DXPE - Earnings call transcript Q1 2019

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Operator

Good morning, my name is Heidi, and I will be your conference operator today. At this time, I would like to welcome everyone to the DXP Enterprises 2019 First Quarter Conference Call. 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 Instructions] Thank you. President Financial Vice begin you Senior conference. your Yee, and Officer, Chief may Kent

Kent Yee

This Yee financial is DXP's Heidi. XX, you, Thank Kent conference first ended to XXXX. the QX and call discuss for our results quarter March XXXX to welcome

today CEO, Little. Joining is Chairman our and me David

that believe our result a filings. update basis in A factors that we material these materially and to may effect discussion as SEC business we statements. are includes of detailed have Before on you Actual started, forward-looking new our from DXP a being is results obligation information want I call ongoing get differ assumes information those forward-looking by no contemplated on or webcast statements. remind an that may many events. the to today's and of recorded contained future

presentation press GAAP During his are non-GAAP call to press non-GAAP financial available is David ir.dxpe.com. present included at summary to over turn and in GAAP financial website provide will measures, results. The and our this now may and earnings to call, our I first the a of reconciliation of measures quarter investor release we our thoughts an accompanying on both a now release.

David Little

in our and thanks us interest to you first Thanks joining Kent call. everyone XXXX DXE. appreciate thank conference your for you on We quarter this and morning

stakeholders and thanks to great congratulations special another all start a off are our our XXXX, We can DXPeople for for trust. you to

fast, uncertainty our the finished by activity the key then customer in will questions while We a as our and up picked we get my prices was Canada. United finish having caused details business, industrial off effects China After will our strong started of question financial of and volatility with are sales in answer XXXX, prepared volatility our aim remarks QX the QX to our continued your residual in end or back driven growing all in States deals drive to around we comments of well portion oil call. geopolitical and and towards the our year and as This we or the through oil the you the quarter. whether answered during market. all as and DXPeople. customers focused the demand noise customers trade continue on driven, being business by Kent growth strong this we out beginning and the After take in and in improvement investing relationships cautiously We of overall and believe within end experienced gas convenient

see You average our day. sales can per this in

a It for growth expect convenience we the to will repeat year, growing move we a and to we we top have XX% growth providing remain and technical believe and in our we as spending our expertise, all market be we customers through continue and to As quality focused line to stakeholders. meet rise the the well experienced approach as on challenge XXXX, challenge. levels but strategies

acquisition and move as organic sales We forward. both continue will growth drive to we

for growth a of stability reflects in Turning results, our increase markets. year-over-year. million revenue to total the X.X% This of DXP our an was and quarter XXXX end $XXX.X first

was by Working XX.X% product driven from XX.X% with Pumping IPS' increased be sales driven Innovative which XX.X% divisions. business increases to QX, sales and of additional is in pleased Overall, continued to $XX.X segment, QX sites, increase and and contribution see. increase we the a Chain's the of Service to Supply grew we backlog, increases growth primarily in which by and year-over-year year. sales segments strength sites. sold terms on equipment are Valley Centers, the year-over-year all our midstream River modular great growth terms for $XXX.X PT continue from in Services, discussing Metal average the to we Central, while Bearing The last packaged to the Texas, million. in Center and products X.X% Service reflects quarter implement sales our new million in sales Within three increase our Chain markets addition million. markets saw onshore Ohio year-over-year greatest versus we $XX.X In of and I to Supply was South time our Solution Gulf coming this increased Center with Coast of growth sales up begin year-over-year Service year-over-year through regions. Pumping Innovative Solution backlog

the to we the and beginning to product Additionally can margins improvement costs ASI profit or similar DXP's to customer for XX.X% that of year and strength progresses. in and in with move line through Metal basis point over be the were improvements look partner quarter increases the of improvement excess see gross overall the consistent in XX year showed growth first sales Typically to manufacturing with increased our a year-over-year XX%. supplier DXP's gross on prices fiscal margins will Working overall excess last first XXXX. XXXX the gross drive year show within profit division to continued quarter pass XX%. We we where margins remain there XXXX. of year through as of as

