- Sales grew 22.3 percent, including 17.5
percent organic growth
- $308.0 million in sales versus $251.9
million in sales in Q3 2017
- Net income of $8.4 million versus $2.9
million compared to Q3 2017
- GAAP diluted EPS of $0.46, compared to
$0.16 in Q3 2017
- $23.2 million in earnings before
interest, taxes, depreciation and amortization (“EBITDA”)
DXP Enterprises, Inc. (NASDAQ: DXPE) today announced
financial results for the third quarter ended September 30,
2018. The following are results for the three months and nine
months ended September 30, 2018, compared to the three months
and nine months ended September 30, 2017. A reconciliation of
the non-GAAP financial measures can be found in the back of this
press release.
Third Quarter 2018 financial highlights:
- Sales increased 22.3 percent to $308.0
million, compared to $251.9 million for the third quarter of
2017.
- Earnings per diluted share for the
third quarter was $0.46 based upon 18.4 million diluted shares,
compared to $0.16 per share in the third quarter of 2017, based on
18.2 million diluted shares.
- Earnings before interest, taxes,
depreciation and amortization (EBITDA) for the third quarter was
$23.2 million compared to $13.5 million for the third quarter of
2017, an increase of 71.9 percent. EBITDA as a percentage of sales
was 7.5 percent and 5.4 percent, respectively, comparing the third
quarter of 2018 versus 2017.
David R. Little, Chairman and CEO commented, “We are pleased
with our performance in the third quarter as the team maintained
momentum and delivered strong results. The oil and gas and
industrial economy remain firm with all key indicators remaining
positive. We achieved 22.3 percent sales growth, solid EBITDA
margins and outstanding diluted earnings per share growth. DXP’s
third quarter 2018 sales were $308.0 million. Organic sales for the
quarter increased 17.5 percent year-over-year and acquisitions
added $12.1 million in sales. EBITDA grew 71.9 percent
year-over-year. In terms of our business segments for the third
quarter of 2018, sales were $187.8 million for Service Centers,
$76.7 million for Innovative Pumping Solutions and $43.6 million
for Supply Chain Services. Business segment operating income
increased 55.6 percent year-over-year. Overall, DXP has been
trending around 20 percent growth year-over-year which is
consistent with our expectations. With the outlook for global
economic growth and oil and industrial demand remaining solid, we
still look to show improvement in organic and acquisition sales
growth and margins. 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
2019.”
Kent Yee, CFO, remarked, “Our third quarter year-over-year
financial results continue to reflect the growth we have been
experiencing in fiscal 2018 and reflect our financial goals to grow
20 percent year-over-year, through a combination of organic and
acquisition sales. On a sales per day basis, DXP continues to show
sequential increases and has experienced eight consecutive quarters
of sales per day per quarter increases. Total debt outstanding as
of September 30, 2018 was $249.6 million. DXP’s secured
leverage ratio or net debt to EBITDA ratio was 2.7:1.0. We expect
to finish fiscal 2018 with strong momentum continuing into fiscal
2019.”
We will host a conference call regarding 2018 third quarter
results on the Company’s website (www.dxpe.com) Monday, November 5,
2018 at 10 am CST. Web participants are encouraged to go to the
Company’s website at least 15 minutes prior to the start of the
call to register, download and install any necessary audio
software. The online archived replay will be available immediately
after the conference call at www.dxpe.com.
Non-GAAP Financial Measures
DXP supplements reporting of net income with non-GAAP
measurements, including EBITDA, adjusted EBITDA 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 and free
cash flow 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.
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, Mexico
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. 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; ability to obtain needed capital, dependence on
existing management, leverage and debt service, domestic or global
economic conditions, 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.
DXP ENTERPRISES, INC. AND SUBSIDIARIES UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($
thousands, except per share amounts)
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2018 2017
2018 2017 Sales $ 308,028 $ 251,930 $
905,191 $ 741,155 Cost of sales 223,958 184,967
659,560 540,741 Gross profit 84,070 66,963 245,631
200,414 Selling, general and administrative expenses 67,257
60,453 197,609 175,411 Operating income 16,813
6,510 48,022 25,003 Other (income) expense, net 120 (153 ) (1,318 )
(324 ) Interest expense 4,781 4,928 15,959
12,573 Income before income taxes 11,912 1,735 33,381 12,754
Provision for (benefit from) income taxes 3,550 (1,176 )
8,962 2,880 Net income 8,362 2,911 24,419 9,874 Net
loss attributable to NCI* (35 ) (55 ) (91 ) (360 ) Net income
attributable to DXP Enterprises, Inc. 8,397 2,966 24,510 10,234
Preferred stock dividend 23 23 68 68
Net income attributable to common shareholders $ 8,374 $
2,943 $ 24,442 $ 10,166 Diluted
earnings per share attributable to DXP Enterprises, Inc. $ 0.46
$ 0.16 $ 1.33 $ 0.56 Weighted
average common shares and common equivalent shares outstanding
18,404 18,234 18,387 18,242 *NCI
represents non-controlling interest
Business segment financial highlights:
- Service
Centers’ revenue for the third quarter was $187.8 million,
an increase of 16.7 percent year-over-year with an 11.0 percent
operating income margin. Organic sales increased 9.2 percent
year-over-year.
