DXP Enterprises(US:DXPE)2020-08-09 10:35Financial Data and Key Metrics Changes - For the six-month period ended June 30, 2020, total sales were $552.4 million and operating income was $17.7 million, with diluted earnings per share at $0.42 [25] - Total sales for Q2 were $251.4 million, a 16.5% decline sequentially and a 24.6% decline year-over-year [26] - Average daily sales for Q2 were $4.0 million per day, down from $5.3 million in Q2 2019 and $4.7 million in Q1 2020 [27] Business Line Data and Key Metrics Changes - Service Center sales were down 15.7% sequentially and 23.1% year-over-year [30] - Innovative Pumping Solutions (IPS) sales decreased 13.6% sequentially and 25.4% compared to Q2 of last year [30] - Supply Chain Services sales declined 23.3% sequentially and 29.1% year-over-year, reflecting significant pullback in oil and gas and transportation-related customers [31] Market Data and Key Metrics Changes - The U.S. and Canada average quarterly rig count is down 57% from Q1 to Q2, significantly affecting demand within the Safety Services division [14] - Downstream refinery business utilization rates dropped from an average of 88% in Q1 to 72% in Q2 [15] - Strength was noted in gold mining, specialty polymers, bottled water, and certain agricultural markets [16] Company Strategy and Development Direction - The company aims to drive sales growth and achieve excellence for stakeholders while navigating the challenges posed by COVID-19 [6][9] - DXP is focusing on maintaining a strong balance sheet to invest in capabilities through growth or acquisitions, with recent acquisitions in stable markets [19][20] - The company plans to continue pushing for resilience and adaptability in the second half of the year [22] Management's Comments on Operating Environment and Future Outlook - Management expressed that the recovery experienced in May and June was short-lived due to a resurgence in COVID-19 cases [11] - The company is adapting to operate safely in a COVID-19 environment while managing demand pressures [13] - Management remains optimistic about the long-term financial performance despite current challenges [6][21] Other Important Information - DXP achieved record cash flow in the quarter, driven by improved collections, resulting in a significant improvement in liquidity and a reduction in total debt [40][41] - The company has no near-term maturities, with a strong capital structure designed for flexibility [44] - The average backlog for Q2 is 6% below fiscal year 2015 but 60% above fiscal year 2016 [18] Q&A Session Summary Question: Can you provide insights on monthly sales per day? - Monthly sales per day decreased from $5.2 million in March to $3.2 million in July, indicating a year-over-year decline of 25% to 35% [48][49] Question: What are the trends in Service Center and IPS segments? - Service Center bookings have shown an uptick in July, while IPS backlog is trending down but remains profitable [51][52] Question: How much temporary cost reduction occurred in Q2? - The company has taken out over $28 million in costs from 2019 levels, with ongoing cost management strategies in place [63] Question: What is the outlook for the Supply Chain segment? - The Supply Chain segment faced significant declines due to customer facility closures, but profitability was maintained as expenses also decreased [68] Question: What are the plans for inventory management? - Adjustments to inventory levels were made in April, with expectations for inventory to decrease in the second half of the year [75] Question: What is the company's approach to M&A? - The company is looking to close 1 or 2 acquisitions by year-end, focusing on businesses that have shown growth during the pandemic [76][79]