DXP Enterprises(US:DXPE)2021-03-09 19:46Financial Data and Key Metrics Changes - DXP's Q4 sales increased 5.7% sequentially to $232.7 million, reflecting improvements from trough levels in Q3 [31] - Total sales for fiscal 2020 were $1 billion, down 20.7% compared to fiscal 2019 [31] - Average daily sales for Q4 were $3.8 million, down from $4.8 million in Q4 2019 [32] - DXP generated $101 million in free cash flow for fiscal 2020 [45] - Adjusted EBITDA for fiscal 2020 was $59.5 million, with adjusted EBITDA margins at 5.9% [41] Business Line Data and Key Metrics Changes - Service centers experienced a 13.1% year-over-year decline, while supply chain services declined 23.2%, and innovative pumping solutions (IPS) declined 38.1% [33] - IPS and supply chain services saw sequential sales growth of 62.8% and 7.1%, respectively, in Q4 [31][27] - Gross margins improved to 27.8%, a 40 basis point increase over 2019, with IPS gross margins improving by 79 basis points year-over-year [21][37] Market Data and Key Metrics Changes - Key end markets driving sales performance included food and beverage, mining, municipal, and specialty chemicals [33] - The oil and gas market is showing signs of improvement, but capital budgets remain cut back, indicating a slow recovery [51] Company Strategy and Development Direction - DXP aims to diversify its exposure to oil and gas to about 20% while focusing on stable markets such as water and wastewater, food and beverage, and alternate energies [53][55] - The company plans to continue its acquisition strategy to enhance market share and capabilities in key geographic regions [47] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for recovery in the oil and gas sector as COVID-19 vaccines are deployed [51][26] - The company remains cautious about the pace of recovery, noting that visibility and uncertainty persist in the current macro environment [26] Other Important Information - DXP completed six acquisitions in 2020, enhancing its market position and capabilities [28] - The company successfully refinanced its term loan B, providing additional financial flexibility [46] Q&A Session Summary Question: Insights on oil and gas market recovery - Management noted that while oil prices have improved, capital budgets are still cut back, leading to a slower recovery pace [51] Question: Future market exposure and M&A strategy - Management aims to reduce oil and gas exposure to about 20% while continuing to pursue acquisitions that enhance market diversity [53] Question: Current sales trends and cost expectations - Sales per business day showed slight fluctuations, with expectations for a significant uptick in March [57] - Q1 typically has higher SG&A costs due to various factors, but management is optimistic about maintaining gross margin trends [58]