make growing will as gross moving which larger a earn is sell margins operating just additional on to are IPS SCS its segment, inventory. the accounts up the lower in the expenses. integrated. transition deliveries by like small double move we fully which a efficient products have is margin extra be of highest a good gross reman this as not very complete. specifics XXXX. gross had is course, that facility the XX% had and issue And repeated our as profit customer also which our down unusual and margins, drives will more volume the is I be we harmed are to off are facility, older income be old customer's IPS because performance of and a income fee news new and presently, benefit. by operating adding ultimate start-up capacity will our with product the margins awesome But margins cost. will and growth rent of when to sites, go As loss pumps, The as mix from not we customer sales service

the actually off. XX.X% points continues one people XX of Centers, going 'XX million XXXX. DXP buildings in accelerating approximately versus better as increased the a of XXXX We to I'm proud the much XXXX XXXX. quarter Service from including and for to Service QX Our corporate which X,XXX first SG&A as XX.X% facility to employees. our our first in our full-time Center growth end to our business project reflect related our improving $X.X move of we organization sales in one to from basis sales and margins very DXP business. building. forward and consolidation two the gross the focus At to the investment to corporate sequentially, declined look fabrication SG&A had profit on of SG&A from quarter of DXP completion percent through QX the increased

being $XX.X the DXP's goal. $X.X share XXXX. a We XXXX, As are million more In a $XX.X efficient. and sales that, on for EBITDA improvement plus X.X%. detail. to momentum our feel these improvement and on shareholders IPS will EBITDA We X.X% XXXX. believe financials the versus point corporate is we overall produced income was look of our in improvement Supply Service of basis year over our point X.X% XX DXP or start margins million EBITDA move $XX.X offering expense it our XX% drive operating partners in on income with I over million, operating margins was over producing average financial percent move Center of DXP amortization. in in improvement. we focused XX.X%. sales of DXP's continue versus opportunity gross XX.X%, to was summary, historical EBITDA which there to delivered always, combined turn XX% and our X.X% our year. Chain team said, overall a be as margins X.X% income a growth, reflects in operations in was to more basis. year of to my closer basis or our results X.X% has margin operating With year great XX% now improve supplier Kent That Overall review included margins million to an customers, is results back DXP last 'XX, and and the DXPeople. alike. over This EBITDA of will was increase closer a to still it income Service margin and privilege to XX behalf over margin pleased

Kent Yee

that results. XXXX. last everyone to us first you review momentum we carried thank Thank from our our financial you, David, shows our fiscal quarter into and joining for for of QX year

and continues growing be sales We our $XXX.X sheet to quarter poised for year-over-year million. a Total increased first for sales are X.X% the acquisitive. us to balance to be

segments. growth by business DXP's supported sales X quarter First was

continued and $X.X growth to by $XX.X market Innovative million. per Service XX.X% Average X.X% followed million first support execution end of day reflects in First daily million The indicators. growing sales $XXX.X key million growing our to for sales the by year-over-year led This growth QX Centers were $XX.X was per and year-over-year XXXX. quarter strategy quarter the Services, Chain $X.X Supply was day million. to Pumping XX.X% growing versus by our Solutions,

we in oil as call. during QX, we volatility round discussed prices another While experienced QX in of our

deceleration quarter first compared ISM, XXXX. overall QX, the a for our indicators index manufacturing During The in stability. in XX.X% to averaged but first quarter showed of XX.X% growth, PMI the

