DXPE DXP Enterprises Inc

• Fiscal 2023 sales of $1.7 billion, up 13.4 percent from fiscal 2022
• Solid full Year GAAP diluted EPS of $3.89
• $174.3 million in adjusted earnings before interest, taxes, depreciation, amortization and other non-cash charges ("Adjusted EBITDA")
• Net income of $68.8 million versus $48.2 million in fiscal 2022
• Refinanced Senior Secured Term Loan B raising $550 million
• Repurchased 1.7 million shares for $54.7 million in fiscal 2023
• $173.2 million in cash and restricted cash
• Closed three acquisitions during the fiscal year - Florida Valve, Riordan, and Alliance Pump & Mechanical

DXP Enterprises, Inc. (NASDAQ: DXPE) today announced financial results for the fourth quarter and fiscal year ended December 31, 2023. The following are results for the three and twelve months ended December 31, 2023, compared to the three and twelve months ended December 31, 2022. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

Fourth Quarter 2023 financial highlights:

• Sales were $407.0 million or $6.7 million per day for the fourth quarter of 2023, compared to $406.3 million or $6.6 million per day for the fourth quarter of 2022.
• Diluted earnings per share for the fourth quarter was $0.94 based upon 17.0 million diluted shares, compared to $0.37 per share in the fourth quarter of 2022 based on 19.3 million diluted shares. Adjusted diluted earnings per shares was $1.12 per share compared to $0.50 per share for the fourth quarter of 2022.
• Adjusted earnings before interest, taxes, depreciation and amortization and other non-cash charges ("Adjusted EBITDA") for the fourth quarter of 2023 was $41.9 million compared to $31.6 million for the fourth quarter of 2022. Adjusted EBITDA as a percentage of sales was 10.3 percent and 7.8 percent, respectively.
• Free cash flow (cash flow from operating activities less capital expenditures) for the fourth quarter was $37.3 million or 92.1 percent of EBITDA.

Fiscal Year 2023 financial highlights:

• Sales increased 13.4 percent to $1.7 billion or $6.7 million per day, compared to $1.5 billion or $5.9 million per day for fiscal 2022.
• Diluted earnings per share for 2023 was $3.89 based upon 17.7 million diluted shares, compared to $2.47 per share in 2022, based on 19.5 million basic shares. Adjusted diluted earnings per share was $4.09 per share compared to $2.69 per share in 2022.
• Net income for the year increased $20.7 million to $68.8 million, compared to $48.2 million for fiscal 2022.
• Adjusted EBITDA for 2023 was $174.3 million compared to $126.8 million for 2022. Adjusted EBITDA as a percentage of sales was 10.4 percent and 8.6 percent, respectively.
• Free cash flow (cash flow from operating activities less capital expenditures) for fiscal 2023 was $94.0 million or 55.2 percent of EBITDA compared to $1.0 million in fiscal 2022.

Business segment financial highlights:

• Service Centers’ revenue for the fiscal year was $1.1 billion, an increase of 13.4 percent year-over-year with a 14.3 percent operating income margin.
• Innovative Pumping Solutions’ revenue for the fiscal year was $273.2 million, an increase of 18.2 percent year over year with a 16.2 percent operating income margin.
• Supply Chain Services’ revenue for the fiscal year was $260.4 million, an increase of 8.3 percent year-over-year with a 8.3 percent operating margin.

David R. Little, Chairman and CEO commented, "Fiscal 2023 was another great year for DXP. DXPeople drove fourth quarter results, with strong performance across all business segments. Broad based business strength across the business helped us deliver 13.4 percent revenue growth on a year-over-year basis. This growth has fueled a healthy momentum coming into 2024. DXP’s Innovative Pumping Solutions sales were up 18.2 percent to $273.2 million, followed by Service Centers sales growing 13.4 percent to $1.1 billion and Supply Chain Services sales growing 8.3 percent at $260.4 million. Congratulations to all of our DXPeople for their hard work and efforts to serve our customers."

Mr. Little continued, "The sales momentum from the fourth quarter accompanied by our backlogs has positioned us for further success as we move into 2024. Additionally, we strengthened our balance sheet in the fourth quarter, raising a new Term Loan B which put an incremental $125 million in cash on the balance sheet. DXP’s balanced end markets, and our ability to continue to execute on acquisitions have set the stage for 2024. We see positive dynamics in our traditional end markets like oil & gas, as well as positive outlooks for end markets like water & wastewater. We are confident our growth strategy, coupled with a continued focus on improving margins and maintaining operational discipline will drive shareholder value."

