Press Release Details

DXP Enterprises Reports Third Quarter 2022 Results

11/09/2022
  • $387.3 million in sales, a 5.3 sequential and 33.8 percent year-over-year increase
  • Net income of $13.2 million versus $7.1 million compared to Q3 2021
  • GAAP diluted EPS of $0.67
  • Non-GAAP diluted EPS of $0.75
  • $34.3 million in earnings before interest, taxes, depreciation & amortization and other non-cash charges ("Adjusted EBITDA")
  • Closed the acquisition of Sullivan Environmental Technologies, Inc.

HOUSTON--(BUSINESS WIRE)-- DXP Enterprises, Inc. (NASDAQ: DXPE) today announced financial results for the third quarter ended September 30, 2022. The following are results for the three and nine months ended September 30, 2022, compared to the three and nine months ended September 30, 2021 and sequentially for the three months ended June 30, 2022, where appropriate. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

Third Quarter 2022 financial highlights:

  • Sales increased 33.8 percent to $387.3 million, compared to $289.5 million for the third quarter of 2021 and 5.3 percent compared to the second quarter of 2022.
  • Earnings per diluted share for the third quarter were $0.67 based upon 19.7 million diluted shares, compared to earnings of $0.36 per share in the third quarter of September 30, 2021, based on 19.6 million diluted shares. Excluding one-time non-cash charges of $1.2 million, earnings per diluted share was $0.75, assuming a 25.1 percent tax rate.
  • Net income for the third quarter was $13.3 million, compared to $7.1 million for the corresponding prior-year period.
  • Adjusted earnings before interest, taxes, depreciation and amortization and other non-cash charges (Adjusted EBITDA) for the third quarter of 2022 was $34.3 million compared to $18.8 million for the third quarter of 2021.

David R. Little, Chairman and CEO remarked, “Thanks to solid execution by our employees, DXP posted strong record sales results for our third quarter of 2022. Our sales growth is being fueled by diversifying into new markets, selling innovative products in new and existing markets, and helping our customers with environmental projects. Our acquisition strategy is focused on stable essential markets that are environmentally friendly. Our results are improving with 33.8 percent year-over-year and 5.3 percent sequential sales growth and 9 percent Adjusted EBITDA margins. During the third quarter, we continued to have strong organic growth within Supply Chain Services, solid organic growth in Service Centers and a meaningful increase in Innovative Pumping Solutions. For the third quarter, sales were $260.1 million for Service Centers, $68.2 million for Supply Chain Services and $59.0 million for Innovative Pumping Solutions. Thank you to all our customers and congratulations to our DXPeople for our record results."

Kent Yee, CFO, remarked, “Our third quarter sales established a new high watermark for DXP. Our third quarter year-over-year and sequential financial results continue to reflect the growth we have been experiencing and reflect our financial goals to grow organically and through acquisition. We are diversifying our end markets and business model exposure. While we face uncertainties going into next year, we remain very confident in our team, our balanced business, a strong balance sheet, and our ability to continue building and strengthening DXP through key initiatives and acquisitions. We expect to deliver exceptional performance and growth in the years ahead. Total debt outstanding as of September 30, 2022 was $364.8 million. DXP's secured leverage ratio or net debt to EBITDA ratio was 2.86:1.0 with a covenant EBITDA of $121.8 million for the last twelve months ending September 30, 2022. We expect to finish 2022 with strong momentum.”

Non-GAAP Financial Measures

DXP supplements reporting of net income with non-GAAP measurements, including EBITDA, Adjusted EBITDA, free cash flow, non-GAAP net income and net debt. This supplemental information should not be considered in isolation or as a substitute for the unaudited GAAP measurements. Additional information regarding EBITDA, Adjusted EBITDA, free cash flow and non-GAAP net income referred to in this press release are included below under "Unaudited Reconciliation of Non-GAAP Financial Information".

The Company believes EBITDA provides additional information about: (i) operating performance, because it assists in comparing the operating performance of the business, as it removes the impact of non-cash depreciation and amortization expense as well as items not directly resulting from core operations such as interest expense and income taxes and (ii) the performance and the effectiveness of operational strategies. Additionally, EBITDA performance is a component of a measure of the Company’s financial covenants under its credit facility. Furthermore, some investors use EBITDA as a supplemental measure to evaluate the overall operating performance of companies in the industry. Management believes that some investors’ understanding of performance is enhanced by including this non-GAAP financial measure as a reasonable basis for comparing ongoing results of operations. By providing this non-GAAP financial measure, together with a reconciliation from net income, the Company believes it is enhancing investors’ understanding of the business and results of operations, as well as assisting investors in evaluating how well the Company is executing strategic initiatives. Free Cash Flow reconciles to the most directly comparable GAAP financial measure of cash flows from operations as provided below. We believe Free Cash Flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to fund acquisitions, make investments, repay debt obligations, repurchase company shares, and for certain other activities.

About DXP Enterprises, Inc.

DXP Enterprises, Inc. is a leading products and service distributor that adds value and total cost savings solutions to industrial customers throughout the United States, Canada and Dubai. DXP provides innovative pumping solutions, supply chain services and maintenance, repair, operating and production ("MROP") services that emphasize and utilize DXP’s vast product knowledge and technical expertise in rotating equipment, bearings, power transmission, metal working, industrial supplies and safety products and services. DXP's breadth of MROP products and service solutions allows DXP to be flexible and customer-driven, creating competitive advantages for our customers. DXP’s business segments include Service Centers, Innovative Pumping Solutions and Supply Chain Services. For more information, go to www.dxpe.com.

The Private Securities Litigation Reform Act of 1995 provides a “safe-harbor” for forward-looking statements. Certain information included in this press release (as well as information included in oral statements or other written statements made by or to be made by the Company) contains statements that are forward-looking. These forward-looking statements include without limitation those about the Company’s expectations regarding the impact of the COVID-19 pandemic and the impact of low commodity prices of oil and gas; the Company's expectations regarding the filing of the Form 10-Q; the description of the anticipated changes in the Company's consolidated balance sheet and the results of operations and the Company's assessment of the impact of such anticipated changes; the Company’s business, the Company’s future profitability, cash flow, liquidity, and growth. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future; and accordingly, such results may differ from those expressed in any forward-looking statement made by or on behalf of the Company. These risks and uncertainties include, but are not limited to; decreases in oil and natural gas prices; decreases in oil and natural gas industry expenditure levels, which may result from decreased oil and natural gas prices or other factors; inability of the Company or its independent auditors to complete the work necessary in order to file the Form 10-Q, in the expected time frame; unanticipated changes to the Company's operating results in the Form 10-Q as filed or in relation to prior periods, including as compared to the anticipated changes stated here; unanticipated impact of such changes and its materiality; ability to obtain needed capital, dependence on existing management, leverage and debt service, domestic or global economic conditions, economic risks related to the impact of COVID-19, ability to manage changes and the continued health or availability of management personnel and changes in customer preferences and attitudes. In some cases, you can identify forward-looking statements by terminology such as, but not limited to, “may,” “will,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “goal,” or “continue” or the negative of such terms or other comparable terminology. For more information, review the Company’s filings with the Securities and Exchange Commission. More information on these risks and other potential factors that could affect the Company’s business and financial results is included in the Company’s filings with the SEC, including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ thousands, except for share and per share amounts)

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

Sales

 

$

387,314

 

 

$

289,494

 

 

$

1,074,537

 

 

$

820,772

 

Cost of sales

 

 

275,681

 

 

 

202,551

 

 

 

763,758

 

 

 

576,921

 

Gross profit

 

 

111,633

 

 

 

86,943

 

 

 

310,779

 

 

 

243,851

 

Selling, general and administrative expenses

 

 

85,094

 

 

 

75,758

 

 

 

236,761

 

 

 

211,587

 

Operating income

 

 

26,539

 

 

 

11,185

 

 

 

74,018

 

 

 

32,264

 

Other (income) loss

 

 

1,566

 

 

 

(450

)

 

 

2,942

 

 

 

(985

)

Interest expense

 

 

6,833

 

 

 

5,264

 

 

 

17,610

 

 

 

15,844

 

Income before income taxes

 

 

18,140

 

 

 

6,371

 

 

 

53,466

 

 

 

17,405

 

Provision for income taxes

 

 

5,097

 

 

 

(565

)

 

 

13,402

 

 

 

2,380

 

Net income

 

 

13,043

 

 

 

6,936

 

 

 

40,064

 

 

 

15,025

 

Net income (loss) attributable to NCI*

 

 

(212

)

 

 

(189

)

 

 

(265

)

 

 

(590

)

Net income attributable to DXP Enterprises, Inc.

