Press Release Details

DXP Enterprises, Inc. Reports Third Quarter 2023 Results

November 8, 2023
  • $27.2 million in cash
  • $419.2 million in sales, an 8.2 percent year-over-year increase
  • $1,271.6 million in year to date sales, an 18.3 percent year-over-year increase
  • Diluted earnings per share of $0.93, up 31.0 percent compared to Q3 2022
  • $44.0 million in earnings before interest, taxes, depreciation & amortization and other non-cash charges ("Adjusted EBITDA")
  • Free Cash Flow of $38.3 million and $56.7 million for the three and nine months ended September 30, 2023
  • Post Q3, successfully reduced borrowing costs by fifty basis points and raised an incremental $125 million

DXP Enterprises, Inc. (the "Company" or "DXPE") (NASDAQ: DXPE) today announced financial results for the third quarter ended September 30, 2023. The following are results for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, and for the three months ended June 30, 2023, where appropriate. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

"The Company posted solid third-quarter results in a lessening inflationary market and varied spending by our customers, delivering solid sales, Adjusted EBITDA, earnings per share and Free Cash Flow performance," said David R. Little, Chairman and Chief Executive Officer.

Third Quarter 2023 financial highlights:

  • Sales increased 8.2 percent to $419.2 million, compared to $387.3 million for the third quarter of 2022, and decreased 2.1 percent compared to the second quarter of 2023.
  • Net income increased 16.1 percent for the third quarter to $16.2 million, compared to $13.9 million for the corresponding prior-year period.
  • Earnings per diluted share for the third quarter was $0.93 based upon 17.4 million diluted shares, compared to earnings of $0.71 per diluted share in the third quarter of September 30, 2022, based on 19.7 million diluted shares.
  • Adjusted EBITDA for the third quarter of 2023 was $44.0 million compared to $34.3 million for the third quarter of 2022. Adjusted EBITDA as a percentage of sales, or Adjusted EBITDA Margin, was 10.5 percent and 8.9 percent, respectively.
  • Free Cash Flow for the third quarter of 2023 was $38.3 million compared to $(5.0) million for the third quarter of 2022

David R. Little, Chairman and Chief Executive Officer continued, “We are pleased with our performance in the third quarter as the team maintained momentum and delivered strong year-over-year results. We achieved 8.2 percent sales growth year-over-year, and solid ten percent plus EBITDA margins and growth. DXP’s third quarter 2023 sales were $419.2 million. Adjusted EBITDA grew 28.3 percent year-over-year. In terms of our business segments for the third quarter of 2023, sales were $294.5 million for Service Centers, $59.0 million for Innovative Pumping Solutions and $65.8 million for Supply Chain Services. Business segment operating income increased 20.3 percent year-over-year. We believe we are well positioned to outgrow the market and to generate improved operating margins and returns for the benefit of our shareholders as we begin to move into 2024.”

Kent Yee, Chief Financial Officer and Senior Vice President, remarked, “Our third quarter year-over-year financial results continue to reflect the growth we have been experiencing in fiscal year 2023, and reflect our financial goals to grow through a combination of organic and acquisition sales. We had a strong quarter of Free Cash Flow generation, producing $38.3 million in Free Cash Flow during the third quarter. Total debt outstanding as of September 30, 2023, was $424.9 million. DXP’s secured leverage ratio or net debt to EBITDA ratio was 2.3:1.0 with a covenant EBITDA of $168.5 million for the last twelve-months ending September 30, 2023. Subsequent to the third quarter, we announced the successful completion of the refinancing of our existing debt plus raising an incremental $125 million. This allowed us to reprice our existing borrowings, saving fifty basis points, while raising incremental monies to help drive anticipated acquisition growth while maintaining liquidity and flexibility. We expect to finish fiscal year 2023 strong with momentum continuing into fiscal year 2024.”

Conference Call Information

DXP Enterprises, Inc. management will host a conference call, November 9, 2023, at 10:00 a.m. Central Time, to discuss the Company’s financial results. The conference call may be accessed by going to https://ir.dxpe.com.

Interested investors and other parties can listen to a webcast of the live conference call by logging onto the Investor Relations section of the Company's website at https://ir.dxpe.com. The online replay will be available on the same website immediately following the call. A slide presentation highlighting the Company’s results and key performance indicators will also be available on the Investor Relations section of the Company’s website.

To learn more about DXP Enterprises, Inc., please visit the Company's website at https://ir.dxpe.com

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 North America 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.

Non-GAAP Financial Measures

DXP supplements reporting of net income with certain non-GAAP measurements, including EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Free Cash Flow, 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, EBITDA Margin, Adjusted EBITDA Margin, Free Cash Flow and net debt 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 facilities. 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 to its most directly comparable GAAP financial measure, 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 shares of the Company's common stock, and for certain other activities.

