DXPE - Earnings call transcript Q1 2021

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Operator

Welcome to DXP Enterprises, Inc. 2021 First Quarter Earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. to conference like host, to now Mr. would turn over the your I Financial Yee, Officer. Kent Chief

Kent Yee

Christian. is our you, XXXX first Thank This ending conference DXP's welcome quarter call QX to to XXst, discuss March results the Kent for XXXX. Yee. And

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

detailed today's from forward-looking includes Before SEC Actual forward-looking on filings. started, that results to of contained those are webcast these being discussion may remind want get in is factors ongoing A an material and believe, materially contemplated many statements. statements. by have we may our basis you business effect differ that I call the recorded and our on we a

new information future assumes or DXP obligation that no information, of However, events. update to as result a

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

David Little

our highlights the a take a his through had to for then on quarter, And our Overall relative continued call. XXXX our flow position week prepared including strong in today developing everyone the our cash levels open strength Good pre-pandemic moving growth. seeing And the will free are perspective, and will a end-market our trends acquisition early thoughts COVID key generation. to confident our and remains quarter efforts, diversification today details February that we across that on first of first challenging good will joining in Kent. Putting positive of the thank we the And we to and Q&A. in with pre-pandemic on morning. resistance begin first weather progress and us accelerate after good execution number today remainder are and XXXX. you, were end-markets of returning with remarks. I for conference we thanks our fiscal quarter towards in that focus. some comments, you financial a perspective strategy my After execution and continued Kent, of DXP, good aside beginnings we

as of our all all thank global from of continued stakeholders their the corner build in the gradually me particular business. to and for pandemic Let grit, our begins in we DXP hard our work DXPeople turn and momentum

of focused of out coming which some PMI market found by which We improvement in business upward shows in manufacturing end-markets which cycle of on positive index industrial have XX% are movement. The last the encouraged XX.X% and appears COVID our gives business is continue is to a conditions us percentage impact was fiscal by to and will last the average indicator signs for XX industrial an positive the and above indication rating January a, XX% looks expand the for the XX.X% should months to and of through rating. the a broad how perform markets trend March to This the today, XX% XXXX. remain of growing from the from, continue legs year our continue year DXP's way lessen. be ISM, DXP's

forward DXP up-ticks business well and that of tied is the modest look majority or tends markets. should strength and mixed closer to flat oil end-markets CapEx gas The is last water actual chemicals, signs our to this along and cycle showing to food budgets. of Oil execution international point and out but count the wait production signs our increased continued recovery and year. throughout on serve XX% is lag increases, in and momentum spending see of to will including to movement rig excited remaining broader side were see, CapEx and the in gas manufacturing business for occurring the and was acquisition budgets XX% regard coming progressed strategy. is international of in trends which and to and the with across the the latest with With the domestic DXP our improve XXXX. the this are underlying improved of March. These to us of in as quarter in demand in strongest general We business. wastewater, And the the trends recovered, early industry beverage,

discussed. increased with DXPeople and first for or DXP. Our DXP recent acquisitions, business markets sequential sequentially and reflect million to your QX indicators This $X.X sales their were in as Total end you X,XXX first our million work per or our hard this day. year-end includes industry as X.X% quarter dedication. quarter results the reporting for improvements Thank growth and $XXX.X is

great my great share is to part are on to APO, work. We And your each your our excited you up the a performed with expectations. always line a Solutions Total have pleasure excited DXP Equipment it first are and They and quarter And Pumping Corporate performance to have had and with family. behalf. in us. our we Keep as results of financial Equipment,

to growth all of This $XX.X to continues us In find QX, and the of have DXPeople challenges. for in results liquidity, cash teamwork DXPeople. our evidenced the of flow which sequential ways our efforts. terms our free million of overall generated financial is cash position support stakeholders, and and to acquisition deliver continued we face in closing the extraordinary acquisitions, by well of flow

services of which DXP industry and provide in markets, to our unique to build win. very We makes gives ways a continue more us our help our customers set to and our of technical in all products capabilities

quarter, third goal markets balanced DXP's our the grow to have during exposure. discussed we of market end As all is a and

alternative opportunities bigger and refineries targets military. chemicals, and food wastewater, water sanitary, beverage, and are Our and energy,

