DXP Enterprises, Inc. Reports Third Quarter 2024 Results
-
$35.0 million in cash -
$472.9 million in sales, a 6.1 percent sequential and 12.8 percent year-over-year increase -
GAAP diluted EPS of
$1.27 -
$52.4 million in earnings before interest, taxes, depreciation & amortization and other non-cash charges ("Adjusted EBITDA") -
Free Cash Flow of
$24.4 million for the quarter, and$54.4 million for the nine months endedSeptember 30, 2024 - Completed five acquisitions through Q3; three water, and two industrial rotating equipment companies
Third Quarter 2024 Financial Highlights:
-
Sales increased 6.1 percent sequentially to
$472.9 million , compared to$445.6 million for the second quarter of 2024 and increased 12.8 percent compared to$419.2 million for the third quarter of 2023.
-
Net income for the third quarter was
$21.1 million , compared to$16.2 million for the third quarter of 2023 and$16.7 million for the second quarter of 2024.
-
Earnings per diluted share for the third quarter was
$1.27 based upon 16.6 million diluted shares, compared to$0.93 earnings per diluted share in the third quarter of 2023, based on 17.4 million diluted shares. Adjusted diluted earnings per share was$1.43 for the third quarter compared to$0.96 in the third quarter of 2023.
-
Adjusted EBITDA for the third quarter was
$52.4 million compared to$44.0 million for the third quarter of 2023 and$48.2 million for the second quarter of 2024. Adjusted EBITDA as a percentage of sales, or Adjusted EBITDA margin, was 11.1 percent, 10.5 percent, and 10.8 percent, respectively.
-
Free Cash Flow (cash flow from operating activities less capital expenditures) for the third quarter was
$24.4 million , compared to$38.3 million for the third quarter of 2023.
Conference Call Information
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
About
Non-GAAP Financial Measures
DXP supplements reporting of net income with certain non-GAAP measurements, including EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, and Free Cash Flow. 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 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 supply or demand for maintenance, repair and operating products, equipment and service; 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
|
|||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||
($ thousands, except share amounts) |
|||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
|
|
|
|
|
|
|
|
||||||||
Sales |
$ |
472,935 |
|
$ |
419,249 |
|
|
$ |
1,331,126 |
|
|
$ |
1,271,556 |
|
|
Cost of sales |
|
326,825 |
|
|
293,687 |
|
|
|
923,341 |
|
|
|
889,101 |
|
|
Gross profit |
|
146,110 |
|
|
125,562 |
|
|
|
407,785 |
|
|
|
382,455 |
|
|
Selling, general and administrative expenses |
|
106,502 |
|
|
89,706 |
|
|
|
301,694 |
|
|
|
273,720 |
|
|
Income from operations |
|
39,608 |
|
|
35,856 |
|
|
|
106,091 |
|
|
|
108,735 |
|
|
Interest expense |
|
15,716 |
|
|
12,684 |
|
|
|
46,644 |
|
|
|
36,068 |
|
|
Other expense (income), net |
|
160 |
|
|
1,234 |
|
|
|
(2,844 |
) |
|
|
522 |
|
|
Income before income taxes |
|
23,732 |
|
|
21,938 |
|
|
|
62,291 |
|
|
|
72,145 |
|
|
Provision for income taxes |
|
2,631 |
|
|
5,766 |
|
|
|
13,165 |
|
|
|
19,339 |
|
|
Net income |
|
21,101 |
|
|
16,172 |
|
|
|
49,126 |
|
|
|
52,806 |
|
|
Preferred stock dividend |
|
23 |
|
|
22 |
|
|
|
68 |
|
|
|
67 |
|
|
