DXPE - Earnings call transcript Q2 2024

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Operator

Thank you for standing by. My name is John, and I'll be your conference operator today. At this time, I would like to welcome everyone to the DXP Enterprises Second Quarter 2024 Earnings Release and Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Kent Yee, Chief Financial Officer. Please go ahead.

Kent Yee

thank everyone and morning. us John, you, you joining to this Thank quarter XXXX. is to our to second welcome Yee, results June QX the This and Call, DXP's Kent XXXX Conference for ending XX, discuss

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

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

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

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

David Little

thanks and improvements by delivered solid today quarter everyone conference with and year-over-year Good another results sequential thank you, call. quarter fiscal execution. XXXX, morning, and Kent, for us We our joining to on Xnd of strong

QX customers second and had and our of XXXX. This record margins. dedication to quarter. impressive We are at results. Overall, allows great through passion quarter achieve we DXPeople their XX% in pleased and to and sales remain to both these another plus continue thank see EBITDA end-market want through performance delivering growth half us to the support demand our levels a for solid I first of DXP's

DXP for to of half XXXX. highs the new forward and look second establishing are We

our through acquisitions. execution grow XXXX half ability solid and first The of to highlighted organically and

platform, wastewater water to X continue strategy as industrial to add grow acquisitions. to rotating and continue to execute our acquisition equipment well We DXP as

business to like have while execute part continue the in-markets commitment to been our diversify of be DXP. which maintaining We and will a to on foundationally our goal Energy,

remarks, DXPeople his for begin you the achieve their after Kent to sales today quarter business. has This which after DXP, strategy will determination the key more to out we then our maintaining quarter great for in around results. I remain we define and take which last us to have see. providing XXXX. EBITDA and while XX%, and particular, on building look customers drive our on is We're This our for experts, a our personally all We all our highs than fifth prepared DXP, relentless of and business Q&A. the on the will customer-driven and work X of best-in-class our is for stakeholders. margins expect to forward remainder we as will of our grow speaks customers next come his comments, the And industrial creating adjusted remain improve momentum. the thank DXP's stakeholders, to financial want to and financial business. I highly fueled continue results expertise second our some hard the profitability center our Yee consistent new to thoughts open to approach all through with as perspective will and chapter, from win-win the this focused DXP

earnings of and In X%. X.X% of adjusted was EBITDA of supported and our year-over-year per diluted $X.X rate sequential results, million quarter terms by second of adjusted sales share $X.XX of growth growth

environment quarter. DXP X.X% to us business day average we of our the well and sales exceptional or teams, $X and acquisition million the sheet, remain second an current sequentially X% X,XXX of dedication. success. Total work or improved robust for million second per for achieve you the well-balanced As business, QX for hard continued Thank your and we increased year-over-year position $XXX.X the the capabilities, DXPeople into balance half year, strong pipeline, that confident to navigate move

Innovative In which led terms of virtually the Supply QX Service by year-over-year, and X.X%. flat sales segment declining XX.X% financial growing Chain Pumping results, Solutions followed Services, way, was Centers

to green Our Solutions Innovative or and energy, and and for wastewater, biofuels Pumping backlog of bookings and IPS continues water segment have projects pump oil strong gas.

pump with serve. we pleased the very diversification We are markets the of

and Our above perform our energy-related at long-term highs. albeit to and backlog resilience bookings all-time show average, continue not

energy, on of backlog bookings, this the as are get over water which forward cycle XXXX we and to both average revenues occurred at good to long-term through this year. What project XX in mentioned related point above feel year-to-date our our move IPS wastewater remains XXXX, indicates first energy the months. going continuing look to the We or we work. in this and we energy seeing back revenue next projected how and our this is both we in average project or results QX and Additionally, in to impacts that X energy revenue,

As maintaining food, focus said, in wastewater within and the markets energy, as margins. finding continue as improving water manage have we such prices levels demand maintain be beverage, all to to and opportunities managing biofuels, while IPS our will we growth, DXP's and

within multi-product Service That remain sales against performance terms to continue with the over Centers, second quarters. nature to the last to continue is highest progress of strongest QX Centers. within Center ongoing a division consistent In us and reflects dynamics. MRO year sales our this mix and and quarter market comparative of the year end X our and last evolving experience investments growth approach resilient our allows internal our Service said, basis, initiatives quarter our performance. On was Service

our We California term. continue growth From the regions to including to remain continue will that experience and expect near regional South constructive the that a over perspective, end-markets year-over-year Canada. Rockies,

is strength And see. also made we of repair in -- and our products automation our rotating U.S. We Chain were equipment Services have to we and is is division, job in Know, to increasing to customer seen our have Services, the to automation seeing flat. our Safety and strategy service SCS investments sales division strength nicely. Supply also by great which in U.S. grow our service customer organic SCS experts or reduce spend. along upgrade our capabilities. coming our metalworking