XX.X% quarter averaged the QX, indexed a XX.X% business first Working Additionally, of XXXX. in the XXXX in versus of reading Metal

and XX down oil QX U.S. rigs rigs from gas, versus is In up count medical of QX. growth rig Chain Canada's rigs but rig The Services and David the terms average XXXX was XX gas Supply beverage food QX, and in for up result down and rigs aerospace, oil the of sales QX count. QX and adding XXXX, the versus mentioned four the XX versus industries. customer new within sites as device, is count

our sales include the which within segment, year-over-year experienced our IPS Ohio sales our our experience Service Regions meaningful the well Our configured-to-order, business. Center as quarter continue engineered-to-order label and Central and in first growth regions. equipment River measurement Valley experienced to growth private in growth South offering which pump as segment, branded

continue see product we Metal our within and increase divisions. a to Seal our Working Additionally, meaningful

Center basis costs Turning total new the XXXX. with jobs implementation quarter business, IPS our strength DXP's XX at QX segment within XX.X%, business for margins gross including associated Service margins improvement over were Centers, Chain gross project related ramping selling softness the sales the Supply within related Services. to Service teams and first DXP's gross the reflects our to a margins, point total

basis XXX and Supply year-over-year. by segment. and XX lower as basis the sites, operating segments jobs of Center's points terms XXXX IPS items business primarily combined, versus and to basis business payroll segment Total commissions in million. $XX.X points new David QX, margin mentioned, operating Solutions business Service DXP the basis in points Innovative was In and XXXX, $XX to versus driven income of within improved associated seasonal Services and points all income by of points XX normal year-over-year XXXX. X payout operating income year income Chain XX the are million. with implementation SCS decreased operating This margins XXX taxes Pumping margins improved basis QX, first increased bonuses

increased XX.X% the from margins into Turning SG&A sales. primarily to EBITDA. up we leverage leverage. Year-over-year XXXX. $XX.X experienced grow EBITDA as QX costs basis we reflecting Xx EBITDA was translated This in operating fixed XX million points,

was XXXX. In QX, XXXX or QX, terms our income million. net million XX.X% $X.X for is EPS, $X.X versus up This of

Our per XXXX in $X.XX for earnings share diluted XXXX. versus $X.XX was QX, QX,

to the balance Turning sheet.

to throughout last capital, working XX.X% project last our the the and We jobs the our nature to capital historical of is again inventory average, this million in estimated month of flat XXXX. investing working year revenue quarter. up IPS. of well. support was from in above IPS. of and We the capital saw ago. QX essentially from and and million our This which sales. turns This $XXX.X our associated are a expect million from carrying DXP seeing we Costs reflects is X.X as growth This seasonal and reflects XX terms In working end is year within $X.X on times, $X.X QX levels profits but amounted related increased trend investment within higher at working it of and projects achieved we inventory

XXXX. XX, of In to an $XX.X increase cash, terms have on $XX.X million March March This is sheet XX. cash of the we in compared million balance at

In business to CapEx, patterns XXXX was made and business million. $X.X quarter some first CapEx quarter X.X% our $X.X equipment items up Compared CapEx dollars IPS during our purchase CapEx the the including of including terms quarter the segment of and million in leasehold are of and or first investments manufacturing first various quarter within for reflects smaller of tools improvements. sales.

software We and in of we operations. or improve are rate also support to XX% continues improve investments Return and leverage to the on capital end corporate quarter run as and was at first ROIC enhance making EBITDA. our invested drive operating our margins the

to the of conclusion, growing been debt entirety forward pleased our business forward was with charge leverage we March this outstanding start through at good XXXX. are improving we and going X.X:X X.X:X. fixed has million. and secured terms Momentum was while structure to forward to ratio look ratio In our and XX, fiscal our pushing coverage March the we Total of capital at $XXX.X profitability. XXXX look In XX was our

We call for to will you now guys turn questions. over the

Operator

[Operator from And your Instructions] Blake Hirschman of Please first go with ahead. question the line Stephens. comes

Blake Hirschman

Yes, guys. morning good

Kent Yee

morning Good Blake.

