DXP Enterprises Inc.

05/08/2024 | Press release | Archived content

First Quarter 2024 Press Release

  • $139.7 million in cash
  • $412.6 million in sales
  • GAAP diluted EPS of $0.67
  • Non-GAAP diluted EPS of $0.74
  • $40.3 million in earnings before interest, taxes, depreciation & amortization and other non-cash charges ("Adjusted EBITDA")
  • Free Cash Flow of $24.1 million, a 6.4 percent year-over-year increase
  • Completed the acquisitions of Hennesy Mechanical Sales, Kappe Associates, and Pro-Seal, Inc.

HOUSTON--(BUSINESS WIRE)-- DXP Enterprises, Inc. ("DXP" or the "Company") (NASDAQ: DXPE) today announced financial results for the first quarter ended March 31, 2024. The following are results for the three months ended March 31, 2024, compared to the three months ended March 31, 2023 and December 31, 2023, where appropriate. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

First Quarter 2024 Financial Highlights:

  • Sales increased 1.4 percent sequentially to $412.6 million, compared to $407.0 million for the fourth quarter of 2023 and decreased 2.7 percent compared to $424.3 million for the first quarter of 2023.
  • Net income for the first quarter of 2024 was $11.3 million, compared to $17.6 million for the first quarter of 2023.
  • Earnings per diluted share for the first quarter of 2024 was $0.67 based upon 17.0 million diluted shares, compared to $0.95 earnings per diluted share in the first quarter of 2023, based on 18.4 million diluted shares. Adjusted diluted earnings per share was $0.74 compared to $0.95 in the first quarter of 2023.
  • Adjusted EBITDA for the first quarter of 2024 was $40.3 million compared to $43.1 million for the first quarter of 2023. Adjusted EBITDA as a percentage of sales, or Adjusted EBITDA margin, was 9.8 percent and 10.2 percent, respectively.
  • Free Cash Flow (cash flow from operating activities less capital expenditures) for the first quarter of 2024 was $24.1 million, compared to $22.6 million for the first quarter of 2023.

David R. Little, Chairman and Chief Executive Officer commented, "Our first quarter results reflect sequential sales growth driven by acquisitions, strong free cash flow, and continued efforts to expand and grow our business. We are encouraged by the sequential increases and the start to the year. As we look ahead to the rest of 2024, we remain optimistic around market conditions, our ability to execute our growth initiatives and the diversity of our end markets to deliver growth in 2024. DXP's first quarter 2024 sales were $412.6 million. In terms of our business segments for the first quarter of 2024, sales were $288.4 million for Service Centers, $62.2 million for Innovative Pumping Solutions, and $62.0 million for Supply Chain Services. 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 move further into 2024."

Kent Yee, Chief Financial Officer and Senior Vice President, remarked, "Our first quarter sequential increase of 1.4 percent was great to see in addition to the $24.1 million of free cash flow along with the closing of three acquisitions. We continue to see bright spots in the market and we currently anticipate the second half of the year to drive growth as we benefit from increases in our project backlog and the diversification of our end markets. We had a strong quarter of free cash flow generation, producing $24.1 million in free cash flow during the first quarter in the midst of closing three acquisitions. DXP ended the quarter with $139.7 million in cash on the balance sheet and net debt of $407.6 million. DXP's secured leverage ratio or net debt to EBITDA ratio was 2.3:1.0 with a covenant EBITDA of $179.3 million for the last twelve-months ending March 31, 2024. We expect to drive organic and acquisition driven growth as we move through fiscal 2024."

Conference Call Information

DXP Enterprises, Inc. management will host a conference call, May 9, 2024, at 10:30 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://www.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, 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 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 March 31,

2024

2023

Sales

$

412,635

$

424,267

Cost of sales

288,753

299,226

Gross profit

123,882

125,041

Selling, general and administrative expenses

94,751

89,642

Income from operations

29,131

35,399

Other income, net

(1,968

)

(469

)

Interest expense

15,544

11,521

Income before income taxes

15,555

24,347

Provision for income taxes

4,223

6,767

Net income

11,332

17,580

Preferred stock dividend

23

23

Net income attributable to common shareholders

$

11,309

$

17,557

Diluted earnings per share attributable to DXP Enterprises, Inc.

