DXP Enterprises(DXPE) - 2023 Q4 - Annual Results

Financial Performance Overview DXP Enterprises reported robust fiscal year 2023 financial performance, driven by strong sales growth and improved profitability Q4 & Fiscal Year 2023 Financial Highlights DXP Enterprises reported strong growth for fiscal year 2023, with sales increasing 13.4% to $1.7 billion and net income rising significantly to $68.8 million from $48.2 million in 2022. The fourth quarter showed stable sales year-over-year at approximately $407 million, but a substantial improvement in profitability, with diluted EPS more than doubling to $0.94 Q4 2023 vs Q4 2022 Key Metrics | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Sales | $407.0 million | $406.3 million | | Diluted EPS | $0.94 | $0.37 | | Adjusted Diluted EPS | $1.12 | $0.50 | | Adjusted EBITDA | $41.9 million | $31.6 million | | Adjusted EBITDA Margin | 10.3% | 7.8% | Fiscal Year 2023 vs 2022 Key Metrics | Metric | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | | Sales | $1.7 billion | $1.5 billion | | Sales Growth | 13.4% | - | | GAAP Diluted EPS | $3.89 | $2.47 | | Adjusted Diluted EPS | $4.09 | $2.69 | | Net Income | $68.8 million | $48.2 million | | Adjusted EBITDA | $174.3 million | $126.8 million | | Adjusted EBITDA Margin | 10.4% | 8.6% | - Key strategic and financial activities during fiscal year 2023 included: - Refinancing the Senior Secured Term Loan B, raising $550 million - Repurchasing 1.7 million shares for $54.7 million - Completing three acquisitions: Florida Valve, Riordan, and Alliance Pump & Mechanical - Ending the year with $173.2 million in cash and restricted cash[5] Management Commentary Management expressed satisfaction with the strong fiscal 2023 results, highlighting broad-based strength and double-digit revenue growth across all business segments. They noted that sales momentum and a strengthened balance sheet, with $173.2 million in cash, position the company for further organic and acquisition-driven growth in 2024. The outlook is positive for key end markets like oil & gas and water & wastewater - CEO David R Little highlighted that strong performance across all business segments drove the 13.4% year-over-year revenue growth in fiscal 2023[7] - The company strengthened its balance sheet in Q4 by raising a new Term Loan B, adding an incremental $125 million in cash[7] - CFO Kent Yee noted that DXP ended fiscal 2023 with a net debt to EBITDA ratio of 2.1:1.0 and plans to drive both organic and acquisition-driven growth in 2024[7] Business Segment Performance Highlights For the full fiscal year 2023, all business segments achieved significant year-over-year revenue growth. Innovative Pumping Solutions led with an 18.2% increase, followed by Service Centers at 13.4% and Supply Chain Services at 8.3%. Operating income margins were strongest in Innovative Pumping Solutions at 16.2% Fiscal Year 2023 Segment Performance | Business Segment | Revenue | YoY Growth | Operating Income Margin | | :--- | :--- | :--- | :--- | | Service Centers | $1.1 billion | 13.4% | 14.3% | | Innovative Pumping Solutions | $273.2 million | 18.2% | 16.2% | | Supply Chain Services | $260.4 million | 8.3% | 8.3% | Consolidated Financial Statements This section presents DXP's consolidated financial statements, detailing significant growth in sales, net income, and assets Consolidated Statements of Operations For the twelve months ended December 31, 2023, DXP's sales grew to $1.68 billion from $1.48 billion in 2022. Gross profit increased to $505.3 million, and income from operations rose to $138.7 million. Net income attributable to common shareholders was $68.7 million, resulting in a diluted EPS of $3.89, a significant increase from $2.47 in the prior year Consolidated Statement of Operations (in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Sales | $1,678,600 | $1,480,832 | | Gross Profit | $505,291 | $422,038 | | Income from Operations | $138,722 | $97,752 | | Net Income | $68,812 | $48,102 | | Diluted EPS | $3.89 | $2.47 | Consolidated Balance Sheets As of December 31, 2023, DXP's total assets increased to $1.18 billion from $1.04 billion at the end of 2022, primarily driven by a significant rise in cash to $173.1 million. Total liabilities also grew to $796.6 million, largely due to an increase in long-term debt. Total shareholders' equity saw a modest increase to $380.9 million Consolidated Balance Sheet Highlights (in thousands) | Line Item | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash | $173,120 | $46,026 | | Total Current Assets | $648,554 | $516,114 | | Total Assets | $1,177,436 | $1,037,280 | | Liabilities & Equity | | | | Total Current Liabilities | $224,165 | $212,901 | | Long-term Debt, net | $520,697 | $409,205 | | Total Liabilities | $796,557 | $671,888 | | Total DXP Enterprises, Inc. equity | $380,879 | $365,392 | Non-GAAP Financial Measures & Reconciliations This section provides reconciliations for key non-GAAP financial measures, including Adjusted EBITDA, Free Cash Flow, and Adjusted Net Income Reconciliation of EBITDA and Adjusted EBITDA The company provides a reconciliation from net income to EBITDA and Adjusted EBITDA. For fiscal year 2023, Adjusted