So flat is actually customers. for good the existing

and because products additions and Service we XX pumps efficiency adding ramping sales they a manage percent of our move of flatten services improvement pump manage look a Chain and as through quarter we However, with proven and increasing over EBITDA by we to are early look Supply for of as the and for will for labor product -- And XX margins, produced operating of costs technology this could new and and adding who also second we will XXXX. our customers. we of overall XX.X%, to mentioned, looked basis of adjusted increases, XX% the quarter growth. This the customers. We all continue over new in for half as we sequential parts have happen anticipate DXP increasing EBITDA sales gross last procurement in this get SCS we inflation, to point point start individual improvement to stayed Overall, overall thanks were sales perform on and industrial A expect sales efficiencies. special year. A and top fifth basis reflects QX we XXXX. agreements. million QX of until as out which DXPeople margins for their we marks to leverage EBITDA adjusted XX.X%. the profit Demand plus is of DXP supplier have continue our customer $XX.X adjusted

Regarding shares. to make acquisitions, capital allocations, to continue diversify fuel through growth we DXP opportunistically while investments repurchasing and

completed and we purchased a for our for and more effort XXX,XXX adaptability let During the shareholders, me grow cyclical and continued about $X DXP all particular, DXP shares million. Again, all evolve and business. quarter, diversified their as our thank acquisition less we in into DXPeople one

The next chapter.

commitments continued is and continue improvement Let ever. in customers make my encouraged by We than me strategy am our and that our profitability. to saying continue our sequential on with stronger sales progress can growth to remarks I

We are and DXP. the remainder next developing fiscal forward improvements working further through We navigating the at driving look chapter. and growth and of to XXXX

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

more to like the new would to next. With it XX% to the for thank excited I our sales quarter successful QX We Kent continue remain for a in continue review was Finally, is year a QX. will have financials to back maintaining quarter turn in now getting to I we what that, DXPeople EBITDA as detail. of margins, another great XXXX. high plus

Kent Yee

to review through market, our QX and of performance financial second stakeholders. thank continue navigate financial to you DXP's the you, create all reflects the through me joining David, for and to quarter -- everyone end-market for us ability value execute successfully our for -- XXXX results. our excuse Thank

new results a with Our high second also quarter new adjusted EBITDA record margins. high along in a sales reflect all-time watermark,

April XXXX. Adjusting X% XXXX. continued versus the per QX with the we specifically the for margins. Total of Average reflect trend quarter. second contributed leverage Center day sales $XXX.X during That Water for to sequentially second went $X.XX and to quarter contribution IPS of day in year, along solid X within and and quarter in gross quarter adjusted acquisitions, margin per closing June, QX our second results As from for IPS average were sales per million. as a million backlog, the that sustained Energy million quarter. been in the day $X.XX the operating quarter million million increased per day through day Service consistent leading during during XXXX in from million acquisitions, line were marked sales out closed have completing year-to-date million it to financial million the performance, end strength pertains QX, million versus in $XX.X during $X.XX additional $X.XX quarter DXP's $X.X with day quarter, and a quarter than daily second per for by reflecting less acquisition second an growth EBITDA average and in push continued quarter the per per second the the second sales within DXP daily sales for sales day typical $X.XX said, quarter or second strength Acquisitions stability daily to $X.XX

business X.XX% Innovative This grew XX.XX% X.XX% year-over-year. growing Supply of Service XX.X% year-over-year. X.X% sequentially and In sales sequentially X.X% declining by and was declined Centers sequentially grew terms followed Pumping Solutions and year-over-year. Services our segments, Chain

of bookings well terms increases energy-related water experience Innovative continue Pumping and the and In in the as backlog, backlog. bookings as and Solutions, to we wastewater

all business native upon to continues today. On up grew levels trending remain that we average to QX of towards notable backlog over X.X% basis, related our backlog The and energy moving and ahead our levels average continues energy be QX conclusion XXXX XXXX are a is backlog all X.X% above we Our meaningfully X-month averages. IPS year-over-year. are stands sales our our based where comparative and

We expect this XXXX. throughout continue to

in also grow to IPS continues it of our additions. a to We and Water see backlog acquisition as strength combination organic due

