DXP Enterprises Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2024

There are 4 speakers on the call.

Operator

you for standing by, and welcome to the DXP Enterprises First Quarter Earnings Call. All lines have been placed into listen only mode. After the speakers' remarks, there will be a question and answer session. And finally, a reminder that this conference is being recorded. Now I would like to turn the call over to Kent Yee, Chief Financial Officer.

Operator

Kent, please go ahead.

Speaker 1

Thank you. This is Kent Yee, and welcome to DXP's Q1 2024 conference call to discuss our results for the Q1 ending March 31, 2024. Joining me today is our Chairman and CEO, David Little. Before we get started, I want to remind you that today's call is being webcast and recorded and includes forward looking statements. Actual results may differ materially from those contemplated by these forward looking statements.

Speaker 1

A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis are contained in our SEC filings. However, DXP assumes no obligation to update that information as a result of new information or future events. During this call, we may present both GAAP and non GAAP financial measures. A reconciliation of GAAP to non GAAP measures is included in our earnings press release. The press release and an accompanying investor presentation are now available on our website at ir.dxpe.com.

Speaker 1

I will now turn the call over to David Little, our Chairman and CEO, to provide his thoughts and a summary of our Q1 performance and financial results.

Speaker 2

Good morning and thank you, Kent, and thanks to everyone for joining us today on our fiscal 2024 Q1 conference call. We are off to a great start in 2024. We remain highly focused on providing expertise our customers have come to expect from DXP and finding ways to help them manage their supply channel, increase their uptime, increase productivity, achieve their ESG objectives and successfully run their operations. Many customers, especially those in industrial, energy and utility space continue to see solid end market demand for their products. DXP remains committed to our overall focus of being customer driven experts to keep their operations running and their people safe.

Speaker 2

This consistent approach has fueled our financial results. 1st quarter adjusted EBITDA of $40,300,000 and adjusted diluted earnings per share of $0.74 was supported by sequential sales growth of 1.4%. Thanks to the efforts of all our DX people across the company, as we continue to build on positive financial results in fiscal 20 23 and driving further operational improvements while performing for our customers. I personally want to thank all our DXP stakeholders, in particular all our DXP people for their determination and hard work as we continue to grow and improve the business. We are encouraged by our results and remain focused on growing our business organically and inorganically in fiscal year 2024.

Speaker 2

I will begin today with some perspective on our Q1 and thoughts on the remainder of 2024. Kent will then take you through the key financial details after my remarks. After his prepared comments, we will open for Q and A. Overall, we are pleased with our Q1 results. Our first quarter highlights good execution and a number of normalized trends across DXP with a lot of effort now focused on capturing additional market share versus managing and working through inflation.

Speaker 2

We also experienced inorganic growth by continued execution of our acquisition strategy to accelerate our end market diversification efforts. We closed 3 great acquisitions in the Q1, including the addition of an industrial and seal company, Proseal, and 2 additional DXP Water Acquisitions, Hensey Mechanical Sales and CAPI and Associates. To our new DXPeople, welcome to DXP and it's great to have you as a part of DXP. That said, we are building more resilient, diversified business that can generate solid performance in uncertain economic conditions. And as we discussed last year, we believe you're seeing and continue to see evidence of these efforts in Q1.

Speaker 2

DXP's broad based industrial end markets, which is 75% of our business today, continues to show resilience primarily due to price increases and in DXPs case, continued growth in demand and market share. The ISM PMI Manufacturing Index, which gives us an indication of how DXP's broad industrial markets will perform, moved from 49.1 reading in January to a 50.3 reading in March. This trend is technically moving from contraction to rolling territory. But in April, we began to we began we went back to a reading of 49.2. We continue to believe in today's inflationary environment, the slight contraction is getting offset by price increases still moving through the supply channel.

