DXP Enterprises Inc (DXPE) Reports Strong Earnings Growth and Robust Free Cash Flow in Q3 2023
Sales rose by 8.2% year-over-year to $419.2 million in Q3 2023.
Diluted earnings per share increased by 31.0% to $0.93 compared to Q3 2022.
Adjusted EBITDA grew by 28.3% to $44.0 million, with a margin of 10.5%.
Free Cash Flow surged to $38.3 million, a significant improvement from $(5.0) million in Q3 2022.
DXP Enterprises Inc (NASDAQ:DXPE) announced its financial results for the third quarter ended September 30, 2023, on November 8, 2023. The company reported a year-over-year sales increase of 8.2% to $419.2 million and a significant rise in diluted earnings per share, which went up by 31.0% to $0.93. Year to date, sales have climbed by 18.3% to $1,271.6 million, reflecting strong growth momentum.
Financial Performance Overview
DXPE's net income for the third quarter increased by 16.1% to $16.2 million compared to the same period last year. Adjusted EBITDA for the quarter was $44.0 million, up from $34.3 million in Q3 2022, with the Adjusted EBITDA Margin also improving to 10.5%. The company's Free Cash Flow for the quarter was notably strong at $38.3 million, a stark contrast to the negative Free Cash Flow reported in the third quarter of the previous year.
Operational Highlights and Segment Performance
DXPE's Service Centers reported a revenue of $294.5 million, with a 14.1% operating income margin, while the Innovative Pumping Solutions segment brought in $59.0 million with an 18.9% operating margin. The Supply Chain Services segment generated $65.8 million in revenue, with an 8.5% operating income margin. The company's business segment operating income increased by 20.3% year-over-year.
Management Commentary
David R. Little, Chairman and Chief Executive Officer, expressed satisfaction with the third-quarter performance, citing solid sales, Adjusted EBITDA, earnings per share, and Free Cash Flow.
We are pleased with our performance in the third quarter as the team maintained momentum and delivered strong year-over-year results,"
Little said. He also highlighted the company's strong EBITDA margins and growth.
Chief Financial Officer and Senior Vice President Kent Yee commented on the financial results, emphasizing the company's growth and strong Free Cash Flow generation.
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,"
Yee remarked.
Debt and Liquidity Position
As of September 30, 2023, DXPE's total debt stood at $424.9 million, with a secured leverage ratio of 2.3:1.0. Following the third quarter, the company successfully refinanced its existing debt and raised an additional $125 million, improving its borrowing costs and liquidity position.
Future Outlook
DXPE's management expects to finish the fiscal year 2023 strongly, with positive momentum carrying into 2024. The company's strategic positioning is anticipated to drive market outgrowth, improved operating margins, and enhanced shareholder returns.
For more detailed information about DXP Enterprises Inc (NASDAQ:DXPE) and its financial results, please visit the Investor Relations section of the company's website at https://ir.dxpe.com.
Investors and interested parties are invited to listen to the live webcast of the conference call discussing the Q3 results, which will be available on the same website.
DXP Enterprises Inc (NASDAQ:DXPE) continues to demonstrate its ability to navigate market challenges and capitalize on growth opportunities, as evidenced by its robust financial performance in the third quarter of 2023. The company's strategic initiatives and operational efficiency have positioned it well for continued success in the upcoming fiscal year.
Explore the complete 8-K earnings release (here) from DXP Enterprises Inc for further details.
This article first appeared on GuruFocus.