In initiatives, Service Centers, along terms market our diversified with our reflects dynamics. growth Service our internal our performance end of Center evolving and

in As this is over and we experienced here David basis, declined Canada. this From year-over-year, divisions, Services back growth customers perspective, in South performing Rockies, we is, grew the down our This encouraging, year-over-year safety was customers to in and QX Services X.X% as second a is and metalworking well the closures technically strongest last last the our that due The quarters. business quarter X year existing performance a primarily sales over XXXX our streamlining point year-over-year. the are growth our our cycle. Regions continue segment, which Center strength of at as mentioned mentioned, line to we which on half second X.X% are is in the to while Centers last Chain product of Service experienced feel the within and highest sales include see. Supply in and good we quarters. sequential facility QX Service California new XXXX. bring is X.X% quarter point quarter comparative And the X Supply second within perform year. the of of experiencing with sequentially of product with U.S. great we sales X.XX% also services our efficiencies some we to Chain

and XXXX mentioned, look customer we David forward into through as new to additions As move XXXX. we

Pumping XXX Turning and were to this a in point attributed DXP's a margins. within total XX.XX%, QX XXXX. This gross gross of Centers Service over XX improvement basis improvement our gross margins within Innovative basis Solutions point improvement QX to margins from is consistency margin year.

overall DXP mix and our Service from to accretive margin gross Acquisitions XX.XX%, higher versus the Innovative That our operating both to Pumping said, XX.XX%, base contributed acquisitions and Additionally, was sales Solutions be Services QX. margins. business. gross from continued contribution, segment contribution Supply XX.XX% Chain a relative a at in Centers

combined, in operations. Total along DXP Solutions and the second operating quarter primarily income within and $XX.X was a income, this operating percentage water growing XXX basis impact points improvements improvements business a income first the terms wastewater across our sales was reflects driven of income margins by of revenue segments, X acquisitions The all segment, segments million In our at This year. in margin with operating improvement in business business but within $XX.X sequentially. of higher operating the operating Innovative million more quarter versus or all X manufacturing this of mix, were income, margins In notably quarter. Pumping IPS. increased pump relative

sequentially increased million in DXP QX this and basis year. Our points people SG&A million increased this of decreased from business pay year-over-year to year compensation and XX.XX% the QX QX as XX of from of incentive the its merit through sales and reflects a for associated the The quarter in SG&A, $X.X percentage increase growth $X.X investing $XXX.X XXXX of points and XX million. basis raises. sales from and to

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

half margins of at in we have to we through XXXX. first discussed margins, this move QX, the pick As as improved expect as up

to from benefit cost as the sales. continue SG&A we experienced we leverage fixed grow We

our million. EPS, was income In of for terms net QX $XX.X

QX $X.XX share per per primarily for repricing diluted our earnings interest items, of per This onetime per earnings in was for Loan adjusting per QX Term versus reflects share impact of Our conservatively share. year, QX associated $X year. $X.XX last with 'XX were higher B share share the amendment diluted expense last of for the 'XX

sheet and Turning to balance the cash flow.

capital, In from million. working December working of $XXX.X terms $XX.X million increased $XX from and million capital our March to

the the our with of $XX.X March have recent percentage associated from this is we million uptick a XX%. an been increase sales, last acquisitions. As since and This XX-month is amounted to where of

us a year We will of the as for and grow longer acquisitions are sales into of as the working a into we XXXX, our capital half period. second the percentage of moved half first with

sheet decrease million million of acquisition cash of In terms in of cash, activity we as June to the of share had XXth. $XX.X compared $X.X $XX.X as a This balance QX on million repurchases. is the as in our end and well reflects

XXXX. CapEx. In or of $X.X compared increase was versus terms of $X QX and an million in QX a to million the quarter increase CapEx $X.X million

versus We XXXX CapEx continue up expect XXXX. to in to pick

facilities We for are employees. business, our investments make operations our continuing our to including in software, and

As communicate continue will as we we'll in invest business move forward, and we growth the focus these to as appropriate. on investments we

versus improvements million which of fashion focus or during look quarter with Return for leverage along a within inventory, highlighted past which the notable did and align of the to $X.X ROIC, a EBITDA cash business. on primarily the quarter. This billings. That the reflects was in improvements business and second we on and reflects was in XXXX. with the negative tightly to billings Turning and from in end flow continue XX% of to required occur of invested aspect in managing inherent operating management flow in continued of this the second capital second profitability investments, investments Free quarter, the work, cash our perspective cash at a our product said, have million project cost flow. QX excess free in the we in has $X.X

contribution our points accretive impact acquisitions Additionally, performance to it both positive and out to recent also profit their EBITDA. and gross and

was secured June charge outstanding last June coverage with months for As our the was fixed Total XXth million. $XXX.XX a XXth, on of ratio $XXX.X X.X:X, covenant debt ratio our and X.X:X XX EBITDA of was leverage million.