Speaker 2

And in DXP's case, continued growth in demand because of the markets we serve and our growth strategies. We will continue to monitor as we move through 2024. Oil and gas, which is the remaining 25% of DXP, has shown consistent demand through 2023 and the early parts of 2024 and we anticipate growth in the future. Given the geopolitical circumstances and the overall relative strength in prices, most of our business in oil and gas is tied closer to actual production and increases in capital budgets. We continue to experience a pickup in sales activity in Q1, which reflects the increase in backlog we continue to see.

Speaker 2

Regarding broader demand, underlying trends remaining consistent with the 4th quarter and trends were the strongest in March as is typical with sales per business day going from $5,900,000 per day in January to $7,500,000 per day in March. Total DXP sales for Q1 increased 1 point 4% sequentially and are $412,600,000 or an average of 6 $600,000 per business day for the Q1. Thank you to the 2,920 DX people for your hard work and dedication. In terms of Q1 financial results, Innovative Pumping Solutions led the way, growing sales 3.2% sequentially and 21% year over year, followed by service centers growing 1.1% sequentially and then supply chain services also growing sales 1.1% sequentially. In terms of IPS, Innovative Plumbing Solutions, our Q1 average IPS energy backlog continues to stay ahead of all averages going back to 2015 with the exception of 2018 average.

Speaker 2

Our start in 2024 had meaningful bookings in the months of February March. And this signals to us that we should have strong energy product revenues over the next 9 to 15 months. We are continuing to get bookings. And as we mentioned earlier, we were likely in the front end of a good cycle on energy related project work that we look forward to as we move through 2024. Service centers keep essential customers running with MROP, maintenance, repair, operating, production, products and services necessary for the customer to stay in business.

Speaker 2

The diversity of the end markets and our MRO nature within service centers allows us to continue to experience balanced sales growth through the Q1. Regions that experienced sequential as well as year over year sales growth included South Atlantic, the North Central. Additionally, Canadian Rotating Equipment and Seal Division from a geographic and product perspective experienced sequential and year over year sales growth also. On notable regions that contributed during the quarter included Southwest, South Central and South Rockies. Supply chain services increased 1.1% sequentially and experienced a 7.6% decline year over year, primarily due to some facility closures with our customers as well as the streamlining and efficiency we brought to our new diversified chemical customer we added last year.

Speaker 2

We mentioned this in Q3 of last year and we will look for these we will look for customer additions as well as continue manage procurement products and managing inflation. But both year over year and sequential growth will flatten until we start ramping new customers. That said, demand for SCS services is increasing because of the proven technology and efficiencies they perform for all their individual customers. But the sales cycle can be protracted and as we look to our CSC leaders to add new customers as we move forward in 2024. DXP's overall gross profit margins for the quarter were 30%, a 55 basis point improvement over Q1 of 2023.

Speaker 2

A special thanks to our DXPeople who have stayed on top of supplier product increases and increased labor costs and overall efficiencies. Overall DXP produced EBITDA of $40,300,000 and EBITDA as apprentice percent of sales of 9.8%, which is below our stated goal of 10% plus. Regarding capital allocations, we continue to make strategic investments to fuel growth and diversify DXP through acquisitions, while opportunistically repurchasing shares. By balancing these two approaches or pursuing both, we are driving long term value for our shareholders. During this quarter, we purchased 326,000 shares amounting to $16,800,000 We produced over $24,100,000 in free cash flow, a solid start to the year and a good benchmark for our expectations going forward.

Speaker 2

Let me conclude my remarks by saying that I am encouraged with our continued sequential improvement in sales and profitability. I believe DXP is well positioned. We continue to make progress on our growth strategies and our commitments to customers is stronger than ever. We are complementing these efforts with a focus on improving efficiency while making strategic investments in the business. We are driving growth and improvements at DXP and we look forward to navigating and working through fiscal 2024.