Information Related to Forward-Looking Statements

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 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: the effectiveness of management’s strategies and decisions; our ability to implement our internal growth and acquisition growth strategies; general economic and business conditions specific to our primary customers; changes in government regulations; our ability to effectively integrate businesses we may acquire; new or modified statutory or regulatory requirements; availability of materials and labor; inability to obtain or delay in obtaining government or third-party approvals and permits; non-performance by third parties of their contractual obligations; unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response thereto; cyber-attacks adversely affecting our operations; other geological, operating and economic considerations and declining prices and market conditions, including reduced oil and natural gas prices and supply or demand for maintenance, repair and operating products, equipment and service; decreases in oil and natural gas industry capital 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, 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. 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 Securities and Exchange Commission, 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)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

Sales

 

$

419,249

 

$

387,314

 

 

$

1,271,556

 

$

1,074,537

 

Cost of sales

 

 

293,687

 

 

275,681

 

 

 

889,101

 

 

763,758

 

Gross profit

 

 

125,562

 

 

111,633

 

 

 

382,455

 

 

310,779

 

Selling, general and administrative expenses

 

 

89,706

 

 

85,094

 

 

 

273,720

 

 

236,761

 

Income from operations

 

 

35,856

 

 

26,539

 

 

 

108,735

 

 

74,018

 

Other expense, net

 

 

1,234

 

 

1,565

 

 

 

522

 

 

2,941

 

Interest expense

 

 

12,684

 

 

6,833

 

 

 

36,068

 

 

17,610

 

Income before income taxes

 

 

21,938

 

 

18,141

 

 

 

72,145

 

 

53,467

 

Provision for income taxes

 

 

5,766

 

 

5,097

 

 

 

19,339

 

 

13,402

 

Net income

 

 

16,172

 

 

13,044

 

 

 

52,806

 

 

40,065

 

Net loss attributable to NCI*

 

 

 

 

(885

)

 

 

 

 

(938

)

Net income attributable to DXP Enterprises, Inc.

 

 

16,172

 

 

13,929

 

 

 

52,806

 

 

41,003

 

Preferred stock dividend

 

 

22

 

 

22

 

 

 

67

 

 

67

 

Net income attributable to common shareholders

 

$

16,150

 

$

13,907

 

 

$

52,739

 

$

40,936

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to DXP Enterprises, Inc.

 

$

0.93

 

$

0.71

 

 

$

2.94

 

$

2.10

 

 

 

 

 

 

 

 

 

 

Weighted average common shares and common equivalent shares outstanding

 

 

17,356

 

 

19,660

 

 

 

17,944

 

 

19,552

 

 

 

 

 

 

 

 

 

 

*NCI represents non-controlling interest

 

 

 

 

 

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ thousands)

 

 

 

 

 

 

 

 

September 30, 2023

 

December 31, 2022

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash

 

$

27,176

 

$

46,026

Restricted cash

 

 

91

 

 

91

Accounts receivable, net of allowances for doubtful accounts

 

 

320,972

 

 

320,880

Inventories

 

 

105,145

 

 

101,392

Costs and estimated profits in excess of billings

 

 

47,211

 

 

23,588

Prepaid expenses and other current assets

 

 

15,799

 

 

21,644

Income taxes receivable

 

 

393

 

 

2,493

Total current assets

 

$

516,787

 

$

516,114

Property and equipment, net

 

 

56,277

 

 

45,964

Goodwill

 

 

342,122

 

 

333,759

Other intangible assets, net of accumulated amortization

 

 

67,913

 

 

79,585

Operating lease right-of-use assets, net

 

 

48,462

 

 

57,402

Other long-term assets

 

 

13,543

 

 

4,456

Total assets

 

$

1,045,104

 

$

1,037,280

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of debt

 

$

4,369

 

$

4,369

Trade accounts payable

 

 

101,439

 

 

100,784

Accrued wages and benefits

 

 

35,540

 

 

26,260

Customer advances

 

 

12,595

 

 

20,128

Billings in excess of costs and estimated profits

 

 

7,181

 

 

10,411

Current-portion operating lease liabilities

 

 

15,459

 

 

18,083

Other current liabilities

 

 

45,275

 

 

32,866

Total current liabilities

 

$

221,858

 

$

212,901

Long-term debt, less unamortized debt issuance costs

 

 

408,105

 

 

409,205

Long-term operating lease liabilities

 

 

34,028

 

 

40,189

Other long-term liabilities

 

 

15,469

 

 

4,701

Deferred income taxes

 

 

2,068

 

 

4,892

Total long-term liabilities

 

$

459,670

 

$

458,987

Total Liabilities

 

$

681,528

 

$

671,888

Equity:

 

 

 

 

Total DXP Enterprises, Inc. equity

 

 

363,576

 

 

365,392

Total liabilities and equity

 

$

1,045,104

 

$

1,037,280

Business segment financial highlights:

  • Service Centers’ revenue for the third quarter was $294.5 million, a 1.3 percent sequential decrease and an increase of 13.2 percent year-over-year with a 14.1 percent operating income margin and a revenue increase of 21.7 percent for the nine months ended September 30, 2023 compared to the same period in 2022.
  • Innovative Pumping Solutions’ revenue for the third quarter was $59.0 million, a sequential decrease of 7.1 percent and a decrease of 0.1 percent year-over-year with a 18.9 percent operating income margin and a revenue increase of 8.5 percent for the nine months ended September 30, 2023 compared to the same period in 2022.
  • Supply Chain Services’ revenue for the third quarter was $65.8 million, a 0.5 percent sequential decrease and a decrease of 3.5 percent year-over-year with a 8.5 percent operating income margin and a revenue increase of 14.0 percent for the nine months ended September 30, 2023 compared to the same period in 2022.
 

