DXPE DXP Enterprises Inc

• $311.2 million in sales, up 8.8 percent, compared to $285.9 million in sales in Q1 2018, led by Supply Chain Services
• Net income of $7.3 million versus $4.5 million compared to Q1 2018
• GAAP diluted EPS of $0.40, compared to $0.24 in Q1 2018
• $21.1 million in earnings before interest, taxes, depreciation and amortization (“EBITDA”) versus $17.9 million in Q1 2018

DXP Enterprises, Inc. (NASDAQ: DXPE) today announced financial results for the first quarter ended March 31, 2019. The following are results for the three months ended March 31, 2019, compared to the three months ended March 31, 2018. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

First Quarter 2019 financial highlights:

• Sales increased 8.8 percent to $311.2 million, compared to $285.9 million for the first quarter of 2018.
• Earnings per diluted share for the first quarter was $0.40 based upon 18.4 million diluted shares, compared to $0.24 per share in the first quarter of 2018.
• Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter was $21.1 million compared to $17.9 million for the first quarter of 2018, an increase of 17.7 percent. EBITDA as a percentage of sales was 6.8 percent and 6.3 percent, respectively, comparing the first quarter of 2019 versus 2018.

David R. Little, Chairman and CEO commented, “We are off to a good start again in 2019. Our first quarter performance shows the team maintained momentum and delivered on expected results. The oil and gas and industrial economy continues to remain firm with all key indicators remaining positive. During the first quarter, we achieved 8.8 percent organic sales growth and believe we continue to expand our leading market positions across our business segments. Our strong earnings per share growth speaks to our team's execution and focus on continuous improvement. DXP’s first quarter 2019 sales were $311.2 million while EBITDA increased 17.7 percent year-over-year. In terms of our business segments for the first quarter of 2019, sales were $186.2 million for Service Centers, $74.7 million for Innovative Pumping Solutions and $50.3 million for Supply Chain Services. Business segment operating income increased 13.7 percent year-over-year. We delivered on our financial results as our markets and customers continue to perform. Entering the second quarter, we look forward to continued strength in our end markets while we drive operational excellence.”

Kent Yee, CFO, remarked, “The first quarter of 2019 financial results were great to see. Our year-over-year financial results continue to reflect the growth we experienced in fiscal 2018. Solid sales growth, accompanied by in-line diluted earnings per share. Our current run rate sales volumes should allow us to leverage operating expenses, deliver on profitability and will lead to strong cash flow generation. We remain confident in the momentum continuing in our business segments and a strong 2019. Total debt outstanding as of March 31, 2019 was $247.9 million. DXP’s secured leverage ratio or net debt to EBITDA ratio was 2.2:1.0.”

We will host a conference call regarding 2019 first quarter results on the Company’s website (www.dxpe.com) Tuesday, May 7, 2019 at 10 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 on-line 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 and free cash flow. This supplemental information should not be considered in isolation or as a substitute for the unaudited GAAP measurements. Additional information regarding EBITDA and free cash flow 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. 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; ability to obtain needed capital, dependence on existing management, leverage and debt service, domestic or global economic conditions, 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.

  DXP ENTERPRISES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($ thousands, except per share amounts)     Three Months EndedMarch 31, 2019   2018   Sales $ 311,225 $ 285,936 Cost of sales 227,025   209,491   Gross profit 84,200 76,445 Selling, general and administrative expenses 69,384   65,296   Operating income 14,816 11,149 Other income, net (33 ) (22 ) Interest expense 5,040   5,041   Income before income taxes 9,809 6,130 Provision for income taxes 2,622   1,636   Net income 7,187 4,494 Net loss attributable to NCI* (104 ) (57 ) Net income attributable to DXP Enterprises, Inc. 7,291 4,551 Preferred stock dividend 23   23   Net income attributable to common shareholders $ 7,268   $ 4,528     Diluted earnings per share attributable to DXP Enterprises, Inc. $ 0.40   $ 0.24     Weighted average common shares and common equivalent shares outstanding 18,406   18,741     *NCI represents non-controlling interest  

Business segment financial highlights:

• Service Centers’ revenue for the first quarter was $186.2 million, an increase of 6.2 percent year-over-year with a 10.2 percent operating income margin.
• Innovative Pumping Solutions’ revenue for the first quarter was $74.7 million, an increase of 10.5 percent year-over-year with a 9.1 percent operating income margin.
• Supply Chain Services’ revenue for the first quarter was $50.3 million, an increase of 17.2 percent year-over-year with an 8.1 percent operating income margin.