Speaker 2

Finally, I would like to thank our DXPeople for a great quarter and a positive start to the beginning of 2024. We're excited for what is next. With that, I will now turn it back to Kent to review the financials in more

Speaker 1

Thank you, David, and thank you to everyone for joining us for our review of our Q1 2024 financial results. Q1 financial performance reflects DXP's ability to continue to successfully navigate through the market and execute and create value for all our stakeholders. We have been successful in transforming and diversifying DXP thus far, but we still have progress to make. We have been successful in navigating inflation pressures. We have been successful in building DXP into becoming the best solution for the industrial customers' needs.

Speaker 1

And we will be successful in continuing to grow sales and earnings and becoming a distributor dedicated to the highest quality of customer service through product increased 1.4% sequentially to $412,600,000 Acquisitions that have been with DXP for less than a year contributed $11,800,000 in sales during the quarter. Average daily sales for the Q1 were $6,600,000 per day versus $6,700,000 per day in Q4 2023 and $6,600,000 per day in Q1 2023. Adjusting for acquisitions, average daily sales were $6,400,000 per day for the Q1 of 2024 versus $6,300,000 per day during the Q1 of 2023. That said, the average daily sales trends during the quarter went from 5,900,000 per day in January to 7,500,000 dollars per day in March, reflecting a typical quarter end push as we closed out the Q1. In terms of our business segments, Innovative Pumping Solutions grew 3.2% sequentially and 21% year over year.

Speaker 1

This was followed by Service Centers growing 1.1% sequentially and sales declining 5.7% year over year. Supply chain services grew 1.1% sequentially and declined 7.6% year over year. In terms of our service centers, regions within our service center business segment, which experienced sequential as well as year over year sales growth include the South Atlantic and North Central. From a product and geographic perspective, our Canadian Rotating Equipment and Seal division also experienced sequential and year over year sales growth. Other notable regions that contributed during the quarter include the Southwest, South Central and South Rocky region.

Speaker 1

In terms of innovative pumping solutions, we continue to experience increases in the energy related backlog. Our Q1 energy related average backlog grew 2.7% over our Q4 average backlog and continues to be ahead of all our averages except 2018 19. The conclusion continues to remain that we are trending meaningfully above all notable sales levels and we are moving towards 2018 and 2019 levels based upon where our backlog stands today. We have been experiencing strong organic sales growth within IPS and we expect that to continue throughout 2024. We also see strength in our IPS Water backlog as it continues to grow due to a combination of organic and acquisition additions.

Speaker 1

Our IPS Water backlog grew 11.8% over our Q4 ending sequentially and a decline year over year, which we mentioned in our Q4 and Q3 earnings call, but is primarily due to some facility closures with existing customers as well as the streamlining and efficiencies we brought to our new customers. As David mentioned, we will look for new customer additions as we move through 2024. Turning to our gross margins. DXP's total gross margins were 30%, a 55 basis point improvement over Q1 2023. This improvement is attributed to consistency in margins within service centers and Innovative Pumping Solutions and the contribution from acquisitions and a higher overall relative gross margin versus our base DXP business.

Speaker 1

That said, from a segment mix sales contribution, Service Centers contributed 69.9%, Supply Chain Services 15% and Innovative Pumping Solutions was 15.1%. In terms of operating income, combined all three business segments increased 16 basis points sequentially and business segment operating income margins of $1,300,000 versus Q4 2023. This was primarily driven by improvements in operating income margins within Service Centers and Supply Chain Services. The improvement in service centers reflects the impact of acquisitions at a higher relative operating income margin. Total DXP operating income was $29,100,000 in Q1 twenty 24.

Speaker 1

Our SG and A for the quarter increased $5,100,000 from Q1 2023 and $1,900,000 from Q4 2023 to $94,800,000 I mean, excuse me, dollars 94,800,000 The increase reflects normal seasonal amounts in terms of payroll taxes, insurance and other administrative items as well as the growth in the business and associated incentive compensation and DXP investing in its people through merit and pay raises. SG and A as a percentage of sales increased 183 basis points year over year to 22.9% 22.96 percent of sales. Turning to EBITDA, Q1 2024 adjusted EBITDA was 40,300,000 dollars Adjusted EBITDA margins were 9.8%. It is worth noting that this is slightly below our recent 10% plus trends and reflects normal financial seasonality associated with higher payroll taxes, insurance and associated items. Additionally, it reflects some unique one time items associated with acquisitions and excess legal expense.