Net income attributable to common shareholders |
$ |
21,078 |
|
$ |
16,150 |
|
|
$ |
49,058 |
|
|
$ |
52,739 |
|
|
|
|
|
|
|
|
|
|
||||||||
Net income |
$ |
21,101 |
|
$ |
16,172 |
|
|
$ |
49,126 |
|
|
$ |
52,806 |
|
|
Foreign currency translation adjustments |
|
380 |
|
|
(844 |
) |
|
|
(141 |
) |
|
|
(87 |
) |
|
Comprehensive income |
$ |
21,481 |
|
$ |
15,328 |
|
|
$ |
48,985 |
|
|
$ |
52,719 |
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
1.34 |
|
$ |
0.98 |
|
|
$ |
3.08 |
|
|
$ |
3.08 |
|
|
Diluted |
$ |
1.27 |
|
$ |
0.93 |
|
|
$ |
2.93 |
|
|
$ |
2.94 |
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
||||||||
Basic |
|
15,750 |
|
|
16,516 |
|
|
|
15,915 |
|
|
|
17,104 |
|
|
Diluted |
|
16,590 |
|
|
17,356 |
|
|
|
16,755 |
|
|
|
17,944 |
|
|
||||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
($ thousands, except share amounts) |
||||||||
|
|
|
|
|||||
ASSETS |
|
|
|
|||||
Current assets: |
|
|
|
|||||
Cash |
$ |
35,000 |
|
|
$ |
173,120 |
|
|
Restricted cash |
|
91 |
|
|
|
91 |
|
|
Accounts receivable, net of allowance of |
|
337,722 |
|
|
|
311,171 |
|
|
Inventories |
|
109,787 |
|
|
|
103,805 |
|
|
Costs and estimated profits in excess of billings |
|
49,707 |
|
|
|
42,323 |
|
|
Prepaid expenses and other current assets |
|
26,637 |
|
|
|
18,044 |
|
|
Total current assets |
|
558,944 |
|
|
|
648,554 |
|
|
Property and equipment, net |
|
73,050 |
|
|
|
61,618 |
|
|
|
|
448,103 |
|
|
|
343,991 |
|
|
Other intangible assets, net |
|
89,356 |
|
|
|
63,895 |
|
|
Operating lease right of use assets, net |
|
48,498 |
|
|
|
48,729 |
|
|
Other long-term assets |
|
10,263 |
|
|
|
10,649 |
|
|
Total assets |
$ |
1,228,214 |
|
|
$ |
1,177,436 |
|
|
|
|
|
|
|||||
LIABILITIES AND EQUITY |
|
|
|
|||||
Current liabilities: |
|
|
|
|||||
Current maturities of debt |
$ |
5,500 |
|
|
$ |
5,500 |
|
|
Trade accounts payable |
|
106,802 |
|
|
|
96,469 |
|
|
Accrued wages and benefits |
|
41,230 |
|
|
|
36,238 |
|
|
Customer advances |
|
12,656 |
|
|
|
12,160 |
|
|
Billings in excess of costs and estimated profits |
|
11,911 |
|
|
|
9,506 |
|
|
Short-term operating lease liabilities |
|
14,928 |
|
|
|
15,438 |
|
|
Other current liabilities |
|
52,618 |
|
|
|
48,854 |
|
|
Total current liabilities |
|
245,645 |
|
|
|
224,165 |
|
|
Long-term debt, net of unamortized debt issuance costs and discounts |
|
519,250 |
|
|
|
520,697 |
|
|
Long-term operating lease liabilities |
|
34,922 |
|
|
|
34,336 |
|
|
Other long-term liabilities |
|
26,029 |
|
|
|
17,359 |
|
|
Total long-term liabilities |
|
580,201 |
|
|
|
572,392 |
|
|
Total liabilities |
|
825,846 |
|
|
|
796,557 |
|
|
Commitments and Contingencies |
|
|
|
|||||
Shareholders' equity: |
|
|
|
|||||
Series A preferred stock, |
|
1 |
|
|
|
1 |
|
|
Series B preferred stock, |
|
15 |
|
|
|
15 |
|
|
Common stock, |
|
345 |
|
|
|
345 |
|
|
Additional paid-in capital |
|
218,062 |
|
|
|
216,482 |
|
|
Retained earnings |
|
368,329 |
|
|
|
319,271 |
|
|
Accumulated other comprehensive loss |
|
(31,381 |
) |
|
|
(31,240 |
) |
|
|
|
(153,003 |
) |
|
|
(123,995 |
) |
|
|
|
402,368 |
|
|
|
380,879 |
|
|
Total liabilities and equity |
$ |
1,228,214 |
|
|
$ |
1,177,436 |
|
Business segment financial highlights:
-
Service Centers’
revenue for the third quarter was
$316.8 million , an increase of 7.6 percent year-over-year, with a 14.6 percent operating income margin.
