DXP Enterprises(US:DXPE)2021-05-09 22:03Financial Data and Key Metrics Changes - Total sales for Q1 2021 increased sequentially by 5.6% to $245.6 million, with average daily sales rising from $3.8 million in Q4 to $3.9 million in Q1 [27][28] - Gross profit margins improved to 29.2%, reflecting a 152 basis point increase over Q4 [21][33] - Adjusted EBITDA for Q1 was $13.9 million, with EBITDA margins at 5.7% [39] Business Line Data and Key Metrics Changes - Service Centers experienced a sequential sales growth of 15.6%, while Supply Chain Services grew by 0.5% [27] - Innovative Pumping Solutions (IPS) saw a decline in operating income margins by 332 basis points, primarily due to higher SG&A costs [36] - Acquisitions contributed $28.4 million in sales during the quarter, enhancing overall performance [27][14] Market Data and Key Metrics Changes - Industrial end-markets, which constitute 67% of the business, showed positive upward movement, with the ISM PMI manufacturing index rising from 58.7% in January to 64% in March [8][9] - Oil and gas, making up 33% of the business, showed mixed recovery signs, particularly in international markets [11][12] Company Strategy and Development Direction - The company aims to grow all markets with a balanced end-market exposure, focusing on food and beverage, water and wastewater, and chemicals [17] - The acquisition strategy is a key component for growth, with recent acquisitions expected to contribute positively to future performance [44][45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to pre-pandemic growth levels, highlighting strong free cash flow generation and market condition improvements [6][7][23] - The company is cautious about the oil and gas sector, noting that capital budgets are expected to remain flat to slightly down domestically, while international projects show more promise [12][54] Other Important Information - The company generated $11.2 million in free cash flow during Q1, supporting ongoing acquisition efforts [15][42] - Total debt outstanding was $329.2 million, reflecting a refinancing of Term Loan B, which provides additional flexibility [43] Q&A Session Summary Question: How did April look and what are the segment trends? - Management noted a strong exit rate for March with early estimates for April showing $4.6 million in sales per business day, indicating positive momentum [49][50] Question: What are the dynamics of cost inflation in the supply chain? - Management acknowledged seeing price increases and delivery issues, indicating potential inflationary pressures but noted that they can pass on costs to customers [56][57] Question: How will SG&A costs be managed as revenue increases? - Management indicated that they retained talent during the pandemic and expect to leverage this as revenue grows, targeting an EBITDA margin of around 8% [64][65] Question: What does the acquisition pipeline look like? - Management confirmed a robust acquisition pipeline with high visibility on upcoming deals, particularly in water and wastewater and food and beverage sectors [66][70]