dxpe-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


			☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2024


			☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________ to __________

Commission file number 0-21513

DXP Enterprises, Inc.

(Exact name of registrant as specified in its charter)


Texas						76-0509661
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

5301 Hollister, Houston, Texas 77040

(Address of principal executive offices, including zip code)

(713) 996-4700


(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class

Trading Symbol

Name of Exchange on which Registered

Common Stock par value $0.01

DXPE

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of registrant's Common Stock, par value $0.01 per share outstanding as of November 4, 2024: 15,694,883.

DXP ENTERPRISES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


		Page
PART I: FINANCIAL INFORMATION
	ITEM 1. Financial Statements	3
	a) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income	3
	b) Unaudited Condensed Consolidated Balance Sheets	4
	c) Unaudited Condensed Consolidated Statements of Cash Flows	5
	d) Unaudited Condensed Consolidated Statements of Equity	6
	e) Notes to Unaudited Condensed Consolidated Financial Statements	8
	ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	17
	ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	28
	ITEM 4. Controls and Procedures	29

PART II: OTHER INFORMATION		30
	ITEM 1. Legal Proceedings	30
	ITEM 1A. Risk Factors	30
	ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	30
	ITEM 3. Default upon Senior Securities	30
	ITEM 4. Mine Safety Disclosures	30
	ITEM 5. Other Information	30
	ITEM 6. Exhibits	31

SIGNATURES		32

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(in thousands, except per share amounts) (unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

Sales	$	472,935	$	419,249	$	1,331,126	$	1,271,556
Cost of sales	326,825		293,687		923,341		889,101
Gross profit	146,110		125,562		407,785		382,455
Selling, general and administrative expenses	106,502		89,706		301,694		273,720
Income from operations	39,608		35,856		106,091		108,735
Interest expense	15,716		12,684		46,644		36,068
Other expense (income), net (Note 15)	160		1,234		(2,844)		522
Income before income taxes	23,732		21,938		62,291		72,145
Provision for income taxes	2,631		5,766		13,165		19,339
Net income	21,101		16,172		49,126		52,806


Preferred stock dividend	23		22		68		67
Net income attributable to common shareholders	$	21,078	$	16,150	$	49,058	$	52,739

Net income	$	21,101	$	16,172	$	49,126	$	52,806
Foreign currency translation adjustments	380		(844)		(141)		(87)
Comprehensive income	$	21,481	$	15,328	$	48,985	$	52,719

Earnings per share (Note 9):
Basic	$	1.34	$	0.98	$	3.08	$	3.08
Diluted	$	1.27	$	0.93	$	2.93	$	2.94

Weighted average common shares outstanding:
Basic	15,750		16,516		15,915		17,104
Diluted	16,590		17,356		16,755		17,944

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts) (unaudited)



	September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash	$	35,000	$	173,120
Restricted cash	91		91
Accounts receivable, net of allowance of $5,316 and $5,584, respectively	337,722		311,171
Inventories	109,787		103,805
Costs and estimated profits in excess of billings	49,707		42,323
Prepaid expenses and other current assets	22,274		18,044

Total current assets	554,581		648,554
Property and equipment, net	73,050		61,618
Goodwill	448,103		343,991
Other intangible assets, net	89,356		63,895
Operating lease right of use assets, net	48,498		48,729
Other long-term assets	17,857		10,649
Total assets	$	1,231,445	$	1,177,436

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt	$	5,500	$	5,500
Trade accounts payable	106,802		96,469
Accrued wages and benefits	41,230		36,238
Customer advances	12,656		12,160
Billings in excess of costs and estimated profits	11,911		9,506

Short-term operating lease liabilities	14,928		15,438
Other current liabilities	56,336		48,854
Total current liabilities	249,363		224,165

Long-term debt, net of unamortized debt issuance costs and discounts	519,250		520,697
Long-term operating lease liabilities	34,922		34,336
Other long-term liabilities	25,542		17,359

