- $27.2 million in cash
- $419.2 million in sales, an 8.2 percent year-over-year
increase
- $1,271.6 million in year to date sales, an 18.3 percent
year-over-year increase
- Diluted earnings per share of $0.93, up 31.0 percent compared
to Q3 2022
- $44.0 million in earnings before interest, taxes, depreciation
& amortization and other non-cash charges ("Adjusted
EBITDA")
- Free Cash Flow of $38.3 million and $56.7 million for the three
and nine months ended September 30, 2023
- Post Q3, successfully reduced borrowing costs by fifty basis
points and raised an incremental $125 million
DXP Enterprises, Inc. (the "Company" or "DXPE") (NASDAQ:
DXPE) today announced financial results for the third quarter
ended September 30, 2023. The following are results for the three
months ended September 30, 2023, compared to the three months ended
September 30, 2022, and for the three months ended June 30, 2023,
where appropriate. A reconciliation of the non-GAAP financial
measures can be found in the back of this press release.
"The Company posted solid third-quarter results in a lessening
inflationary market and varied spending by our customers,
delivering solid sales, Adjusted EBITDA, earnings per share and
Free Cash Flow performance," said David R. Little, Chairman and
Chief Executive Officer.
Third Quarter 2023 financial highlights:
- Sales increased 8.2 percent to $419.2 million, compared to
$387.3 million for the third quarter of 2022, and decreased 2.1
percent compared to the second quarter of 2023.
- Net income increased 16.1 percent for the third quarter to
$16.2 million, compared to $13.9 million for the corresponding
prior-year period.
- Earnings per diluted share for the third quarter was $0.93
based upon 17.4 million diluted shares, compared to earnings of
$0.71 per diluted share in the third quarter of September 30, 2022,
based on 19.7 million diluted shares.
- Adjusted EBITDA for the third quarter of 2023 was $44.0 million
compared to $34.3 million for the third quarter of 2022. Adjusted
EBITDA as a percentage of sales, or Adjusted EBITDA Margin, was
10.5 percent and 8.9 percent, respectively.
- Free Cash Flow for the third quarter of 2023 was $38.3 million
compared to $(5.0) million for the third quarter of 2022
David R. Little, Chairman and Chief Executive Officer continued,
“We are pleased with our performance in the third quarter as the
team maintained momentum and delivered strong year-over-year
results. We achieved 8.2 percent sales growth year-over-year, and
solid ten percent plus EBITDA margins and growth. DXP’s third
quarter 2023 sales were $419.2 million. Adjusted EBITDA grew 28.3
percent year-over-year. In terms of our business segments for the
third quarter of 2023, sales were $294.5 million for Service
Centers, $59.0 million for Innovative Pumping Solutions and $65.8
million for Supply Chain Services. Business segment operating
income increased 20.3 percent year-over-year. We believe we are
well positioned to outgrow the market and to generate improved
operating margins and returns for the benefit of our shareholders
as we begin to move into 2024.”
Kent Yee, Chief Financial Officer and Senior Vice President,
remarked, “Our third quarter year-over-year financial results
continue to reflect the growth we have been experiencing in fiscal
year 2023, and reflect our financial goals to grow through a
combination of organic and acquisition sales. We had a strong
quarter of Free Cash Flow generation, producing $38.3 million in
Free Cash Flow during the third quarter. Total debt outstanding as
of September 30, 2023, was $424.9 million. DXP’s secured leverage
ratio or net debt to EBITDA ratio was 2.3:1.0 with a covenant
EBITDA of $168.5 million for the last twelve-months ending
September 30, 2023. Subsequent to the third quarter, we announced
the successful completion of the refinancing of our existing debt
plus raising an incremental $125 million. This allowed us to
reprice our existing borrowings, saving fifty basis points, while
raising incremental monies to help drive anticipated acquisition
growth while maintaining liquidity and flexibility. We expect to
finish fiscal year 2023 strong with momentum continuing into fiscal
year 2024.”
Conference Call Information
DXP Enterprises, Inc. management will host a conference call,
November 9, 2023, at 10:00 a.m. Central Time, to discuss the
Company’s financial results. The conference call may be accessed by
going to https://ir.dxpe.com.
Interested investors and other parties can listen to a webcast
of the live conference call by logging onto the Investor Relations
section of the Company's website at https://ir.dxpe.com. The online
replay will be available on the same website immediately following
the call. A slide presentation highlighting the Company’s results
and key performance indicators will also be available on the
Investor Relations section of the Company’s website.