-
Innovative Pumping Solutions’
revenue for the third quarter was
$89.8 million , an increase of 52.3 percent year-over-year, with a 20.3 percent operating income margin.
-
Supply Chain Services’
revenue for the third quarter was
$66.3 million , an increase of 0.7 percent year-over-year, with a 8.4 percent operating income margin.
SEGMENT DATA |
||||||||||||
($ thousands, unaudited) |
||||||||||||
|
|
|
|
|
|
|
|
|||||
|
Three Months Ended |
|
Nine Months Ended |
|||||||||
Sales |
2024 |
|
2023 |
|
2024 |
|
2023 |
|||||
Service Centers |
$ |
316,831 |
|
$ |
294,459 |
|
$ |
911,783 |
|
$ |
914,078 |
|
Innovative Pumping Solutions |
|
89,825 |
|
|
58,962 |
|
|
225,417 |
|
|
158,440 |
|
Supply Chain Services |
|
66,279 |
|
|
65,828 |
|
|
193,926 |
|
|
199,038 |
|
Total Sales |
$ |
472,935 |
|
$ |
419,249 |
|
$ |
1,331,126 |
|
$ |
1,271,556 |
|
|
|
|
|
|
|
|
|
|||||
|
Three Months Ended |
|
Nine Months Ended |
|||||||||
Operating Income |
2024 |
|
2023 |
|
2024 |
|
2023 |
|||||
Service Centers |
$ |
46,154 |
|
$ |
41,912 |
|
$ |
130,329 |
|
$ |
134,549 |
|
Innovative Pumping Solutions |
|
18,207 |
|
|
10,599 |
|
|
38,543 |
|
|
26,555 |
|
Supply Chain Services |
|
5,568 |
|
|
5,589 |
|
|
16,653 |
|
|
16,519 |
|
Total Segments Operating Income |
$ |
69,929 |
|
$ |
58,100 |
|
$ |
185,525 |
|
$ |
177,623 |
RECONCILIATION OF OPERATING INCOME FOR REPORTABLE SEGMENTS |
|||||||||||||
($ thousands, unaudited) |
|||||||||||||
|
|
|
|
|
|
|
|
||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||
Income from operations for reportable segments |
$ |
69,929 |
|
$ |
58,100 |
|
$ |
185,525 |
|
|
$ |
177,623 |
|
Adjustment for: |
|
|
|
|
|
|
|
||||||
Amortization of intangibles |
|
5,245 |
|
|
5,866 |
|
|
14,333 |
|
|
|
15,206 |
|
Corporate expenses |
|
25,076 |
|
|
16,378 |
|
|
65,101 |
|
|
|
53,682 |
|
Income from operations |
$ |
39,608 |
|
$ |
35,856 |
|
$ |
106,091 |
|
|
$ |
108,735 |
|
Interest expense |
|
15,716 |
|
|
12,684 |
|
|
46,644 |
|
|
|
36,068 |
|
Other expense (income), net |
|
160 |
|
|
1,234 |
|
|
(2,844 |
) |
|
|
522 |
|
Income before income taxes |
$ |
23,732 |
|
$ |
21,938 |
|
$ |
62,291 |
|
|
$ |
72,145 |
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION |
||||||||||||||||
($ thousands, unaudited) |
||||||||||||||||
The following table sets forth the reconciliation of EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin to the most comparable |
||||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|||||||||
Income before income taxes |
$ |
23,732 |
|
|
$ |
21,938 |
|
|
$ |
62,291 |
|
|
$ |
72,145 |
|
|
Plus: Interest expense |
|
15,716 |
|
|
|
12,684 |
|
|
|
46,644 |
|
|
|
36,068 |
|
|
Plus: Depreciation and amortization |
|
8,720 |
|
|
|
7,983 |
|
|
|
24,385 |
|
|
|
21,468 |
|
|
EBITDA |
$ |
48,168 |
|
|
$ |
42,605 |
|
|
$ |
133,320 |
|
|
$ |
129,681 |
|
|
Plus: other non-recurring items(1) |
|
2,950 |
|
|
|
551 |
|
|
|
4,292 |
|
|
|
551 |
|
|
Plus: stock compensation expense |
|
1,322 |
|
|
|
864 |
|
|
|
3,398 |
|
|
|
2,211 |
|
|
Adjusted EBITDA |
$ |
52,440 |
|
|
$ |
44,020 |
|
|
$ |
141,010 |
|
|
$ |
132,443 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Operating Income Margin |