SEGMENT DATA

($ thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

Sales

 

2023

 

 

2022

 

 

2023

 

 

2022

Service Centers

$

294,458

 

$

260,083

 

$

888,116

 

$

729,977

Innovative Pumping Solutions

 

58,963

 

 

59,044

 

 

184,402

 

 

169,890

Supply Chain Services

 

65,828

 

 

68,187

 

 

199,038

 

 

174,670

Total Sales

$

419,249

 

$

387,314

 

$

1,271,556

 

$

1,074,537

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

Operating Income

 

2023

 

 

2022

 

 

2023

 

 

2022

Service Centers

$

41,441

 

$

35,718

 

$

130,274

 

$

95,437

Innovative Pumping Solutions

 

11,155

 

 

7,327

 

 

31,638

 

 

23,122

Supply Chain Services

 

5,593

 

 

5,332

 

 

16,522

 

 

14,311

Total Segments operating income

$

58,189

 

$

48,377

 

$

178,434

 

$

132,870

 

Reconciliation of Operating Income for Reportable Segments

($ thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Income from operations for reportable segments

$

58,189

 

$

48,377

 

$

178,434

 

$

132,870

Adjustment for:

 

 

 

 

 

 

 

Amortization of intangibles and fixed assets

 

5,866

 

 

5,132

 

 

15,206

 

 

13,958

Corporate expenses

 

16,467

 

 

16,706

 

 

54,493

 

 

44,894

Income from operations

$

35,856

 

$

26,539

 

$

108,735

 

$

74,018

Interest expense

 

12,684

 

 

6,833

 

 

36,068

 

 

17,610

Other (income) expense, net

 

1,234

 

 

1,565

 

 

522

 

 

2,941

Income before income taxes

$

21,938

 

$

18,141

 

$

72,145

 

$

53,467

 

 

 

 

 

 

 

 

 

Unaudited Reconciliation of Non-GAAP Financial Information

($ thousands)

 

The following table sets forth the reconciliation of EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin to the most comparable U.S. GAAP financial measure (in thousands):

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net income attributable to DXP Enterprises, Inc.

$

16,172

 

 

$

13,929

 

 

$

52,806

 

 

$

41,003

 

Less: Net loss attributable to non-controlling interest

 

 

 

 

(885

)

 

 

 

 

 

(938

)

Plus: Interest expense

 

12,684

 

 

 

6,833

 

 

 

36,068

 

 

 

17,610

 

Plus: Provision for income taxes

 

5,766

 

 

 

5,097

 

 

 

19,339

 

 

 

13,402

 

Plus: Depreciation and amortization

 

7,983

 

 

 

7,493

 

 

 

21,468

 

 

 

21,325

 

EBITDA

$

42,605

 

 

$

32,467

 

 

$

129,681

 

 

$

92,402

 

Plus: NCI income (loss) before tax(1)

 

 

 

 

159

 

 

 

 

 

 

433

 

Plus: other non-recurring items(2)

 

551

 

 

 

1,193

 

 

 

551

 

 

 

1,193

 

Plus: stock compensation expense

 

864

 

 

 

505

 

 

 

2,211

 

 

 

1,368

 

Adjusted EBITDA

$

44,020

 

 

$

34,324

 

 

$

132,443

 

 

$

95,396

 

 

 

 

 

 

 

 

 

Operating Income Margin

 

8.6

%

 

 

6.9

%

 

 

8.6

%

 

 

6.9

%

EBITDA Margin

 

10.2

%

 

 

8.4

%

 

 

10.2

%

 

 

8.6

%

Adjusted EBITDA Margin

 

10.5

%

 

 

8.9

%

 

 

10.4

%

 

 

8.9

%

(1) NCI represents non-controlling interest.

(2) Other non-recurring items includes the loss associated with closing an international location for the three and nine months ended September 30, 2023 and the loss associated with the sale of a VIE for the three and nine months ended September 30, 2022.

 

Unaudited Reconciliation of Non-GAAP Financial Information

($ thousands)

 

The following table sets forth the reconciliation of Free Cash Flow to the most comparable GAAP financial measure (in thousands):

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

Net cash from operating activities

 

$

39,758

 

 

$

(3,432

)

 

$

63,775

 

 

$

2,256

 

Less: purchases of property and equipment

 

 

(1,486

)

 

 

(1,578

)

 

 

(7,103

)

 

 

(3,426

)

Free Cash Flow

 

$

38,272

 

 

$

(5,010

)

 

$

56,672

 

 

$

(1,170

)

 

Kent Yee, 713-996-4700
Senior Vice President, CFO
www.dxpe.com

Source: DXP Enterprises, Inc.
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