EX-99.1 2 earningsrelease9302022.htm EX-99.1 Document
dxplogoa02.jpg
NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS

DXP ENTERPRISES REPORTS THIRD QUARTER 2022 RESULTS

•$387.3 million in sales, a 5.3 sequential and 33.8 percent year-over-year increase
•Net income of $13.9 million versus $7.1 million compared to Q3 2021
•GAAP diluted EPS of $0.71
•Non-GAAP diluted EPS of $0.78
•$34.3 million in earnings before interest, taxes, depreciation & amortization and other non-cash charges ("Adjusted EBITDA")
•Closed the acquisition of Sullivan Environmental Technologies, Inc.

Houston, TX – November 9, 2022 – DXP Enterprises, Inc. (NASDAQ: DXPE) today announced financial results for the third quarter ended September 30, 2022. The following are results for the three and nine months ended September 30, 2022, compared to the three and nine months ended September 30, 2021 and sequentially for the three months ended June 30, 2022, where appropriate. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

Third Quarter 2022 financial highlights:

•Sales increased 33.8 percent to $387.3 million, compared to $289.5 million for the third quarter of 2021 and 5.3 percent compared to the second quarter of 2022.
•Earnings per diluted share for the third quarter were $0.71 based upon 19.7 million diluted shares, compared to earnings of $0.36 per share in the third quarter of September 30, 2021, based on 19.6 million diluted shares. Excluding one-time non-cash charges of $1.2 million, earnings per diluted share was $0.78, assuming a 25.1 percent tax rate.
•Net income for the third quarter was $13.9 million, compared to $7.1 million for the corresponding prior-year period.
•Adjusted earnings before interest, taxes, depreciation and amortization and other non-cash charges (Adjusted EBITDA) for the third quarter of 2022 was $34.3 million compared to $18.8 million for the third quarter of 2021.
David R. Little, Chairman and CEO remarked, “Thanks to solid execution by our employees, DXP posted strong record sales results for our third quarter of 2022. Our sales growth is being fueled by diversifying into new markets, selling innovative products in new and existing markets, and helping our customers with environmental projects. Our acquisition strategy is focused on stable essential markets that are environmentally friendly. Our results are improving with 33.8 percent year-over-year and 5.3 percent sequential sales growth and 9 percent Adjusted EBITDA margins. During the third quarter, we continued to have strong organic growth within Supply Chain Services, solid organic growth in Service Centers and a meaningful increase in Innovative Pumping Solutions. For the third quarter, sales were $260.1 million for Service Centers, $68.2 million for Supply Chain Services and $59.0 million for Innovative Pumping Solutions. Thank you to all our customers and congratulations to our DXPeople for our record results."

Kent Yee, CFO, remarked, “Our third quarter sales established a new high watermark for DXP. Our third quarter year-over-year and sequential financial results continue to reflect the growth we have been experiencing and reflect our financial goals to grow organically and through acquisition. We are diversifying our end markets and business model exposure. While we face uncertainties going into next year, we remain very confident in our 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 deliver exceptional performance and growth in the years ahead. Total debt outstanding as of September 30, 2022 was $364.8 million. DXP's secured leverage ratio or net debt to EBITDA ratio was 2.86:1.0 with a covenant EBITDA of $121.8 million for the last twelve months ending September 30, 2022. We expect to finish 2022 with strong momentum.”
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".


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NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS
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.
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NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS
DXP ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ thousands, except for share and per share amounts)
   
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Sales$387,314 $289,494 $1,074,537 $820,772 
Cost of sales275,681 202,551 763,758 576,921 
Gross profit111,633 86,943 310,779 243,851 
Selling, general and administrative expenses85,094 75,758 236,761 211,587 
Operating income 26,539 11,185 74,018 32,264 
Other (income) loss1,565 (450)2,941 (985)
Interest expense6,833 5,264 17,610 15,844 
Income before income taxes18,141 6,371 53,467 17,405 
Provision for income taxes 5,097 (565)13,402 2,380 
Net income 13,044 6,936 40,065 15,025 
Net income (loss) attributable to NCI*(885)(189)(938)(590)
Net income attributable to DXP Enterprises, Inc.13,929 7,125 41,003 15,615 
Preferred stock dividend22 23 67 68 
Net income attributable to common shareholders$13,907 $7,102 $40,936 $15,547 
Diluted earnings per share attributable to DXP Enterprises, Inc.$0.71 $0.36 $2.10 $0.78 
Weighted average common shares and common equivalent shares outstanding19,660 19,550 19,552 19,900 
*NCI represents non-controlling interest




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NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS

Business segment financial highlights:

•Service Centers’ revenue for the third quarter was $260.1 million, a 3.6 percent sequential increase and an increase of 22.4 percent year-over-year with a 13.7 percent operating income margin.
•Innovative Pumping Solutions’ revenue for the third quarter was $59.0 million, a sequential increase of 2.2 percent and an increase of 62.0 percent year-over-year with a 12.4 percent operating income margin.
•Supply Chain Services’ revenue for the third quarter was $68.2 million, a 15.7 percent sequential increase and an increase of 68.3 percent year-over-year with a 7.8 percent operating income margin.