Speaker 1

We still continue to expect to benefit from the cost SG and A leverage we experienced as we grow sales and anticipate this will pick up as we move through fiscal 2024. In terms of EPS, our net income for Q1 was $11,300,000 Our earnings per diluted share for Q1 2024 was 0 point 67 dollars per share versus $0.95 per share last year. Conservatively adjusting for some of the one time items just previously mentioned, earnings per diluted share for Q1 twenty twenty four was $0.74 per share. Turning to the balance sheet and cash flow. In terms of working capital, our working capital decreased $3,200,000 from December to $268,900,000 As a percentage of sales, this amounted to 16.1%.

Speaker 1

That is 3 consecutive quarters of working capital creating cash for DXP or a source of cash of $38,100,000 and a decline as a percentage of sales. In terms of cash, we had $139,700,000 in cash on the balance sheet as of March 31. This is a decrease of $33,100,000 dollars 33,400,000 excuse me, compared to the end of Q4 and reflects the 3 acquisitions we closed during the quarter, Hennessy, CAPI and Proseal as well as $16,800,000 in share repurchases. In terms of CapEx, CapEx in the Q1 was $2,900,000 or a decrease of $2,300,000 compared to Q4 2023 and a $910,000 decrease versus Q1 of 2023. Last year CapEx increased versus 2022 and like this time last year we continue to expect CapEx to pick up in 2024 versus 2023.

Speaker 1

We are continuing to make investments in our business, software, our facilities and operations for our employees. As we move forward, we will continue to invest in the business as we focus on growth and we'll communicate these investments as appropriate. Turning to free cash flow. Free cash flow for the Q1 was $24,100,000 or an increase of 6.4% versus Q1 2023. This primarily reflects improvements in profitability along with a reduction in receivable days and continued management of our project work, which we have highlighted in the past as requiring investments in inventory, product and costs in excess of billings.

Speaker 1

That said, we continue to focus on tightly managing this aspect of our business from a cash flow perspective and look to align billings with the investment. Return on invested capital, our ROIC at the end of the Q1 was 36.3% and should continue to improve as we drive margins and operating leverage and improve our run rate EBITDA. As of March 31, our fixed charge coverage ratio was 2.3:one and our secured leverage ratio was 2.3:one with a covenant EBITDA for the last 12 months of 179,300,000 dollars Total debt outstanding on March 31 was $547,300,000 In terms of liquidity, as of the Q1, we were undrawn on our ABL with $3,100,000 in letters of credit with $131,900,000 of availability in liquidity of $271,600,000 including $139,700,000 in cash. DXP is poised to execute on our acquisition strategy when they anticipate closing another acquisition before quarter end. In terms of acquisitions, we closed on 3 acquisitions during the quarter, Hennessy Mechanical Sales, Kathy and Associates and ProSuit.

Speaker 1

We look forward to them fully reporting with us for the Q2 of 2024. Tennessee and Kathy provide DXP with leading platforms within the municipal, industrial water and wastewater industries and Proseal provides DXP with leading rotating equipment and seal provider in Michigan and Alaska. Welcome to DXP, Hennessy, CAPI and Proseal. DXP's acquisition pipeline continues to remain active and the market continues to present compelling opportunity. As we discussed during the Q4 earnings call, we anticipated closing 3 acquisitions before mid year and we have accomplished that goal as of Q1 and we have a letter of intent and plan on closing another acquisition before the Q2 ends bringing that to a total of 4 acquisitions by the end of the second quarter.

