DXP Enterprises Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 8, 2025
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Operator

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the DXP Enterprises First Quarter twenty twenty five Earnings Release. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. I would now like to turn the conference over to Kent Yee, Chief Financial Officer. Kent, you may begin.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

Thank you, Krista. This is Kent Yee, and welcome to DXP's Q1 twenty twenty five conference call to discuss our results for the first quarter ending 03/31/2025. 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.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

A detailed discussion of the many factors that we believe may have a material effect on our business and on an ongoing basis are contained in our SEC filings. However, DXP assumes no obligation to update that information because 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.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

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

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

Good morning, and thank you, Kent, and thank you to everyone for joining us today on our fiscal '20 '20 '5 first quarter conference call. Thank you for joining us this morning, thank you to all the DX people for your hard work. We are off to a great start in 2025. We remain highly focused on providing the expertise our customers have come to expect from DXP and finding ways to help them manage their supply channel, increase their uptime, increase productivity and successfully run their business. DXP remains committed to our overall focus on being customer driven experts that keep their operations running and their people safe.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

This consistent approach has fueled our financial results. First quarter adjusted EBITDA of $52,500,000 and adjusted diluted earnings per share of $1.26 was supported by year over year sales growth of 15.5% and sequential sales growth of 1.2%. Thanks to the efforts of all our DX people across the company, we continue to build on the positive financial results of fiscal twenty twenty four, driving further operational improvements while performing for our customers. I personally want to thank all our DXP stakeholders, in particular, all our DX people for their determination and hard work as we continue to grow and improve the business. We remain focused on building trust and making a difference with our customers and our communities with a customer first approach.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

We are encouraged by our results and remain focused on growing our business organically and inorganically in fiscal year twenty twenty five. I will begin today with some perspective on our first quarter and thoughts on the remainder of 2025. Kent will then take you through the key financial details after my remarks. And after his prepared comments, we will open for Q and A. Overall, we are pleased with our fiscal quarter results.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

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. During the first quarter of twenty twenty five, we experienced organic growth of 11.1 year over year as well as acquisitions contributing $31,100,000 in sales with continued execution of our acquisition strategy to accelerate our end market diversification efforts. We closed one acquisition in the first quarter, Arroyo Process Equipment. To our new DX people, welcome to DXP, and it is great to have you as a part of our DXP family. That said, we're building our building a more resilient diversified business that can generate solid performance in uncertain markets and as we discussed last year, we believe you're seeing the continued evidence of these efforts in Q1 as micro volatility and uncertainty begins to rise specifically around tariffs, which I will address later in on my comments.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

DXP's broad based industrial end market, which are 77% of our business today, continue to show resilience primarily due to the diversification of end markets and in DXP's case continued growth in demand or market share gains. ISM and PMI manufacturing index which has which gives us an indication of how DXP's broad industrial market will perform, moved from 50.9 reading in January to a 49 reading in March. This trend is technically moving from growth to slight contraction, especially with a reading in April of 48.7. That said, we continue to believe in today's inflationary environment that this slight contraction will get us will get offset by price increases moving through the supply channel. In DXP's case, demand in line with expected historical average growth.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

We continue to monitor as we move through 2025. Oil and gas, which is the remaining 23% of DXP has shown consistent demand through 2024 and the early parts of 2025. We anticipate some growth primarily driven by large projects which we mentioned back in 2024. Given the geopolitical circumstances and the overall relative volatility in prices, most of our business, which is oil and gas, is tied closer to actual production or increase in capital budgets. We continue to experience pickup in sales activity in Q1, which reflects an increase in the backlog we continue to see.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

Regarding the broader demand, underlying trends remain consistent in the first quarter and trends were the strongest in March. As is typical with our sales per business day going from 6,900,000 per day in January to $8,100,000 per day in March. Total DXP sales Q1 increased 15.5% year over year and 1.2% sequentially or were $476,600,000 or an average of 67,600,000 per business day for the first quarter. Thank you to the 3,138 DX people for your hard work and dedication. In terms of Q1 financial results, Innovative Pumping Solutions led the way growing sales 38.5% year over year followed by Service Centers growing 13.4% year over year and then supply chain services also grew 2.1% year over year.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