 

 

13,255

 

 

 

7,125

 

 

 

40,329

 

 

 

15,615

 

Preferred stock dividend

 

 

22

 

 

 

23

 

 

 

67

 

 

 

68

 

Net income attributable to common shareholders

 

$

13,233

 

 

$

7,102

 

 

$

40,262

 

 

$

15,547

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to DXP Enterprises, Inc.

 

$

0.67

 

 

$

0.36

 

 

$

2.06

 

 

$

0.78

 

 

 

 

 

 

 

 

 

 

Weighted average common shares and common equivalent shares outstanding

 

 

19,660

 

 

 

19,550

 

 

 

19,552

 

 

 

19,900

 

 

 

 

 

 

 

 

 

 

*NCI represents non-controlling interest

 

 

 

 

Business segment financial highlights:

  • Service Centers’ revenue for the third quarter was $260.1 million, a 3.6 percent sequential increase and an increase of 22.4 percent year-over-year with a 13.7 percent operating income margin.
  • Innovative Pumping Solutions’ revenue for the third quarter was $59.0 million, a sequential increase of 2.2 percent and an increase of 62.0 percent year-over-year with a 12.4 percent operating income margin.
  • Supply Chain Services’ revenue for the third quarter was $68.2 million, a 15.7 percent sequential increase and an increase of 68.3 percent year-over-year with a 7.8 percent operating income margin.
 

SEGMENT DATA

($ thousands, unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

Sales

2022

 

2021

 

2022

 

2021

Service Centers

$

260,083

 

$

212,539

 

$

729,977

 

$

608,542

Innovative Pumping Solutions

 

59,044

 

 

36,440

 

 

169,890

 

 

96,411

Supply Chain Services

 

68,187

 

 

40,515

 

 

174,670

 

 

115,819

Total DXP Sales

$

387,314

 

$

289,494

 

$

1,074,537

 

$

820,772

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

Operating Income

 

2022

 

 

2021

 

 

2022

 

 

2021

Service Centers

$

35,718

 

$

29,381

 

$

95,437

 

$

77,819

Innovative Pumping Solutions

 

7,327

 

 

277

 

 

23,122

 

 

6,027

Supply Chain Services

 

5,332

 

 

3,181

 

 

14,311

 

 

8,991

Total segments operating income

$

48,377

 

$

32,839

 

$

132,870

 

$

92,837

 

Reconciliation of Operating Income for Reportable Segments

($ thousands, unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2022

 

2021

 

2022

 

2021

Operating income for reportable segments

$

48,377

 

$

32,839

 

 

$

132,870

 

$

92,837

 

Adjustment for:

 

 

 

 

 

 

 

Amortization of intangibles

 

5,132

 

 

4,238

 

 

 

13,958

 

 

12,690

 

Corporate expenses

 

16,706

 

 

17,416

 

 

 

44,894

 

 

47,883

 

Total operating income

$

26,539

 

$

11,185

 

 

$

74,018

 

$

32,264

 

Interest expense

 

6,833

 

 

5,264

 

 

 

17,610

 

 

15,844

 

Other (income) loss

 

1,566

 

 

(450

)

 

 

2,942

 

 

(985

)

Income before income taxes

$

18,140

 

$

6,371

 

 

$

53,466

 

$

17,405

 

 

 

 

 

 

 

 

Unaudited Reconciliation of Non-GAAP Financial Information

($ thousands)

 

The following table is a reconciliation of EBITDA and Adjusted EBITDA, non-GAAP financial measures, to income before taxes, calculated and reported in accordance with U.S. GAAP.

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2022

 

2021

 

2022

 

2021

Income before income taxes

$

18,140

 

$

6,371

 

$

53,466

 

$

17,405

Plus: interest expense

 

6,833

 

 

5,264

 

 

17,610

 

 

15,844

Plus: depreciation and amortization

 

7,493

 

 

6,486

 

 

21,325

 

 

20,070

EBITDA

$

32,466

 

$

18,121

 

$

92,401

 

$

53,319

 

 

 

 

 

 

 

 

Plus: NCI income (loss) before tax*

$

159

 

$

190

 

$

433

 

$

787

Plus: One-time non-cash loss

 

1,193

 

 

 

 

1,193

 

 

Plus: stock compensation expense

 

505

 

 

514

 

 

1,368

 

 

1,354

Adjusted EBITDA

$

34,323

 

$

18,825

 

$

95,395

 

$

55,460

* NCI represents non-controlling interest

 

 

 

 

 

 

 

 

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ thousands)