Our recent in is of example strides making acquisitions another Verplanck Carter directions. & of these

continue diversity led and markets nature followed the the improvements, activity and way, as Pumping move see time then Chain Centers first by results, the remain of expect Supply Solutions. continues to end and is Service MRO resilient Centers we Services financial allows to to within of us increase experiencing through terms as we year. Chain In to The to Supply Service the recover. Innovative

We in continue segment. Innovative Pumping is Solutions tied We largest our and within see the decline to business experience to domestic. and improvement budgets versus IPS industry. gas oil budgets a the stronger international cap capital

expenses money We lower and continue make to sales demand. monitor on

the average our continue XX% to customers in consistent In are with backlog, terms we declines numbers capital budgets. slower strength of below and backlog that cutting the are IPS now XXXX see

were $XX.X these over DXP today continued biofuels, recent have gross improvement other and of produced in our Our declining markets, find reflects is wastewater. EBITDA as a basis and for from of main overall the we DXP's focus as demand acquisitions. with within IPS, and This such IPS is which opportunities margins point and a XXX to within despite improvement DXP's consistent beverage sales to food levels QX. and and XX.X%, our solutions margins and quarter profit X.X%, managing percent sales experts. market Overall, profit acquisitions We strategies EBITDA and customer-driven decline leverage, today. improve being for market up, to gross million declines if a to strong water to to In financial not our environment. be organic like geographies inorganic summary, to we continue objective growth performance operating it and would certain experience begins begin growth through and we sales we fast, from is where as to should And organic continue technical by in convenient look improvement pick to transition providing That growth. drive in our said, is marketing industries. and of

We going customer and vary pace reiterate the forward continue end and magnitude of type that market. to by recovery will geography,

continued improvement firmly remarks encouraged believe well in sales with by this I growth we positioned our pattern Let to conclude that sequential and and that me XXXX. my into continue are am saying profitability

times, uncertain We flow free business have managed producing invest that our continuing and benefit strong acquisitions and future cash the growth. successfully the making business in to will through

it all I it adversity, and all have With turn financials will to collective to we honor our value in the stakeholders. that is overcome We review and team the back detail. to tremendous now of for more are an Kent experiencing deliver a

Kent Yee

and such financial of David, variation quarter we of either move reflects in and was February. an events to performance performance review unusual based the QX past Thank are everyone Since year our hit unforeseen primarily on or due as increase, negative thank of joining a trough that the storm quarterly to likely third normal sales results our growth. of results. direction quarter the quarter sequential pandemic, in and first for the XXXX to measuring we are like winter in experience move monthly upon sequential positive Monthly you, us our you second COVID-XX our financial XXXX XXXX. for impact based

in result However, will year, generation. Centers respectively. review we year. increase should results strong first versus and margin free to first our margin Services flow takeaways. a sales throughout Total Chain see. previous Overall, from month overall X.X% X.X% were contributed sales last and the the Service expectation quarter is see sales the quarter to and Acquisitions to in increased a sequentially, That which million. growth following sequentially growth and gross will Centers QX way, sequential earnings year-over-year we Chain led cash $XXX.X the Services, good reflects in that during Supply sequentially the shortly. for million $XX.X DXP's significant experienced growing quarter Strong the quarterly in first sales XX.X% Supply improvement and said, We performance Service as compared acquisitions, which recent summary quarter. and