Blake Hirschman

On the about across days, chatter space quarterly sales, lot timing been selling Easter. impact, of of the a there's weather

you if and trying if those if And to anything take guys see here. note stab [indiscernible]. look there's of trying to any Just quantify want a to at to so,

Kent Yee

kind we into call see to is April. read quarter of, things. Blake, those said, Yes, our out an you'll to there into tend first and focus quarter I'll day sales business going the was the acceleration on And what per through it That can for April. and I not you

per sales another business in and billion day million January, were $X.X So $X.X April. in million million $X.X in March February, in $X.X

Blake Hirschman

then and And end what versus of the kind the expectations the excited you that. kind for wanted about between the land look of have more forward energy lay you get side you're of kind cycle, just industrial on sides of Thanks which here it. to between of two Got as one the things, the from two? market

David Little

in So as were XXXX. they're not we're about excited both, they as robust

sight we I gas acquisition, anything going XX% don't, oil there they going not organically exciting XX%, it not in that said, they're don't it's grow both have compared XX% up. I'm to oil that. says our losing As of grew still, overall business gas, leveled we an out see I I not, the But that, including can it's so something fact I including down. I that and out see I and and think but is just, fact

they're to And happy stable at that industrial $XX this I'm in to perform frankly to heads causes oil and they're $XX go so, [indiscernible] up that at continues as prices. I $XX not WTI, market as I point, it and with that, at that. both because pretty the and when preferred performing And well. think

Blake Hirschman

on to to more opportunities. it. Thanks focused guys. kind smaller Got gauge lastly a and you're bigger trying get deal pipeline And bolt-on or lot on your wanted just on M&A, for update doing a appetite if the of

Kent Yee

Kent. No, Blake, is this

opportunities one, we're in On on there's the focusing those. market, obviously always the last

average $XX nice million Our bread also, butter that hey, we've been big to from is in time comes revenue million. if at to along always That $XX said, and time, one of never a shy looking those. we

revenue, so, acquisition. is through butter million bread but to and the $XX in million we grow And $XX

for positioned that kind sheet this think we're so, point. and balance And we at the of

So...

David Little

doing add And geography be I acquisitions to there. the will national that player and guys and out to add a to bigger with that, compete we're just add try scale

a that of it to how whole or doesn't long and going national think XX we smaller as the perfectly of do It growth scale we're in acquisitions lot million just through facilitates to do and that geography matter acquisition. the we're terms $XXX as happy do So footprint. in our

Blake Hirschman

sense. Got it turn it. I Thanks. over. Makes will

Operator

of And Capital Steve your with go Markets. next question comes line ahead. from the KeyBanc Barger Please

Steve Barger

installed much good base. guys. from How from the Hey, versus chain morning supply new the came growth growth locations

it, in were missed quarter? if the any sorry in tuck-ins And I there the acquisitions

Kent Yee

no the latter, were there answer tuck-ins. To

you your organic. answer existing mix the implementations quarter new our the up on all This SCS old because Steve, question, with in to was versus I some have of would follow are with answer quick I To of mean, is, customers.

just as sites. with as as just customers, easy some it's So customers additional are of existing new not them

So...

Steve Barger

Well, you We Got pace same can you'll add just the based XQ it. to half, at Yeah. into locations talk and do you're think later. continue what on in the seeing? back

Kent Yee

Supply Within segment the or... referring Chain you're to, Services

Steve Barger

Yeah. Correct.

Kent Yee

the timeline implementation on half we'll but thus seen them are future here we some looked if They far. of know have I've all at some that's their at I that implementations. more when back that they add They do have recently. the -- had pace QX, I don't

-- as we many share. So as can and not

Steve Barger

Sure.