SEGMENT DATA
($ thousands, unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
Sales2022202120222021
Service Centers$260,083 $212,539 $729,977 $608,542 
Innovative Pumping Solutions59,044 36,440 169,890 96,411 
Supply Chain Services68,187 40,515 174,670 115,819 
Total DXP Sales$387,314 $289,494 $1,074,537 $820,772 
Three Months Ended September 30,Nine Months Ended September 30,
Operating Income2022202120222021
Service Centers$35,718 $29,381 $95,437 $77,819 
Innovative Pumping Solutions7,327 277 23,122 6,027 
Supply Chain Services5,332 3,181 14,311 8,991 
Total segments operating income$48,377 $32,839 $132,870 $92,837 


Reconciliation of Operating Income for Reportable Segments
($ thousands, unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Operating income for reportable segments$48,377 $32,839 $132,870 $92,837 
Adjustment for:
Amortization of intangibles5,132 4,238 13,958 12,690 
Corporate expenses16,706 17,416 44,894 47,883 
Total operating income$26,539 $11,185 $74,018 $32,264 
Interest expense6,833 5,264 17,610 15,844 
Other (income) loss1,565 (450)2,941 (985)
Income before income taxes$18,141 $6,371 $53,467 $17,405 
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NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS



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 September 30,Nine Months Ended September 30,
2022202120222021
Income before income taxes$18,141 $6,371 $53,467 $17,405 
Plus: interest expense6,833 5,264 17,610 15,844 
Plus: depreciation and amortization7,493 6,486 21,325 20,070 
EBITDA$32,467 $18,121 $92,402 $53,319 
Plus: NCI income (loss) before tax*$159 $190 $433 $787 
Plus: One-time non-cash loss1,193 — 1,193 — 
Plus: stock compensation expense505 514 1,368 1,354 
Adjusted EBITDA$34,324 $18,825 $95,396 $55,460 
* NCI represents non-controlling interest


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NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS

DXP ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
($ thousands)

September 30, 2022December 31, 2021
ASSETS
Current assets:
Cash$16,972 $48,989 
Restricted cash91 91 
Accounts receivable, net of allowances for doubtful accounts283,522 218,137 
Inventories131,290 100,894 
Costs and estimated profits in excess of billings30,122 17,193 
Prepaid expenses and other current assets11,652 9,522 
Income taxes receivable652 9,748 
Total current assets$474,301 $404,574 
Property and equipment, net46,657 51,880 
Goodwill332,988 296,541 
Other intangible assets, net of accumulated amortization84,516 79,205 
Operating lease right-of-use assets54,054 57,221 
Other long-term assets3,559 4,806 
Total assets$996,075 $894,227 
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt$43,906 $3,300 
Trade accounts payable97,947 77,842 
Accrued wages and benefits27,455 23,006 
Customer advances25,496 12,924 
Billings in excess of costs and estimated profits4,265 3,581 
Federal income taxes payable587 0 
Current-portion operating lease liabilities17,526 18,203 
Other current liabilities28,679 42,206 
Total current liabilities$245,861 $181,062 
Long-term debt, less unamortized debt issuance costs313,739 315,397 
Long-term operating lease liabilities37,279 39,922 
Other long-term liabilities4,637 3,603 
Deferred income taxes8,947 7,516 
Total long-term liabilities$364,602 $366,438 
Total Liabilities$610,463 $547,500 
Equity:
Total DXP Enterprises, Inc. equity386,497 346,674 
Non-controlling interest(885)53 
Total Equity$385,612 $346,727 
Total liabilities and equity$996,075 $894,227 

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NEWS RELEASE
CONTACT: Kent Yee
Senior Vice President, CFO
www.dxpe.com
THE INDUSTRIAL DISTRIBUTION EXPERTS

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 September 30,Nine Months Ended September 30,
2022202120222021
Net cash from operating activities$(3,432)$6,625 $2,256 $22,831 
Less: purchases of property and equipment(1,578)(1,458)(3,426)(2,984)
Plus: proceeds from sales of property & equipment— — — 1,297 
Free cash flow$(5,010)$5,167 $(1,170)$21,144 

Note: Supplemental non-cash items include share repurchases which have been excluded.


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 September 30,Nine Months Ended September 30,
2022202120222021
GAAP Net Income:$13,907 $7,102 $40,936 $15,547 
One-time non-cash loss 1,193 — 1,193 — 
Adjustment for taxes*299 — 299 — 
Non-GAAP net income$15,399 $7,102 $42,428 $15,547 
Diluted earnings per share:
GAAP$0.71 $0.36 $2.10 $0.78 
Non-GAAP$0.78 $0.36 $2.17 $0.78 
* Adjustment for taxes relates to the tax effects of the adjustments that we incorporate into non-GAAP measures in order to provide a more meaningful measure on non-GAAP net income. For tax purposes the year-to-date effective tax rate of 25.1 percent was applied to the one-time non-cash loss for conservative purposes.
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