Kent Yee, CFO commented, "Fiscal 2023 financial performance reflects the execution of our end market diversification efforts, our plans to grow both organically and through acquisitions, and continuous improvement in our operations and efficiency. Total sales and adjusted EBITDA grew 13.4 percent and 37.5 percent, respectively. Our fiscal 2023 diluted earnings per share was $3.89. We are pleased with the fourth quarter, and year-end results. We positioned our balance sheet in the fourth quarter to support our growth plans in 2024. DXP ended the year with $173.2 million in cash on the balance sheet and net debt of $375.5 million. DXP’s secured leverage ratio or net debt to EBITDA was 2.1:1.0 with a covenant EBITDA of $178.4 million for fiscal 2023. We expect to drive both organic and acquisition driven growth while driving shareholder and stakeholder value."

Non-GAAP Financial Measures

DXP supplements reporting of net income with non-GAAP measurements, including EBITDA, adjusted EBITDA, free cash flow, Adjusted Net Income attributable to DXP Enterprises, Inc., 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, free cash flow and Adjusted Net Income attributable to DXP Enterprises, Inc. 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.

Conference Call Information

DXP Enterprises, Inc. management will host a conference call, March 7, 2024, at 3:30 p.m. Central Time, to discuss the Company’s financial results. The conference call may be accessed by going to https://ir.dxpe.com. Interested investors and other parties can listen to a webcast of the live conference call by logging onto the Investor Relations section of the Company's website at https://ir.dxpe.com. The online replay will be available on the same website immediately following the call. A slide presentation highlighting the Company’s results and key performance indicators will also be available on the Investor Relations section of the Company’s website.

To learn more about DXP Enterprises, Inc., please visit the Company's website at https://ir.dxpe.com

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. 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 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; 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 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

 

 

Twelve Months Ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

Sales

$

1,678,600

 

 

$

1,480,832

 

 

$

1,113,921

 

Cost of sales

 

1,173,309

 

 

 

1,058,794

 

 

 

785,415

 

Gross profit

 

505,291

 

 

 

422,038

 

 

 

328,506

 

Selling, general and administrative expenses

 

366,569

 

 

 

324,286

 

 

 

288,649

 

Income from operations

 

138,722

 

 

 

97,752

 

 

 

39,857

 

Other (income) expense, net

 

(1,355

)

 

 

2,716

 

 

 

(414

)

Interest expense

 

53,146

 

 

 

29,135

 

 

 

21,089

 

Income before income taxes

 

86,931

 

 

 

65,901

 

 

 

19,182

 

Provision for income tax expense

 

18,119

 

 

 

17,799

 

 

 

3,431

 

Net income

 

68,812

 

 

 

48,102

 

 

 

15,751

 

Net loss attributable to noncontrolling interest

 

—

 

 

 

(53

)

 

 

(745

)

Net income attributable to DXP Enterprises, Inc.

 

68,812

 

 

 

48,155

 

 

 

16,496

 

Preferred stock dividend

 

90

 

 

 

90

 

 

 

90

 

Net income attributable to common shareholders

$

68,722

 

 

$

48,065

 

 

$

16,406

 

 

 

 

 

 

 

Net income

$

68,812

 

 

$

48,102

 

 

$

15,751

 

Foreign currency translation adjustments

 

435

 

 

 

(2,393

)

 

 

747

 

Comprehensive income

$

69,247

 

 

$

45,709

 

 

$

16,498

 

 

 

 

 

 

 

Basic

$

4.07

 

 

$

2.58

 

 

$

0.87

 

Diluted

$

3.89

 

 

$

2.47

 

 

$

0.83

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

Basic

 

16,870

 

 

 

18,631

 

 

 

18,949

 

Diluted

 

17,710

 

 

 

19,471

 

 

 

19,789

 

DXP ENTERPRISES, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

($ thousands, except per share amounts)

 

 

As of December 31,

 

 

2023

 

 

 

2022

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash

$

173,120

 

 

$

46,026

 

Restricted cash

 

91

 

 

 

91

 

Accounts receivable, net of allowance of $5,584 and $7,610, respectively

 

311,171

 

 

 

320,880

 

Inventories

 

103,805

 

 

 

101,392

 

Costs and estimated profits in excess of billings

 

42,323

 

 

 

23,588

 

Prepaid expenses and other current assets

 

18,044

 

 

 

24,137

 

Total current assets

 

648,554

 

 

 

516,114

 

Property and equipment, net

 

61,618

 

 

 

