- $ 333.3 million in sales, up 7.1 percent, compared to
$311.2 million in sales in Q2 2018
- Net income of $13.4 million versus $11.5 million compared to Q2
2018
- GAAP diluted EPS of $0.73, compared to $0.63 in Q2 2018
- $28.7 million in earnings before interest, taxes, depreciation
and amortization (“EBITDA”)
DXP Enterprises, Inc. (NASDAQ: DXPE) today announced
financial results for the second quarter ended June 30, 2019. The
following are results for the three and six months ended June 30,
2019, compared to the three and six months ended June 30, 2018. A
reconciliation of the non-GAAP financial measures can be found in
the back of this press release.
For the six months ended June 30, 2019, sales were $644.5
million, up 7.9 percent over the same period in 2018. EBITDA is up
11.8 percent to $49.8 million for the six month period, compared to
the same six month period in 2018 (adjusting for the one-time gain
associated with selling a corporate facility).
Second Quarter 2019 financial highlights:
- Sales increased 7.1 percent to $333.3 million, compared to
$311.2 million for the second quarter of 2018.
- Earnings per diluted share for the second quarter was $0.73
based upon 18.4 million diluted shares, compared to $0.63 per share
in the second quarter of 2018.
- Earnings before interest, taxes, depreciation and amortization
(EBITDA) for the second quarter was $28.7 million compared to $28.0
million for the second quarter of 2018, an increase of 2.7 percent.
Adjusting for the one-time gain associated with selling a corporate
facility, EBITDA increased 7.8 percent.
- EBITDA as a percentage of sales was 8.6 percent for the second
quarter of 2019 and 2018, respectively.
David R. Little, Chairman and CEO, commented, “We are pleased
with our year-over-year and sequential sales growth and continual
improvement in gross profit margins. Underlying demand in our end
markets is consistent and continues to perform plus we continue to
take market share. DXP's second quarter 2019 sales were $333.3
million, or a 7.1 percent increase over the second quarter of 2018.
EBITDA grew 7.8 percent. During the second quarter of 2019, sales
were $200.0 million for Service Centers, $81.0 million for
Innovative Pumping Solutions and $52.3 million for Supply Chain
Services. Business segment operating income increased 11.1 percent
year-over-year and increased 30.7 percent sequentially. Overall, we
are very pleased with the progress DXP is making. We maintained
margin performance, improved cash flow and we are taking market
share. We continue to invest in our growth strategies and focus on
growing the top-line and bottom-line at the same time."
Kent Yee, CFO, commented, “For the second quarter, we are
pleased that we achieved diluted EPS of $0.73, with 15.9 percent
year-over-year growth and EBITDA of $28.7 million. Our gross
margins showed improvement with the DXP team looking to drive
further consistency, improving 25 basis points year-over-year and
54 basis points sequentially. Total debt outstanding as of June 30,
2019 was $247.0 million. DXP's secured leverage ratio or net debt
to EBITDA was 2.2:1.0. Our push for profitable growth, combined
with disciplined execution, continues to position DXP well for the
future."
We will host a conference call regarding 2019 second quarter
results on the Company’s website (www.dxpe.com) Tuesday, August 6,
2019 at 4 pm 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 on-line 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 Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Sales
$
333,318
$
311,227
$
644,543
$
597,163
Cost of sales
241,331
226,111
468,356
435,602
Gross profit
91,987
85,116
176,187
161,561
Selling, general and administrative
expenses
69,140
65,056
138,524
130,352
Operating income
22,847
20,060
37,663
31,209
Other expense (income), net
185
(1,416
)
152
(1,438
)
Interest expense
4,885
6,137
9,925
11,178
Income before income taxes
17,777
15,339
27,586
21,469
Provision for income taxes
4,427
3,776
7,049
5,412
Net income
13,350
11,563
20,537
16,057
Net (loss) income attributable to NCI*
(109
)
1
(213
)
(56
)
Net income attributable to DXP
Enterprises, Inc.
13,459
11,562
20,750
16,113
Preferred stock dividend
22
22
45
45
Net income attributable to common
shareholders
$
13,437
$
11,540
$
20,705
$
16,068
Diluted earnings per share attributable to
DXP Enterprises, Inc.
$
0.73
$
0.63
$
1.13
$
0.88
Weighted average common shares and common
equivalent shares outstanding
18,436
18,398
18,421
18,378
*NCI represents non-controlling
interest
Business segment financial highlights:
- Service Centers’ revenue for the
second quarter was $200.0 million, an increase of 3.3 percent
year-over-year with an 11.6 percent operating income margin.