ramped the QX. contract Total As project in sales sales indicator. family. inquire Gulf line the SCS expects in improve, Supply pricing. along the sequentially, our to with this, we with Services QX would end and employees and sequentially. if are are quarter our beginning the David performance day quarter sales APO/CEC, driving customers' $X.X a is customers $X.X average sequential California, sales also $X.X in Solutions mining, million $XXX,XXX were facilities Texas, sales the which open with to said, associated Equipment for specialty revenue more million municipal as chemicals. Average Adjusting for million Centers Southwest. growth per X.X% sales day experienced day segment food Chain of million $X.X per quarter. including include daily to Adjusting day and day general are X.X% to the positive one a That acquisitions, have continue work. $X.X grown of Key Service Pumping first January of for the markets as Regions sales normalization Customers business to include during QX. for which trends from million versus as in commentary first see and beverage, which per per vaccinated, Coast March, mentioned, performance, one-time the Unadjusted daily have adjustment and reflects during our industrial, were excited we accelerate. activity average daily part within per DXP grew vaccinations

Innovative of the continue Solutions, declines. we to terms are Pumping In we backlog monitoring experience as

we the flat to discussed slow indicators. tied industry projects slightly down As QX, in from we XXXX. improvements start and international is CapEx of in in the point. see to dollars demand CapEx mainly do a Domestically, at see we essentially recovery this But rebound budgets

QX from down average to down it's XXXX average compared the monthly and Our backlog the average from but was backlog. XX% XX.X% the up XXXX average XX.X%, backlog backlog, XXXX

we monitoring XXXX always looking to are of continuing upon stands are new always. We end slightly at where the as the based monthly our above and for bookings backlog backlog quarter. first comment, the we levels Again, trend

one-time gross jobs experienced and experienced in in associated sequentially our unique despite gross total efforts revenue that within services XX Service water wastewater QX we to in make working more basis improvement DXP's deliver with a were from over jobs on decline continuing gross improved to as the associated mentioned Gross a is basis XXX a QX through solutions business. XX.X%, experienced municipal from several point margin well shift improvements point and with XX% comments. Turning margins margins. as innovative and margins QX, while more projects, adjustment to to supply centers move chain cost and previous the international pumping mix QX our margins past QX. my decline the improvement lower also to as

margins operating $X.X operating business adjusting In all increased centers margins the from combined in for business expense sequential DXP decreased income QX segments Service versus income to Total million impairment of basis operating operating basis QX XX points QX. QX XX basis points income. resulting XX in three terms income segment in operating $XX.X points versus improved income million.

basis Innovative margins as rightsize cost pumping basis our declined operating income sequentially, points some points sequentially. points a XXX pricing. increased fixed associated solutions operating well continue costs, Excluding revenue XXX one-time acquisitions as Supply higher structure primarily operating SG&A margins which income experienced income with reflects the XX chain we to associated services adjustment in demand, basis margins aforementioned cost absorption. with as to contract decline primarily

for the and the -- million This $XX.X seasonal taxes was and payout quarter this driven from normal QX me commissions of bonuses by SG&A payroll million first associated was Our to first increased increased $XX.X the XXXX of primarily from with excuse year items. QX.

Additionally, contraction most reflects share. associated other in in with customer comments this position to are respond and to increased we a tomorrow those gain and market is Similar we and the the to DXP our the we vaccines, also coronavirus positioning are costs today as who items. legal of needs respond are believe transaction QX, will distribution with mindful to that passing, accelerated

Turning were million. adjusted QX $XX.X EBITDA EBITDA X.X%. EBITDA. to was margins Adjusted

through mentioned growth the we maintain margins. experience should David we as as COVID as move gross operating we and drive long rebound leverage As organic

tax, In Texas continues effective by booked reserve of a the credits a with upon of tax lot challenge risk happened QX, R&D terms quarter based our similar what In the noise increased significant to tax QX. DXP to in this have associated state. the of rate

forward, Going XX%. XX% between continues expect rebound a rate normalized to effective DXP to we tax if

of terms was net QX In our income for $XXX,XXX. EPS,

quarter diluted earnings for was $X.XX Our per the share per first share.

