- $127.5 million in cash and cash equivalents
- $245.6 million in sales
- GAAP diluted EPS of $0.02, including significant tax reserves
due to proposed state tax positions ($0.06 per share)
- Free cash flow for the quarter of $11.2 million
DXP Enterprises, Inc. (NASDAQ: DXPE) today announced
financial results for the first quarter ended March 31, 2021. The
following are results for the three months ended March 31, 2021,
compared to the three months ended March 31, 2020 and December 31,
2020, where appropriate. A reconciliation of the non-GAAP financial
measures can be found in the back of this press release.
First Quarter 2021 financial highlights:
- Sales increased 5.6 percent sequentially to $245.6 million,
compared to $232.7 million for the fourth quarter of 2020 and
decreased 18.4% compared to $301.0 million for the first quarter of
2020.
- Earnings per diluted share for the first quarter was $0.02
based upon 20.0 million diluted shares, compared to $0.31 per share
in the first quarter of March 31, 2020, based on 18.6 million
diluted shares.
- Adjusted earnings before interest, taxes, depreciation and
amortization (Adjusted EBITDA) for the first quarter of 2021 was
$13.9 million compared to $13.6 million for the fourth quarter of
2020 and $18.8 million for the first quarter of 2020.
Post-Quarter highlights:
- Closed acquisition of Carter & Verplanck
- Furthers efforts to diversify DXP end markets and create
national water and wastewater platform
David R. Little, Chairman and CEO commented, “Our first quarter
results reflect sequential sales growth driven by acquisitions,
strong free cash flow and continued efforts to match costs to the
demand of our business. We are encouraged by the sequential
increases. As we look ahead to the rest of 2021, we remain
optimistic that the global and U.S. economy will recover from the
impact of the pandemic, in particularly, oil demand and capital
projects spending which typically lags most cycles. Thank you to
all our customers, vendors and DXPeople for the support and efforts
in keeping safety at the forefront. DXP’s first quarter 2021 sales
were $245.6 million, or a 5.6 percent increase over the fourth
quarter. DXP’s industrial end markets, which is 67 percent of our
business (including the recent acquisitions), appears to have found
some legs and shows signs of positive upward movement. During the
first quarter, sales were $186.4 million for Service Centers, $36.0
million for Supply Chain Services and $23.2 million for Innovative
Pumping Solutions.
We continue to anticipate a better fiscal year 2021. As such, we
remain focused on improving our ability to serve existing and new
customers, continuing to focus on enhancing and improving our
operational execution, investing in products and people and
strategically aligning DXP for the future.”
Kent Yee, CFO commented, “Our first quarter sequential increase
of 5.6 percent was great to see in addition to the $11.2 million of
free cash flow. We see bright spots as the world attempts to
recover from the global pandemic and vaccination efforts increase.
As of March 31, 2021, we had $127.5 million in cash and cash
equivalents on the balance sheet. Our senior leverage was 2.82:1,
well under our covenant of 5.75:1. We continue to execute our
acquisition strategy and diversify our end market exposure. We are
excited by the tone at DXP and anticipate that this should continue
to show in our financial results. We anticipate the second half of
the year to be stronger than the first half as momentum
builds.”
Financial Strength and Liquidity
Net debt, calculated as total long-term debt, net of cash and
cash equivalents, on our balance sheet as of March 31, 2021, was
down to $201.7 million compared to $212.6 million at December 31,
2020. As of March 31, 2021, DXP has approximately $258.6 million in
liquidity, consisting of $127.4 million in cash on hand and
approximately $131.2 million in availability under our ABL
facility.
We will host a conference call regarding March 31, 2021 first
quarter results on the Company’s website (www.dxpe.com) Friday, May
7, 2021 at 10:30 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, free cash flow,
non-GAAP net income 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, free cash flow and non-GAAP net income 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 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. These
forward-looking statements include without limitation those about
the Company’s expectations regarding the impact of the COVID-19
pandemic and the impact of low commodity prices of oil and gas; 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; decreases in oil and natural gas
prices; decreases in oil and natural gas industry expenditure
levels, which may result from decreased oil and natural gas prices
or other factors; ability to obtain needed capital, dependence on
existing management, leverage and debt service, domestic or global
economic conditions, economic risks related to the impact of
COVID-19, 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. For more information, review the Company’s
filings with the Securities and Exchange Commission. 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 SEC, 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, except per share
amounts)
Three Months Ended March
31,
2021
2020
Sales
$
245,616
$
300,983
Cost of sales
174,007
216,998
Gross profit
71,609
83,985
Selling, general and administrative
expenses
65,397
73,070
Impairment and other charges
—
—
Operating income
6,212
10,915
Other income
(430)
(834)
Interest expense
5,243
4,377
Income before income taxes
1,399
7,372
Provision for income taxes*
1,271
1,724
Net income
128
5,648
Net loss attributable to NCI**
(212)
(62)
Net income attributable to DXP
Enterprises, Inc.
