DXPE - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the DXP Enterprises Fourth Quarter and Fiscal 2019 Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, David Little, CEO; and Kent Yee CFO. ahead. go Please

Kent Yee

XXXX. This QX Kenzie. for Yee welcome December and fourth Thank conference is call DXP's XX, ending year XXXX and results to to quarter you, fiscal Kent discuss the our

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

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

we our at During is non-GAAP to both The press now present of non-GAAP release earnings release. GAAP measures reconciliation A financial press website may is this ir.dxpe.com. on call, measures. GAAP included our in and available

turn and results. summary I will XXXX thoughts provide quarter fiscal fourth the to David now the in of his to over call

David Little

to after thanks we then and key will open details fourth Q&A. the our remarks you on conference comments, call. Kent, Thanks Kent quarter and take my after financial Kent's through XXXX prepared and year-end everyone for will

capital the and DXP took expenses on We productive. of started that to making short-term year and XXXX added become more intention grow various fiscal with meaningful sales investments internally require investment. initiatives

payable around new new of corporate brand, inventory our several our to multiple supply operations internal expanding PW-PC’s. moving facility and software customers, customers, Some support capabilities sizes human to new created in PWA-SL’s service programs supply and our applications fabrication of included chain our teams, products accounts for label XXX,XXX support including PumpWorks repair new deliveries facility and vendor-managed these two to chain our to better and and plus new initiatives, implementing business, more improving services, resource services, and our a aftermarket and corporate large private provide faster enhancing, flagship consolidating Houston

to and fast, convenient are with experts. initiatives these We pleased make us technical

XXXX and which $XX.X related initiatives for million, Capital million positioning the expenditures these and $XX.X was growth DXP support in of future. for fiscal entirely of were

were instances our three of to Subsequent oil the by the end year. finish initiatives gas deceleration slow backlog. largely we growth our halted And and closed we we Our as supported for experienced as out to in quarters activity markets some year. QX, and continued in a QX

that in end activity pointed industrial with that in our our up Additionally, market to started show signs a to caught slowness results indicators QX.

However, we balance the to we have feel recent creating of XXXX. on renewed XXXX optimistic our given to the margin sheet, the despite in improvement, and the strength future environment activity, in focus gross efficiencies about acquisition and opportunities volatility drive market

are We win projects and in to participate believe in XXXX this activity. and there execute will that DXP

recent macro our market customers direction indicators have in Therefore, Coronavirus. metalworking until to developing programs the rebound business was to event, a and minimum. but including end DXP trending the overall seemed be possible. the keep most Our as the of a our was to health index, the employees economy exposure positive slowly better keeping safe started help to Briefly PMI

supply made in PumpWorks PumpWorks supply as is channel, everything America. affected which not made -- -- in channel will be

our and QX. halt markets year-end show that their to the quarter customers spending fiscal has and the fourth in Our results abrupt as started signs overall industrial slowness in approach oil to gas reflect the

QX were or sales $X.X DXP day. business million for $XXX.X million, per Total

ship comments. our the impact after softened Kent in have that In -- slowing the or were impacted of items. However, his review one-time during have -- profits also unique by would sales. we They some would will jobs,

effort full days and the for driving growth sales working day organic stakeholder success provide a total value XXX% X.X% doing and DXPeople a creation. to delivered DXP year. and continued

many we my is free we investments to It cash Thank as XXXX, share the for businesses which Systems We and of is at DXP flow we the significant acquisitions pleasure in provide by continue our focus driven work additional results share to positioned behalf. for in beginning of to X,XXX look going to the customers after Repair. stakeholders. hard year dedication. our their forward, DXPeople you fast, your two and convenient and all close after take made the to of significant Machinery our generated million technical for believe the your Inc. Pumping fiscal financial capital We closed deployment Turbo is market always $XX.X the year, on in XXXX. and expertise our

Service Turning to $XXX.X to $X.X XX.X% X.X% or Center in Supply fiscal Solutions million. million, million. results. year Chain the X.X% were $XXX.X while billion Innovative XXXX over year-over-year increase our increased DXP year-over-year X.X% sales sales year-over-year increased to $XXX.X Pumping sales Total fiscal XXXX. were to sales Services

Supply of beverage in including Chain last addition new They device, markets. implemented customers and sites. aerospace QX new reflects have XX-plus growth medical of since customer sales the the year sites food and

power continues Pumping modular driven for customers. by our Innovative increase jobs ETO to packaged midstream, chemical, upstream, CTO and refinery, be petrochemical sales equipment Solutions of and

