HOUSTON--(BUSINESS WIRE)--DXP Enterprises, Inc. (NASDAQ: DXPE) today announced financial results for the third quarter ended September 30, 2019. The following are results for the three months and nine months ended September 30, 2019, compared to the three months and nine months ended September 30, 2018. A reconciliation of the non-GAAP financial measures can be found in the back of this press release.
Third Quarter 2019 financial highlights:
- Sales increased 6.2 percent to $327.2 million, compared to $308.0 million for the third quarter of 2018.
- Earnings per diluted share for the third quarter was $0.71 based upon 18.4 million diluted shares, compared to $0.46 per share in the third quarter of 2018, based on 18.4 million diluted shares.
- Earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter was $28.2 million compared to $23.2 million for the third quarter of 2018, an increase of 21.4 percent.
David R. Little, Chairman and CEO commented, “DXP reported excellent sales and net income for the third quarter. We are pleased with our results, which reflect continued execution of our strategy and a focus on being customer driven experts in MROP solutions. Underlying demand in our end markets has wavered but we continue to take market share and focus on execution. We achieved 6.2 percent sales growth, maintained EBITDA margins and drove outstanding diluted earnings per share growth. During the third quarter of 2019, sales were $193.7 million for Service Centers, $82.2 million for Innovative Pumping Solutions and $51.3 million for Supply Chain Services. Business segment operating income increased 15.1 percent year-over-year. DXP’s third quarter 2019 total sales were $327.2 million and EBITDA grew 21.4 percent year-over-year. Overall, we maintained margin performance, continued to improve cash flow and executed in a changing end market backdrop. We will remain focused on growing the top-line and bottom-line as we move into fiscal 2020.”
Kent Yee, CFO, commented, “We are pleased with 6.2 percent sales growth and 8.6 percent EBITDA margins. This translated into $0.71 diluted earnings per share or 54.3 percent earnings growth year-over-year. Total debt outstanding as of September 30, 2019 was $245.0 million. DXP’s secured leverage ratio or net debt to EBITDA was 2.0:1.0. Our strong execution with our focus on sales growth and margin improvement delivered strong earnings, generated cash flow and continues to position us drive shareholder value.”
We will host a conference call regarding 2019 third quarter results on the Company’s website (www.dxpe.com) Thursday, November 7, 2019 at 10 am CST. Web participants are encouraged to go to the Company’s website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. The on-line archived replay will be available immediately after the conference call at www.dxpe.com.
Non-GAAP Financial Measures
DXP supplements reporting of net income with non-GAAP measurements, including EBITDA, adjusted EBITDA and free cash flow. This supplemental information should not be considered in isolation or as a substitute for the unaudited GAAP measurements. Additional information regarding EBITDA and free cash flow referred to in this press release are included below under "Unaudited Reconciliation of Non-GAAP Financial Information."
The Company believes EBITDA provides additional information about: (i) operating performance, because it assists in comparing the operating performance of the business, as it removes the impact of non-cash depreciation and amortization expense as well as items not directly resulting from core operations such as interest expense and income taxes and (ii) the performance and the effectiveness of operational strategies. Additionally, EBITDA performance is a component of a measure of the Company’s financial covenants under its credit facility. Furthermore, some investors use EBITDA as a supplemental measure to evaluate the overall operating performance of companies in the industry. Management believes that some investors’ understanding of performance is enhanced by including this non-GAAP financial measure as a reasonable basis for comparing ongoing results of operations. By providing this non-GAAP financial measure, together with a reconciliation from net income, the Company believes it is enhancing investors’ understanding of the business and results of operations, as well as assisting investors in evaluating how well the Company is executing strategic initiatives.
About DXP Enterprises, Inc.
DXP Enterprises, Inc. is a leading products and service distributor that adds value and total cost savings solutions to industrial customers throughout the United States, Canada, Mexico and Dubai. DXP provides innovative pumping solutions, supply chain services and maintenance, repair, operating and production ("MROP") services that emphasize and utilize DXP’s vast product knowledge and technical expertise in rotating equipment, bearings, power transmission, metal working, industrial supplies and safety products and services. DXP's breadth of MROP products and service solutions allows DXP to be flexible and customer-driven, creating competitive advantages for our customers. DXP’s business segments include Service Centers, Innovative Pumping Solutions and Supply Chain Services. For more information, go to www.dxpe.com.
