- $58.3 million in cash
- $424.3 million in sales, a 4.4 percent sequential and 32.8
percent year-over-year increase
- Net income of $17.6 million versus $12.6 million compared to Q1
2022
- GAAP diluted EPS of $0.95
- $43.1 million in earnings before interest, taxes, depreciation
& amortization and other non-cash charges ("Adjusted
EBITDA")
- Free cash flow of $22.6 million
DXP Enterprises, Inc. (NASDAQ: DXPE) today announced
financial results for the first quarter ended March 31, 2023. The
following are results for the three months ended March 31, 2023,
compared to the three months ended March 31, 2022. A reconciliation
of the non-GAAP financial measures can be found in the back of this
press release.
First Quarter 2023 financial highlights:
- Sales increased 32.8 percent to $424.3 million, compared to
$319.4 million for the first quarter of 2022 and 4.4 percent
compared to the fourth quarter of 2022.
- Earnings per diluted share for the first quarter were $0.95
based upon 18.4 million diluted shares, compared to earnings of
$0.65 per share in the first quarter of March 31, 2022, based on
19.4 million diluted shares.
- Net income for the first quarter was $17.6 million, compared to
$12.6 million for the corresponding prior-year period.
- Adjusted earnings before interest, taxes, depreciation and
amortization and other non-cash charges (Adjusted EBITDA) for the
first quarter of 2023 was $43.1 million compared to $28.3 million
for the first quarter of 2022. Adjusted EBITDA as a percentage of
sales was 10.2 percent and 8.8 percent, respectively.
- Free cash flow (cash flow from operating activities less
capital expenditures) for the first quarter of 2023 was $22.6
million compared to $1.9 million for the first quarter of
2022.
“The DXPeople continue to perform well and set new highs amidst
solid demand in an ever-changing environment. All three segments
delivered strong growth and good margins, while we continue to
invest in our growth strategies and continue to be customer driven
experts,” commented David R. Little, Chairman and CEO.
“While managing the slowing pace of inflation and other market
challenges, overall, we are off to a great start to the year, and
we feel good about the outlook for 2023. With our strong, growing
DXPeople, a robust acquisition pipeline, and a drive to continue to
create value for all our stakeholders, we are confident in our
ability to drive exceptional performance and growth in years to
come. DXP’s first quarter 2023 sales were a record $424.3 million,
or a 32.8 percent increase year-over-year and a 4.4 percent
increase over the fourth quarter. Sales were $295.2 million for
Service Centers, $62.0 million for Innovative Pumping Solutions and
$67.0 million for Supply Chain Services.”
David R. Little, finally remarked, “Thanks to solid execution by
our employees, DXP posted strong record sales results and adjusted
EBITDA for our first quarter of 2023. The DXP team continues to
improve and execute well in a challenging and inconsistent market
environment. Profitable growth remains a primary focus, including
M&A opportunities and organic initiatives, as we position DXP
to deliver and drive increased shareholder value. Thank you to all
our customers and DXPeople."
Kent Yee, CFO, remarked, “Our first quarter sales and adjusted
EBITDA established another set of new high watermarks for DXP. Our
first quarter year-over-year and sequential financial results
continue to reflect the growth we have been experiencing over the
last ten quarters and reflect our financial goals to grow
organically and through acquisitions. We have diversified our end
markets and business model exposure. Our acquisitions continued to
perform well, contributing strongly to our overall sales and
Adjusted EBITDA growth for the quarter. We remain very confident in
our tremendous team, our balanced business, a strong balance sheet,
and our ability to continue building and strengthening DXP through
key initiatives and acquisitions. We expect to continue delivering
exceptional performance and growth in the years ahead. Total debt
outstanding as of March 31, 2023, was $427.0 million. DXP's secured
leverage ratio or net debt to EBITDA ratio was 2.52:1.0 with a
covenant EBITDA of $146.4 million for the last twelve months ending
March 31, 2023. We expect to find ways to continue the momentum
through fiscal 2023.”
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, Adjusted 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. 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 company shares, and for certain other
activities.
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 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; 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; 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, 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 for share
and per share amounts)
Three Months Ended March
31,
2023
2022
Sales
$
424,267
$
319,411
Cost of sales
299,226
224,527
Gross profit
125,041
94,884
Selling, general and administrative
expenses
89,642
73,325
Operating income
35,399
21,559
Other (income) loss
(469
)
536
Interest expense
11,521
5,162
Income before income taxes
24,347
15,861
Provision for income taxes
6,767
3,332
Net income
17,580
12,529
Net (loss) attributable to NCI*
—
(113
)
Net income attributable to DXP
Enterprises, Inc.