XXXX the yearly of maintained decelerate X.X% last average from the backlog, levels IPS average and to XX.X% decreased XXXX. in is QX months the XXXX October of two XXXX. yearly its terms IPS monthly backlog. down to average from backlog The In through continued it

point our high backlog there fair XXXX get while the of share. customers the win XXXX has backlog its in to out are we total remain off the DXP Overall, that should and commentary in dollar amounts by the encouraged jobs that decelerated points, market from

and we XX% a if we make growth from XXXX cannot slightly in experienced volume envisioning XXXX we mind to in sales where Keep scenario money. not that XXXX, is down are

made We have to are the the adjustments We we we be cycle. able at profitably last during levels should just -- perform current experiencing.

saw by driven divisions. was particular River Valley, increases sales primarily Ohio Gulf growth rotating Seal West, year-over-year regions. Coast in DXP, sales strength in we year-over-year our Service Center equipment and Texas, product Centers, metalworking, Service The Within

performance highest in sales River record Ohio of specifically Our history its year regions Valley Congratulations. with the a DXP. set

overall for margins XX.X%, items XX were unique year the IPS's a point for eight over over XXXX. gross improvement XX.X% DXP's and Adjusting or improvement XXXX. were basis margins point profit jobs, an basis gross

light and to That than improvements said, conditions. we stronger are improvements have these internal on changing jobs in We did disappointed personnel including made the through finished still even incremental should and have are have as and look in profit margins market processes cost we XXXX adjustments XXXX. gross in driving of we changes

basis of to XXXX going in XX.X% from XX.X% XX points XXXX. percent SG&A as a in and sales increased

In macro a terms of envelope more will sales while targeted thoughts as be acquisition on the on of accelerated SG&A for my costs become in the pushing pushing focused environment SG&A, and XXXX. on managed efficiencies we to cost percent

and within margin X.X% as there our of corporate which just million, want areas efficient mentioned have and But We be expenses amortization. income was improvement this DXP. the operating $XX.X is sure I to opportunity just in mentioned. still that -- towards those I includes businesses targeted we or overall DXP's feel operations to more is make

and improving results QX margin XX.X%. one-time Centers Adjusting the income these income margin been finally jobs and the margins points. for in costs. was one-time quarter, Supply costs, Supply X.X% Service weaknesses impact income margins Chain IPS the with IPS Services were operating XXX XX.X%. to operating showing due have of with X.X% margins And operating jobs margins Chain would income were operating basis lower fourth

XXXX was comments. started XXXX. sales as X.X% versus businesses I've produced million XXXX. I $XX.X a focused percent was my in internally EBITDA of as of allocation, terms you investing as in I’ve with DXP fiscal Overall, in EBITDA started $XX.X -- And on in million shared capital versus X.X% when the of

forcefully. focused paying sheet down headed to give pristine a pursue generating XXXX us on acquisitions DXP the cash, Additionally maintaining into debt, would opportunities that balance more

expect towards future flow successful generating the execution cash continued we of shareholder improvement free value. strategy, our greater and For

the a we okay, summary, and our quarters building three seemed will prices quarter. with then first has and backlog pleased the coronavirus. $XX barrel, were go driven a down and In fourth but QX outlook In of are reappear, lot disappointed by with and not oil to noise sales that our slowly in

in to historical combined of to gross our average XX-plus-percent a continue to improvement basis. closer our look We margins, move on drive

anticipate cannot initiatives acquisitions. appropriate, take we future drive through to XXXX to of growth and growth anything volatility, light environment. in to where efficiency, Improve will We internal where and be drive through proactively acquisitions fiscal for need ever-changing margins sales another sales through look and one granted year but market of drive gross

a alike. smarter. All proposition. shareholders suppliers on DXP innovate together know to remain will great year improve strive a focused our drive to We customers. differentiated results for sales, and customers' business DXP value producing for create we and DXP has our the compelling has work and continue in functions will that value energized our growth team corporate upcoming for great segments and lead and three change, to operations

back Kent will in that, turn I With to to detail. review the more over now financials it

Kent Yee

everyone and by impact Thank in XXXX our review Pumping fourth us the environment, and impacted, customers. greatest but Innovative shift joining Solutions. felt our operating thank segments to the gas fiscal reflects financial oil you QX were for three for and you, specifically, results. was David, quarter of within financial performance All business a the

improvements closed my we acquisition to DXP generation, year and gross XXXX. in in as strong and year having operating I within position, Pumping said, drive cash to finished fiscal further poised the later two free since Innovative That our in Solutions, comments into on drive acquisitions touch a will execute which move continue year-end, flow on margins strategy,

macro navigating comments, on environment. plans, our in and serve to positioning focused to his XXXX As changing while investment We mentioned DXP industry our employees the suppliers. executed David continue and fiscal was customers, and internal

