- Fiscal 2022 sales of $1.5 billion, up 32.9 percent from fiscal
2021
- Solid full Year GAAP diluted EPS of $2.47
- $126.8 million in earnings before interest, taxes,
depreciation, amortization and other non-cash charges ("Adjusted
EBITDA")
- Net income of $48.2 million versus $16.5 million in fiscal
2021
- Raised an incremental $105 million in Senior Secured Term Loan
B financing
- Repurchased 1.3 million shares for $35.2 million in fiscal
2022
- $46.1 million in cash and restricted cash
- Closed four acquisitions during the fiscal year - Burlingame,
Drydon, Cisco, and Sullivan
DXP Enterprises, Inc. (NASDAQ: DXPE) today announced
financial results for the fourth quarter and fiscal year ended
December 31, 2022. The following are results for the three and
twelve months ended December 31, 2022, compared to the three and
twelve months ended December 31, 2021. A reconciliation of the
non-GAAP financial measures can be found in the back of this press
release.
Fourth Quarter 2022 financial highlights:
- Sales grew 38.6 percent to $406.3 million, compared to $293.1
million for the fourth quarter of 2021.
- Earnings per diluted share for the fourth quarter was $0.37
based upon 19.3 million diluted shares, compared to $0.05 per share
in the fourth quarter of 2021, based on 19.6 million diluted
shares. Excluding one-time cash charges associated with raising the
incremental Term Loan B financing of $2.0 million, earnings per
diluted share was $0.50 per share.
- Adjusted earnings before interest, taxes, depreciation and
amortization and other non-cash charges (Adjusted EBITDA) for the
fourth quarter of 2022 was $31.6 million compared to $14.8 million
for the fourth quarter of 2021. Adjusted EBITDA as a percentage of
sales was 7.8 percent and 5.0 percent, respectively.
Fiscal Year 2022 financial highlights:
- Sales increased 32.9 percent to $1.5 billion, compared to $1.1
billion for 2021.
- Earnings per diluted share for 2022 was $2.47 based upon 19.5
million diluted shares, compared to $0.83 per share in 2021, based
on 19.8 million basic shares. Excluding one-time charges totaling
$3.3 million associated with amending and extending the ABL
Revolver and raising the incremental Senior Secured Term Loan B
financing and other one-time non-cash charges, earnings per diluted
share was $2.69 per share.
- Net income for the year increased $31.7 million to $48.1
million, compared to $16.4 million for fiscal 2021.
- Adjusted EBITDA for 2022 was $126.8 million compared to $70.2
million for 2021. Adjusted EBITDA as a percentage of sales was 8.6
percent and 6.3 percent, respectively.
David R. Little, Chairman and CEO commented, "Fiscal 2022 was
another great year for DXP. DXPeople drove fourth quarter results
well above expectations, with strong performance across all
business segments. Broad based business strength across the
business helped us deliver 33% revenue growth on a year-over-year
basis. Consistent and resilient demand, along with price impacts
delivered robust revenue growth in the fourth quarter on a sales
per business day basis and throughout fiscal 2022. This growth has
fueled a healthy momentum coming into 2023. DXP’s Innovative
Pumping Solutions sales were up 65.6 percent to $231.1 million,
followed by Supply Chain Services sales growing 52.3 percent at
$240.4 million and Service Centers sales growing 23.6 percent to
$1.0 billion. Congratulations to all of our DXPeople for their hard
work and efforts to serve our customers given the headwinds of
supply chain issues, supplier increases, and employee
turnover."
Mr. Little continued, "The sales momentum from the fourth
quarter accompanied by our backlogs has positioned us for further
success as we move into 2023. Additionally, we strengthened our
balance sheet in the fourth quarter, raising an incremental $105
million under our Term Loan B. The strength of the balance sheet,
the balanced end markets that we have delivered upon, and our
ability to continue to execute on acquisitions have set the stage
for 2023. We see positive dynamics in our traditional end markets
like oil & gas, as well as positive outlooks for end markets
like water & wastewater. We are confident our growth strategy,
coupled with a continued focus on improving margins and maintaining
operational discipline will drive shareholder value."