So you see year move up expect would if you margins that in pace tick slows the as to sequentially through Chain? Supply down, back

Kent Yee

right Yes, the margins in Services. the the I of towards we're would weighted improving now Supply say second half Chain year of

Steve Barger

thinking Okay. price to your about Can the on some potential seen China that talk we've headlines costs? you recent And exposure week. and just this COGS about trade of impacts

David Little

We have area. a our little fabrication exposure in

as far already, price the of kind year. have them at had increases, price had cetera, the they've they've they've already et increases beginning and our As of partners then normal they've supplier to had

that So of much have to steel on we exposure really terms really fabrication issue, go our don't piping the are our in and supplier units. not and and things partners like

in of pretty the So and pretty it's that's, cost but quarter, the a the bit that little but year part last that last overall. into have and over minor is creeped some of first insignificant

Steve Barger

the cost more but your seen I'm you price most rapidly? raising well. that side think IPS competitors of Does you as domestically and produced an have on me correct wrong, And I it. products are for Got give advantage if

David Little

things control cetera we're The all I It's the were fine it the but China, that, panel, the American think raise steel really and piping American on. and get too. prices that the just people et didn't the when the again, from into the elbows and motor, fine on people whether, don't, we you to the ever get the, opportunity their the components So pump, base took like the product. we're, I took

So, kind our through filtered that of through but of first historical the that's and been we've through jobs quarter. most and really,

really being going don't we forward. see So an issue that

Steve Barger

from the last me. one And Okay.

quarter operating As for of you that going IPS is roll persist? talked and forward on off as is had the or year you you and the mix through that think call, about that mentioned year this the the improves about go worst for this you margin

David Little

that It to worst mean, at to really the quarter. a I nice the didn't end the year get be slips the tends of could a don't of we have then all and shipped it into first be, sudden job have that

sense could don't have competitive job. we so, to that, bit use particular little in mean, a know a margins but a hate the And customer on But on well, word, the have I this fit. lumpy jobs, perfect the really a don't that I it's high environment we real we

down to customer the great have. and have one is margins we relationship our get and he with order dirty a So and maybe lower is we exactly wanting that we what versus we where what get he is,

And margins that we job. so on particular make higher

or our million when can margins opportunistic. $XXX,XXX a just sense have are even a project, So a little million you project, that you $X project that $X

general, our supplier our But go so, up years. I up manufacturing would little at the go the first any in therefore partners bounce year, costs quarter a say, cost that of the can bit. around And of first given they

on the the those So then throughout to a watermark low for the quarter tenancy and we be and increase. year prices margins we can pass have first

Steve Barger

time. the for Thanks Understood.

Operator

Sidoti. line with go ahead. comes And your Please next question the Brian Lau from of

Brian Lau

Good morning everybody.

for call the On Joe Mondillo.

on can back up Do we XX% in on operating those margins. XX% on the follow IPS specifically you get to think a comments the Just margin? or

David Little

Yes, short I That's I a answer. know, I sorry... do. am

Brian Lau

that. Appreciate

David Little

you more color I'll that. give than

Brian Lau

No, And that. that's I fine. appreciate

David Little

Yeah.

a operating make lost You reman. quarter, know, XX% income and our PMI we quarter really And we XXX,XXX. this remanufacturing those gross on just volume XX% that product which had we are margins low

the just first that's quarter. in what's the So of here happened magnitude

something or a for very Now didn't the whatever because of some we reason us. they job blow-up have in a have this -- lot just had but didn't We first lose they nice quarter. the on just product we didn't XXX,XXX have shipped backlog,

new had so more we're we paint mean, into double facility, had property, things you as new it's imagine to yet, there's room. that, facility, into you double manufacturing we I'm booth, services, that a a ride it's this facility value-added rent, increased you you moving and can just a right some had cost. bigger then got got acres, So just or on expenses state-of-the-art roll facility is plenty of got we our sufficiencies telling [indiscernible], can increased capacity, this I a We roll old in on And we're we got expenses. XX it's

in make of a take just are awesome reputation, care want things they we of be of perform. want going our But future. our want And the going that lose have trying just him so, on customer. that delivery to lot lose we're for have the We in don't we to through, that to slide, sure muddling to there's we IPS to to trust DXP kind don't don't

of we started the this -- at year... I So guess bit big last a actually little process