Our one-stop our and and products be smarter and enhancing business facilities be our all expanding for tools growth, customer initiatives for software improving continue to manage and source were on more services to our needs. offering a to the focused efficient

from the for for fourth and reflecting we quarter Total customers. grew the Total oil sales $XXX.X X% activity in million, DXP year-over-year our gas X.X%. XXXX experienced sales decreased stall fiscal to

we three pace months we quarters and were to X.X%. on a through were grow six First to X.X% still grow track of on XXXX,

of the drop-off oil majority gas the The from and in our QX markets. spending shift and end or occurred in halting

the fourth second $X the day per per year-over-year fiscal in QX, XXXX, daily for we XXXX. for quarter million were versus XXXX grew sales per day daily Average QX for were such, million As million on fiscal, $X Average X.X% a million per $X.X in QX, of $X.X XXXX. sales day versus basis. and half day

three Services and Centers Service In segments, with Pumping showing growth sales the of with Solutions, by business improvement, X.X% growth. followed all X.X% increasing greatest year-over-year, growth experienced Innovative our XX.X%, Supply experienced terms Chain which

SCS XXXX. Supply consistent sites, which new has of of implementing customer have Chain sales and customers XXXX, medical new quarter-over-quarter since growth reflects including highlighted XX-plus markets. aerospace and the sites, in addition food sequential growth the we device, QX beverage through

was our chemical, driven where by upstream, growth customers. markets and pump IPS midstream, label power and End sales private branded offering. include engineered-to-order growth refinery, we the configured-to-order, experienced petrochemical

fiscal segment in West regions. Regions River Texas which within meaningful XXXX our experienced growth include Ohio sales Coast Service Centers Gulf Valley, and

meaningful product our Additionally, divisions. increases working we equipment within rotating metal and saw seal,

Valley we David As congratulate the $XX.X record, growing in team. to River setting ORV region for a million mentioned, to over to sales. want Congratulations sales our Ohio

great year. a had You

DXP's Turning reflect to our progress. total DXP's XX.X%. were total margins XXXX for gross margins. margins gross gross

share manufacturing QX and negatively should to gross gradual margins would projects in simply for adjustments these by projects profit some Adjusting in fiscal a jobs were XXXX. and have we were However, on and dollars. that too market see processes We QX, There been lost been impacted have personnel breakeven gross changes mistakes. year in aggressive on improvement improve basis, XX.X%. made multiple and building these we

operating In operating XXXX. by by versus business business combined, versus $X.X segments points decreased income three to XXXX in terms million DXP segment operating all income million. XX basis income $XX.X declined margin or year-over-year X.X% of Total

point million, decline XXX margin Solutions, points XX a Innovative improved Service for followed had Supply to year-over-year Pumping to points Centers to basis $XX.X year XXXX. XXX $XX.X Chain operating fiscal basis million decreased which by income $XX.X basis Services million.

is of implementation sites the our scaling, in with not revenue earlier during associated SCS SCS and conference fully as decline mentioned The new calls.

by management increase intended a cost impacted Additionally, software implementing Chain warehouse was one was Services of our that on of for overrun productivity. to customers significant Supply

fiscal Supply sequentially to Chain and year back improved points QX they into basis track XXX operating margins on said, income That from going are QX Services XXXX.

QX. million terms by by not $X.X profitability, the share only jobs IPS, items was multiple we're focused In impacted also time shipping same at SG&A of IPS but they during of one-time on that gains impacted market versus

In XXXX. corporate operating $X.X million $XX.X sales. for SG&A, these items million been in income would X.X% or incurred of that terms not Adjusting of in DXP have items, one-time will an additional repeat

Turning were million. do of one-time X.X% $XX.X year to to the sale a would aforementioned for XXXX if adjust EBITDA million, need EBITDA. that compared X.X% was fiscal includes from the or adjusted fiscal Fiscal remember X.X% and XXXX XXXX. note margins EBITDA EBITDA XXXX to our we have $XX.X of Again for in sales. corporate fiscal We facility. been items gain

comparative basis, a been on So would flat EBITDA have year-over-year.

terms of to Alberta, X%. from tax tax, statutory our future rate rate the In year a change. this Canada due impact lower effective of XX% was moved primarily to

due estimate benefit tax received Work an has past in also We and from Tax and previously reform. increased change the a R&D received an DXP favorable Opportunity that to in Credits

