-looking statements involve significant risks and uncertainties that could cause actual future results to differ materially from expectations, including the effectiveness of management strategies, economic and business conditions, regulatory changes, acquisition integration capabilities, material and labor availability, and cyberattacks[12]