dxpe-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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


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

Commission file number 0-21513

DXP Enterprises, Inc.

(Exact name of registrant as specified in its charter)


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

5301 Hollister, Houston, Texas 77040

(Address of principal executive offices, including zip code)

(713) 996-4700


(Registrant's telephone number, including area code)

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

Title of Each Class

Trading Symbol

Name of Exchange on which Registered

Common Stock par value $0.01

DXPE

NASDAQ Global Select Market

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

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

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

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

Emerging growth company ☐

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

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

Number of shares of registrant's Common Stock, par value $0.01 per share outstanding as of August 3, 2024: 15,788,714.

DXP ENTERPRISES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


		Page
PART I: FINANCIAL INFORMATION
	ITEM 1. Financial Statements	3
	a) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income	3
	b) Unaudited Condensed Consolidated Balance Sheets	4
	c) Unaudited Condensed Consolidated Statements of Cash Flows	5
	d) Unaudited Condensed Consolidated Statements of Equity	6
	e) Notes to Unaudited Condensed Consolidated Financial Statements	7
	ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	15
	ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	25
	ITEM 4. Controls and Procedures	26

PART II: OTHER INFORMATION		27
	ITEM 1. Legal Proceedings	27
	ITEM 1A. Risk Factors	27
	ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
	ITEM 3. Default upon Senior Securities	27
	ITEM 4. Mine Safety Disclosures	27
	ITEM 5. Other Information	27
	ITEM 6. Exhibits	28

SIGNATURES		29

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Sales	$	445,556	$	428,040	$	858,191	$	852,307
Cost of sales	307,763		296,188		596,516		595,414
Gross profit	137,793		131,852		261,675		256,893
Selling, general and administrative expenses	100,441		94,372		195,192		184,014
Income from operations	37,352		37,480		66,483		72,879
Other income, net	(1,035)		(242)		(3,004)		(712)
Interest expense	15,384		11,863		30,928		23,384
Income before income taxes	23,003		25,859		38,559		50,207
Provision for income taxes	6,310		6,805		10,534		13,573
Net income	16,693		19,054		28,025		36,634


Preferred stock dividend	22		22		45		45
Net income attributable to common shareholders	$	16,671	$	19,032	$	27,980	$	36,589

Net income	$	16,693	$	19,054	$	28,025	$	36,634
Foreign currency translation adjustments	93		659		(521)		757
Comprehensive income	$	16,786	$	19,713	$	27,504	$	37,391

Earnings per share (Note 9):
Basic	$	1.05	$	1.11	$	1.75	$	2.10
Diluted	$	1.00	$	1.06	$	1.66	$	2.01

Weighted average common shares outstanding:
Basic	15,868		17,211		15,998		17,402
Diluted	16,708		18,051		16,838		18,242

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

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts) (unaudited)



	June 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash	$	49,936	$	173,120
Restricted cash	90		91
Accounts receivable, net of allowance of $5,511 and $5,584, respectively	326,583		311,171
Inventories	107,483		103,805
Costs and estimated profits in excess of billings	36,741		42,323
Prepaid expenses and other current assets	23,262		18,044

Total current assets	544,095		648,554
Property and equipment, net	68,407		61,618
Goodwill	426,821		343,991
Other intangible assets, net	85,895		63,895
Operating lease right of use assets, net	50,520		48,729
Other long-term assets	13,408		10,649
Total assets	$	1,189,146	$	1,177,436

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt	$	5,500	$	5,500
Trade accounts payable	101,185		96,469
Accrued wages and benefits	32,987		36,238
Customer advances	13,286		12,160
Billings in excess of costs and estimated profits	12,080		9,506

Short-term operating lease liabilities	15,218		15,438
Other current liabilities	47,447		48,854
Total current liabilities	227,703		224,165

Long-term debt, net of unamortized debt issuance costs and discounts	519,735		520,697
Long-term operating lease liabilities	36,617		34,336
Other long-term liabilities	20,410		17,359

Total long-term liabilities	576,762		572,392
Total liabilities	804,465		796,557
Commitments and Contingencies (Note 10)
Shareholders' equity:
Series A preferred stock, $1.00 par value; 1,000,000 shares authorized	1		1
Series B preferred stock, $1.00 par value; 1,000,000 shares authorized	15		15
Common stock, $0.01 par value, 100,000,000 shares authorized; 15,788,714 and 16,177,237 outstanding, respectively	345		345
Additional paid-in capital	216,803		216,482
Retained earnings	347,251		319,271
Accumulated other comprehensive loss	(31,761)		(31,240)
Treasury stock, at cost 4,607,773 and 4,141,989 shares, respectively	(147,973)		(123,995)
Total DXP Enterprises, Inc. equity	384,681		380,879