 

SEGMENT DATA

($ thousands, unaudited)

      Sales   Operating Income Three Months EndedMarch 31, Three Months EndedMarch 31, Business Segment 2019   2018 2019   2018 Service Centers $ 186,179 $ 175,362 $ 18,980 $ 15,830 Innovative Pumping Solutions 74,723 67,642 6,799 6,382 Supply Chain Services 50,323   42,932   4,086   4,054 Total DXP Sales $ 311,225   $ 285,936   $ 29,865   $ 26,266    

Reconciliation of Operating Income for Reportable Segments

($ thousands, unaudited)

      Three Months EndedMarch 31, 2019   2018 Operating income for reportable segments $ 29,865 $ 26,266 Adjustment for: Amortization of intangibles 3,814 4,358 Corporate expenses 11,235   10,759   Total operating income 14,816 11,149 Interest expense 5,040 5,041 Other income, net (33 ) (22 ) Income before income taxes 9,809   6,130    

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 net income, calculated and reported in accordance with U.S. GAAP.

      Three Months EndedMarch 31,

Three MonthsEndedDecember 31,

2019   2018 2018 Net income 7,187 4,494 11,102 Plus: income tax expense 2,622 1,636 4,223 Plus: interest expense 5,040 5,041 4,978 Plus: depreciation and amortization 6,206 6,714 6,454       EBITDA 21,055   17,885   26,757   Plus: NCI loss before tax 137 57 37 Plus: stock compensation expense 505 736 526       Adjusted EBITDA 21,697   18,678   27,320    

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ thousands, except per share amounts)

         

As of March 31,2019

As of December 31,2018

ASSETS Current assets: Cash $ 30,606 $ 40,304 Restricted cash 122 215 Accounts receivable, net of allowances for doubtful accounts 197,267 191,829 Inventories 121,754 114,830 Costs and estimated profits in excess of billings 38,150 32,514 Prepaid expenses and other current assets 5,597 4,938 Federal income taxes receivable —   960 Total current assets $ 393,496 $ 385,590 Property and equipment, net 51,404 51,330 Goodwill 194,052 194,052 Other intangible assets, net of accumulated amortization 63,609 67,207 Operating lease right-of-use assets 70,851 — Other long-term assets 1,795   1,783 Total assets $ 775,207   $ 699,962   LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt $ 3,414 $ 3,407 Trade accounts payable 92,460 87,407 Accrued wages and benefits 16,882 21,275 Customer advances 3,867 3,223 Billings in excess of costs and estimated profits 8,207 10,696 Federal income taxes payable 67 — Current-portion operating lease liability 17,660 — Other current liabilities 16,075   17,269 Total current liabilities $ 158,632 $ 143,277 Long-term debt, less unamortized debt issuance costs 236,591 236,979 Long-term operating lease liability 52,993 — Other long-term liabilities 988 2,819 Deferred income taxes 9,422   8,633 Total long-term liabilities $ 299,994   $ 248,431 Total Liabilities $ 458,626   $ 391,708 Equity: Total DXP Enterprises, Inc. equity 315,279 306,848 Non-controlling interest 1,302   1,406 Total Equity $ 316,581   $ 308,254 Total liabilities and equity $ 775,207   $ 699,962  

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 EndedMarch 31, 2019   2018   Net cash used in operating activities (5,310 ) (808 ) Less: purchase of equipment 2,312 791 Plus: proceeds from sales of assets 29 —     Free cash flow (7,593 ) (1,599 )  

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Kent Yee713-996-4700Senior Vice President, CFOwww.dxpe.com