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

XXXX Our Adjusting share would share all by one-time earnings $X.XX previously, $X.XX we in in for XXXX. XXXX $X.XX unique or earnings diluted $X.XX per been the for have fiscal share these impact per was or items. items versus a per have discussed fiscal diluted

sheet. to the Turning balance

end $XX capital of our X.X% We payable in average, is capital points Working year above X.X a This working million times the times from reflects increased a as the million day percentage was working drivers an $XXX.X quarter XX.X%. of of capital, a of sales terms the working achieved million. include of million XXXX from in increase main payables basis but impact. in The QX. to prior fourth inventory historical X.X accounts increase inventory our capital and year In the XXX or reduction improvement turns ago. compared in to $XX.X a down average $XX.X at

new From of down in down vendors, in we impact QX, million our QX. recently inventory and Coupa, are which accounts financial mentioned we've the procure-to-pay $X.X payable this million. a platform, is $X.X We with managing is our seeing invested in relationship investment and

better While us we it with the purchasing paying as a move vendors, time to in manage forward will get take advantage strategically position data in future. and more of over and line helped trends in payable our accounts we be

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

XXXX fiscal X.X% of fourth quarter XXXX in are X.X% CapEx, quarter was sales. million $X.X to In was or CapEx total sales. terms the CapEx of CapEx in of fourth million. or up dollars fiscal $XX.X million Compared $XX.X

investments office, in As discussing, corporate we within have been CapEx our during the including service our fabrication facilities Houston other reflects made locations. new year and facilities, center

have or to continuing more in make with maintenance enhance year operations $XX.X growth to and CapEx, XX% growth a people software Fiscal where CapEx been in XXXX our also We has are corporate has the our provide investments related. year Of been tools on $XX.X be to we focused support CapEx. million efficient. million versus

during fourth flow solid cash free operating quarter. the cash generated We Turning to flow.

we Cash $XX.X from During from increased of XX.X% million flow flow respectively. operations XXXX. and versus QX or million cash and had $XX.X fiscal $X.X million operations XXXX

For growth $XX.X $XX.X free generated CapEx, free cash million, fiscal we would or flow. Adjusting related have an the increase XX.X% million been adjusted in of cash versus flow XXXX. XXXX, for

improvements While to comfortable future. we end further of where with flow cash the to are had come improve with we enhance the are year looking generation, and our at in the always we

on Return capital our XX.X%. ROIC invested was

$XXX.X at ratio XX fixed charge million. secured ratio and December Total capital X.X:X. our structure outstanding our of at was terms leverage debt In X.X:X December our was coverage XX, was

continue acquisition drive business productivity, on greater plans In consistent goals, our we of our improving free and EBITDA margin businesses. improvement and is driving to financial DXP propel in margin way the segments more flow cash and to EPS disciplined we and do on to focused execution its to leverage have conclusion, the we remain sales growth, achieving operate path increases. organic

now over call for will We turn your questions. the

Operator

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

line Your is open.

Blake Hirschman

guys. morning Good Hi.

David Little

Good morning, Blake.

Kent Yee

Good morning, Blake.

Blake Hirschman

just IPS. and with there. breakeven I'll The are one start margins First essentially

and believe You all about flat. talked of with to basically bridge Can of talk we down million, about to how little start help that. the more that $X.X the a Yeah, I way you kind bit got costs. I'll one-time us

Kent Yee

this Blake, Kent. is Well,

First margin jobs had had gross off simply just I of We some that all, that. dollars. started negative with

do for So the uncharacteristic first us. adjustment you very that's would

As it business, market we said will. to was side an on build nature in aggressive the some effort you sales share our and if of

$X a that so impact. million was And roughly

that's just conservative gross a broke average it's not say, that's So just closer to hey performed and view those our but could to jobs that breakeven, if assume purely a you margins, jobs -- have even. to at maybe those just

that's impact. a million so $X And

as additional were QX had the you non-cash cash, as that to in that's through you segment. some $X.X where well that that get SG&A. items flow million some of And as kind impact related Then SG&A IPS well you the

you million that's where kind of so And there well. the as get $X.X additional

So you're at that's through. million just really in total alone, flowing IPS $X.X looking

didn't have would we so we income those at the were wouldn't margins, in And math, operating basically if breakeven we have -- positive a you territory. QX have do surely we quarter. in not items, obviously the that can been at We but been had would the

And had margin that again performed it. doesn't But that, looked so, once top of gross of those perspective. we that million could income on reflect at kind add you how at potentially operating jobs our another from that's average $X

So…

Blake Hirschman

should quarters carrying Or -- the that bid within is And through? IPS? of few okay. something into So jobs this aggressively next the we year about be more or over have the flow majority thinking

Kent Yee

four could depending of late another even kind the that see a as of and Yes. those jobs. XXXX say we six just upon it Blake. potentially would timing What in that's great ship XXXX as to question, can is, No I jobs

more, have funnel, of volume a terms you we out jobs the QX. number majority of in will so some And not the went of if in in

be there more now can well but we don't point this will be We more into know at exact the future. but -- And it. just so right -- timing see there some could the

Blake Hirschman

the talked gross noise? then that for these margins of due Was of pieces the to segment is want of of better there there. on product back. that kind Okay. And geographical Or little a took segment to we've kind that IPS issues mainly Just feel bit a more step a some get about?