 

 

 

 

 

 

 

September 30, 2022

 

December 31, 2021

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash

 

$

16,972

 

 

$

48,989

Restricted cash

 

 

91

 

 

 

91

Accounts receivable, net of allowances for doubtful accounts

 

 

283,522

 

 

 

218,137

Inventories

 

 

131,290

 

 

 

100,894

Costs and estimated profits in excess of billings

 

 

30,122

 

 

 

17,193

Prepaid expenses and other current assets

 

 

11,652

 

 

 

9,522

Income taxes receivable

 

 

652

 

 

 

9,748

Total current assets

 

$

474,301

 

 

$

404,574

Property and equipment, net

 

 

46,657

 

 

 

51,880

Goodwill

 

 

332,988

 

 

 

296,541

Other intangible assets, net of accumulated amortization

 

 

84,516

 

 

 

79,205

Operating lease right-of-use assets

 

 

54,054

 

 

 

57,221

Other long-term assets

 

 

3,559

 

 

 

4,806

Total assets

 

$

996,075

 

 

$

894,227

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of debt

 

$

43,906

 

 

$

3,300

Trade accounts payable

 

 

97,948

 

 

 

77,842

Accrued wages and benefits

 

 

27,455

 

 

 

23,006

Customer advances

 

 

25,496

 

 

 

12,924

Billings in excess of costs and estimated profits

 

 

4,265

 

 

 

3,581

Federal income taxes payable

 

 

587

 

 

 

0

Current-portion operating lease liabilities

 

 

17,526

 

 

 

18,203

Other current liabilities

 

 

28,679

 

 

 

42,206

Total current liabilities

 

$

245,862

 

 

$

181,062

Long-term debt, less unamortized debt issuance costs

 

 

313,739

 

 

 

315,397

Long-term operating lease liabilities

 

 

37,279

 

 

 

39,922

Other long-term liabilities

 

 

4,637

 

 

 

3,603

Deferred income taxes

 

 

8,947

 

 

 

7,516

Total long-term liabilities

 

$

364,602

 

 

$

366,438

Total Liabilities

 

$

610,464

 

 

$

547,500

Equity:

 

 

 

 

Total DXP Enterprises, Inc. equity

 

 

385,823

 

 

 

346,674

Non-controlling interest

 

 

(212

)

 

 

53

Total Equity

 

$

385,611

 

 

$

346,727

Total liabilities and equity

 

$

996,075

 

 

$

894,227

Unaudited Reconciliation of Non-GAAP Financial Information

($ thousands)

 

The following table is a reconciliation of free cash flow, a non-GAAP financial measure, to cash flow from operating activities, calculated and reported in accordance with U.S. GAAP.

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

Net cash from operating activities

 

$

(3,432

)

 

$

6,625

 

 

$

2,256

 

 

$

22,831

 

Less: purchases of property and equipment

 

 

(1,578

)

 

 

(1,458

)

 

 

(3,426

)

 

 

(2,984

)

Plus: proceeds from sales of property & equipment

 

 

 

 

 

 

 

 

 

 

 

1,297

 

Free cash flow

 

$

(5,010

)

 

$

5,167

 

 

$

(1,170

)

 

$

21,144

 

 

 

 

 

 

 

 

 

 

Note: Supplemental non-cash items include share repurchases which have been excluded.

 

The following table is a reconciliation of adjusted net income, a non-GAAP financial measure, to net income, calculated and reported in accordance with U.S. GAAP.

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

GAAP Net Income:

$

13,233

 

$

7,102

 

$

40,262

 

$

15,547

One-time non-cash loss

 

1,193

 

 

 

 

1,193

 

 

Adjustment for taxes*

 

299

 

 

 

 

299

 

 

Non-GAAP net income

$

14,725

 

$

7,102

 

$

41,754

 

$

15,547

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

GAAP

$

0.67

 

$

0.36

 

$

2.06

 

$

0.78

Non-GAAP

$

0.75

 

$

0.36

 

$

2.14

 

$

0.78

 

* Adjustment for taxes relates to the tax effects of the adjustments that we incorporate into non-GAAP measures in order to provide a more meaningful measure on non-GAAP net income. For tax purposes the year-to-date effective tax rate of 25.1 percent was applied to the one-time non-cash loss for conservative purposes.

 

Kent Yee
Senior Vice President, CFO
Phone: (713) 996-4700
www.dxpe.com

Source: DXP Enterprises, Inc.

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