The Private Securities Litigation Reform Act of 1995 provides a “safe-harbor” for forward-looking statements. Certain information included in this press release (as well as information included in oral statements or other written statements made by or to be made by the Company) contains statements that are forward-looking. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future; and accordingly, such results may differ from those expressed in any forward-looking statement made by or on behalf of the Company. These risks and uncertainties include, but are not limited to; ability to obtain needed capital, dependence on existing management, leverage and debt service, domestic or global economic conditions, and changes in customer preferences and attitudes. In some cases, you can identify forward-looking statements by terminology such as, but not limited to, “may,” “will,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “goal,” or “continue” or the negative of such terms or other comparable terminology. For more information, review the Company’s filings with the Securities and Exchange Commission.
DXP ENTERPRISES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($ thousands, except per share amounts) |
||||||||||||||||
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|
|
|
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||||||||||||
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Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Sales |
|
$ |
327,178 |
|
|
$ |
308,028 |
|
|
$ |
971,721 |
|
|
$ |
905,191 |
|
Cost of sales |
|
234,474 |
|
|
223,958 |
|
|
702,830 |
|
|
659,560 |
|
||||
Gross profit |
|
92,704 |
|
|
84,070 |
|
|
268,891 |
|
|
245,631 |
|
||||
Selling, general and administrative expenses |
|
70,987 |
|
|
67,257 |
|
|
209,511 |
|
|
197,609 |
|
||||
Operating income |
|
21,717 |
|
|
16,813 |
|
|
59,380 |
|
|
48,022 |
|
||||
Other (income) expense, net |
|
(25 |
) |
|
120 |
|
|
127 |
|
|
(1,318 |
) |
||||
Interest expense |
|
4,986 |
|
|
4,781 |
|
|
14,911 |
|
|
15,959 |
|
||||
Income before income taxes |
|
16,756 |
|
|
11,912 |
|
|
44,342 |
|
|
33,381 |
|
||||
Provision for income taxes |
|
3,606 |
|
|
3,550 |
|
|
10,655 |
|
|
8,962 |
|
||||
Net income |
|
13,150 |
|
|
8,362 |
|
|
33,687 |
|
|
24,419 |
|
||||
Net income (loss) attributable to NCI* |
|
41 |
|
|
(35 |
) |
|
(172 |
) |
|
(91 |
) |
||||
Net income attributable to DXP Enterprises, Inc. |
|
$ |
13,109 |
|
|
$ |
8,397 |
|
|
$ |
33,859 |
|
|
$ |
24,510 |
|
Preferred stock dividend |
|
23 |
|
|
23 |
|
|
68 |
|
|
68 |
|
||||
Net income attributable to common shareholders |
|
$ |
13,086 |
|
|
$ |
8,374 |
|
|
$ |
33,791 |
|
|
$ |
24,442 |
|
Diluted earnings per share attributable to DXP Enterprises, Inc. |
|
$ |
0.71 |
|
|
$ |
0.46 |
|
|
$ |
1.84 |
|
|
$ |
1.33 |
|
Weighted average common shares and common equivalent shares outstanding |
|
18,442 |
|
|
18,404 |
|
|
18,428 |
|
|
18,387 |
|
||||
|
|
|
|
|
|
|
|
|
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*NCI represents non-controlling interest |
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Business segment financial highlights:
- Service Centers’ revenue for the third quarter was $193.7 million, an increase of 3.2 percent year-over-year with a 12.9 percent operating income margin.
- Innovative Pumping Solutions’ revenue for the third quarter was $82.2 million, an increase of 7.2 percent year-over-year with a 12.3 percent operating income margin.
- Supply Chain Services’ revenue for the third quarter was $51.3 million, an increase of 17.6 percent year-over-year with a 6.1 percent operating income margin.