Kent Yee

following I'm there I not guess Blake.

Just maybe one. versus the clarify previous the question

Blake Hirschman

back to IPS was we there the there's where in gross due or saw other the that Was in in well? margins segments mainly maybe that step some headwinds as other

Kent Yee

I as Yes. majority well. the got follow there apologize the of I you was you, Blake. No head I now.

gross centers, No, IPS back notable. talking but related. service majority DXP primarily headwind the A was that small driven. IPS was margins? in decline a of You're the total was step quarter-to-quarter There nothing

Blake Hirschman

then around or And And with the can sales just come any things Okay. about commentary thinking should they have back all at Coronavirus of you how lastly, this day we be the we situation? the have how per is, And the since year? guys trends? get market bounced if end

Kent Yee

you November day, business estimate read X.X sales bring I'll numbers and per million, as X.X start of per then October January terms do as X.X do the and X.X million, was million. per day day, December through X.X QX million for million In February I'll February. just I and normally I normally you

a you averaging will bottomed, here. we big the from month of up XXXX, Blake. And bit March picking -- a we as little typically if us, off were day we're million X per So definitely is but pull for a kind

finish have March a we month So quarter big we in we're normally the anticipating when out. as

Blake Hirschman

in hop right. lot. will I Thanks a All back queue.

Operator

ahead. of Mondillo Company. question & comes next Please Our Joe go with Sidoti the line from

Joe Mondillo

call I of IPS. something Hi the the guys. so missed morning. we couple I a I beginning apologize already, off, things; first of if but Good covered apologize.

call backlog in But backlog were I to it So this November, time you of long we looking the is that revenue quarter than relative just seemed was back lead terms the stated down. said for, much going the type like business. lighter in a third slightly think you to back

a type be was I effect. XXXX that would of thinking so And

should stated than trending what or off be And you much XX% was and good fourth that even for. pretty you looking quarter lighter revenue I so thought

you expectations? could to relative quarter So guess help your how understand I progressed the fourth

David Little

The Joe, quite you'll buying. like our fourth I This David. specifically is on the more by be talking -- -- color this about capital, quarter that It just we is you're IPS. seemed stock And that. everybody really wish asking inactivity. just looked is had -- really,

produce they're off during So But or the much holidays the backlog work. would. as there holidays to working in quite was have of as plenty tendency normally we a

So project in business really, component we that we weekly a ship where side. the a of get happens though week order an and also it capital there's just also in

So that drastically. of slowed pretty kind

that and rolling the then it the except year, have get cash any -- flow going And up. that rest up on stock so customers to were was the and money the were word spend they of try answer -- I an their street our the really -- to they build don't they gas for fact for their not for

Joe Mondillo

Okay.

orders like backlog the in the quarter, the months or half new well. of is trends and sounds understand least the the trended us the trend at first there in so did terms didn't you the -- How your orders where orders help so? over have how today? So of five Could last it the bookings

Kent Yee

Yes.

were stood average if XXXX X.X%. we average backlog stood XX.X% at at down you the down You total year that meaning comments. is in that XXXX essentially where But versus backlog we where look XXXX QX call -- so X.X% down on year-over-year said you point a would of of missed view basis, the the it's was Joe a said, the December at from just just is versus backlog. earlier the December dollar fiscal That monthly David's part

dollars with hearing up up the and perspective, follows with to interacting from And there's that So team absolute our hey activity. our we're the what firms still field point customers. from the that in

showing that materially. And in and in in February in And know so dollars likely there's not projects do backlog won but are March. our we down, appear our have be been to backlog that

point, feel to -- is good percentage an you off we're an from perspective, remember of we it coming XX-plus percent XXXX. But once from again, was absolute with so at. off got XXXX our XX.X%. where down that's But dollar up And absolute

And comfortable the we there was of and still I'm we're we're our beginning was the getting seeing commentary into are deceleration backlog the with And this what go a net-net, at in that's backlog. still up at we occurring that continuing, year. so where QX here pick is, IPS really but as the in

we And so to clarity have we'll greater get once QX our QX earnings call.