$

0.67

$

0.95

Weighted average common shares and common equivalent shares outstanding

16,968

18,436

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ thousands, except share amounts)

March 31, 2024

December 31, 2023

ASSETS

Current assets:

Cash

$

139,697

$

173,120

Restricted cash

91

91

Accounts receivable, net of allowance of $4,946 and $5,584, respectively

313,791

311,171

Inventories

108,186

103,805

Costs and estimated profits in excess of billings

35,259

42,323

Prepaid expenses and other current assets

19,808

18,044

Total current assets

616,832

648,554

Property and equipment, net

64,039

61,618

Goodwill

370,949

343,991

Other intangible assets, net

67,675

63,895

Operating lease right of use assets, net

53,443

48,729

Other long-term assets

11,217

10,649

Total assets

$

1,184,155

$

1,177,436

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of debt

$

5,500

$

5,500

Trade accounts payable

97,324

96,469

Accrued wages and benefits

31,655

36,238

Customer advances

12,619

12,160

Billings in excess of costs and estimated profits

8,195

9,506

Short-term operating lease liabilities

15,796

15,438

Other current liabilities

58,313

48,854

Total current liabilities

229,402

224,165

Long-term debt, net of unamortized debt issuance costs and discounts

520,217

520,697

Long-term operating lease liabilities

38,914

34,336

Other long-term liabilities

20,158

17,359

Total long-term liabilities

579,289

572,392

Total liabilities

808,691

796,557

Commitments and Contingencies

Shareholders' equity:

Series A preferred stock, $1.00 par value; 1,000,000 shares authorized

1

1

Series B preferred stock, $1.00 par value; 1,000,000 shares authorized

15

15

Common stock, $0.01 par value, 100,000,000 shares authorized; 15,928,305 and 16,177,237 outstanding, respectively

345

345

Additional paid-in capital

217,292

216,482

Retained earnings

330,580

319,271

Accumulated other comprehensive loss

(31,854

)

(31,240

)

Treasury stock, at cost 4,468,354 and 4,141,989 shares, respectively

(140,915

)

(123,995

)

Total DXP Enterprises, Inc. equity

375,464

380,879

Total liabilities and equity

$

1,184,155

$

1,177,436

Business segment financial highlights:

  • Service Centers' revenue for the first quarter was $288.4 million, a decrease of 5.7 percent year-over-year with a 14.0 percent operating income margin.
  • Innovative Pumping Solutions' revenue for the first quarter was $62.2 million, an increase of 21.0 percent year-over-year with a 11.2 percent operating income margin.
  • Supply Chain Services' revenue for the first quarter was $62.0 million, a decrease of 7.5 percent year-over-year with a 8.5 percent operating income margin.

SEGMENT DATA

($ thousands, unaudited)

Three Months Ended March 31,

Sales

2024

2023

Service Centers

$

288,435

$

305,813

Innovative Pumping Solutions

62,216

51,411

Supply Chain Services

61,984

67,043

Total Sales

$

412,635

$

424,267

Three Months Ended March 31,

Operating Income

2024

2023

Service Centers

$

40,320

$

45,820

Innovative Pumping Solutions

6,970

9,190

Supply Chain Services

5,262

5,514

Total Segments Operating Income

$

52,552

$

60,524

RECONCILIATION OF OPERATING INCOME FOR REPORTABLE SEGMENTS

($ thousands, unaudited)

Three Months Ended March 31,

2024

2023

Income from operations for reportable segments

$

52,552

$

60,524

Adjustment for:

Amortization of intangibles

4,369

4,758

Corporate expenses

19,052

20,367

Income from operations

$

29,131

$

35,399

Interest expense

15,544

11,521

Other income, net

(1,968

)

(469

)

Income before income taxes

$

15,555

$

24,347

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 March 31,

2024

2023

Income before income taxes

$

15,555

$

24,347

Plus: Interest expense

15,544

11,521

Plus: Depreciation and amortization

7,538

6,782

EBITDA

$

38,637

$

42,650

Plus: other non-recurring items(1)

842

-

Plus: stock compensation expense

864

476

Adjusted EBITDA

$

40,343

$

43,126

Operating Income Margin

7.1

%

8.3

%

EBITDA Margin

9.4

%

10.1

%

Adjusted EBITDA Margin

9.8

%

10.2

%

(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 U.S. GAAP financial measure (in thousands):

Three Months Ended March 31,

2024

2023

Sales by Business Segment

Service Centers

$

288,435

$

305,813

Innovative Pumping Solutions

62,216

51,411

Supply Chain Services

61,984

67,043

Total DXP Sales

$

412,635

$

424,267

Acquisition Sales

11,775

19,133

Organic Sales

$

400,860

$

405,134

Business Days

63

64

Sales per Business Day

$

6,550

$

6,629

Organic Sales per Business Day

$

6,363

$

6,330

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

Three Months Ended March 31,

2024

2023

Net cash from operating activities

$

26,989

$

26,449

Less: purchases of property and equipment

(2,894

)

(3,804

)

Free Cash Flow

$

24,095

$

22,645

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

Three Months Ended March 31,

2024

2023

Net Income

$

11,332

$

17,580

One-time non-cash items

942

-

Adjustment for taxes

256

-

Adjusted Net Income

$

12,530

$

17,580

Weighted average common shares and common equivalent shares outstanding

Diluted

16,968

18,436

Diluted Earnings per Share

$

0.67

$

0.95

Adjusted Diluted Earnings per Share

$

0.74

$

0.95

Kent Yee, 713-996-4700

Senior Vice President, CFO

www.dxpe.com

Source: DXP Enterprises, Inc.