Total liabilities and equity	$	1,189,146	$	1,177,436

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

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)


	Six Months Ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	28,025		36,634
Reconciliation of net income to net cash provided by operating activities:
Depreciation	4,456		4,145
Amortization of intangibles and fixed assets	11,209		9,340

(Recovery of) provision for credit losses	(771)		1,001
Payment of contingent consideration liability in excess of acquisition-date fair value	(17)		(79)
Fair value adjustment on contingent consideration	(305)		839
Amortization of debt issuance costs	1,788		1,409
Restricted stock compensation expense	2,076		1,347
Deferred income taxes	(4,944)		(6,313)
Changes in operating assets and liabilities, net of effects of businesses acquired:
Accounts receivable, net	(3,085)		3,815
Costs and estimated profits in excess of billings	5,561		(23,151)
Accounts payable and accrued expenses	(3,018)		1,721
Prepaid expenses and other assets	2,267		5,226
Inventories	2,548		(3,179)
Billings in excess of costs and estimated profits	2,591		(5,095)
Other long-term liabilities	(6,657)		(3,643)
Net cash provided by operating activities	$	41,724	$	24,017

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(11,719)		(5,617)

Acquisition of businesses, net of cash acquired	(119,017)		(8,488)
Net cash used in investing activities	$	(130,736)	$	(14,105)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on asset-backed credit facility	—		7,870
Repayments on asset-backed credit facility	—		(7,870)
Repayments under term loan facility	(2,750)		(2,184)

Payment for acquisition contingent consideration liability	(4,483)		(3,921)
Preferred stock dividends paid	(45)		(45)
Shares repurchased held in treasury	(23,978)		(33,583)
Payment for employee taxes withheld from stock awards	(1,755)		(432)
Principal payments on finance leases	(1,992)		—
Net cash used in financing activities	$	(35,003)	$	(40,165)
Effect of foreign currency on cash	830		(240)
Net change in cash and restricted cash	(123,185)		(30,493)
Cash and restricted cash at beginning of period	173,211		46,117
Cash and restricted cash at end of period	$	50,026	$	15,624

Supplemental cash flow information (Note 14)

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

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands) (unaudited)


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

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

Currency translation adjustment	—		—		—		—		—		—		(614)		(614)
Repurchases of shares	—		—		—		—		—		(16,920)		—		(16,920)
Net income	—		—		—		—		11,332		—		—		11,332
Balance at March 31, 2024	$	1	$	15	$	345	$	217,292	$	330,580	$	(140,915)	$	(31,854)	$	375,464
Preferred dividends paid	—		—		—		—		(22)		—		—		(22)
Compensation expense for restricted stock	—		—		—		1,212		—		—		—		1,212

Tax related items for share based awards	—		—		—		(1,701)		—		—		—		(1,701)

Currency translation adjustment	—		—		—		—		—		—		93		93
Repurchases of shares	—		—		—		—		—		(7,058)		—		(7,058)
Net income	—		—		—		—		16,693		—		—		16,693
Balance at June 30, 2024	$	1	$	15	$	345	$	216,803	$	347,251	$	(147,973)	$	(31,761)	$	384,681


	Series A preferred stock		Series B preferred stock		Common stock		Paid-in capital		Retained earnings		Treasury stock		Accum other comp loss		Total equity
Balance at December 31, 2022	$	1	$	15	$	345	$	213,937	$	250,549	$	(67,780)	$	(31,675)	$	365,392
Preferred dividends paid	—		—		—		—		(23)		—		—		(23)
Compensation expense for restricted stock	—		—		—		476		—		—		—		476

Tax related items for share based awards	—		—		—		(104)		—		—		—		(104)

Currency translation adjustment	—		—		—		—		—		—		98		98
Repurchases of shares	—		—		—		—		—		(9,135)		—		(9,135)
Net income	—		—		—		—		17,580		—		—		17,580
Balance at March 31, 2023	$	1	$	15	$	345	$	214,309	$	268,106	$	(76,915)	$	(31,577)	$	374,284
Preferred dividends paid	—		—		—		—		(22)		—		—		(22)
Restricted stock compensation expense	—		—		—		871		—		—		—		871

Tax related items for share based awards	—		—		—		(328)		—		—		—		(328)

Currency translation adjustment	—		—		—		—		—		—		659		659
Repurchases of shares	—		—		—		—		—		(25,053)		—		(25,053)
Net income	—		—		—		—		19,054		—		—		19,054
Balance at June 30, 2023	$	1	$	15	$	345	$	214,852	$	287,138	$	(101,968)	$	(30,918)	$

SEC Form 10-Q filed by DXP Enterprises Inc.