Joe Mondillo

Okay. that clarify said the you the I Could down And you just X% XXXX. just you you thought thought of there XX.X%. said end end it remarks at clarify? towards your was I down just Could of

Kent Yee

points look Yes. if ended you you end data only at where we Yes, But backlog X.X%. our you the without are of we different the versus where just down were absolute I'm dissect how at, giving at giving two backlog XXXX we numbers. XXXX dollars of

Joe Mondillo

thought... I then And Okay.

Kent Yee

fiscal average in look then at and average If such monthly but not backlog that's that you to XXXX it's had entirety QX backlog year strong seems of and compare you but down a XX.X%. only, only -- if monthly the it down XXXX, the -- we look only that's

Joe Mondillo

Okay, it. okay. got I

weaker trying pricing sounds like your on share after some to some in It coincidence. follow-up total a And regarding share. trying maybe go relative you could you're this to comments competitive more lower-margin of take strategies a demand to that the time made that. that But some projects margins period. it sounds with -- and be to you're like So and

And the X% some of -- margin So XXXX, end type you margin at backlog a that low-margin while lower? made down that your comments of negative that regarding is is projects? is or coincidence margin is the the the relative to just

David Little

best answer never can. Sales, to business this buy customers done from with gained I'll I the actually Sulzer. brand-new we two So used

and I not And below from was gain the to we not and What actually take we're thing. common cost. aggressive so share fact would us the sales that trying not a to wouldn't business. mind bought what's And that acceptable market and and that cetera. really me get That's orders right et really is don't we common won our they

sell there maintain reason costs. to be So might at account a and

we and we need take There give to not might cost. But money at it's an maintain sell we're equipment shop going jobs and to to be the so might just the order same the acceptable work at where in customer time.

it's They person manufacturing was not happening did job. order so balances. and the it got their salespeople. had that check It point took wanted is side and an lost so and the checks didn't and good order. we We the Salespeople we the where checks but the where that was there And and on balances money. have we

Joe Mondillo

terms guess that to in strategy And in process? of the I the or terms effects the manage, was this internal there process you and guys of

Kent Yee

were There personnel Yes. the process. We've looked at changes. some

we still But to in question there are while, And jobs personnel the got when so we call but work through. in changes. changes fully expect Joe I know some some we've don't you in jumped put the on previous

we throughout that And as so go expect improvements be the year. we there will

Joe Mondillo

million you Okay. of hoping could exactly was $X.X items And were? clarify I that Kent, then what the one-time

Kent Yee

of $X.X is the stuff. a So billion lot

categorized that do some some with roughly was you to incorrectly jobs Some that perspective -- these We $XXX,XXX. got costs did of machines had could from a one and corporate argue there. of was that of it R&D the buy so out

there. another also reflecting just But being some made bad financial that was that So decisions was $XXX,XXX.

another was while. there books been to that take for $XXX,XXX an in $XXX,XXX related a once inventory and the the job again on impact that And specific had then another then needed we to to an magnitude of reserve

So get impacted QX their you add in up that that SG&A. -- another you and all $X.X we million that

Joe Mondillo

Okay.

for question just guess I and me so I'll And hop then in last queue. back

could drastic in is this term? defensively the the the know I you the maybe thinking at was a drop at I margins, little near mean, least addressed, margin so more look what to quarter. So sort maybe in of but fourth you're just of Or pinpoint

in were XX% directionally, XX% margins? year help you're definitively if maybe the earlier in in just Could to and at terms to near-term thinking anything doing to IPS zero more the of just quarter. fourth point You you us the in you went where

Kent Yee

Yes. guidance mean, if place the Joe. hey don't think we imagine, provide No. I I I

one-time So if you forward. I'll those is, here's what IPS see million should that say going will $X.X we items not that's impact

So obviously just about place, margins that's IPS thinking one to going terms just start of in forward. you're

a fair. XX-plus negative I'll think that jobs amount dollars. call it QX it's of profit gross disproportionate do these had jobs. I had in We

on at And million then at my be from keep can so, question impact same that performed is that bake but they should the margin would jobs conservative. another in perspective you those those volume you the breakeven what dollars level, to would quantify at. But $X if

they And appropriate from another, be of between and so million historic average the $X could impact million and closer anywhere be that $X margin may so gross line. it our call would that have to I'll performed to level,

probably of -- IPS a on feel the a so And then good But I you purely we that, the in this where world noise don't it guidance I'll of related, out. best provide you performance have do top hey specific in best in part but the is any take of think gives drop that's noise. that volume QX

I what would anecdotally. probably that's say so And

Joe Mondillo

back Okay. I’ll but a have in I Thanks. more a hop queue. lot. couple questions Thanks

David Little

Okay.