- Innovative
Pumping Solutions’ revenue for the third quarter was $76.7
million, an increase of 50.2 percent year-over-year with a 11.4
percent operating income margin.
- Supply Chain
Services’ revenue for the third quarter was $43.6 million,
an increase of 8.9 percent year-over-year with a 8.9 percent
operating income margin.
SEGMENT DATA
($ thousands, unaudited)
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, Sales 2018
2017 2018 2017 Service Centers $
187,763 $ 160,863 $ 556,700 $ 474,324 Innovative Pumping Solutions
76,662 51,027 218,561 144,555 Supply Chain Services 43,603
40,040 129,930 122,276
Total DXP Sales
$ 308,028 $ 251,930
$ 905,191 $ 741,155
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, Operating Income 2018
2017 2018 2017 Service Centers $ 20,590 $
15,550 $ 58,353 $ 47,308 Innovative Pumping Solutions 8,773 1,838
24,109 7,103 Supply Chain Services 3,886 3,982 12,196
11,758
Total segments operating income $
33,249 $ 21,370 $
94,658 $ 66,169
Reconciliation of Operating Income for
Reportable Segments
($ thousands, unaudited)
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2018 2017
2018 2017 Operating income for reportable
segments $ 33,249 $ 21,370 $ 94,658 $ 66,169 Adjustment for:
Amortization of intangibles 4,098 4,336 12,575 12,943 Corporate
expenses 12,338 10,524 34,061 28,223
Total operating income 16,813 6,510 48,022 25,003 Interest expense
4,781 4,928 15,959 12,573 Other expense (income), net 120
(153 ) (1,318 ) (324 )
Income before income taxes
11,912 1,735 33,381
12,754
Unaudited Reconciliation of Non-GAAP
Financial Information
($ thousands, unaudited)
The following table is a reconciliation of
EBITDA and adjusted EBITDA, a non-GAAP financial measure, to income
before income taxes, calculated and reported in accordance with
U.S. GAAP.
Three Months EndedSeptember 30, Nine
Months EndedSeptember 30, 2018 2017
2018 2017 Income before income taxes 11,912
1,735 33,381 12,754 Plus: interest expense 4,781 4,928 15,959
12,573 Plus: depreciation and amortization 6,506 6,836 19,710
20,598
EBITDA 23,199
13,499 69,050 45,925
Plus: NCI loss before tax 64 85 120 578 Plus: Stock
compensation expense 526 382 2,023 1,392
Adjusted EBITDA 23,789 13,966
71,193 47,895
DXP ENTERPRISES, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
($ thousands, except per share
amounts)
September 30, 2018 December 31, 2017
ASSETS Current assets: Cash $ 15,994 $ 22,047
Restricted Cash 396 3,532 Accounts receivable, net of allowances
for doubtful accounts 183,454 167,272 Inventories 116,545 91,413
Costs and estimated profits in excess of billings 38,432 26,915
Prepaid expenses and other current assets 5,640 5,296 Federal
income taxes receivable 1,323 1,440
Total current
assets 361,784 317,915 Property and equipment,
net 52,617 53,337 Goodwill 194,052 187,591 Other intangible assets,
net of accumulated amortization 71,783 78,525 Other long-term
assets 1,596 1,715
Total assets $
681,832 $ 639,083 LIABILITIES
AND EQUITY Current liabilities: Current maturities of
long-term debt $ 3,394 $ 3,381 Trade accounts payable 91,117 80,303
Accrued wages and benefits 16,733 18,483 Customer advances 2,876
2,189 Billings in excess of costs and estimated profits 5,554 4,249
Other current liabilities 16,703 16,220
Total current
liabilities 136,377 124,825 Long-term debt, less
unamortized debt issuance costs 237,434 238,643 Other long-term
liabilities 2,611 — Deferred income taxes 8,048 7,069
Total long-term liabilities 248,093
245,712 Total Liabilities 384,470
370,537 Equity: Total DXP Enterprises, Inc.
equity 296,885 267,979 Non-controlling interest
477 567
Total Equity 297,362
268,546 Total liabilities and equity $
681,832 $ 639,083
Unaudited Reconciliation of Non-GAAP
Financial Information
($ thousands, unaudited)
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 EndedSeptember 30, Nine Months
EndedSeptember 30, 2018 2017
2018 2017 Net cash provided by
operating activities $ 16,825 $ 673 $ 9,842 $ 8,527 Less: purchase
of equipment 2,189 1,039 7,705 2,157
Free cash flow 14,636 (366 )
2,137 6,370
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181105005222/en/
DXP Enterprises, Inc.Kent YeeSenior Vice President,
CFOwww.dxpe.com
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