- $15.5 million in cash
- $428.0 million in sales, a 16.4 percent year-over-year
increase
- Net income attributable to common shareholders of $19.0 million
versus $14.4 million compared to Q2 2022
- GAAP diluted EPS of $1.06
- $45.3 million in earnings before interest, taxes, depreciation
& amortization and other non-cash charges ("Adjusted
EBITDA")
- Completed the acquisitions of Riordan Materials Corporation and
Florida Valve & Equipment Corp. and Environmental MD
DXP Enterprises, Inc. (NASDAQ: DXPE) today announced
financial results for the second quarter ended June 30, 2023. The
following are results for the three months ended June 30, 2023,
compared to the three months ended June 30, 2022. A reconciliation
of the non-GAAP financial measures can be found in the back of this
press release.
Second Quarter 2023 financial highlights:
- Sales increased 16.4 percent to $428.0 million, compared to
$367.8 million for the second quarter of 2022 and 0.9 percent
compared to the first quarter of 2023.
- Earnings per diluted share for the second quarter were $1.06
based upon 18.1 million diluted shares, compared to earnings of
$0.74 per share in the second quarter of June 30, 2022, based on
19.6 million diluted shares.
- Net income for the second quarter was $19.1 million, compared
to $14.4 million for the corresponding prior-year period.
- Adjusted EBITDA for the second quarter of 2023 was $45.3
million compared to $32.6 million for the second quarter of 2022.
Adjusted EBITDA as a percentage of sales was 10.6 percent and 8.9
percent, respectively.
David R. Little, Chairman and CEO commented, "Second quarter
results reflect the resilience and durability of DXP’s business. We
are pleased with our sequential sales growth and strength in our
gross profit margins. This resulted in operating leverage that
produced earnings per share of $1.06. We continue to experience
broad-based demand across our key regions, products, and end
markets. DXP’s second quarter 2023 sales were $428.0 million, or a
16.4 percent increase over the second quarter of 2022. Organic
sales for the quarter, increased 20.2 percent and acquisitions
added $7.3 million in sales. Adjusted EBITDA grew $12.7 million, or
38.9 percent over the second quarter of 2022. During the second
quarter of 2023, sales were $298.4 million for Service Center,
$66.2 million for Supply Chain Services, and $63.4 million for
Innovative Pumping Solutions. Overall, we are very pleased with our
performance and the progress DXP continues to make as a growth
company. We are optimistic that we can show continued sales and
profit improvement during the second half of 2023."
Kent Yee, CFO remarked, "This is DXP’s eleventh consecutive
quarter of sequential sales increases. We closed two acquisitions
and look forward to closing more during the second half of 2023.
Our second quarter sales and adjusted EBITDA continues to set new
high watermarks. Specifically, this quarter reflects continued
execution of our strategic goals and the confidence we have in our
balanced mix of business, tremendous teams, and a strong balance
sheet to support our key initiatives. Total debt outstanding as of
June 30, 2023, was $425.9 million. DXP’s secured leverage ratio or
net debt to EBITDA ratio was 2.53:1.0 with a covenant EBITDA of
$161.9 million for the last twelve months ending June 30,
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 facilities. 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 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,
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Sales
$
428,040
$
367,812
$
852,307
$
687,223
Cost of sales
296,188
263,550
595,414
488,076
Gross profit
131,852
104,262
256,893
199,147
Selling, general and administrative
expenses
94,372
78,342
184,014
151,667
Income from operations
37,480
25,920
72,879
47,480
Other (income) expense, net
(242
)
839
(712
)
1,377
Interest expense
11,863
5,615
23,384
10,777
Income before income taxes
25,859
19,466
50,207
35,326
Provision for income taxes
6,805
4,973
13,573
8,305
Net income
19,054
14,493
36,634
27,021
Net income (loss) attributable to NCI*
—
60
—
(53
)
Net income attributable to DXP
Enterprises, Inc.
19,054
14,433
36,634
27,074
Preferred stock dividend
22
22
45
45
Net income attributable to common
shareholders
$
19,032
$
14,411
$
36,589
$
27,029
Diluted earnings per share attributable to
DXP Enterprises, Inc.
$
1.06
$
0.74
$
2.01
$
1.39
Weighted average common shares and common
equivalent shares outstanding
18,051
19,606
18,242
19,491
*NCI represents non-controlling
interest
Business segment financial highlights:
- Service Centers’ revenue for the
second quarter was $298.4 million, a 1.1 percent sequential
increase and an increase of 18.9 percent year-over-year with a 14.8
percent operating income margin.