Operator

ahead. of line the Please from comes KeyBanc Markets. Carl Capital go question next Schemm Our with

Carl Schemm

good Hi, morning.

David Little

good Hey, morning, Carl.

Carl Schemm

to portfolio? rationale, geographic else acquisitions. you Can -- quickly the those of or might kind the Or bring the product So kind of they're the acquisitions expanding what just what describe lines on just if expansion?

Kent Yee

existing We year the geography us. South We category and core good were us equipment. At Atlanta a beginning but Systems Yes. in mentioning No have did were in locations they equipment not provided you we of a the location. Georgia and product our amount did for closed Carl not Atlantic. some did Pumping PT rotating They new rotating Inc. appreciate have based we We I of not bearing absolutely. have that. the

sales Rough to $XX basis, on are $XX XX-month sales. they a about million million in

And so mix. They we're end bring to also part of them as our good excited have a with us market portfolio.

water, general chemical markets. beverage wastewater, So and they're food primarily and and pulp industrial some other paper

us have here to the excited DXP. with Pumping we're So at Systems team

end market side. exposure power some on repair single of closed other roughly a meaningful It's Turbo markets. kind and again Machinery around municipal wastewater, then the transaction. $X the And February, industrial is water, million sales chemical and we Repair location, it's in in Once

products. market end So in our and new new geography, core coverage

Carl Schemm

Great. I would want ratio getting looking you are the that push net kind What of of guess sort upper at then to limit debt-to-EBITDA What's deals. future comfortable to? just to? you leverage on

Kent Yee

answer I'll ways that Carl. and No, Yes. two

had we million And and of of on balance have the balance First as cash We about balance million $XX sheet. year-end. actually the cash on at I worth had sheet. of $XX sheet the foremost, worth of on in cash today, excess

-- onesies acquisitions work as call that we So, doing as through can to we're twosie them, going long cash. I'm and be as these I

leverage so, all equal. And shouldn't things being rise actually

call are we us That we've we business. pause said, your where gotten what our we the to said B That as Historically, when govern and could Loan covenants comfortable. look some question four do taken you probably the a times on have EBITDA, that kind about, well. we've kind up delever kind -- we've closer Term of that really of of

of and terms having how it about able the more think we're to we in access just well capital as transactions. so, to structure And

Carl Schemm

Thanks. Great.

Operator

Our with go next & of the Sidoti Company. ahead. Mondillo Joe comes question Please from line

Joe Mondillo

guys. Hi

everything to drop? center, about the I margins year-over-year of where going a And place. count over jump also, mostly? They doesn't because continue predicting then these service a of the that would At are. time the down? have follow-up thinking seasonal. couple it you What questions. outside of the all business And tick on forward? tough if anything? and be that sequential the in I weighed drove that's you're going to the in Could you number seem It oil volume address how gas? guess what two, of say rig on and terms And Just really Is margins,

Kent Yee

sure once Centers they're I'm here. Service in and chime but you side. David will exposure, MRO Centers remember, gas to on But still Service the again the have The more the oil and Yes. got they

activity service Joe if end end our see we the mix. So, in and a gas oil center curtailing markets, market

have today so about roughly customers DXP's XX% then. most to OEMs end that's make some mix For what what do have they part tend of be those approximates, they the total oil a sense, and of and do. MRO more and They gas OEM market

halt up it of Services Once I we've year-over-year, that impacted gas always we just guys QX, XX.X% saw but David, you this I which of oil that Even again, though have exposure. impact segments was what the they're and so, gas that's oil even those have by were to kind kind spending. all -- Chain that if think you're Supply know had don't here thoughts some seeing impacted of segments some in volatility in touch. all and And there?

David Little

about margins talking are Well, gross margin? are talking or we we operating

Kent Yee

Service within margins Centers. Operating

David Little

quite Service Because actually. I Centers think did well

Kent Yee

-- No Yes. the year... the for

David Little

a gross year really goal a our up did that. was Center IPS up the And and business of for of get Our blew profit job Service nice to margins jobs. bunch

lingering much little the say the so, not for going There's XXXX. be in The perform that a did Joe this just -- overall kind of I to help down higher in be will a going you jobs, IPS of bit. well jobs less. than is them. GP mix And was it's not still but mix XXXX you few were in for to came

margin operating the overall do of it's So, not going more not were happen IPS had that the the income made that XXXX. well jobs X.X% for in than did -- to year

we we seeing on the got So this I end of started to I coming. year. at before of mean, the this kind way mean,