To learn more about DXP Enterprises, Inc., please visit the
Company's website at https://ir.dxpe.com
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 North America 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.
Non-GAAP Financial Measures
DXP supplements reporting of net income with certain non-GAAP
measurements, including EBITDA, Adjusted EBITDA, EBITDA Margin,
Adjusted EBITDA Margin, Free Cash Flow, 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, EBITDA Margin,
Adjusted EBITDA Margin, Free Cash Flow and net debt 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 to its most directly comparable GAAP financial
measure, 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
shares of the Company's common stock, and for certain other
activities.
Information Related to Forward-Looking Statements
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: the effectiveness of management’s strategies and
decisions; our ability to implement our internal growth and
acquisition growth strategies; general economic and business
conditions specific to our primary customers; changes in government
regulations; our ability to effectively integrate businesses we may
acquire; new or modified statutory or regulatory requirements;
availability of materials and labor; inability to obtain or delay
in obtaining government or third-party approvals and permits;
non-performance by third parties of their contractual obligations;
unforeseen hazards such as weather conditions, acts of war or
terrorist acts and the governmental or military response thereto;
cyber-attacks adversely affecting our operations; other geological,
operating and economic considerations and declining prices and
market conditions, including reduced oil and natural gas prices and
supply or demand for maintenance, repair and operating products,
equipment and service; decreases in oil and natural gas industry
capital 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. 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
Securities and Exchange Commission, 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)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Sales
$
419,249
$
387,314
$
1,271,556
$
1,074,537
Cost of sales
293,687
275,681
889,101
763,758
Gross profit
125,562
111,633
382,455
310,779
Selling, general and administrative
expenses
89,706
85,094
273,720
236,761
Income from operations
35,856
26,539
108,735
74,018
Other expense, net
1,234
1,565
522
2,941
Interest expense
12,684
6,833
36,068
17,610
Income before income taxes
21,938
18,141
72,145
53,467
Provision for income taxes
5,766
5,097
19,339
13,402
Net income
16,172
13,044
52,806
40,065
Net loss attributable to NCI*
—
(885
)
—
(938
)
Net income attributable to DXP
Enterprises, Inc.
16,172
13,929
52,806
41,003
Preferred stock dividend
22
22
67
67
Net income attributable to common
shareholders
$
16,150
$
13,907
$
52,739
$
40,936
Diluted earnings per share attributable to
DXP Enterprises, Inc.
$
0.93
$
0.71
$
2.94
$
2.10
Weighted average common shares and common
equivalent shares outstanding
17,356
19,660
17,944
19,552
*NCI represents non-controlling
interest
DXP ENTERPRISES, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
($ thousands)
September 30, 2023
December 31, 2022
ASSETS
Current assets:
Cash
$
27,176
$
46,026
Restricted cash
91
91
Accounts receivable, net of allowances for
doubtful accounts
320,972
320,880
Inventories
105,145
101,392
Costs and estimated profits in excess of
billings
47,211
23,588
Prepaid expenses and other current
assets
15,799
21,644
Income taxes receivable
393
2,493
Total current assets
$
516,787
$
516,114
Property and equipment, net
56,277
45,964
Goodwill
342,122
333,759
Other intangible assets, net of
accumulated amortization
67,913
79,585
Operating lease right-of-use assets,
net
48,462
57,402
Other long-term assets
13,543
4,456
Total assets
$
1,045,104
$
1,037,280
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt
$
4,369
$
4,369
Trade accounts payable
101,439
100,784
Accrued wages and benefits
35,540
26,260
Customer advances
12,595
20,128
Billings in excess of costs and estimated
profits
7,181
10,411
Current-portion operating lease
liabilities
15,459
18,083
Other current liabilities
45,275
32,866
Total current liabilities
$
221,858
$
212,901
Long-term debt, less unamortized debt
issuance costs
408,105
409,205
Long-term operating lease liabilities
34,028
40,189
Other long-term liabilities
15,469
4,701
Deferred income taxes
2,068
4,892
Total long-term liabilities
$
459,670
$
458,987
Total Liabilities
$
681,528
$
671,888
Equity:
Total DXP Enterprises, Inc.
equity
363,576
365,392
Total liabilities and equity
$
1,045,104
$
1,037,280
Business segment financial highlights:
- Service Centers’ revenue for the
third quarter was $294.5 million, a 1.3 percent sequential decrease
and an increase of 13.2 percent year-over-year with a 14.1 percent
operating income margin and a revenue increase of 21.7 percent for
the nine months ended September 30, 2023 compared to the same
period in 2022.