45,964

 

Goodwill

 

343,991

 

 

 

333,759

 

Other intangible assets, net

 

63,895

 

 

 

79,585

 

Operating lease right of use assets, net

 

48,729

 

 

 

57,402

 

Other long-term assets

 

10,649

 

 

 

4,456

 

Total assets

$

1,177,436

 

 

$

1,037,280

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Current maturities of debt

$

5,500

 

 

$

4,369

 

Trade accounts payable

 

96,469

 

 

 

92,805

 

Accrued wages and benefits

 

36,238

 

 

 

26,260

 

Customer advances

 

12,160

 

 

 

20,128

 

Billings in excess of costs and estimated profits

 

9,506

 

 

 

10,411

 

Short-term operating lease liabilities

 

15,438

 

 

 

18,083

 

Other current liabilities

 

48,854

 

 

 

40,845

 

Total current liabilities

 

224,165

 

 

 

212,901

 

Long-term debt, net of unamortized debt issuance costs and discounts

 

520,697

 

 

 

409,205

 

Long-term operating lease liabilities

 

34,336

 

 

 

40,189

 

Other long-term liabilities

 

17,359

 

 

 

9,593

 

Total long-term liabilities

 

572,392

 

 

 

458,987

 

Total liabilities

 

796,557

 

 

 

671,888

 

Shareholders' Equity:

 

 

 

Series A preferred stock, $1.00 par value; 1,000,000 shares authorized

 

1

 

 

 

1

 

Series B convertible preferred stock, $1.00 par value; 1,000,000 shares authorized

 

15

 

 

 

15

 

Common stock, $0.01 par value, 100,000,000 shares authorized; 16,177,237 and 17,690,069 outstanding, respectively

 

345

 

 

 

345

 

Additional paid-in capital

 

216,482

 

 

 

213,937

 

Retained earnings

 

319,271

 

 

 

250,549

 

Accumulated other comprehensive loss

 

(31,240

)

 

 

(31,675

)

Treasury stock, at cost 4,141,989 and 2,435,352 shares, respectively

 

(123,995

)

 

 

(67,780

)

Total DXP Enterprises, Inc. equity

 

380,879

 

 

 

365,392

 

Total liabilities and equity

$

1,177,436

 

 

$

1,037,280

 

SEGMENT DATA

($ thousands, unaudited)

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

Sales

 

2023

 

 

2022

 

 

2023

 

 

2022

Service Centers

$

256,966

 

$

279,378

 

$

1,145,082

 

$

1,009,356

Innovative Pumping Solutions

 

88,748

 

 

61,212

 

 

273,150

 

 

231,102

Supply Chain Services

 

61,330

 

 

65,704

 

 

260,368

 

 

240,374

Total DXP Sales

$

407,044

 

$

406,294

 

$

1,678,600

 

$

1,480,832

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

Operating Income

 

2023

 

 

2022

 

 

2023

 

 

2022

Service Centers

$

33,603

 

$

31,807

 

$

163,877

 

$

127,174

Innovative Pumping Solutions

 

12,622

 

 

6,826

 

 

44,260

 

 

30,037

Supply Chain Services

 

5,001

 

 

5,238

 

 

21,524

 

 

19,530

Total segment operating income

$

51,226

 

$

43,871

 

$

229,661

 

$

176,741

Reconciliation of Operating Income for Reportable Segments

($ thousands, unaudited)

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

Operating income for reportable segments

$

51,226

 

 

$

43,871

 

 

$

229,661

 

 

$

176,741

Adjustment for:

 

 

 

 

 

 

 

Amortization of intangibles

 

3,025

 

 

 

4,957

 

 

 

18,231

 

 

 

18,915

Corporate and other expense, net

 

18,214

 

 

 

15,180

 

 

 

72,708

 

 

 

60,074

Total operating income

$

29,987

 

 

$

23,734

 

 

$

138,722

 

 

$

97,752

Interest expense

 

17,078

 

 

 

11,525

 

 

 

53,146

 

 

 

29,135

Other (income) expense, net

 

(1,876

)

 

 

(227

)

 

 

(1,355

)

 

 

2,716

Income before income taxes

$

14,785

 

 

$

12,436

 

 

$

86,931

 

 

$

65,901

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 income (loss) before income taxes, calculated and reported in accordance with U.S. GAAP.

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

2023

 

 

 

2022

 

 

2023

 

 

2022

 

Net income attributable to DXP Enterprises, Inc.