17,580
12,642
Preferred stock dividend
23
23
Net income attributable to common
shareholders
$
17,557
$
12,619
Diluted earnings per share attributable to
DXP Enterprises, Inc.
$
0.95
$
0.65
Weighted average common shares and common
equivalent shares outstanding
18,436
19,374
*NCI represents non-controlling
interest
Business segment financial highlights:
- Service Centers’ revenue for the
first quarter was $295.2 million, a 5.7 percent sequential increase
and an increase of 34.9 percent year-over-year with a 15.1 percent
operating income margin.
- Innovative Pumping Solutions’
revenue for the first quarter was $62.0 million, a sequential
decrease of 1.3 percent and an increase of 16.9 percent
year-over-year with a 16.6 percent operating income margin.
- Supply Chain Services’ revenue for
the first quarter was $67.0 million, a 2.0 percent sequential
increase and an increase of 41.0 percent year-over-year with a 8.2
percent operating income margin.
SEGMENT DATA
($ thousands, unaudited)
Three Months Ended March
31,
Sales
2023
2022
Service Centers
$
295,226
$
218,797
Innovative Pumping Solutions
61,998
53,058
Supply Chain Services
67,043
47,556
Total DXP Sales
$
424,267
$
319,411
Three Months Ended March
31,
Operating Income
2023
2022
Service Centers
$
44,705
$
27,351
Innovative Pumping Solutions
10,305
7,069
Supply Chain Services
5,514
4,020
Total segments operating income
$
60,524
$
38,440
Reconciliation of Operating
Income for Reportable Segments
($ thousands, unaudited)
Three Months Ended March
31,
2023
2022
Operating income for reportable
segments
$
60,524
$
38,440
Adjustment for:
Amortization of intangibles
4,758
4,235
Corporate expenses
20,367
12,646
Total operating income
$
35,399
$
21,559
Interest expense
11,521
5,162
Other (income) loss
(469
)
536
Income before income taxes
$
24,347
$
15,861
Unaudited Reconciliation of
Non-GAAP Financial Information
($ thousands)
The following table is a reconciliation of
EBITDA and Adjusted EBITDA, non-GAAP financial measures, to income
before taxes, calculated and reported in accordance with U.S.
GAAP.
Three Months Ended March
31,
2023
2022
Income before income taxes
$
24,347
$
15,861
Plus: interest expense
11,521
5,162
Plus: depreciation and amortization
6,782
6,752
EBITDA
$
42,650
$
27,775
Plus: NCI income (loss) before tax*
$
—
$
113
Plus: stock compensation expense
476
370
Adjusted EBITDA
$
43,126
$
28,258
* NCI represents non-controlling
interest
DXP ENTERPRISES, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
($ thousands)
March 31, 2023
December 31, 2022
ASSETS
Current assets:
Cash
$
58,282
$
46,026
Restricted cash
91
91
Accounts receivable, net of allowances for
doubtful accounts
311,387
320,880
Inventories
109,403
101,392
Costs and estimated profits in excess of
billings
41,967
23,588
Prepaid expenses and other current
assets
17,238
21,644
Income taxes receivable
972
2,493
Total current assets
$
539,340
$
516,114
Property and equipment, net
47,754
45,964
Goodwill
333,816
333,759
Other intangible assets, net of
accumulated amortization
74,830
79,585
Operating lease right-of-use assets
52,353
57,402
Other long-term assets
5,068
4,456
Total assets
$
1,053,161
$
1,037,280
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt
$
4,369
$
4,369
Trade accounts payable
106,320
100,784
Accrued wages and benefits
26,617
26,260
Customer advances
14,507
20,128
Billings in excess of costs and estimated
profits
10,183
10,411
Federal income taxes payable
6,266
—
Current-portion operating lease
liabilities
17,698
18,083
Other current liabilities
38,795
32,866
Total current liabilities
$
224,755
$
212,901
Long-term debt, less unamortized debt
issuance costs
408,755
409,205
Long-term operating lease liabilities
38,507
40,189
Other long-term liabilities
4,770
4,701
Deferred income taxes
2,090
4,892
Total long-term liabilities
$
454,122
$
458,987
Total Liabilities
$
678,877
$
671,888
Equity:
Total DXP Enterprises, Inc.
equity
374,284
365,392
Total liabilities and equity
$
1,053,161
$
1,037,280
Unaudited Reconciliation of
Non-GAAP Financial Information
($ thousands)
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,
2023
2022
Net cash from operating activities
$
26,449
$
2,680
Less: purchases of property and
equipment
(3,804
)
(740
)
Free cash flow
$
22,645
$
1,940
Note: Supplemental non-cash items include
share repurchases which have been excluded.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230511005993/en/
Kent Yee Senior Vice President, CFO 713-996-4700
www.dxpe.com
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