In terms of IPS or Innovative Pumping Solutions, both our energy and DXP Water continued to perform. Our Energy business performed in line with previous year's performance, starting off the year slowly from a project perspective and is anticipated to ramp as we approach Q2 through Q4. Our DXP water platform continues to grow sequentially with Q1 of twenty twenty five coming in as the tenth consecutive quarter of sequential sales growth. Our Q1 average IPS energy backlog continues to stay ahead of all averages going back to 2015 and is at an all time high. Our start to 2025 had meaningful bookings in the months of January and March, and this continues to signal that we should have strong energy project revenue over the next nine to fifteen months.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

We are continuing to get bookings from both energy and water project work, and we feel we are comfortable delivering strong sales performance in 2025. Service Centers keeps essential customers running with MROP, maintenance, repair, operating and production products and services necessary for the customer to stay in business. The diversity of end markets and our MRO nature within Service Centers allows us to continue to experience balanced sales growth through the first quarter and achieve a new sales watermark for our Service Centers segment. Regions that experienced notable sequential as well as year over year sales growth included Alaska, North Central, Texas Gulf Coast. Additionally, our air compressor and metalworking and Canadian rotating equipment experienced sequential and year over year sales growth from a product and geographic perspective.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

Supply chain services increased 1.3 sequentially and grew 2.1% year over year. We want to always remind everyone that SCS goal is always to make our customers more efficient and streamline their spend. That said, demand for SCS services is increasing because of the proven technology and efficiency they perform for all of their industrial customers. But the sales cycle can be protracted as we look to our SCS leaders to add new customers as we move forward in 2025. Regarding capital allocation, we continue to make strategic investments to fuel and diversify DXP through acquisitions and organically while opportunistically purchasing shares.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

By balancing these two approaches, our pursuing both, we are driving long term value for our shareholders. In today's environment, we will remain consistent with these goals with a mind towards preserving DXP's liquidity and strength regardless of the market condition. Let me conclude my remarks by saying DXP is well positioned. We continue to make progress with our growth strategy and our commitments to customers are stronger than ever. We are complementing these efforts with a focus on improving efficiencies while making strategic investments in the business.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

We are driving growth and improvements at DXP and we look forward to navigating and working through fiscal twenty twenty five. While the external environment remains unpredictable, we are working closely with our suppliers and channel partners to understand the full impact that announced tariffs will have on our business. It is clear to DXP that there will be winners and losers. The investment we have made in the past and understanding of our key product categories and other information, pricing knowledge positions DXP to effectively navigate the tariff situation. The key question here will be what happens to demand because of higher tariffs?

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

Question mark. As we move forward, we remain committed to ensuring transparency with our customers, offering market relevant pricing while targeting price cost neutrality as tariffs evolve. Distributors benefited from inflationary environments and depending on the depth and duration of the tariff uncertainty, it may play out that way, but the situation remains highly unpredictable and the impacts on demand are unknown at this time. In any case, we expect to play a key role in helping our customers navigate these current challenges, and I am confident in our team's ability to remain agile in this dynamic environment. We are appreciative of our end markets and product diversification as we recognize that different markets will be more choppy than others as they digest this policy shift.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

But we remain cautiously optimistic that both our customer base and our relationships with them will be better positioned in the long run once we get a more complete understanding of where things will settle out in Washington. Finally, I would like to thank our DX people for a great quarter and a positive start to the beginning of twenty twenty five. We are excited for what is next. Thanks. With that, I will now turn it over to Ken to review the financial results in more detail.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

Thank you, David, and thank you to everyone for joining us for our review of our first quarter twenty twenty five financial results. Q1 financial performance reflects DXP's ability to continually to successfully navigate through the market and execute and create value for our stakeholders. We will also be successful in navigating the current market volatility surrounding tariffs and trade. As it pertains to our first quarter, DXP's first quarter financial results reflect record service center sales performance establishing a new high watermark at $327,000,000 remarkable year over year sales growth within IPS growing 38.5% year over year driven by strength within DXP Water, continued gross margin strength and stability with a year over year improvement of 151 basis points to 31.5%, continued execution of our acquisition strategy completing the purchase of Arroyo process equipment and consistent operating leverage leading to sustained adjusted EBITDA margins north of our 10% plus goal. Total sales for the first quarter increased 15.5% year over year and 1.2% sequentially to 476,600,000 Acquisitions that have been with DXP for less than a year contributed $31,100,000 in sales during the quarter.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

Average daily sales for the first quarter were $7,600,000 per day versus $7,600,000 per day in Q4 of twenty twenty four and 6,600,000.0 per day in Q1 of twenty twenty four. Adjusting for acquisitions, average daily sales were 7,100,000.0 per day for the first quarter of twenty twenty five versus 6,400,000.0 per day during the first quarter of twenty twenty four. That said, the average daily sales trend during the quarter went from 6,800,000.0 per day in January to 8,100,000.0 per day in March, reflecting a typical quarter end push as we closed out the first quarter. In terms of our business segments and on a year over year basis, innovative pumping solutions grew 38.5%. This was followed by service centers growing 13.4% and supply chain services growing 2.1% year over year.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

In terms of our service centers, sales grew 5.2% sequentially and 13.4% year over year as previously mentioned. Regions that experienced sequential as well as year over year sales growth include Alaska, North Central and the Texas Gulf Coast. From a product and geographic perspective, our air compressor, Canadian rotating equipment and metalworking divisions also have experienced sequential and year over year sales growth. From a segment operating income perspective, we have had four consecutive quarters of 14% or greater and we will look for this to continue as we still believe there are regions that can enhance or become more consistent in their operating income margins. In terms of innovative pumping solutions, we continue to experience increases in both the energy and DXP water backlog.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

Our native or DXP energy business continues to get bookings and is following the normal cadence of starting the year slowly with an anticipated improvement or stronger sales performance in Q2 through Q4. Our Q1 energy related average backlog grew 5.5% over our Q4 average backlog and continues to be ahead of all our averages. That said, we do have a large project in our backlog. Excluding this project, backlog is up 7.6% from Q4. The conclusion continues to remain that we are trending meaningfully above all notable sales levels and our backlog continues to grow even excluding the impacts of unique or large projects.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

Our DXP water platform experienced our tenth consecutive quarter of sequential sales growth and we look for this to continue as we move through 2025. We also see strength in our IPS water backlog as it continues to grow due to a combination of organic and acquisition additions. Supply chain services performance primarily reflects a 1.3% increase sequentially and grew 2.1% year over year. As David mentioned, we will look for new customer additions as we move through 2025. Demand for SCS services is increasing as customers look for efficiency and we anticipate some nice wins starting to show in 2025.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

Turning to our gross margins, DXP's total gross margins were 31.5%, a 151 basis point improvement over Q1 of twenty twenty four. This improvement is attributed to consistency in margins within service centers and innovative pumping solutions and the contribution from acquisitions at a higher overall relative gross margin versus our base DXP business. That said from a segment mix sales contribution, service centers contributed 68.6%, supply chain services 13.3% and innovative pumping solutions was 18.1%, which continues to elevate DXP's gross margins. In terms of operating income combined, all three business segments increased 111 basis points year over year and six basis points sequentially in the business segment operating income margins. This was driven by improvements in operating income margins across all three segments year over year and sequentially by improvements within SCS and service centers.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

Total DXP operating income was $40,500,000 in Q1 of twenty twenty five. Our SG and A for the quarter increased $15,000,000 from Q1 twenty twenty four and $05,000,000 from Q4 of twenty twenty four to $109,800,000 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. SG and A as a percentage of sales increased seven basis points year over year to 23% of sales. Turning to EBITDA, Q1 twenty twenty five adjusted EBITDA was $52,500,000 Adjusted EBITDA margins were 11%. It is worth noting that this is slightly above our recent 10% plus trends amidst our normal financial seasonality associated with higher payroll taxes, insurance and associated items.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

Additionally, it reflects some unique one time items associated with acquisitions and excess legal expenses. We continue to expect to benefit from the fixed cost SG and A leverage we experienced as we grow sales and anticipate there is still an upside as we move through fiscal twenty twenty five. In terms of EPS, our net income for Q1 was $20,600,000 dollars Our earnings per diluted share for Q1 twenty twenty five was $1.25 per share versus $0.67 per share last year. Conservatively adjusting for some of the one time items, earnings per diluted share for Q1 twenty twenty five was $1.26 per share. Turning to the balance sheet and cash flow.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

In terms of working capital, our working capital increased 34,300,000 from December to 325,300,000.0. As a percentage of sales, this amounted to 17.4%. This is a notable uptick from where we have been but remains around our historical averages. This reflects an uptick in receivables, which I will touch on later, and a 15,500,000.0 increase in other current liabilities. In terms of cash, we had a hundred and 14,300,000.0 in cash on the balance sheet as of March 31.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

This is a decrease of 34,000,000 compared to the end of q four and reflects the acquisition of Arroyo, investments in facilities and equipment, and software and tax payments that were deferred in 2024. In terms of CapEx, CapEx in the first quarter was $19,900,000 or an increase of $10,500,000 compared to Q4 twenty twenty four. This reflects the purchase of a facility in conjunction with the Arroyo purchase, the continued investment in our facilities and equipment and overall improvements and investment in software and other equipment. As we have discussed, we have continued to make meaningful investments in the business as we grow and should begin to see this taper as we approach the back half of 2025. That said, a majority of our CapEx is growth oriented and controllable.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

These investments should drive improvement and efficiency on behalf of our DXP employees. Excuse me. Turning to free cash flow. Cash flow from operations was 3,000,000 in q one of this year versus q one of last year was 27,000,000. This is due to growth in accounts receivable as well as our DSO days going from sixty eight point seven to seventy days along with the growth of the business compared to a year ago.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

This also includes tax tax payments which were deferred from q two of last year due to storms that were paid in q one of this year. Adjusting for these one time or unique payments, cash flow from operating activities would have been 21,900,000.0 or in line with q one twenty twenty four. That said, we continue investing in projects and experienced the uptick in receivables during q one, which I previously mentioned. As we move through 2025, this should balance out and we should turn free cash flow positive. We continue to focus on tightly managing this aspect of our business from a cash flow perspective and look to align billings with the investments.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

As a reminder, we typically have negative cash flow from operations in the first quarter and positive cash flow from operations in the second through the fourth quarter. Return on invested capital, our ROIC at the end of the first quarter was 36.8% and is consistent with DXP driving margins, operating leverage and improving our run rate EBITDA. As of March 31, our fixed charge coverage secured leverage ratio was 2.5 to one with a covenant EBITDA for the last twelve months of 212,800,000.0. Total debt outstanding on March 31 was 647,300,000.0. In terms of liquidity, as of the first quarter, we were undrawn on our ABL with 26,100,000.0 in letters of credits with a hundred and 8,900,000.0 in availability and liquidity of 223,200,000.0, including a hundred and 14,300,000.0 in cash.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

DXP is poised to execute our acquisition strategy when anticipating closing another acquisition before the quarter end. In terms of acquisitions, we closed one acquisition during the quarter, Arroyo Process and Equipment. We look forward to them fully reporting with us for the second quarter of twenty twenty five. Arroyo provides DXP with a leading rotating equipment product and service provider in Florida. Welcome to DXP Arroyo.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

DXP's acquisition pipeline continues to remain active and the market continues to present compelling opportunities. As we discussed during during the q four earnings call, we anticipate closing two to three acquisitions before mid year and we have closed two deals year to date and we have another two under letter of intent and plan on closing another acquisition before the second quarter ends, bringing that to a total of three acquisitions by the end of the second quarter. That said, we are stressing sustainable performance with our acquisitions and remain comfortable with our ability to execute on our pipeline. In summary, our resilient and critical MRO and supply chain solutions combined with our project capabilities and exposure to the sustainable secular trends, including water and wastewater in various energy markets, would drive our future sales and profitability. We are excited about the future.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

We look forward with great confidence to a future sustained growth and market outperformance. I will now turn the call over for questions.

Operator

Thank you. We will now begin the question and answer Your first question comes from Zach Marriott with Stephens. Please go ahead.

Zach Marriott
Research Associate at Stephens Inc

Good morning and thank you for taking my questions.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

Good morning, Zach. Good morning, Zach.

Zach Marriott
Research Associate at Stephens Inc

Is there any color you can share on daily sales trends by month for both Q1 and Q2 thus far?

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

Yeah. Absolutely, Zach. And as I typically do, I'll I'll back up to q four of last year, and then I'll bring it forward through, April is what we have at this point, a flash of April. So in October, we were at 7,200,000 per day. November, seven point five.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

December, eight point one. January, six point eight. February, seven point eight. March, eight point one. And then April '7 point '8 million per day.

Zach Marriott
Research Associate at Stephens Inc

Great. Much appreciated there. And then is there anything that should drive a meaningful margin difference whether up or down when comparing q one with q two? No. No.

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

You know, once again, I

Kent Yee
SVP & Chief Financial Officer at DXP Enterprises Inc

mean, you know, once again, our mix has has shifted, Zach, you know, call it really over the last year or so. But, you know, as it pertains to q one versus q two, there wouldn't be anything substantive that would cause a a a differ from where we're at today.

Zach Marriott
Research Associate at Stephens Inc

Makes sense. And then just one more quick one is, are you seeing any signs of things slowing down with all the tariff and macro uncertainty?

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

Well, that's the multimillion dollar question. You know, the the the tariffs, we're working really hard to take care of our customers and to minimize tariffs and minimize price increases as much as we can. And and and because we're a, in my opinion, a manufacturer of pumps and a distributor of major brand pumps, we have a lot of knowledge around that area. And so we when we also understand where somebody might be wanting to charge a whole bunch on on tariffs, and so we can lead them to other alternate products, etcetera. And so we're always trying to take care of them.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

But at the end of the day, we're we're not in the business of eating tariffs. So we're we're, you know, we're passing them all on. That said, your question, it's a good one, is, well, do we have an effect on on demand? And at this point, we would have to absolutely say no. We're not seeing any, effect on demand.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

Maybe maybe a little more effect of stalling a little bit around the fact is where's Washington gonna end up? You know, it's well, I think we're all expecting to have tariffs. 45% tariffs sounds a little excessive. So I I think people are maybe stalling a bit. But we haven't seen any projects canceled or or our activity is good, our backlog is good, our bookings are good.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

So at this point, we're not feeling much.

Zach Marriott
Research Associate at Stephens Inc

Great. Thanks for the color, and I'll turn it back.

Operator

We have no further questions at this time. David Little, I'll

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

turn it Yeah. Let me let me ask Zach if he wants to rethink and ask some We only have one person covering us. So, Zach, do have anything else you wanna fire away at? We don't wanna cut you short.

Operator

Zach's line is now open.

Zach Marriott
Research Associate at Stephens Inc

I'm all good. Appreciate it.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

Okay. Well, I will close. And and thank you. I think it's I think I'd like to make a few additional points. One one is, you know, DXP manufactures pumps, and, we have parts made, really all over the all over the country.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

So we understand tariffs specifically because of that. And then and then we represent major brands of other additional pumps. And so we understand the complexity of their supply channel and and where they might be able to just, say, move tariffs from China to India or Mexico or Korea, where wherever wherever they need to do. So so we kinda understand what everybody's going through to to minimize tariffs to the best of their abilities. And so I I think we're really good at helping our customers to minimize the the cost of of all this.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

And and we're and we're also good at calling people out on the fact that maybe they're just using tariffs as an excuse to have a a big price increase. So I I wanna make sure that y'all understand that. And and then I think that it's important that we that we sort of understand the fact that DXP is operating like a growth company. We don't we don't do acquisitions just for the fun of it. We do acquisitions to diversify our markets, to grow our geography, to grow our capabilities, and we do acquisitions to grow.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

These acquisitions are not random. They're they're they go through a lot of scrutiny to make sure they're gonna fit with what our customers base wants to, have us participate in and value adds that we can bring to them, etcetera. And then and then around those, also, let me say that we're we're pleased as we diversified our markets by focusing acquisitions that are have just not been oil and gas as an example, but also that they're highly profitable. So our our 10% organic growth and the strategies around that and the fact that we used to do 10%. Ten % EBITDA used to be our our gold, and now we're doing 11.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

So now I have a ten, eleven, and 10 with 10 being the inorganic piece of that gold is is pretty significant for us. And so we don't see a reason not to maintain 11 and possibly grow that over time as we do. And so there's also a attitude around, I call them bets, but their their investments, where the regions and and all the way down to to the service center level, are encouraged to make make bets to grow the business. We're not we're not trying to just sit here and and and be good at what we do and let the economy dictate how we do. So, that's important to us.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

And, and so you you might see from time to time where we took all our free cash flow and spent it doing something. And, so that that shouldn't be an unusual event. We're not we're not trying to go backwards in distribution. As you know, if you if your sales are declining and everything, well, then receivables go down, inventory goes down, etcetera, and you generate a lot of cash flow. But eventually, you go out of business too.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

But, that's that's not our goal, and we're, we're trying to to grow the business. So and then lastly, I meant to say this earlier was we don't really have any fixed pricing agreements. So we don't have anything that dictates that we're gonna eat margins. So we're not we're not here to eat margin. We're here to help our customers and we're going to, but we're not here to lower our asked the question, back about about if our margin's gonna go up or down.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

Well, I I don't we're not. And, because the last resort is we're gonna pass those price increases on, and we feel justified to do so because of, a, we didn't create tariffs, but but, b, we're trying everything we could to get them a product or provide a service set in a cost effective way. So with that, I'd like to continue to thank all our DXP people that have heard that speech before as and as they execute that. So, anyway, thanks a bunch, and and we really really had a great start of the year. And we have no reason to believe at this point that anything is going be different.

David Little
Chairman of the Board, President & CEO at DXP Enterprises Inc

We're going to continue to grow. So thank you very much.

Operator

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Analysts
    • Kent Yee
      SVP & Chief Financial Officer at DXP Enterprises Inc
    • David Little
      Chairman of the Board, President & CEO at DXP Enterprises Inc
    • Zach Marriott
      Research Associate at Stephens Inc
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Key Takeaways

  • DXP delivered 15.5% year-over-year sales growth ($476.6 M) with Q1 adjusted EBITDA of $52.5 M and adjusted EPS of $1.26, driven by 11.1% organic growth and $31.1 M from acquisitions.
  • DXP closed the acquisition of Arroyo Process Equipment in Q1 as part of its ongoing strategy to diversify end markets, and expects to complete three acquisitions by the end of Q2.
  • Innovative Pumping Solutions achieved 38.5% year-over-year sales growth and its energy and water backlog is at an all-time high, signaling strong project revenues over the next 9–15 months.
  • The Service Centers segment set a new sales watermark ($327 M) with broad MRO offerings fueling growth across key regions and product lines, while Supply Chain Services saw steady year-over-year growth as demand for efficiency solutions increases.
  • Amid announced tariffs, DXP is leveraging its supply-chain expertise to maintain price-cost neutrality and transparency with customers, noting no material impact on demand to date but monitoring macro uncertainty closely.
AI Generated. May Contain Errors.
Earnings Conference Call
DXP Enterprises Q1 2025
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