$

16,005

 

 

$

7,154

 

$

68,812

 

$

48,155

 

Less: Net loss attributable to non-controlling interest (NCI)

 

—

 

 

 

885

 

 

—

 

 

(53

)

Plus: Interest expense

 

17,078

 

 

 

11,525

 

 

53,146

 

 

29,135

 

Plus: Provision for income tax expense

 

(1,220

)

 

 

4,397

 

 

18,119

 

 

17,799

 

Plus: Depreciation and amortization

 

8,637

 

 

 

7,175

 

 

30,105

 

 

28,500

 

EBITDA

$

40,500

 

 

$

31,136

 

$

170,182

 

$

123,536

 

Plus: NCI income before tax

 

—

 

 

 

—

 

 

—

 

 

227

 

Plus: other non-recurring items(1)

 

500

 

 

 

—

 

 

1,051

 

 

1,193

 

Plus: stock compensation expense

 

861

 

 

 

482

 

 

3,072

 

 

1,850

 

Adjusted EBITDA

$

41,861

 

 

$

31,618

 

$

174,305

 

$

126,806

 

(1) Other non-recurring items primarily include the loss associated with closing an international location for the year ended December 31, 2023 and the loss associated with the sale of a variable interest entity (VIE) for the year ended December 31, 2022.

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 (unaudited).

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net cash from operating activities

$

42,444

 

 

$

3,638

 

 

$

106,222

 

 

$

5,894

 

Less: purchases of property and equipment, net

 

(5,160

)

 

 

(1,490

)

 

 

(12,263

)

 

 

(4,916

)

Free Cash Flow

$

37,284

 

 

$

2,148

 

 

$

93,959

 

 

$

978

 

 

 

 

 

 

 

 

 

Unaudited Reconciliation of Non-GAAP Financial Information ($ thousands, unaudited)

The following table is a reconciliation of adjusted net income attributable to DXP Enterprises, Inc., a non-GAAP financial measure, to net income attributable to DXP Enterprises, Inc., calculated and reported in accordance with U.S. GAAP.

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Net Income attributable to DXP Enterprises, Inc.

$

16,005

 

$

7,154

 

$

68,812

 

$

48,155

One-time non-cash loss

 

—

 

 

—

 

 

—

 

 

1,193

One-time debt financing costs

 

1,981

 

 

1,972

 

 

1,981

 

 

2,103

Other non-recurring items

 

500

 

 

—

 

 

1,051

 

 

—

Adjustment for taxes*

 

517

 

 

533

 

 

632

 

 

890

Adjusted Net Income attributable to DXP Enterprises, Inc.

$

19,003

 

$

9,659

 

$

72,476

 

$

52,341

 

 

 

 

 

 

 

 

Weighted average common shares and common equivalent shares outstanding

 

 

 

 

 

 

 

Basic

 

16,177

 

 

18,422

 

 

16,870

 

 

18,631

Diluted

 

17,017

 

 

19,262

 

 

17,710

 

 

19,471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Share

$

0.94

 

$

0.37

 

$

3.89

 

$

2.47

Adjusted Diluted Earnings per Share

$

1.12

 

$

0.50

 

$

4.09

 

$

2.69

 

 

 

 

 

 

 

 

* Adjustment for taxes relates to the tax effects of the adjustments that we incorporated into non-GAAP measures in order to provide a more meaningful measure of Adjusted Net Income attributable to DXP Enterprises, Inc. Also, we have included an adjustment for the normalizing of tax credits and adjustments. The year-to-date effective tax rate of 20.8 percent was applied to the one-time charges associated with the disposal of DXP's variable interest entity and one-time debt financing costs.

2023 Sales Per Business Day Reconciliation

($ thousands, except Business days, unaudited)

 

 

Q1

Q2

Q3

Q4

Total Sales

$424

$428

$419

$407

Business Days

64

64

63

61

Sales Per Business Day

$6,629

$6,688

$6,655

$6,673

Organic Sales and Acquisition Sales

($ thousands, unaudited)

 

 

 

Twelve Months Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

Service Centers

 

$

1,145,082

 

$

1,009,356

 

$

816,496

Innovative Pumping Solutions

 

 

273,150

 

 

231,102

 

 

139,591

Supply Chain Services

 

 

260,368

 

 

240,374

 

 

157,834

Total DXP Sales

 

 

1,678,600

 

 

1,480,832

 

 

1,113,921

Acquisition Sales

 

 

33,078

 

 

41,527

 

 

147,472

Organic Sales

 

$

1,645,522

 

$

1,439,305

 

$

966,449

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240307539845/en/

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