Speaker 1

That said, we remain comfortable with our ability to execute on our pipeline and valuations continue to remain reasonable. Regarding capital allocation, we repurchased or returned $16,800,000 to shareholders via share repurchases in Q1. As previously mentioned, we will continue to be opportunistic as we move through 2024 and support our shareholders as we move through cycles. In summary, our resilient and critical and MRO supply chain solutions combined with our project capabilities and exposure to the sustainable secular trends, including water and wastewater and various energy markets will drive our future sales and profitability. Heading into 2024, we refreshed our balance sheet, which has allowed us to continue to invest in the business both organically and through acquisitions, while also returning capital to shareholders.

Speaker 1

We are excited about the future. We will keep our eyes focused on those things we can control and what is ahead of us. We are excited because there is still substantial value embedded in DXP. We look forward with great confidence to a future of sustained growth and market performance. I will now turn the call over for questions.

Operator

Thank you. And as mentioned, the floor is now open for questions. Your first question comes from the line of Cole Couzens from Stephens. Please go ahead.

Speaker 3

Hey, guys. Thanks for taking my questions.

Speaker 1

Hey, Cole. How are you?

Speaker 3

Doing well. Just wanted to start here on ADS trends. If you mind, can you walk through kind of what you're seeing quarter to date in April early May on both an organic and an inorganic basis?

Speaker 1

What I'll do is, Cole, I'll walk you through kind of the quarter and through April. I don't have a view given we're only 9 days into May and a fair amount of our sales per business day usually come between the mid to the back end of the month. So I wouldn't want to forecast anything there. But and then I'll get to your second half of your question, which was kind of the trends maybe on an organic versus acquisition basis, if you will. Going back from January, sales per business day were $5,900,000 February was 6.3 dollars And then March, as I mentioned in the script, was $7,500,000 April was $6,800,000 per day.

Speaker 1

So April was up 2.7% year over year on a comparative basis. Excluding, if you will, some of our recent acquisitions, meaning Proseal, CAPI, Hennessey, Alliance, Board of Valve and Reardon, the trend on a sales per business day was $5,800,000 in January, dollars 6,200,000 in February, dollars 7,200,000 in March and then $6,400,000 in April.

Speaker 3

And how much of that is is that pretty reflective of typical seasonality in your view?

Speaker 1

Yes. I think what we saw, if you were to look at the timeframe last year, you always get a quarter end push in March. And so we experienced that again this year. And then as we jumped into April, right, we kind of trend above, I'll call it that Q1 average as we move into Q2. And so that's we're following that, not in the same quantums as last year, but we are still growing year over year from a sales per business day perspective.

Speaker 3

Okay, great. And do you mind reminding us how many selling days you're assuming here in 2Q and maybe for the remainder of the year as well?

Speaker 1

Yes. So we had 63 selling days obviously in Q1, which by the way was one less day than this time last year. So on a comparative basis, you do need to factor that in just in terms of the performance year over year. And then your second question just for Q2. Q2, we're forecasting 64 days for Q2 with 22 already happening in April.

Speaker 1

For the year, it's usually around 252 days. I'm literally put pen to pad, but it's usually the day usually the days usually fall out between 252 253.

Speaker 3

Okay. And then last one on revenue. I think it was down a little bit year over year. What are some of the underlying end markets or product categories that were softer here on a year over year basis? And then on a sequential basis, it seems like demand is broadly consistent with the Q1.

Speaker 3

But is there anything notable in any market or product category that's changed versus last quarter?

Speaker 1

Yes. And I don't know if David has any insights here, but from my perspective, kind of what we did see was typical. We do have project work, which we talk about pretty frequently in our Innovative Pumping Solutions segment. And so I think it's always hard to time absolutely when some of those jobs will shift. And once again, our backlog is pretty robust.

Speaker 1

So I think I don't know if it's necessarily end market driven is where I'm getting that is so much just some projects whether water, wastewater, call it, our energy related didn't quite shift at year end. And so some of those will happen. Now once again, not to get into details, but some of that's on percentage of completion and some of that is just the project work hasn't started. But I don't know if David has any insights there.

