U.S. Markets closed

DXP Enterprises Reports Second Quarter 2022 Results

·10 min read
  • $367.8 million in sales, a 15.2 percent sequential and 28.7 percent year-over-year increase

  • Net income of $14.4 million versus $8.1 million compared to Q2 2021

  • GAAP diluted EPS of $0.74

  • $32.6 million in earnings before interest, taxes, depreciation & amortization and other non-cash charges ("Adjusted EBITDA")

  • Closed the acquisition of Cisco Air Systems, Inc.

HOUSTON, August 08, 2022--(BUSINESS WIRE)--DXP Enterprises, Inc. (NASDAQ: DXPE) today announced financial results for the second quarter ended June 30, 2022. The following are results for the three and six months ended June 30, 2022, compared to the three and six months ended June 30, 2021 and sequentially for the three months ended March 31, 2022, where appropriate. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

Second Quarter 2022 financial highlights:

  • Sales increased 28.7 percent to $367.8 million, compared to $285.7 million for the second quarter of 2021 and approximately 15.2 percent compared to $319.4 million for the first quarter of 2022.

  • Earnings per diluted share for the second quarter were $0.74 based upon 19.6 million diluted shares, compared to earnings of $0.41 per share in the second quarter of June 30, 2021, based on 20.1 million diluted shares.

  • Net income for the second quarter was $14.4 million, compared to $8.1 million for the corresponding prior-year period.

  • Adjusted earnings before interest, taxes, depreciation and amortization and other non-cash charges (Adjusted EBITDA) for the second quarter of 2022 was $32.6 million compared to $28.3 million for the first quarter of 2022 and $22.7 million for the second quarter of 2021.

David R. Little, Chairman and CEO remarked, "Our second quarter financial results reflect broad based strength across DXP. We are pleased with our sequential and year-over-year sales growth and continual strength in EBITDA margins. We have underlying business momentum while our industry continues to effectively manage through inflationary pressures. This resulted in operating leverage that produced earnings per share of $0.74. DXP's second quarter 2022 sales were $367.8 million, or a 28.7 percent increase over the second quarter of 2021. Organic sales for the quarter were $346.5 million and acquisitions contributed $21.3 million in sales. Adjusted EBITDA grew 43.8 percent.

During the second quarter, sales were $251.1 million for Service Centers, $57.8 million for Innovative Pumping Solutions and $58.9 million for Supply Chain Services. While the macro-environment continues to remain dynamic, we still see a strong second half of 2022 with good demand trends, acquisitions and strategic initiatives that will allow us to finish 2022 strong and position us for a better 2023. Thank you to all our customers and DXPeople."

Kent Yee, CFO, remarked, "We are pleased that we achieved diluted EPS of $0.74, with 80.5 percent year-over-year growth and Adjusted EBITDA of $32.6 million for the second quarter. Our second quarter year-over-year and sequential financial results continue to reflect the growth we have been experiencing over the last four quarters and reflect our financial goals to grow organically and through acquisition while diversifying our end market and business model exposure. Total debt outstanding as of June 30, 2022 was $354.2 million . DXP's secured leverage ratio or net debt to EBITDA ratio was 3.1:1.0 with a covenant EBITDA of $106.7 million for the last twelve months ending June 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." 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.

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,

2022

2021

2022

2021

Sales

$

367,812

$

285,691

$

687,223

$

531,278

Cost of sales

263,550

200,413

488,076

374,370

Gross profit

104,262

85,278

199,147

156,908

Selling, general and administrative expenses

78,342

70,432

151,667

135,829

Operating income

25,920

14,846

47,480

21,079

Other (income) loss

839

(105

)

1,377

(535

)

Interest expense

5,615

5,337

10,777

10,580

Income before income taxes

19,466

9,614

35,326

11,034

Provision for income taxes

4,973

1,684

8,305

2,945

Net income

14,493

7,930

27,021

8,089

Net income (loss) attributable to NCI*

60

(189

)

(53

)

(401

)

Net income attributable to DXP Enterprises, Inc.

14,433

8,119

27,074

8,490

Preferred stock dividend

22

22

45

45

Net income attributable to common shareholders

$

14,411

$

8,097

$

27,029

$

8,445

Diluted earnings per share attributable to DXP Enterprises, Inc.

$

0.74

$

0.41

$

1.39

$

0.42

Weighted average common shares and common equivalent shares outstanding

19,606

20,131

19,491

20,079

*NCI represents non-controlling interest

Business segment financial highlights:

  • Service Centers’ revenue for the second quarter was $251.1 million, a 14.8 percent sequential increase and an increase of 19.8 percent year-over-year with a 12.9 percent operating income margin.