Total long-term liabilities	579,714		572,392
Total liabilities	829,077		796,557
Commitments and Contingencies (Note 10)
Shareholders' equity:
Series A preferred stock, $1.00 par value; 1,000,000 shares authorized	1		1
Series B preferred stock, $1.00 par value; 1,000,000 shares authorized	15		15
Common stock, $0.01 par value, 100,000,000 shares authorized; 15,694,883 and 16,177,237 outstanding, respectively	345		345
Additional paid-in capital	218,062		216,482
Retained earnings	368,329		319,271
Accumulated other comprehensive loss	(31,381)		(31,240)
Treasury stock, at cost 4,707,773 and 4,141,989 shares, respectively	(153,003)		(123,995)
Total DXP Enterprises, Inc. equity	402,368		380,879


Total liabilities and equity	$	1,231,445	$	1,177,436

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)


	Nine Months Ended September 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	49,126		52,806
Reconciliation of net income to net cash provided by operating activities:
Depreciation	6,821		6,262
Amortization of intangibles and fixed assets	17,564		15,206

(Recovery of) provision for credit losses	(783)		(277)
Payment of contingent consideration liability in excess of acquisition-date fair value	(108)		(160)
Fair value adjustment on contingent consideration	380		1,502
Amortization of debt issuance costs	2,678		2,176
Restricted stock compensation expense	3,398		2,211
Deferred income taxes	(10,376)		(10,178)
Changes in operating assets and liabilities, net of effects of businesses acquired:
Accounts receivable, net	(12,325)		2,295
Costs and estimated profits in excess of billings	(7,392)		(23,629)
Accounts payable and accrued expenses	16,622		12,868
Prepaid expenses and other assets	2,848		16,583
Inventories	1,130		(3,397)
Billings in excess of costs and estimated profits	2,410		(3,232)
Other long-term liabilities	(1,925)		(7,261)
Net cash provided by operating activities	$	70,068	$	63,775

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(15,673)		(7,103)

Acquisition of businesses, net of cash acquired	(149,440)		(8,848)
Net cash used in investing activities	$	(165,113)	$	(15,951)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on asset-backed credit facility	6,000		7,870
Repayments on asset-backed credit facility	(6,000)		(7,870)
Repayments under term loan facility	(4,125)		(3,276)

Payment for acquisition contingent consideration liability	(4,580)		(5,090)
Preferred stock dividends paid	(68)		(67)
Shares repurchased held in treasury	(28,783)		(56,215)
Payment for employee taxes withheld from stock awards	(1,818)		(464)
Principal payments on finance leases	(3,010)		(1,632)
Net cash used in financing activities	$	(42,384)	$	(66,744)
Effect of foreign currency on cash	(691)		70
Net change in cash and restricted cash	(138,120)		(18,850)
Cash and restricted cash at beginning of period	173,211		46,117
Cash and restricted cash at end of period	$	35,091	$	27,267

Supplemental cash flow information (Note 14)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands) (unaudited)


	Series A preferred stock		Series B preferred stock		Common stock		Paid-in capital		Retained earnings		Treasury stock		Accum other comp loss		Total equity
Balance at December 31, 2023	$	1	$	15	$	345	$	216,482	$	319,271	$	(123,995)	$	(31,240)	$	380,879
Preferred dividends paid	—		—		—		—		(23)		—		—		(23)
Compensation expense for restricted stock	—		—		—		864		—		—		—		864

Tax related items for share based awards	—		—		—		(54)		—		—		—		(54)

Currency translation adjustment	—		—		—		—		—		—		(614)		(614)
Repurchases of shares	—		—		—		—		—		(16,920)		—		(16,920)
Net income	—		—		—		—		11,332		—		—		11,332
Balance at March 31, 2024	$	1	$	15	$	345	$	217,292	$	330,580	$	(140,915)	$	(31,854)	$	375,464
Preferred dividends paid	—		—		—		—		(22)		—		—		(22)
Compensation expense for restricted stock	—		—		—

SEC Form 10-Q filed by DXP Enterprises Inc.