Speaker 2

Well, there's not any deviation around product categories. In other words, pumps were consistent, safety was consistent, metalworking actually up a little bit, but it was pretty much pretty consistent across the board on product category.

Speaker 3

Okay, that's helpful. And then across each of the three segments, as we kind of move into 2Q here, just directionally, kind of how are you guys expecting revenue to progress on a sequential basis from here?

Speaker 2

So just quickly, it's almost every quarter that the first quarter and then the second quarter is better than the Q1 and the third quarter is better than the second quarter. So from a that almost happens invariably unless there's a big swing in days or something happens every time. So I don't know if that's totally your question, but I do want to point that out.

Speaker 1

Yes. No, and I would call I was just going to say I agree with David. We formally, obviously, as everyone knows, we don't necessarily give guidance. That said, I think the trends we see, right, if you go back to the sales per business day, January was up year over year 4.5%, February was up 1.9% year over year. March was technically down slightly 5%, but then April we're back 2.7 I guess the point being is I think if you kind of blend that a little bit together, what you're seeing is that on a year over year basis, we're trending in the I'll call it in the 1.5% to 2% range from an actual performance basis.

Speaker 1

And I think all things being equal, as we look to the year, we don't see any big shifts. Once again, we're acquisitive. That's always the comment. We're in the business of buying businesses and growing DXP, but

Speaker 2

we can't time those things and we announce those when appropriate. A little color on what I said, again, took a broader picture. But on what I said is part of that's just simply our manufacturers trying to ship everything towards the end of the quarter because we're all so disciplined around quarters. And so everybody is shipping things. And so we actually do quite a bit of business in the last two days of a month and then the last two days of the quarter gets a little crazy too.

Speaker 2

So I'll just give you a reason for it.

Speaker 3

It. Yes, that's helpful. And then just in terms of EBITDA margin, I know you guys kind of acknowledge this, but 10% to the goal in our view, you're kind of in that range in Q1. And I know there's some seasonality impacting it in Q1. But going forward here in Q2, do you guys think that 10% level is attainable?

Speaker 3

Or should it move higher or lower for any reason?

Speaker 1

Yes, we definitely think the 10% call is attainable. You hit it spot on. There was some seasonality and just some one time unique costs, which we conservatively and I'd emphasize conservatively included as add back to adjusted EBITDA and that put us at 9.8%. That said, as we move into Q2, Q3 and Q4, 10% definitely attainable given our mix today. And we would see that materializing.

Speaker 3

And to expand on that a little bit, you just said given your mix, is most of that going to be on the gross margin line? I think you've seen some good improvement there. Or do you think you can try to drive leverage as well?

Speaker 1

Yes. I mean, hey, we've had consistent 30% plus gross margins here more recently and that's definitely contributed to the lift in EBITDA margins, but we also get the operating leverage as we grow the business and grow sales per my comments in my script. But and I think we'll continue to see that once again. We expect to continue to get some sales growth and with that you get some operating leverage out of the system. The wins that are always challenging for everybody not unique to us is there's not just inflation.

Speaker 1

Inflation from a product perspective is good for DXP. But from a people perspective, we've got to work through that as merit and pay raises come through the system. And we've done a good job thus far of managing that. But those pressures have been pretty consistent over the last 6 to 12 to 9 months very easily.

Speaker 2

I would add to that a little bit. There's a big push to get incremental gross profit margins up. And so not only to pass on inflation and cost of product going up, but actually to get a little more for ourselves because our people cost is going up and etcetera, things are going up. So we're pushing value. And then consistent with that on capital allocation is we're doing our acquisitions in air compressors and water historic have higher gross profit margins and higher EBITDA margins.

Speaker 2

So that's healthy.