- Innovative Pumping Solutions’
revenue for the second quarter was $63.4 million, a sequential
increase of 2.3 percent and an increase of 9.8 percent
year-over-year with a 16.0 percent operating income margin.
- Supply Chain Services’ revenue for
the second quarter was $66.2 million, a 1.3 percent sequential
decrease and an increase of 12.3 percent year-over-year with a 8.2
percent operating income margin.
SEGMENT DATA
($ thousands, unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
Sales
2023
2022
2023
2022
Service Centers
$
298,432
$
251,098
$
593,658
$
469,894
Innovative Pumping Solutions
63,441
57,788
125,439
110,846
Supply Chain Services
66,167
58,926
133,210
106,483
Total Sales
$
428,040
$
367,812
$
852,307
$
687,223
Three Months Ended June
30,
Six Months Ended June
30,
Operating Income
2023
2022
2023
2022
Service Centers
$
44,129
$
32,368
$
88,834
$
59,719
Innovative Pumping Solutions
10,178
8,726
20,483
15,795
Supply Chain Services
5,416
4,958
10,929
8,978
Total Segments operating income
$
59,723
$
46,052
$
120,246
$
84,492
Reconciliation of Operating
Income for Reportable Segments
($ thousands, unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Income from operations for reportable
segments
$
59,723
$
46,052
$
120,246
$
84,492
Adjustment for:
Amortization of intangibles
4,582
4,591
9,340
8,826
Corporate expenses
17,661
15,541
38,027
28,186
Income from operations
$
37,480
$
25,920
$
72,879
$
47,480
Interest expense
11,863
5,615
23,384
10,777
Other (income) expense, net
(242
)
839
(712
)
1,377
Income before income taxes
$
25,859
$
19,466
$
50,207
$
35,326
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Income before income taxes
$
25,859
$
19,466
$
50,207
$
35,326
Plus: interest expense
11,863
5,615
23,384
10,777
Plus: depreciation and amortization
6,703
7,080
13,485
13,832
EBITDA
$
44,425
$
32,161
$
87,076
$
59,935
Plus: NCI income (loss) before tax*
$
—
$
(45
)
$
—
$
68
Plus: stock compensation expense
871
493
1,347
863
Adjusted EBITDA
$
45,296
$
32,609
$
88,423
$
60,866
* NCI represents non-controlling
interest
DXP ENTERPRISES, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
($ thousands)
June 30, 2023
December 31, 2022
ASSETS
Current assets:
Cash
$
15,533
$
46,026
Restricted cash
91
91
Accounts receivable, net of allowances for
doubtful accounts
318,651
320,880
Inventories
104,950
101,392
Costs and estimated profits in excess of
billings
46,770
23,588
Prepaid expenses and other current
assets
15,274
21,644
Income taxes receivable
7,698
2,493
Total current assets
$
508,967
$
516,114
Property and equipment, net
47,538
45,964
Goodwill
342,273
333,759
Other intangible assets, net of
accumulated amortization
72,466
79,585
Operating lease right-of-use assets,
net
54,051
57,402
Other long-term assets
9,138
4,456
Total assets
$
1,034,433
$
1,037,280
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt
$
4,369
$
4,369
Trade accounts payable
93,978
100,784
Accrued wages and benefits
28,563
26,260
Customer advances
15,555
20,128
Billings in excess of costs and estimated
profits
5,333
10,411
Current-portion operating lease
liabilities
17,324
18,083
Other current liabilities
42,843
32,866
Total current liabilities
$
207,965
$
212,901
Long-term debt, less unamortized debt
issuance costs
408,430
409,205
Long-term operating lease liabilities
37,650
40,189
Other long-term liabilities
8,718
4,701
Deferred income taxes
2,205
4,892
Total long-term liabilities
$
457,003
$
458,987
Total Liabilities
$
664,968
$
671,888
Equity:
Total DXP Enterprises, Inc.
equity
369,465
365,392
Total liabilities and equity
$
1,034,433
$
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net cash from operating activities
$
(2,430
)
$
5,686
$
24,017
$
5,686
Less: purchases of property and
equipment
(1,813
)
(1,848
)
(5,617
)
(1,848
)
Free cash flow
$
(4,243
)
$
3,838
$
18,400
$
3,838
Note: Supplemental non-cash items include
share repurchases which have been excluded.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808582583/en/
Kent Yee 713-996-4700 Senior Vice President, CFO
www.dxpe.com
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