- Innovative Pumping Solutions’
revenue for the third quarter was $59.0 million, a sequential
decrease of 7.1 percent and a decrease of 0.1 percent
year-over-year with a 18.9 percent operating income margin and a
revenue increase of 8.5 percent for the nine months ended September
30, 2023 compared to the same period in 2022.
- Supply Chain Services’ revenue for
the third quarter was $65.8 million, a 0.5 percent sequential
decrease and a decrease of 3.5 percent year-over-year with a 8.5
percent operating income margin and a revenue increase of 14.0
percent for the nine months ended September 30, 2023 compared to
the same period in 2022.
SEGMENT DATA
($ thousands, unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
Sales
2023
2022
2023
2022
Service Centers
$
294,458
$
260,083
$
888,116
$
729,977
Innovative Pumping Solutions
58,963
59,044
184,402
169,890
Supply Chain Services
65,828
68,187
199,038
174,670
Total Sales
$
419,249
$
387,314
$
1,271,556
$
1,074,537
Three Months Ended September
30,
Nine Months Ended September
30,
Operating Income
2023
2022
2023
2022
Service Centers
$
41,441
$
35,718
$
130,274
$
95,437
Innovative Pumping Solutions
11,155
7,327
31,638
23,122
Supply Chain Services
5,593
5,332
16,522
14,311
Total Segments operating income
$
58,189
$
48,377
$
178,434
$
132,870
Reconciliation of Operating
Income for Reportable Segments
($ thousands, unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Income from operations for reportable
segments
$
58,189
$
48,377
$
178,434
$
132,870
Adjustment for:
Amortization of intangibles and fixed
assets
5,866
5,132
15,206
13,958
Corporate expenses
16,467
16,706
54,493
44,894
Income from operations
$
35,856
$
26,539
$
108,735
$
74,018
Interest expense
12,684
6,833
36,068
17,610
Other (income) expense, net
1,234
1,565
522
2,941
Income before income taxes
$
21,938
$
18,141
$
72,145
$
53,467
Unaudited Reconciliation of
Non-GAAP Financial Information
($ thousands)
The following table sets forth the reconciliation of EBITDA,
EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin to the
most comparable U.S. GAAP financial measure (in thousands):
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net income attributable to DXP
Enterprises, Inc.
$
16,172
$
13,929
$
52,806
$
41,003
Less: Net loss attributable to
non-controlling interest
—
(885
)
—
(938
)
Plus: Interest expense
12,684
6,833
36,068
17,610
Plus: Provision for income taxes
5,766
5,097
19,339
13,402
Plus: Depreciation and amortization
7,983
7,493
21,468
21,325
EBITDA
$
42,605
$
32,467
$
129,681
$
92,402
Plus: NCI income (loss) before tax(1)
—
159
—
433
Plus: other non-recurring items(2)
551
1,193
551
1,193
Plus: stock compensation expense
864
505
2,211
1,368
Adjusted EBITDA
$
44,020
$
34,324
$
132,443
$
95,396
Operating Income Margin
8.6
%
6.9
%
8.6
%
6.9
%
EBITDA Margin
10.2
%
8.4
%
10.2
%
8.6
%
Adjusted EBITDA Margin
10.5
%
8.9
%
10.4
%
8.9
%
(1) NCI represents non-controlling
interest.
(2) Other non-recurring items includes the
loss associated with closing an international location for the
three and nine months ended September 30, 2023 and the loss
associated with the sale of a VIE for the three and nine months
ended September 30, 2022.
Unaudited Reconciliation of
Non-GAAP Financial Information
($ thousands)
The following table sets forth the
reconciliation of Free Cash Flow to the most comparable GAAP
financial measure (in thousands):
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net cash from operating activities
$
39,758
$
(3,432
)
$
63,775
$
2,256
Less: purchases of property and
equipment
(1,486
)
(1,578
)
(7,103
)
(3,426
)
Free Cash Flow
$
38,272
$
(5,010
)
$
56,672
$
(1,170
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231108939015/en/
Kent Yee, 713-996-4700 Senior Vice President, CFO
www.dxpe.com
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