$XXX.X liquidity, closing as availability of letters X this undrawn $XX.X credit and our including million were with ABL million, is another strategy acquisitions acquisition on would $X.X with at terms in anticipate liquidity of half quarter, the of second $XXX.X poised of execute in In we on of during year. our second to minimum and million million the cash. DXP of

continues terms opportunities. X valuations we have remain and minimum In XXXX, comfortable year-end. continue we pipeline on during That reasonable. remain of our of half DXP's and the will first closed to to said, remain we to compelling execute acquisitions acquisitions, acquisition close continues and to at X with pipeline before the our ability market look active to present another

to repurchased we QX. $X.X in allocation, capital million or via repurchases returned shareholders Regarding share

We finishing close we up will before out are current program, and look our this year-end. close to to the

be future we next support as we through chapter. we excited As the mentioned, to and cycles. In summary, of move XXXX through continue we opportunistic shareholders previously will are our as move the building about

will focused things We eyes ahead those we keep can control and is us. of our what on

there We future value and excited with DXP. look a because sustained are in is confidence substantial forward still to embedded growth market outperformance. We great of

now questions. call will over the for turn I

Operator

Instructions] first of comes from Your Stephens. the Kane question [Operator line from Max

Max Kane

mentioned you revenue you during a that your on just year-over-year remarks basis. the grew which grew say quarter? and during the prepared X% end-markets revenue categories or provide acquisitions underlying on some to $XX.X you product So Can sequential contributed quarter? clarify, color did million X% And in of

Kent Yee

sales correct. that quarter. question this, day your fulsome during let That's then end-markets a the regarding business give address do correct. per me That's starting with Max, answer and positive were

per million year-over-year. Last $X.XX million per year, we June day, was per $X.XX business we averaged which then is was for and March, QX watermark was average QX day. per day, $X.XX QX, was million, up X% a million day. million $X.XX coincidentally day. high from which $X.XX May day per million of sales ended $X.XX our at Taking April -- per was

business So you trending see from year-over-year, day still perspective. that up sales per can we're a

markets acquisitions. In well that as that's and other organic ones, your water drove was both up. definitely water as question or that around of terms of Part the of some

Hennesy which During the were Kappe and acquisitions. first closed half, we obviously, water X

not up business. energy on within I X.X%. it, comparative IPS, -- call But year-over-year, And that basis native then you if on it but IPS picked a I'm sure up look if you was our our

and be all Food that worthy would we've had so takes the with perform. and pointing And Obviously, end-markets. continues out. -- our to of puts Beverage

those point the of so to. are markets And I'd some

Max Kane

just on And you. revenue. sticking Got

can walk just maybe you've inorganic early and July August, ADS seen you basis? so trends, what through Regarding on quarter-to-date in far organic and an both

Kent Yee

Yes. $X.X got million, $X.X flash. It's a per looking July, up. it, million at, million we still We're day. per $X.X day, call

Max Kane

Got days quarter? How all for in are selling rest the here year. just then And you. the looking assuming many and out the third of fourth you

Kent Yee

the quarter New holidays, Third another is due just business be Thanksgiving, XX. from And Christmas both will actual light to QX then always days and Year's.

so you And upon those. view just how dependent

technically still a people those in Supply just around days in our to particular QX. day, of Chain could business, One XX business roughly and some in kind it call but quite of be XX Services get but

Max Kane

Perfect. And then, yes, on my last question EBITDA margins. here adjusted is

on It trend the year? like to we slightly and margin expect at the out in Should highest this off, before during third quarter last second exceeding we basis. looked a similar play quarter. First showed XQ when congrats sequential look compressing the But target. a fourth XX% on your year EBITDA

Kent Yee

we're is the in mentioned supporting SG&A The way customer-facing back merit raises business, I'd as SG&A, I office, increases. making because both pay our and is well in growing as investments that the merit answer our

what the lot offsets we've doing our to overall light accretive And so of once compression. That that, said, margins be again. there been been some a acquisitions is have Max, could

doing, portfolio, north water, a and then a being base it, existing we're I XX% relative EBITDA but of operating typically more the it, said think becomes making higher to income mix acquisitions our and call kind of, we specific. margin. of it bit that with in pay little and XX%, and wastewater, mentioning, the counterbalancing margins. business, at a raises support lot And it our salespeople they're so a I'll of investments we're bears And growth additions be then And

Operator

that Quarter Enterprises our Call. well gentlemen, session concludes Q&A DXP Conference and as joining Ladies for us. as XXXX Earnings all Thank Second you

disconnect. You may now

DXP Enterprises (DXPE) 9 Aug 242024 Q2 Earnings call transcript