|
8.4 |
% |
|
|
8.6 |
% |
|
|
8.0 |
% |
|
|
8.6 |
% |
|
EBITDA Margin |
|
10.2 |
% |
|
|
10.2 |
% |
|
|
10.0 |
% |
|
|
10.2 |
% |
|
Adjusted EBITDA Margin |
|
11.1 |
% |
|
|
10.5 |
% |
|
|
10.6 |
% |
|
|
10.4 |
% |
|
(1) Other non-recurring items includes unique acquisition integration costs and other non-cash, non-recurring costs not related to continuing business operations. |
The following table sets forth the reconciliation of Organic Sales and Organic Sales per Business Day to the most comparable |
||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
|||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|||||
Sales by Business Segment |
|
|
|
|
|
|
|
|||||
Service Centers |
$ |
316,831 |
|
$ |
294,459 |
|
$ |
911,783 |
|
$ |
914,078 |
|
Innovative Pumping Solutions |
|
89,825 |
|
|
58,962 |
|
|
225,417 |
|
|
158,440 |
|
Supply Chain Services |
|
66,279 |
|
|
65,828 |
|
|
193,926 |
|
|
199,038 |
|
Total DXP Sales |
$ |
472,935 |
|
$ |
419,249 |
|
$ |
1,331,126 |
|
$ |
1,271,556 |
|
Acquisition Sales |
|
28,535 |
|
|
3,868 |
|
|
63,713 |
|
|
30,266 |
|
Organic Sales |
$ |
444,400 |
|
$ |
415,381 |
|
$ |
1,267,413 |
|
$ |
1,241,290 |
|
|
|
|
|
|
|
|
|
|||||
Business Days |
|
64 |
|
|
63 |
|
|
191 |
|
|
191 |
|
Sales per Business Day |
$ |
7,390 |
|
$ |
6,655 |
|
$ |
6,969 |
|
$ |
6,657 |
|
Organic Sales per Business Day |
$ |
6,944 |
|
$ |
6,593 |
|
$ |
6,636 |
|
$ |
6,499 |
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION CONTINUED |
||||||||||||||||
($ thousands, unaudited) |
||||||||||||||||
The following table sets forth the reconciliation of Free Cash Flow to the most comparable GAAP financial measure (in thousands): |
||||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|||||||||
Net cash from operating activities |
$ |
28,344 |
|
|
$ |
39,758 |
|
|
$ |
70,068 |
|
|
$ |
63,775 |
|
|
Less: purchases of property and equipment |
|
(3,954 |
) |
|
|
(1,486 |
) |
|
|
(15,673 |
) |
|
|
(7,103 |
) |
|
Free Cash Flow |
$ |
24,390 |
|
|
$ |
38,272 |
|
|
$ |
54,395 |
|
|
$ |
56,672 |
|
The following table is a reconciliation of adjusted net income attributable to |
||||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|||||||||
Net Income |
$ |
21,101 |
|
|
$ |
16,172 |
|
|
$ |
49,126 |
|
|
$ |
52,806 |
|
|
One-time non-cash items |
|
2,950 |
|
|
|
551 |
|
|
|
4,292 |
|
|
|
551 |
|
|
Adjustment for taxes |
|
(327 |
) |
|
|
(145 |
) |
|
|
(907 |
) |
|
|
(145 |
) |
|
Adjusted Net Income |
$ |
23,724 |
|
|
$ |
16,578 |
|
|
$ |
52,511 |
|
|
$ |
53,212 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Weighted average common shares and common equivalent shares outstanding |
|
|
|
|
|
|
|
|||||||||
Diluted |
|
16,590 |
|
|
|
17,356 |
|
|
|
16,755 |
|
|
|
17,944 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Diluted Earnings per Share |
$ |
1.27 |
|
|
$ |
0.93 |
|
|
$ |
2.93 |
|
|
$ |
2.94 |
|
|
Adjusted Diluted Earnings per Share |
$ |
1.43 |
|
|
$ |
0.96 |
|
|
$ |
3.13 |
|
|
$ |
2.97 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20241104403504/en/
Senior Vice President, CFO
713-996-4700
www.dxpe.com
Source: