$289.5 million in sales, 31.5% year-over-year increase
GAAP diluted EPS of $0.36
$63.1 million in cash and cash equivalents
Free cash flow for the quarter of $5.2 million
Closed the acquisition of Process Machinery and Premier Water

DXP Enterprises, Inc. (NASDAQ:DXPE) today announced financial results for the third quarter ended September 30, 2021. The following are results for the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020 and sequentially for the three months ended June 30, 2021, where appropriate. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.

Third Quarter 2021 financial highlights:

Sales increased 31.5 percent to $289.5 million, compared to $220.2 million for the third quarter of 2020 and $285.7 million for the second quarter of 2021.
Earnings per diluted share for the third quarter was $0.36 based upon 19.6 million diluted shares, compared to a loss of $1.95 per share in the third quarter of September 30, 2020, based on 17.8 million diluted shares.
Net income for the third quarter was $7.1 million, compared to a loss of $34.7 million for the prior-year period.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) for the third quarter of 2021 was $18.8 million compared to $22.6 million for the second quarter of 2021 and $13.7 million for the third quarter of 2020.
Cash flow from operations was $6.6 million, compared to $7.6 million for the second quarter of 2021.
Free cash flow (cash flow from operations less capital expenditures) for the third quarter of 2021 was $5.2 million, compared to $6.8 million in the second quarter of 2021.

David R. Little, Chairman and CEO commented, "We are pleased to report our third quarter financial results. DXP's third quarter sales included year-over-year increases across all three business segments. Total DXP sales increased sequentially and were essentially flat from a sales per business day standpoint compared to Q2 with continued improvement in gross margins. Service Centers led the way with strong performance across all comparatives. Our improved momentum continued in the third quarter as our DXPeople worked together to manage through supply chain challenges and get in front of rising product costs as we rebound from COVID. With strong contributions from our acquisitions, we delivered another quarter of sales and gross margin improvement.

DXP's third quarter 2021 sales were $289.5 million, or a 31.5 percent increase year-over-year and an 1.3 percent increase over the second quarter. During the third quarter, sales were $212.5 million for Service Centers, $40.5 million for Supply Chain Services and $36.4 million for Innovative Pumping Solutions. We experienced our first sequential quarter end increase in 10 quarters within the IPS backlog while experiencing a rising oil and gas price environment. Most of our customers and the markets we serve continue to show improvement. We remain encouraged by the sequential increases despite the continued choppiness associated with COVID-19 and the related supply chain issues. We added two acquisitions during the quarter and have more active deals that we expect to close moving into fiscal year 2022. With ongoing positive market trends, a strong acquisition pipeline and steady improvement in our execution and capabilities, we are confident in our ability to deliver strong results to our stakeholders during the remainder of 2021 and beyond. Thank you to all our customers and DXPeople."

Kent Yee, CFO, added, "First, I want to thank McConnell & Jones for working with us to get our third quarter done in a timely manner and putting us in a position to follow suit with our year-end audit. With our filing of our third quarter results, we are now current on all filings. Our third quarter year-over-year sales growth of 31.5 percent and gross margin improvement were great to see. Our financial results reflect our continued focus on our customers and improving market conditions. Sales per business day for the quarter were essentially flat to Q2, going from $4.57 million per day to $4.52 million per day for Q3 and were $4.65 and $4.63 million per day, respectively for the months of October and November. The sequential increase in the IPS backlog was great to see and we anticipate the trend to continue. As of September 30, 2021, we had $63.1 million in cash and cash equivalents. The decrease in cash has been primarily driven by our acquisition activity. We have completed three acquisitions since the four at year-end 2020, as well as executing share repurchases to continue to drive value for all of DXP's stakeholders. We are well on our way into diversifying DXP's end markets while creating stakeholder value. We turned DXP's sales growth into a $2.31 per share year-over-year improvement in earnings per diluted share or $0.36 in earning per diluted share for the third quarter. Total debt outstanding as of September 30, 2021 was $327.5 million with senior leverage of 3.44:1, well under our covenant of 5.50:1. We remain excited by our sales team's focus on organic sales growth as well as the contributions from recent acquisitions. The teamwork as well as the overall tone at DXP is moving in the right direction and we look forward to continuing the momentum into fiscal 2022, driving organic and acquisition driven growth."

Financial Strength and Liquidity

Net debt, calculated as total long-term debt, net of cash and cash equivalents, on our balance sheet as of September 30, 2021, was $264.4 million compared to $210.6 million at December 31, 2020. As of September 30, 2021, DXP has approximately $194.0 million in liquidity, consisting of $63.0 million in cash on hand and approximately $131.0 million in availability under our ABL facility.

Non-GAAP Financial Measures

DXP supplements reporting of net income with non-GAAP measurements, including EBITDA, adjusted EBITDA, free cash flow, non-GAAP net income and net debt. This supplemental information should not be considered in isolation or as a substitute for the unaudited GAAP measurements. Additional information regarding EBITDA, adjusted EBITDA, free cash flow and non-GAAP net income referred to in this press release are included below under "Unaudited Reconciliation of Non-GAAP Financial Information."

The Company believes EBITDA provides additional information about: (i) operating performance, because it assists in comparing the operating performance of the business, as it removes the impact of non-cash depreciation and amortization expense as well as items not directly resulting from core operations such as interest expense and income taxes and (ii) the performance and the effectiveness of operational strategies. Additionally, EBITDA performance is a component of a measure of the Company's financial covenants under its credit facility. Furthermore, some investors use EBITDA as a supplemental measure to evaluate the overall operating performance of companies in the industry. Management believes that some investors' understanding of performance is enhanced by including this non-GAAP financial measure as a reasonable basis for comparing ongoing results of operations. By providing this non-GAAP financial measure, together with a reconciliation from net income, the Company believes it is enhancing investors' understanding of the business and results of operations, as well as assisting investors in evaluating how well the Company is executing strategic initiatives. Free Cash Flow reconciles to the most directly comparable GAAP financial measure of cash flows from operations as provided below. We believe Free Cash Flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to fund acquisitions, make investments, repay debt obligations, repurchase company shares, and for certain other activities.

About DXP Enterprises, Inc.

DXP Enterprises, Inc. is a leading products and service distributor that adds value and total cost savings solutions to industrial customers throughout the United States, Canada and Dubai. DXP provides innovative pumping solutions, supply chain services and maintenance, repair, operating and production ("MROP") services that emphasize and utilize DXP's vast product knowledge and technical expertise in rotating equipment, bearings, power transmission, metal working, industrial supplies and safety products and services. DXP's breadth of MROP products and service solutions allows DXP to be flexible and customer-driven, creating competitive advantages for our customers. DXP's business segments include Service Centers, Innovative Pumping Solutions and Supply Chain Services. For more information, go to www.dxpe.com.

The Private Securities Litigation Reform Act of 1995 provides a "safe-harbor" for forward-looking statements. Certain information included in this press release (as well as information included in oral statements or other written statements made by or to be made by the Company) contains statements that are forward-looking. These forward-looking statements include without limitation those about the Company's expectations regarding the impact of the COVID-19 pandemic and the impact of low commodity prices of oil and gas; the Company's expectations regarding the filing of the Form 10-Q; the description of the anticipated changes in the Company's consolidated balance sheet and the results of operations and the Company's assessment of the impact of such anticipated changes; the Company's business, the Company's future profitability, cash flow, liquidity, and growth. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future; and accordingly, such results may differ from those expressed in any forward-looking statement made by or on behalf of the Company. These risks and uncertainties include, but are not limited to; decreases in oil and natural gas prices; decreases in oil and natural gas industry expenditure levels, which may result from decreased oil and natural gas prices or other factors; inability of the Company or its independent auditors to complete the work necessary in order to file the Form 10-Q, in the expected time frame; unanticipated changes to the Company's operating results in the Form 10-Q as filed or in relation to prior periods, including as compared to the anticipated changes stated here; unanticipated impact of such changes and its materiality; ability to obtain needed capital, dependence on existing management, leverage and debt service, domestic or global economic conditions, economic risks related to the impact of COVID-19, ability to manage changes and the continued health or availability of management personnel and changes in customer preferences and attitudes. In some cases, you can identify forward-looking statements by terminology such as, but not limited to, "may," "will," "should," "intend," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "goal," or "continue" or the negative of such terms or other comparable terminology. For more information, review the Company's filings with the Securities and Exchange Commission. More information on these risks and other potential factors that could affect the Company's business and financial results is included in the Company's filings with the SEC, including in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

DXP ENTERPRISES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($ thousands, except per share amounts)
										(Restated)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020

Sales	$	289,494		$	220,193		$	820,772		$	772,577
Cost of sales	202,551			158,892			576,921			558,081
Gross profit	86,943			61,301			243,851			214,496
Selling, general and administrative expenses	75,758			53,746			211,587			188,484
Impairment and other charges	—			48,401			—			48,401
Operating income (loss)	11,185			(40,846		)	32,264			(22,389		)
Other (income) loss	(450		)	320			(985		)	(381		)
Interest expense	5,264			3,752			15,844			12,059
Income (loss) before income taxes	6,371			(44,918		)	17,405			(34,067		)
Provision for income taxes (benefit)	(565		)	(10,143		)	2,380			(7,647		)
Net income (loss)	6,936			(34,775		)	15,025			(26,420		)
Net loss attributable to NCI*	(189		)	(109		)	(590		)	(233		)
Net income (loss) attributable to DXP Enterprises, Inc.	7,125			(34,666		)	15,615			(26,187		)
Preferred stock dividend	23			23			68			68
Net income (loss) attributable to common shareholders	$	7,102		$	(34,689	)	$	15,547		$	(26,255	)

Diluted earnings (loss) per share attributable to DXP Enterprises, Inc.	$	0.36		$	(1.95	)	$	0.78		$	(1.47	)

Weighted average common shares and common equivalent shares outstanding	19,550			17,790			19,900			17,743

*NCI represents non-controlling interest

Business segment financial highlights:

Service Centers' revenue for the third quarter was $212.5 million, a 1.4 percent sequential increase and an increase of 28.9 percent year-over-year with a 13.8 percent operating income margin.
Innovative Pumping Solutions' revenue for the third quarter was $36.4 million, a sequential decrease of 0.8 percent and an increase of 66.6 percent year-over-year with a 0.8 percent operating income margin.
Supply Chain Services' revenue for the third quarter was $40.5 million, a 3.0 percent sequential increase and a increase of 21.2 percent year-over-year with a 7.9 percent operating income margin.

						SEGMENT DATA
($ thousands, unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
Sales	2021		2020			2021		2020
Service Centers	$	212,539	$	164,900		$	608,542	$	501,333
Innovative Pumping Solutions	36,440		21,876			96,411		152,376
Supply Chain Services	40,515		33,417			115,819		118,868
Total DXP Sales	$	289,494	$	220,193		$	820,772	$	772,577

								(Restated)
	Three Months Ended September 30,					Nine Months Ended September 30,
Operating Income	2021		2020			2021		2020
Service Centers	$	29,381	$	22,151		$	77,819	$	53,531
Innovative Pumping Solutions	277		(2,913		)	6,027		16,080
Supply Chain Services	3,181		2,900			8,991		10,008
Total segments operating income	$	32,839	$	22,138		$	92,837	$	79,619


Reconciliation of Operating Income for Reportable Segments ($ thousands, unaudited)

										(Restated)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Operating income for reportable segments	$	32,839		$	22,138		$	92,837		$	79,619
Adjustment for:
Impairment and other charges	—			48,401			—			48,401
Amortization of intangibles	4,238			3,053			12,690			9,296
Corporate expenses	17,416			11,530			47,883			44,311
Total operating income	$	11,185		$	(40,846	)	$	32,264		$	(22,389	)
Interest expense	5,264			3,752			15,844			12,059
Other (income) loss	(450		)	320			(985		)	(381		)
Income before income taxes	$	6,371		$	(44,918	)	$	17,405		$	(34,067	)


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 before taxes, calculated and reported in accordance with U.S. GAAP.

								(Restated)
	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020			2021		2020
Income before income taxes	6,371		(44,918		)	17,405		(34,067		)
Plus: interest expense	5,264		3,752			15,844		12,059
Plus: depreciation and amortization	6,486		5,304			20,070		17,294
EBITDA	$	18,121	$	(35,862	)	$	53,319	$	(4,714	)

Plus: NCI loss income before tax*	190		183			787		233
Plus: Impairment and other charges	—		48,401			—		48,401
Plus: stock compensation expense	514		983			1,354		2,870
Adjusted EBITDA	$	18,825	$	13,705		$	55,460	$	46,790
* NCI represents non-controlling interest


DXP ENTERPRISES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS ($ thousands, except per share amounts)

			(Restated)
	September 30, 2021		December 31, 2020
ASSETS
*Current assets:*
Cash	$	63,043	$	119,328
Restricted cash	91		91
Accounts receivable, net of allowances for doubtful accounts	205,817		166,941
Inventories	106,376		97,071
Costs and estimated profits in excess of billings	17,714		18,459
Prepaid expenses and other current assets	6,444		4,548
Federal income taxes receivable	10,906		2,987
*Total current assets*	$	410,391	$	409,425
Property and equipment, net	51,756		56,899
Goodwill	308,880		261,767
Other intangible assets, net of accumulated amortization	83,589		80,088
Operating lease right-of-use assets	53,233		55,188
Other long-term assets	5,108		4,764
Total assets	$	912,957	$	868,131

LIABILITIES AND EQUITY
*Current liabilities:*
Current maturities of long-term debt	$	3,300	$	3,300
Trade accounts payable	91,385		64,849
Accrued wages and benefits	26,597		20,621
Customer advances	7,652		3,688
Billings in excess of costs and estimated profits	891		4,061
Current-portion operating lease liabilities	18,213		15,891
Other current liabilities	40,583		34,729
*Total current liabilities*	$	188,621	$	147,139
Long-term debt, less unamortized debt issuance costs	315,920		317,139
Long-term operating lease liabilities	35,478		38,010
Other long-term liabilities	3,097		2,930
Deferred income taxes	8,501		1,777
Total long-term liabilities	$	362,996	$	359,856
Total Liabilities	$	551,617	$	506,995
*Equity:*
*Total DXP Enterprises, Inc. equity*	361,132		360,338
Non-controlling interest	208		798
*Total Equity*	$	361,340	$	361,136
Total liabilities and equity	$	912,957	$	868,131


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


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.

										(Restated)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020

Net cash from operating activities	$	6,625		$	30,476		$	22,831		$	92,240
Less: purchases of property and equipment	(1,458		)	(1,397		)	(2,984		)	(6,530		)
Plus: proceeds from sales of property and equipment	—			—			1,297			123
Free cash flow	$	5,167		$	29,079		$	21,144		$	85,833

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

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DXP Enterprises Reports Third Quarter 2021 Results