Speaker 3

Got it. And we'll I'll come back to capital allocation in a little bit. But just higher level too, I think you guys have more recently last quarter and I think this quarter in the press release, you guys talked about some growth initiatives here. Can you walk through what exactly those are and maybe what anywhere in? And if everything goes right and you can execute the playbook, kind of what you hope to achieve by executing that?

Speaker 2

Well, that's an interesting question. I'm not 100% sure I want to tell the world what I'm doing to grow sales, to be quite honest. And so we don't talk about that. I think some things that are just obvious, we'll talk about a little bit and that's a team of people that are trying to capture national accounts on the rotating equipment side of our business. Every motion, AIT, people like that do national accounts on bearings and power transmission.

Speaker 2

So we're in that process of doing that from a pump or rotating equipment scenario. That's working for us. Sometimes it doesn't always lead to a 100% national account, but in every case, it's creating incremental business for us. We're also again, I'm not going to tell you what, but we're adding product and product capabilities And that's incrementally working and it's something that is consistent with the same customer, the same product, it's an attachment to that product. And so it's being readily accepted by our existing sales force.

Speaker 2

And so there's not really a lot of expense added to doing it. And so that is incrementally helping us. And then we're all the time supply chain services is a really long sale, but when you get one, it's $50,000,000 or $60,000,000 So So it's a large sale. So they don't happen every day. It's a very lumpy business in that sense.

Speaker 2

But so we're always pushing integrated supply through our supply chain service offering and we've had a little garage sale. We've got a lot of opportunities on the table and we hope to get some of those closed and if they are, they're pretty significant. And then we're just always fighting the B2B channel and then a lot of money on content development, etcetera, don't classify ourselves as an e commerce company, or by productivity company designed to help make it easier for our customers to do business with us. So that's always in the works. Getting something

Speaker 1

No, I mean, yes, the only thing I'd add there, Cole, is then obviously we complement that organic growth with acquisitions. And so, I think when it comes to answering your question around our growth initiatives, We do think for strategic reasons kind of here, we disclose less, the world's gotten copycat ish is the best way to put it. And so we strategically take the position of, yes, articulating that we're always focused on growth. We view ourselves as a growth company. We always have organic plans that people know DXP, but we also do that through acquisitions.

Speaker 1

But the absolute disclosure given other strategics, private equity, etcetera, I think David hit it right on the nose.

Speaker 3

Okay, great. That's good color. And completely understand that. And lastly, just to circle up on capital allocation. You all have done a good job executing on some deals here and it sounds like there's more in the pipeline.

Speaker 3

Is there any more color you can provide kind of on what those deals look like? I know you mentioned earlier in the call that kind of some of your diversification efforts have reaped a lot of benefits. So just any color in terms of size or end market would be appreciated.

Speaker 1

Yes. So I'll start with the latter. From end market perspective, everyone knows we've had a real push on water wastewater. So I'll call it really very likely towards more Q3, Q4, we'll have 1 to 2 on the water wastewater side continue to close. And then kind of one of our more recent themes is we found some nice, I'll call it down the fairway rotating equipment focused industrial type distributor.

Speaker 1

So the one likely to close before the end of Q2, it follows in that path. It will be just a nice tuck in acquisition. We probably won't have a lot of fanfare around that one just because it's very similar to like a Proseal, just in terms of relative size, closer to our average acquisition size of $26,000,000 to $35,000,000 in revenue, but they have very nice profitability. So they've got 10% plus EBITDA margins and so we'll just kind of move forward with that. And people will see start to see that early in our results in Q2, but then as we move into Q3 and Q4.

Speaker 1

So that's what I would say just in terms of kind of the acquisition focus and what people will see over the short to medium term.

Operator

And this does close out our Q and A session. I would like to thank our speakers for today's presentation and thank you all for joining us. This concludes today's conference call. Enjoy the rest of your day. You may now disconnect.

Powered by Quartr
Earnings Conference Call
DXP Enterprises Q1 2024
00:00 / 00:00