Kent Yee, CFO commented, "Fiscal 2022 financial performance
reflects the execution of our end market diversification efforts,
our plans to grow both organically and through acquisitions, and
continuous improvement in our operations and efficiency. Total
sales and adjusted EBITDA grew 32.9 percent and 80.6 percent,
respectively. We delivered strong sales growth, operating margin
expansion, and thus, operating leverage of 2.4x. Our fiscal 2022
diluted earnings per share was $2.47. We are pleased with the
fourth quarter, and year-end results. We positioned our balance
sheet in the fourth quarter to support our growth plans in 2023.
DXP ended the year with $46.1 million in cash on the balance sheet
and net debt of $382.1 million. DXP’s secured leverage ratio or net
debt to EBITDA was 2.8:1.0 with a covenant EBITDA of $135.1 million
for fiscal 2022. We continue to have momentum going into fiscal
2023 and we expect to drive both organic and acquisition driven
growth while driving shareholder and stakeholder value."
Financial Strength and Liquidity
Net debt, calculated as total long-term debt, net of cash and
cash equivalents, on our balance sheet as of December 31, 2022, was
$382.1 million compared to $277.7 million at December 31, 2021. As
of December 31, 2022, DXP has approximately $178.4 million in
liquidity, consisting of $46.0 million in cash on hand and
approximately $132.4 million in availability under our ABL
facility.
Management Commentary
"During the fourth quarter of fiscal 2022, we delivered solid
results despite the market volatility. We achieved yet another
quarter of year-over-year net sales and earnings growth in addition
to delivering consolidated Adj. EBITDA margins of 7.8 percent. Our
fourth quarter was the strongest fourth quarter performance in the
Company's history. These results demonstrate strong operational
execution and the resiliency of our business model, which enables
DXP to perform across the economic cycle," said David Little, Chief
Executive Officer.
"As an enterprise, our performance continues to match our
strategic focus of core improvement and continues to outperform
expectations. Our record fiscal year operating results demonstrates
our ability to execute on our goals. Supply Chain Services had a
record year, at $240.4 million, catapulted by the addition of a
large diversified chemical customer that we are excited to have on
board. We look forward to finding similar opportunities going
forward and organically growing our Supply Chain business with new
customer wins and establishing new sales highs. Innovative Pumping
Solutions experienced meaningful growth within our heritage 529
energy fabrication business, which is already off to a great start
in 2023, along with significant growth from our recent water
acquisitions which continue to perform well for DXP. Also, Service
Centers had a record year at $1.0 billion in sales, driven by
strong price and good demand dynamics in a variety of end markets
including chemicals, manufacturing, water & wastewater and
energy as well as the addition of our recent air compressor
acquisitions and the overall performance of acquisitions that we
have made within Service Centers since fiscal 2020," continued
Little.
"Our balance sheet remains in excellent condition, as we ended
the year with total liquidity of $178.4 million, including cash and
cash equivalents of $46.1 million and $132.4 million available
under our ABL. We believe our strong liquidity and strong counter
cyclical cash generation profile will allow us to operate from a
position of financial strength going forward as we continue to
navigate near-term market dynamics. Sales per business day, as a
broad KPI improved from the third quarter going from $6.0 million
per day to $6.6 million per day or an improvement of 8.3 percent.
Year-over-year, we grew sales per business day 36 percent," added
Kent Yee, Senior Vice President and Chief Financial Officer.
Outlook
"As we enter our fiscal 2023, there remains a level of
volatility and uncertainty that appears to be leveling as we
progress through the early parts of fiscal 2023. We have high
confidence in our operating teams, flexible business model and
execution strategy. Our first few months fiscal 2023 performance
reinforces our discipline to remain focused on what we can control.
Estimated sales per business day in January and February were $5.7
million and $5.9 million per day, respectively. Looking ahead, we
intend to maintain that same discipline to navigate the current
environment while positioning DXP to be an even stronger company
through investments to automate and modernize the business as we
continue to grow organically and through acquisitions," added David
Little, Chief Executive Officer.