were acquisitions margins and income ultimately gross accretive earnings. recent to to Our operating

and Turning to cash the sheet flow. balance

million. $XXX million working of capital, from to In working increased QX capital $X.X terms our

this As sales, inventory. XX.X%. a amounted of accounts This an in receivable increase to primarily and reflects percentage

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

our capital first Regarding levels, CapEx, maintenance was rate CapEx or control reflecting $XXX, minimal the needs XXX, investment ability increase to our quarter and QX the business. of an from run of in $XXX,XXX

loan producing to operating sale solid ROIC for flow. cash million flow. was $XX.X $XX.X inflow from cash or Return cash the cash free free in on generated capital the X.X:X. X.X:X quarter Turning coverage in was provides and our forward. XX, $X.X reflects a We quarter flow leverage invested debt Total XX%. first amortization. and B at $XXX.X charge refinancing March first reset Term our of flexibility March At outstanding includes from during secured our assets. and cash operating fixed move ratio as our The was million million, This was additional the which our first activities XX the quarter and ratio we million of of refinancing covenants

excuse -- B As reminder a in new the Term XXXX. matures Loan me,

terms we the in $XXX.X have In ABL. consisting our liquidity liquidity, and cash of million remain and over on ABL undrawn of undrawn

and our we subsequent to capabilities. Tampa, earlier they wastewater & acquisition QX on this & in we us provides early or ended to closed our terms acquisitions In continue week a $X.X million QX. in of Verplanck water QX of sales. and another end Verplanck Carter with the by to Carter acquisition closing with expand of the anticipate platform in quarter-end, Headquartered

continues to strong had acquisitions, for we from as strategy acquisition the look contribution in and year-end quarter DXP CVI's create QX. value we by forward Our evidenced to

pipeline in Our strong and end remains different is markets. expanding

turn for More companies that, joining is now talent growing over high questions. valuable to importantly company. call we'll expertise the our the and With very and at the DXP experience brings

Operator

Moll. Tommy question from [Operator Instructions] first Your is

open. is line Your

Tommy Moll

my Good and morning thanks questions. for taking

Kent Yee

morning. Hey, you? How good Tommy. are

Tommy Moll

are you all? Doing great. Doing How great.

Kent Yee

Good.

Tommy Moll

highlighted. for gave that varying some you to quarter items Well, unpack some just kind the the of the across of one-time trends commentary helpful first plus segments you

there's the think I as progression maybe I'm you the point first to we forward. anything or we're could April about for how good of if you think looked go terms quarter. how So- in curious

pretty think you. differently -- widely would very my Is March. segment-by-segment understand rate help called some do I out level strong a could notes pretty You be at really strong for exit Thank back move may looking a those varying for anything us you there helpful. But trends. to how seeing you're

Kent Yee

because IPS Yes, could of chain. But supply the everyone in what for versus And business centers kind go of do the then through I'll we comment David normalization call no the accounting terms the heavy quarter some sales cadence worries. get just a during this have the quarter, felt day. end per we is normalize entry of we on view on to the Tommy at service versus just just we maybe a and did maybe you do year that of trends. the should I'll

February, million. for day $X.X And April show million -- million sales $X.X million were in and January March, per $X.X so in then estimates business early $X.X for

we're strong. bit point Service -- Chain. good little And IPS a and is rebound and Supply so of is the Centers, of difference But seeing between to cadence there your a this

I thoughts And don't share to -- just David want so on kind if you some of...