- Innovative Pumping Solutions’
revenue for the second quarter was $81.0 million, an increase of
9.1 percent year-over-year with a 14.8 percent operating income
margin.
- Supply Chain Services’ revenue for
the second quarter was $52.3 million, an increase of 20.6 percent
year-over-year with a 7.2 percent operating income margin.
SEGMENT DATA ($ thousands,
unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
Sales
2019
2018
2019
2018
Service Centers
$
199,978
$
193,576
$
386,157
$
368,937
Innovative Pumping Solutions
81,028
74,257
155,751
141,899
Supply Chain Services
52,312
43,394
102,635
86,327
Total DXP Sales
$
333,318
$
311,227
$
644,543
$
597,163
Three Months Ended June
30,
Six Months Ended June
30,
Operating Income
2019
2018
2019
2018
Service Centers
$
23,230
$
21,933
$
42,210
$
37,762
Innovative Pumping Solutions
12,028
8,956
18,827
15,338
Supply Chain Services
3,784
4,255
7,870
8,309
Total segments operating income
$
39,042
$
35,144
$
68,907
$
61,409
Reconciliation of Operating Income for
Reportable Segments ($ thousands, unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Operating income for reportable
segments
$
39,042
$
35,144
$
68,907
$
61,409
Adjustment for:
Amortization of intangibles
3,803
4,119
7,617
8,477
Corporate expenses
12,392
10,965
23,627
21,723
Total operating income
22,847
20,060
37,663
31,209
Interest expense
4,885
6,137
9,925
11,178
Other income, net
185
(1,416
)
152
(1,438
)
Income before income taxes
17,777
15,339
27,586
21,469
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 net income, calculated and
reported in accordance with U.S. GAAP.
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Net income
13,350
11,563
20,537
16,057
Plus: income tax expense
4,427
3,776
7,049
5,412
Plus: interest expense
4,885
6,137
9,925
11,178
Plus: depreciation and amortization
6,065
6,491
12,271
13,205
EBITDA
28,727
27,967
49,782
45,852
Plus: NCI (loss) income before tax
(145
)
1
283
(56
)
Plus: stock compensation expense
524
761
1,029
1,497
Adjusted EBITDA
29,106
28,729
51,094
47,293
* NCI represents non-controlling
interest
DXP ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS ($ thousands,
except per share amounts)
As of
June 30, 2019
December 31, 2018
ASSETS
Current assets:
Cash
$
25,429
$
40,304
Restricted cash
124
215
Accounts receivable, net of allowances for
doubtful accounts
210,257
191,829
Inventories
128,012
114,830
Costs and estimated profits in excess of
billings
35,484
32,514
Prepaid expenses and other current
assets
4,729
4,938
Federal income taxes receivable
593
960
Total current assets
$
404,628
$
385,590
Property and equipment, net
55,534
51,330
Goodwill
194,052
194,052
Other intangible assets, net of
accumulated amortization
59,953
67,207
Operating lease right-of-use assets
69,094
—
Other long-term assets
3,346
1,783
Total assets
$
786,607
$
699,962
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt
$
3,420
$
3,407
Trade accounts payable
89,293
87,407
Accrued wages and benefits
20,772
21,275
Customer advances
5,077
3,223
Billings in excess of costs and estimated
profits
5,968
10,696
Current-portion operating lease
liabilities
17,887
—
Other current liabilities
15,904
17,269
Total current liabilities
$
158,321
$
143,277
Long-term debt, less unamortized debt
issuance costs
236,202
236,979
Long-term operating lease liabilities
51,188
—
Other long-term liabilities
1,024
2,819
Deferred income taxes
9,662
8,633
Total long-term liabilities
$
298,076
$
248,431
Total Liabilities
$
456,397
$
391,708
Equity:
Total DXP Enterprises, Inc.
equity
329,017
306,848
Non-controlling interest
1,193
1,406
Total Equity
$
330,210
$
308,254
Total liabilities and equity
$
786,607
$
699,962
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 Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Net cash from (used in) operating
activities
1,850
(6,175
)
(3,460
)
(6,983
)
Less: purchases of equipment
(6,272
)
(4,725
)
(8,584
)
(5,516
)
Plus: proceeds from sales of assets
5
2,700
34
2,700
Free cash flow
(4,417
)
(8,200
)
(12,010
)
(9,799
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190806005812/en/
Kent Yee 713-996-4700 Senior Vice President, CFO
www.dxpe.com
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