EBITDA was $174.3 million, a 37.5% increase from $126.8 million in 2022. Adjustments from net income primarily included interest expense, taxes, D&A, stock compensation, and other non-recurring items EBITDA and Adjusted EBITDA Reconciliation (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income attributable to DXP | $16,005 | $7,154 | $68,812 | $48,155 | | EBITDA | $40,500 | $31,136 | $170,182 | $123,536 | | Adjusted EBITDA | $41,861 | $31,618 | $174,305 | $126,806 | Reconciliation of Free Cash Flow Free cash flow for fiscal year 2023 was $94.0 million, a dramatic improvement from just $1.0 million in fiscal 2022. This was driven by a substantial increase in net cash from operating activities, which grew to $106.2 million Free Cash Flow Reconciliation (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net cash from operating activities | $42,444 | $3,638 | $106,222 | $5,894 | | Less: purchases of property and equipment, net | ($5,160) | ($1,490) | ($12,263) | ($4,916) | | Free Cash Flow | $37,284 | $2,148 | $93,959 | $978 | Reconciliation of Adjusted Net Income and EPS Adjusted Net Income for fiscal year 2023 was $72.5 million, or $4.09 per diluted share, compared to $52.3 million, or $2.69 per diluted share, in 2022. Adjustments to GAAP Net Income included one-time debt financing costs and other non-recurring items Adjusted Net Income and EPS Reconciliation | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income attributable to DXP | $16.0M | $7.2M | $68.8M | $48.2M | | Adjusted Net Income | $19.0M | $9.7M | $72.5M | $52.3M | | Diluted EPS | $0.94 | $0.37 | $3.89 | $2.47 | | Adjusted Diluted EPS | $1.12 | $0.50 | $4.09 | $2.69 | Supplemental Financial Data This section provides detailed segment performance data and an analysis of sales drivers, including organic growth and acquisitions Segment Data For the full year 2023, Service Centers remained the largest segment with $1.15 billion in sales and $163.9 million in operating income. Innovative Pumping Solutions showed strong growth, with sales reaching $273.2 million and operating income of $44.3 million. Supply Chain Services contributed $260.4 million in sales and $21.5 million in operating income Segment Sales (in thousands) | Segment | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Service Centers | $256,966 | $279,378 | $1,145,082 | $1,009,356 | | Innovative Pumping Solutions | $88,748 | $61,212 | $273,150 | $231,102 | | Supply Chain Services | $61,330 | $65,704 | $260,368 | $240,374 | Segment Operating Income (in thousands) | Segment | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Service Centers | $33,603 | $31,807 | $163,877 | $127,174 | | Innovative Pumping Solutions | $12,622 | $6,826 | $44,260 | $30,037 | | Supply Chain Services | $5,001 | $5,238 | $21,524 | $19,530 | Sales Analysis The company's sales per business day remained consistent throughout 2023, averaging around $6.7 million. For the full year, organic sales growth was the primary driver of performance, with organic sales reaching $1.65 billion, up from $1.44 billion in 2022. Sales from acquisitions contributed $33.1 million in 2023 2023 Sales Per Business Day (in thousands) | Quarter | Total Sales | Business Days | Sales Per Business Day | | :--- | :--- | :--- | :--- | | Q1 | $424 | 64 | $6,629 | | Q2 | $428 | 64 | $6,688 | | Q3 | $419 | 63 | $6,655 | | Q4 | $407 | 61 | $6,673 | Organic vs. Acquisition Sales (in thousands) | Sales Type | 2023 | 2022 | | :--- | :--- | :--- | | Total DXP Sales | $1,678,600 | $1,480,832 | | Acquisition Sales | $33,078 | $41,527 | | Organic Sales | $1,645,522 | $1,439,305 | Company Information & Disclosures This section provides an overview of DXP Enterprises' business and outlines important disclosures regarding forward-looking statements and risks About DXP Enterprises, Inc. DXP Enterprises, Inc. is a distributor of products and services to industrial customers in the United States, Canada, Mexico, and Dubai. The company provides innovative pumping solutions, supply chain services, and a wide range of MROP (maintenance, repair, operating, and production) products and services. Its operations are divided into three business segments: Service Centers, Innovative Pumping Solutions, and Supply Chain Services - DXP is a leading products and service distributor focused on adding value and total cost savings for industrial customers[9] - The company's business segments are Service Centers, Innovative Pumping Solutions, and Supply Chain Services[9] Forward-Looking Statements This press release contains forward-looking statements that involve risks and uncertainties. These statements pertain to expectations about future profitability, cash flow, liquidity, and growth. Key risks include fluctuations in oil and gas prices, economic conditions, the ability to obtain capital, and other factors detailed in the company's SEC filings - The report includes forward-looking statements concerning future business performance, profitability, and growth, which are subject to significant risks and uncertainties[10] - Identified risks include oil and gas price volatility, economic conditions, and other factors disclosed in SEC filings like Form 10-K and 10-Q[10]