So it -- been was we've on it. so

IPS or up even operating one margin, see income either should you So, margin, XXXX. gross gross go operating in

Joe Mondillo

Okay. everybody And else…

David Little

ahead. Go

Joe Mondillo

going margins. on just a just regarding to question follow-up Service was I my Center say

referencing I And especially nicely. was reason in XXXX? are think the rotating you second sense I of was Canada equipment the things the in get those rotating really in to in of about a earlier your the XXXX. we're improved two understand then, into Just as quarter whether business quarter sort entering of the part talk in fundamentals pretty actually of quarter; good your was understand definitely. just I year and think the the far was as really alone. or And third fourth I as year good I why year sustainable business, margins those strong. Could was equipment Canada and

David Little

faced So, gas Canada oil with and strong a still is headwind. pretty

more Canada water the Eastern course, Of is related.

a real we're well. of think So, and has it's -- gas fine what to got activity. flat. oil have I The side forecasting and going It's business, sort got doing doing

and we And doing guy was and well. it up the had where our we safety job then, picked up Canada changed is hired he's structure service we're a on great of margin new So, a -- doing side and in there. we kind

playing doing everybody's and So, a really together nice job. well

continue. So, I expect that to

So, not. to think I don't that any have it's reason

last a profitable, the much level sales So, maybe slight be continuing flat and improvement on pretty the as same say still side. I would year, services to safety

Joe Mondillo

And fundamentals then just rotating here-- equipment the and

David Little

Well, to and rotating business. equipment there. that to things not little It's that our not where really we're estimate just issues about fabrication cetera. having how talking how don't know we a fabricate all clarity we're the for et It's

So, we're on the more just pump a really side. little

going but than so -- we it much market So will these pumps at manufacture less that's have for again, cost a market the the what pay us to and is only to pay.

we really this got do have backlog getting midstream strong little we've softer, is there -- into in activity a And a so year. headed it's the work that to but

a really as we have be of of start would XXXX of than And XXXX. worrying to aggressive looks many don't is so just over jobs good more activity little is that I up on. to a XXXX the part better be that -- kind that about shaping we And than got XXXX. these I'd

I think have I So, that's kind say. to of what

Joe Mondillo

acquisitions is go context with your executing my you of have on today? in leverage what the question. Where strategy? And guess I two question. year, last your your after this leverage level M&A where and to just comfort is -- Okay do these that's

Kent Yee

is this Joe, Yes, Kent.

just credit Our terms calculating ratio. reflect the leverage on And does only cash $XX X.X:X. ratio $XX agreement using defined million is of of our the worth million sheet as in in that of our balance

add less million So, that we little end. than $XX additional bit if you the year we're really at had a

had million We on million $XX balance have a on cash worth the $XX of the balance cash Today, sheet. of of we sheet. total worth

So, terms frankly level those flat sheet. of transactions. we balance in two have almost were on able hold the the And really execute cash that we to of

a you Your lot cycle, don't debt We Black you've structure got the our redid I regarding question this. kind comfortability. of times at flexibility events, give to like feel will, this this appropriate just to macro the this point, if us point built in when we know of if but it's for capital comfortable. Swan say we At

process we're we have our $XX so at of the ABL additional there. we're in which capacity creating million undrawn on And some and then

additional up it based accordion million We DXP. feature net an upon growth have an $XX where can we flex of

it that still probably we'll be but will do undrawn. so And

pursue have So, properly, to structured getting be forward away acquisitions also multiple, at opportunistically we sure long ample a of get them what at win go is get and the performing. businesses them capacity right meaning I'm are the and

transactions, past is tend And the necessarily cause in and when a we looking it's at these that recently us the so we more DXP, to it's be tends transactions do and here net the the if larger haven't we've to it's it's to much. leverage. that of be those been that the to peaked a Obviously, kind win of leverage going as and shareholders impact for going some net smaller win for not

what's more Pumping we're Systems a turbomachinery. to And closer looking what is Turbomachinery pumping today, then in here so recently in in what revenue. at revenue lot in a we lot roughly $X million saw million systems $XX of of was pipeline was and in the

Joe Mondillo

to Okay. used And cash those acquisitions? finance you

Kent Yee

Yes. did. we Yes,

Joe Mondillo

Okay, a all day. right. Thanks. good Have

Operator

[Operator Instructions]

Operator

Thank time. We have questions no call. at your conclude for today's does this participation. telephone This conference you

disconnect. may You now

DXP Enterprises (DXPE) 6 Mar 202019 Q4 Earnings call transcript