2022 Sales Per Business Day
Reconciliation
($ thousands, except Business
days, unaudited)
Q1
Q2
Q3
Q4
Total Sales
$319,411
$367,812
$387,314
$406,295
Business Days
64
63
64
62
Sales Per Business Day
$4,991
$5,838
$6,052
$6,553
Earnings Call Update
DXP will not host a conference call regarding December 31, 2022
fourth quarter and fiscal 2022 results but rather will provide this
enhanced press release and supplemental earnings release materials
including a comprehensive question and answer document. The online
materials will be available at ir.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, 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. 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 CONSOLIDATED
STATEMENTS OF OPERATIONS
($ thousands, except per share
amounts)
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
Sales
$
406,295
$
293,149
$
1,480,832
$
1,113,921
Cost of sales
295,036
208,494
1,058,794
785,415
Gross profit
111,259
84,655
422,038
328,506
Selling, general and administrative
expenses
87,525
77,062
324,286
288,649
Impairments and other charges
—
—
—
—
Operating income
23,734
7,593
97,752
39,857
Other (income) expense, net
(227
)
570
2,716
(414
)
Interest expense
11,525
5,245
29,135
21,089
Income before income taxes
12,436
1,778
65,901
19,182
Provision for income taxes
4,397
1,051
17,799
3,431
Net income
8,039
727
48,102
15,751
Net income (loss) attributable to NCI*
885
(155
)
(53
)
(745
)
Net income attributable to DXP
Enterprises, Inc.
7,154
882
48,155
16,496
Preferred stock dividend
23
22
90
90
Net income attributable to common
shareholders
$
7,131
$
860
$
48,065
$
16,406
Diluted earnings per share attributable to
DXP Enterprises, Inc.
$
0.37
$
0.05
$
2.47
$
0.83
Weighted average common shares and common
equivalent shares outstanding
19,262
19,579
19,471
19,789
*NCI represents non-controlling
interest
Business segment financial highlights:
- Service Centers’ revenue
for the fiscal year was $1.0 billion, an increase of 23.6 percent
year-over-year with a 12.6 percent operating income margin.
- Revenue for the fourth quarter was $279.4 million, an increase
of 34.3 percent year-over-year with a 11.4 percent operating income
margin.
- Innovative Pumping
Solutions’ revenue for the fiscal year was $231.1
million, an increase of 65.6 percent year over year with an 13.0
percent operating income margin.
- Revenue for the fourth quarter was $61.2 million, an increase
of 41.8 percent year-over-year with an operating income margin of
11.3 percent.
- Supply Chain Services’
revenue for the fiscal year was $240.4 million, an increase of 52.3
percent year-over-year with a 8.1 percent operating margin.
- Revenue for the fourth quarter was $65.7 million, an increase
of 56.4 percent year-over-year with a 7.9 percent operating income
margin.
SEGMENT DATA
($ thousands, unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
Sales
2022
2021
2022
2021
Service Centers
$
279,378
$
207,955
$
1,009,356
$
816,496
Innovative Pumping Solutions
61,212
43,179
231,102
139,591
Supply Chain Services
65,704
42,015
240,374
157,834
Total DXP Sales
$
406,294
$
293,149
$
1,480,832
$
1,113,921
Three Months Ended December
31,
Twelve Months Ended December
31,
Operating Income
2022
2021
2022
2021
Service Centers
$
31,737
$
21,679
$
127,174
$
98,931
Innovative Pumping Solutions
6,914
6,043
30,036
12,070
Supply Chain Services
5,220
2,787
19,530
11,963
Total segment operating income
$
43,871
$
30,509
$
176,740
$
122,964
Reconciliation of Operating
Income for Reportable Segments
($ thousands, unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
Operating income for reportable
segments
$
43,871
$
30,509
$
176,741
$
122,964
Adjustment for:
Impairments and other charges
—
—
—
—
Amortization of intangibles
4,957
4,507
18,915
17,197
Corporate expenses
15,180
18,409
60,074
65,910
Total operating income
$
23,734
$
7,593
$
97,752
$
39,857
Interest and other financing expenses
11,525
5,245
29,135
21,089
Other (income) expense, net
(227
)
570
2,716
(414
)
Income before income taxes
$
12,436
$
1,778
$
65,901
$
19,182
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 (loss) before
income taxes, calculated and reported in accordance with U.S.