  • Innovative Pumping Solutions’ revenue for the second quarter was $57.8 million, a sequential increase of 8.9 percent and an increase of 57.3 percent year-over-year with a 15.1 percent operating income margin.

  • Supply Chain Services’ revenue for the second quarter was $58.9 million, a 23.9 percent sequential increase and an increase of 49.8 percent year-over-year with a 8.4 percent operating income margin.

SEGMENT DATA

($ thousands, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

Sales

2022

2021

2022

2021

Service Centers

$

251,098

$

209,633

$

469,894

$

396,002

Innovative Pumping Solutions

57,788

36,727

110,846

59,972

Supply Chain Services

58,926

39,331

106,483

75,304

Total DXP Sales

$

367,812

$

285,691

$

687,223

$

531,278

Three Months Ended June 30,

Six Months Ended June 30,

Operating Income

2022

2021

2022

2021

Service Centers

$

32,368

$

26,300

$

59,719

$

48,437

Innovative Pumping Solutions

8,726

4,803

15,795

5,751

Supply Chain Services

4,958

3,488

8,978

5,810

Total segments operating income

$

46,052

$

34,591

$

84,492

$

59,998

Reconciliation of Operating Income for Reportable Segments

($ thousands, unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Operating income for reportable segments

$

46,052

$

34,591

$

84,492

$

59,998

Adjustment for:

Amortization of intangibles

4,591

4,306

8,826

8,452

Corporate expenses

15,541

15,439

28,186

30,467

Total operating income

$

25,920

$

14,846

$

47,480

$

21,079

Interest expense

5,615

5,337

10,777

10,580

Other (income) loss

839

(105

)

1,377

(535

)

Income before income taxes

$

19,466

$

9,614

$

35,326

$

11,034

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,

2022

2021

2022

2021

Income before income taxes

19,466

9,614

35,326

11,034

Plus: interest expense

5,615

5,337

10,777

10,580

Plus: depreciation and amortization

7,080

6,958

13,832

13,584

EBITDA

$

32,161

$

21,909

$

59,935

$

35,198

Plus: NCI income (loss) before tax*

(45

)

315

68

598

Plus: stock compensation expense

493

460

863

840

Adjusted EBITDA

$

32,609

$

22,684

$

60,866

$

36,636

* NCI represents non-controlling interest

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

($ thousands)

June 30, 2022

December 31, 2021

ASSETS

Current assets:

Cash

$

20,574

$

48,989

Restricted cash

91

91

Accounts receivable, net of allowances for doubtful accounts

273,310

218,137

Inventories

119,694

100,894

Costs and estimated profits in excess of billings

25,655

17,193

Prepaid expenses and other current assets

13,645

9,522

Income taxes receivable

316

9,748

Total current assets

$

453,285

$

404,574

Property and equipment, net

49,974

51,880

Goodwill

334,779

296,541

Other intangible assets, net of accumulated amortization

83,131

79,205

Operating lease right-of-use assets

59,898

57,221

Other long-term assets

3,823

4,806

Total assets

$

984,890

$

894,227

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of debt

$

32,424

$

3,300

Trade accounts payable

103,641

77,842

Accrued wages and benefits

28,749

23,006

Customer advances

17,465

12,924

Billings in excess of costs and estimated profits

2,076

3,581

Federal income taxes payable

1,423

0

Current-portion operating lease liabilities

18,418

18,203

Other current liabilities

33,331

42,206

Total current liabilities

$

237,527

$

181,062

Long-term debt, less unamortized debt issuance costs

314,663

315,397

Long-term operating lease liabilities

42,316

39,922

Other long-term liabilities

3,893

3,603

Deferred income taxes

10,905

7,516

Total long-term liabilities

$

371,777

$

366,438

Total Liabilities

$

609,304

$

547,500

Equity:

Total DXP Enterprises, Inc. equity

375,586

346,674

Non-controlling interest

53

Total Equity

$

375,586

$

346,727

Total liabilities and equity

$

984,890

$

894,227

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,

2022

2021

2022

2021

Net cash from operating activities

$

3,005

$

7,788

$

5,686

$

16,206

Less: purchases of property and equipment

(1,108

)

(846

)

(1,848

)

(1,526

)

Plus: proceeds from sales of property & equipment

1,297

Free cash flow

$

1,897

$

6,942

$

3,838

$

15,977

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20220808005205/en/

Contacts

Kent Yee 713-996-4700
Senior Vice President, CFO
www.dxpe.com