David Little

got to Supply had -- point we've pretty Yes fact they I out sales that Sure. significant the was think, Chain Services is Tommy, the adjustment $XXX-and-some-odd-thousand. to an that

And chain which back. so look you actually And is growth. and supply And sequential if had they add encouraging. at that

they them had they airline that pretty gas some some actually down last take were you If hit year oil facilities that and closed some through accounts And then had et also cetera. hard. accounts

was accounts, the beverage that down. positive The So were big and was negatives. those and brought two other what but them other food

They're a build oil so the and accounts. things small way we're recovery seeing gas starting And in in to again.

bounced of their back reflected The quarter to then of, very have maintenance year slightly part line last And Centers, so them really that. continue. work back ever looks to has people nicely we'll as not ones is and the sequentially Service quarter are side repair operating gone fourth and first But kind we lost we that's so clearly, but up. lost we that it's to accounts off the fine. good. doing that have from so And where And build

for encouraging very that's us. So

IPS. there real is -- a where IPS the the is And we problem break so -- out just kind of we put refresher. And

sell but branches in take may projects, we it Our capital and IPS. put that

really like. get business so operating and most our and CapEx which business a looks repair versus like versus looks is picture, pure unusual maintenance And we our what of companies

strictly go of kind So when same course, looks And, going the CapEx. long-term et they their what and trends budget oil we year. but that's last general like gas and awesome, there -- concerned budgets guess look IPS looks the future of at the like this cut to it's of they're they're the year is price attitude oil they're not of I because with our like cetera. with

So want those at make they're And to about being we a more positive to I is there, to the increase international. have IPS in reluctant say business some that the we see can not point. budgets because The still is capital this to that. not United I'd but little States you go it past. less But zero, note going like and and we to less adjust money activity

Kent Yee

The there's that we're add our thing Tommy in seeing that other I West that excited region particularly, also that about. only to what are some that would IPS segment water in, that to projects are are come in California wastewater is we're is

-- it's are oil bucket predominantly other so… there's and IPS in so And end gas that markets but there some

Tommy Moll

you, That's Thank both. Yes. Okay. helpful. extremely

managed There's inflation price/cost the maybe some supplier of this your own talk And more base? what extent supply are that own your side is you've that in and plan year? of or to business. probably of Let's around the what To the kind manage are your of commentary a on dynamics MRO about rest this you seeing cost of lot chain.

David Little

Right.

sell don't lumber. we So

increases. that problems past we prices XX%. seeing -- some high We're more we're that's A in be we X%. -- then seen we've So something And the high. would with be numbers thank raising pretty And But can number we're X% are shortages. would somebody to than delivery seeing seeing goodness. more price and be normal deal one that and won't seeing

We're all goes unemployment getting that think those inflation see. the as help, pressures also to things So of but people raise fact is is can't and pay We'll to me work that just back back come coming. reflecting down. I

level is distribution. and so inflation good -- just X%, for X% that wouldn't in of And me percent some kill us let me but say then --

know the I on a up have Services as Chain can how documentation little normally gone of then the we out can takes long as we point own which raise longer. Services So you that will pass prices. with Chain that costs Supply that continue we company, to customer, to -- Supply it can our proper

margin a get they some pressure, that So margin get prices, to because profit while pressure the right gross they to those done. raise takes do have it but

little give break So somebody lag. calls and we new something bit up immediately. price them just us a a wants it's something a of can Whereas and

Tommy Moll

helpful. you. Yes. Thank That’s

David Little

fix volumes But from that go stuff to the is been the actually I use shortages. fine. that. temperatures one one that operation auto that these we're has our think same hadn't to that's back We trying dealing understanding saw China. we and pump are you all levels we some. We're side. inventory use and and -- chips these to able industry There with we for and hope of like was computer what our in up sensors those the The much only We've adjust better

have So to get. been those impossible

Tommy Moll

Yes.