GAAP.
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
Income before income taxes
12,436
1,778
$
65,901
$
19,182
Plus: interest and other financing
expenses
11,525
5,245
29,135
21,089
Plus: depreciation and amortization
7,175
7,073
28,500
27,143
EBITDA
$
31,136
$
14,096
$
123,536
$
67,414
Plus: NCI loss income before tax*
—
206
227
993
Plus: One-time non-cash loss
—
—
1,193
—
Plus: stock compensation expense
482
469
1,850
1,823
Adjusted EBITDA
$
31,618
$
14,771
$
126,806
$
70,230
* NCI represents non-controlling
interest
DXP ENTERPRISES, INC. AND
SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE
SHEETS
($ thousands, except per share
amounts)
December 31, 2022
December 31, 2021
ASSETS
Current assets:
Cash
$
46,026
$
48,989
Restricted cash
91
91
Accounts receivable, net of allowances for
doubtful accounts
320,880
218,137
Inventories
101,392
100,894
Costs and estimated profits in excess of
billings
23,588
17,193
Prepaid expenses and other current
assets
21,644
9,522
Federal income taxes receivable
2,493
9,748
Total current assets
$
516,114
$
404,574
Property and equipment, net
45,964
51,880
Goodwill
333,759
296,541
Other intangible assets, net of
accumulated amortization
79,585
79,205
Operating lease right-of-use assets
57,402
57,221
Other long-term assets
4,456
4,806
Total assets
$
1,037,280
$
894,227
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt
$
4,369
$
3,300
Trade accounts payable
100,784
77,842
Accrued wages and benefits
26,260
23,006
Customer advances
20,128
12,924
Billings in excess of costs and estimated
profits
10,411
3,581
Current-portion operating lease
liabilities
18,083
18,203
Other current liabilities
32,866
42,206
Total current liabilities
$
212,901
$
181,062
Long-term debt, less unamortized debt
issuance costs
409,205
315,397
Long-term operating lease liabilities
40,189
39,922
Other long-term liabilities
4,701
3,603
Deferred income taxes
4,892
7,516
Total long-term liabilities
$
458,987
$
366,438
Total Liabilities
$
671,888
$
547,500
Equity:
Total DXP Enterprises, Inc.
equity
365,392
346,674
Non-controlling interest
$
—
53
Total Equity
$
365,392
$
346,727
Total liabilities and equity
$
1,037,280
$
894,227
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 December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
Net cash from operating activities
$
3,638
$
14,258
$
5,894
$
37,089
Less: purchases of property and
equipment
(1,490
)
(3,015
)
(4,916
)
(5,999
)
Plus: proceeds from sales of property and
equipment
—
372
—
1,669
Free cash flow
$
2,148
$
11,615
$
978
$
32,759
The following table is a reconciliation of adjusted net income,
a non-GAAP financial measure, to net income, calculated and
reported in accordance with U.S. GAAP.
Three Months Ended December
31,
Twelve Months Ended December
31,
2022
2021
2022
2021
GAAP Net Income:
$
7,154
$
882
$
48,155
$
16,496
One-time non-cash loss
—
—
1,193
—
One-time debt financing costs
1,972
—
2,103
—
Adjustment for taxes*
533
—
890
—
Non-GAAP net income
$
9,659
$
882
$
52,341
$
16,496
Weighted average common shares and
common equivalent shares outstanding
Basic
18,422
18,739
18,631
18,949
Diluted
19,262
19,579
19,471
19,789
Diluted earnings per share:
GAAP
$
0.37
$
0.05
$
2.47
$
0.83
Non-GAAP
$
0.50
$
0.05
$
2.69
$
0.83
* Adjustment for taxes relates to the tax
effects of the adjustments that we incorporated into non-GAAP
measures in order to provide a more meaningful measure of non-GAAP
net income. Also, we have included an adjustment for the
normalizing of tax credits and adjustments. The year-to-date
effective tax rate of 27.0 percent was applied to the one-time
charges associated with the disposal of DXP's variable interest
entity and one-time debt financing costs.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230414005463/en/
Kent Yee Senior Vice President, CFO 713-996-4700
www.dxpe.com
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