Kent Yee

Back in the year. last

David Little

And completion October. year. to it should come …this in

Brian Lau

think to kind of that. year? keep around Supply X% revenue adding do for or Thanks And back rest Chain going we you in Services, again to of get down more helpful. the the that can cost of That's the then is

Kent Yee

at what again, the they're QX. back have to implementations going Once end more today can from we a see of few

So always cost. once that business, again and to new he's JJ win And more trying team. cause will today, there some his then out

the mode that's, start they have. to a watered have bit a when margins But down. problem they're their in implementations future for And they they're eventually now, little is so, in us it to get good some But scale. in sense if will

So...

David Little

'XX these 'XX 'XX in on order, lead-time and long of got to items win Joe, so and just are really So, sort better.

a that, new Jeffery correctly, just won't he over or efficient. lot line job, start wasn't the them. the John growing a those details, he was a -- he I he bottom be he Grow you into of And if but was was implementations need to we didn't business the may that, but was you just we growing because really was growing just go it find he remember telling that I'm and have for But efficient business. better So all while.

during So he where X% going no times he just had those hit growth on.

So, to he X%. around do there. do, going needs growth be and if has be will we're going then he going going hit on, somewhere which X.X%, not to we're We're to to

Brian Lau

All right. Thanks for that.

Operator

[Operator Instructions] And as there are no that, further questions. queued Oh! someone's As I up. say

a have You Barger Capital line Please Steve of KeyBanc ahead. with follow-up from the Markets. go

Steve Barger

cash flow Thanks. the quarter of the just the negative, cash generation free think should curious capital how working Free obviously for remainder year? in flow ticked up, about we

Kent Yee

cash Yeah, shipment positive. usually we Steve, my comments, you quarter. the our first we heard cash as move cash, last we up cetera. our we that And invested to fair have did of on shipped flow would my last I year, we then of IPS heavy like free collect year. free a similar progress prepared to mention it me those billings, et used typically the comments, typically a through of flow, this in the QX, also project If think side in we turn year, similar is amount Kent, i.e., In that business, and

last around conversion free so, year think was would XX%. cash flow I And our

again once expect of if in absolute maybe level. I think something But... those you just depending little the not cadence year, upon similar the this bit jobs can a higher

Steve Barger

more on just market. last And the color any it. then one Got one, Canadian

up were just and Some and political talking other consistent Is of slowdown distributors the headwinds takeaway PVF there. with a really expecting about constraints your view? that

David Little

that is activity places and activity We're about And gas talking period part industrial and drilling with in and in dealing Calgary actually the water Their world. of oil Toronto nicely Alberta we're other Montreal Edmonton really doing and and down, is products. where and not quite is. I'm It down. particular and in

is so remote stuff going is make, okay. hospital, drilling Canada So okay, money turnarounds is the down our down, these to Even going We're make centers be our that be we in medical going there, on-site particular down, safety part that that for is activity okay. are staffing services safety, business Canada. overall, but people will to are to is do

is there there, it's business growing. So not

we dealing we're and the get. volume So with have that we

then then talking and he call of I is about I'll Alberta a let's, got And I'm nobody maybe wherever politically guy. Alberta. looks we, that's everybody him is a how likes so, wrong, a new, And guess they the sure oil lady is. of governor, And course over now and liberal gas. in a pro rid But head there they have that who businessman got

we'll So guy. Prime Minister still but the has to fight he see,

it's there things while. so, And take to but could little improve, going a

Steve Barger

Understood. Thank you.

Operator

And with so And are to that, there no thank conference participating. for all like you today's call. further questions, concludes this

You disconnect. may now

David Little

you. Thank

DXP Enterprises (DXPE) 11 May 192019 Q1 Earnings call transcript