Let's move the SG&A. to your P&L here down

So potentially at at we've a a pretty the But where recent rest better over taken XX now you're through. of comes as position cost least some may point you year to or than response of looks the that the be model out where good, all of back. in events the definitely lived quarters, you've months, in this last some

mean, disciplined are guys generally. you I there? philosophy the what's costs So on pretty

right sales So is a heads fixed of for there you're add for on while? you unit or direction much now do how how back, manage cost headed back as relationship you that, that the a your revenue potentially maybe higher, hopefully every rough

David Little

have stop, we don't we kind question. there that but that that manage would be will would, COVID-XX an felt normally was. pandemic like know there think it asked event you really process I and stop. glad So, I felt we a a don't we I'm was necessarily that of because start like a like and

my to we to that we So sales and not We They're DXPeople. -- easy getting. opinion our talent train held or on rationalize to we were in by of not volume up. of productivity to come kind our kind didn't the easy

we so, employee stuff make really reduction And didn't priority. a

I and top should so expand therefore, see the us on line, grow you think, And you line. see the leverage as bottom

like could that get X%. EBITDA back to think pretty to I'd easily so, And

goal XX% Our and we've good. is times XX%, that's at been when but really are

So soon, targeting really more of appropriate. XX% the X% I'm not but anytime in something line is

so, percent would And since a for we doing job percent really profit on perfect, took pretty at. XX-point-something is of be gross is good position said, be too wanted where pretty margins, already as because we're but a in XX-something. a to we good on, XX% that SG&A for I recover us. take high But fast. sales I'll to like we're

we that right. we And got hope so,

Tommy Moll

an see pipeline, rest in could question of context me I'm does other the visibility law have side. progress? of Good year pipeline a works one curious tuck-in on. there. may change like? potential more the There's But from you the good may strategic from the you got in continued that give Last like appetite How you've terms progress to what tax the Yes. at look think impact and the us? a more what acquisition on standpoint. It sounds least

Kent Yee

of saw I that, tax marketplace law And others, spot your conversations XXXX point this recently yes, in that weird the Yes. to begins momentum, with think I visibility politically. done change those becoming I've a get Yes, we on. on earlier I is there lot chasing got just a repeat the see Tommy, QX. the a and out and market end a are had at comments end you as in that where the what then, at. high now early we've we're your no, before on last of way, some there's is, got here, think overall that we're spot publicly that sense we terms we've quarter, process of looking thought going of grab And it's because hopefully opportunities broader maybe, think one but you're see to just in of we in here the dynamics the

potential transaction that could they for And so, it. of those create need of end -- get do some see changes always feel the And that does back frankly, this level. we to it some always at entrepreneurs tax activity in year, front towards

of so, but got think pipeline, accelerate it year. end the could we the I And already back towards robust a

-- So

David Little

Capital gains going up.

Kent Yee

those gains capital items. going and up Yes, then

And so --

David Little

in we're to be looking direction that clear so that just and with and is certain though, the And comment certain we're pretty and beverage. we geographies selective Tommy, like maybe wastewater in my at food like headed. being water we industries, DXP

that the business we like where only so geographies And we're we're geographies or -- and that so -- geographies But are or areas. not in we're gas that's in geographies, kind geographies municipality industrial they're those not appropriate what of thinking.

So we're being pretty selective.

Kent Yee

some also pressure think, a been getting upside. on maybe there's multiples, the perspective, I at, you've Tommy, multiple From what

look growth got an equity aggressive more these don't yet have and got And of a businesses profile that necessarily plan, what to want of is, at private in business. the they And lot I multiple. don't sellers' lifestyle sandbox. guys mean they by You've match that a closer the we are you growth expectations their businesses

what of obviously matching some said, so, And and David up try to it the disciplined. also geographies is the markets with be right We with valuation.

And to create creating we're so, there. out value, the we'd that way like

So...

Tommy Moll

the turn Thanks for Thank today. very it I’ll time That’s both. all you, back. helpful.

David Little

Okay.

Operator

day. call showing time. for conference great earnings this a no have I'm session. in further Q&A at Thank you This participating today's does question our and conclude And

DXP Enterprises (DXPE) 9 May 212021 Q1 Earnings call transcript