340
5,710
Preferred stock dividend
23
23
Net income attributable to common
shareholders
$
317
$
5,687
Diluted earnings per share attributable to
DXP Enterprises, Inc.
$
0.02
$
0.31
Weighted average common shares and common
equivalent shares outstanding
20,026
18,553
*DXP recorded a reserve against its Texas
R&D tax credit due to significant proposed amendments to
R&D franchise tax credits by the state of Texas that resulted
in an unusually high effective tax rate for the period ended March
31, 2021.
**NCI represents non-controlling
interest
Business segment financial highlights:
- Service Centers’ revenue for the
first quarter was $186.4 million, a 15.6 percent sequential
increase and an increase of 2.1 percent year-over-year with a 11.9
percent operating income margin.
- Innovative Pumping Solutions’
revenue for the first quarter was $23.2 million, a sequential
decrease of 34.7 percent and a decrease of 66.8 percent
year-over-year with a 4.1 percent operating income margin.
- Supply Chain Services’ revenue for
the first quarter was $36.0 million, a 0.5 percent sequential
increase and a decrease of 25.6 percent year-over-year with a 6.5
percent operating income margin.
SEGMENT DATA ($ thousands,
unaudited)
Three Months Ended September
30,
Sales
2021
2020
Service Centers
$
186,398
$
182,585
Innovative Pumping Solutions
23,245
70,021
Supply Chain Services
35,973
48,377
Total DXP Sales
$
245,616
$
300,983
Three Months Ended March
31,
Operating Income
2021
2020
Service Centers
$
22,116
$
16,926
Innovative Pumping Solutions
947
10,428
Supply Chain Services
2,323
3,755
Total segments operating income
$
25,386
$
31,109
Reconciliation of Operating Income for
Reportable Segments ($ thousands, unaudited)
Three Months Ended March
31,
2021
2020
Operating income for reportable
segments
$
25,386
$
31,109
Adjustment for:
Amortization of intangibles
4,146
3,197
Corporate expenses
15,028
16,997
Total operating income
$
6,212
$
10,915
Interest expense
5,243
4,377
Other income
(430)
(834)
Income before income taxes
$
1,399
$
7,372
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 taxes,
calculated and reported in accordance with U.S. GAAP.
Three Months Ended March
31,
2021
2020
Income before income taxes
1,399
7,372
Plus: interest expense
5,243
4,377
Plus: depreciation and amortization
6,626
6,025
EBITDA
$
13,268
$
17,774
Plus: NCI loss income before tax*
283
82
Plus: stock compensation expense
380
904
Adjusted EBITDA
$
13,931
$
18,760
* NCI represents non-controlling
interest
DXP ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS ($
thousands, except per share amounts)
March 31, 2021
December 31, 2020
ASSETS
Current assets:
Cash
$
127,361
$
117,353
Restricted cash
91
91
Accounts receivable, net of allowances for
doubtful accounts
168,003
163,429
Inventories
103,407
97,071
Costs and estimated profits in excess of
billings
14,415
18,459
Prepaid expenses and other current
assets
7,534
4,548
Federal income taxes receivable
5,773
5,632
Total current assets
$
426,584
$
406,583
Property and equipment, net
54,110
56,899
Goodwill
248,499
248,339
Other intangible assets, net of
accumulated amortization
76,008
80,088
Operating lease right-of-use assets
59,949
55,188
Other long-term assets
4,332
4,764
Total assets
$
869,482
$
851,861
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt
$
3,300
$
3,300
Trade accounts payable
81,595
75,744
Accrued wages and benefits
19,179
20,621
Customer advances
3,967
3,688
Billings in excess of costs and estimated
profits
5,950
4,061
Current-portion operating lease
liabilities
17,590
15,891
Other current liabilities
21,775
20,834
Total current liabilities
$
153,356
$
144,139
Long-term debt, less unamortized debt
issuance costs
316,741
317,139
Long-term operating lease liabilities
41,267
38,010
Other long-term liabilities
2,930
2,930
Deferred income taxes
2,248
1,777
Total long-term liabilities
$
363,186
$
359,856
Total Liabilities
$
516,542
$
503,995
Equity:
Total DXP Enterprises, Inc.
equity
352,354
347,068
Non-controlling interest
586
798
Total Equity
$
352,940
$
347,866
Total liabilities and equity
$
869,482
$
851,861
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 March
31,
2021
2020
Net cash from operating activities
$
10,552
$
(1,612)
Less: purchases of property and
equipment
680
3,235
Plus: proceeds from sales of property and
equipment
1,297
—
Free cash flow
$
11,169
$
(4,847)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210507005109/en/
Kent Yee (713) 996-4700 Senior Vice President, CFO
www.dxpe.com
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