SEGMENT DATA ($ thousands, unaudited) |
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|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
Sales |
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Service Centers |
$ |
193,727 |
|
|
$ |
187,763 |
|
|
$ |
579,884 |
|
|
$ |
556,700 |
|
Innovative Pumping Solutions |
82,169 |
|
|
76,662 |
|
|
237,920 |
|
|
218,561 |
|
||||
Supply Chain Services |
51,282 |
|
|
43,603 |
|
|
153,917 |
|
|
129,930 |
|
||||
Total DXP Sales |
$ |
327,178 |
|
|
$ |
308,028 |
|
|
$ |
971,721 |
|
|
$ |
905,191 |
|
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
Operating Income |
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Service Centers |
$ |
25,071 |
|
|
$ |
20,590 |
|
|
$ |
67,281 |
|
|
$ |
58,353 |
|
Innovative Pumping Solutions |
10,097 |
|
|
8,773 |
|
|
28,924 |
|
|
24,109 |
|
||||
Supply Chain Services |
3,110 |
|
|
3,886 |
|
|
10,980 |
|
|
12,196 |
|
||||
Total segments operating income |
$ |
38,278 |
|
|
$ |
33,249 |
|
|
$ |
107,185 |
|
|
$ |
94,658 |
|
Reconciliation of Operating Income for Reportable Segments ($ thousands, unaudited) |
|||||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Operating income for reportable segments |
$ |
38,278 |
|
|
$ |
33,249 |
|
|
$ |
107,185 |
|
|
$ |
94,658 |
|
Adjustment for: |
|
|
|
|
|
|
|
||||||||
Amortization of intangibles |
3,806 |
|
|
4,098 |
|
|
11,424 |
|
|
12,575 |
|
||||
Corporate expenses |
12,755 |
|
|
12,338 |
|
|
36,381 |
|
|
34,061 |
|
||||
Total operating income |
21,717 |
|
|
16,813 |
|
|
59,380 |
|
|
48,022 |
|
||||
Interest expense |
4,986 |
|
|
4,781 |
|
|
14,911 |
|
|
15,959 |
|
||||
Other expense (income), net |
(25 |
) |
|
120 |
|
|
127 |
|
|
(1,318 |
) |
||||
Income before income taxes |
$ |
16,756 |
|
|
$ |
11,912 |
|
|
$ |
44,342 |
|
|
$ |
33,381 |
|
Unaudited Reconciliation of Non-GAAP Financial Information |
($ thousands, unaudited) |
The following table is a reconciliation of EBITDA and adjusted EBITDA, a non-GAAP financial measure, to income before income taxes, calculated and reported in accordance with U.S. GAAP.
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Income before income taxes |
$ |
16,756 |
|
|
$ |
11,912 |
|
|
$ |
44,342 |
|
|
$ |
33,381 |
|
Plus: interest expense |
4,986 |
|
|
4,781 |
|
|
14,911 |
|
|
15,959 |
|
||||
Plus: depreciation and amortization |
6,422 |
|
|
6,506 |
|
|
18,693 |
|
|
19,710 |
|
||||
|
|
|
|
|
|
|
|
||||||||
EBITDA |
$ |
28,164 |
|
|
$ |
23,199 |
|
|
$ |
77,946 |
|
|
$ |
69,050 |
|
|
|
|
|
|
|
|
|
||||||||
Plus: NCI (income) loss before tax |
(55 |
) |
|
64 |
|
|
228 |
|
|
120 |
|
||||
Plus: Stock compensation expense |
473 |
|
|
526 |
|
|
1,502 |
|
|
2,023 |
|
||||
|
|
|
|
|
|
|
|
||||||||
Adjusted EBITDA |
$ |
28,582 |
|
|
$ |
23,789 |
|
|
$ |
79,676 |
|
|
$ |
71,193 |
|
DXP ENTERPRISES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS ($ thousands, except per share amounts) |
|||||||
|
September 30, 2019 |
|
December 31, 2018 |
||||
ASSETS |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash |
$ |
28,436 |
|
|
$ |
40,304 |
|
Restricted Cash |
124 |
|
|
215 |
|
||
Accounts receivable, net of allowances for doubtful accounts |
210,098 |
|
|
191,829 |
|
||
Inventories |
131,916 |
|
|
114,830 |
|
||
Costs and estimated profits in excess of billings |
33,898 |
|
|
32,514 |
|
||
Prepaid expenses and other current assets |
6,328 |
|
|
4,938 |
|
||
Federal income taxes receivable |
1,518 |
|
|
960 |
|
||
Total current assets |
412,318 |
|
|
385,590 |
|
||
Property and equipment, net |
58,516 |
|
|
51,330 |
|
||
Goodwill |
194,052 |
|
|
194,052 |
|
||
Other intangible assets, net of accumulated amortization |
56,072 |
|
|
67,207 |
|
||
Operating lease ROU asset |
67,296 |
|
|
— |
|
||
Other long-term assets |
3,300 |
|
|
1,783 |
|
||
Total assets |
$ |
791,554 |
|
|
$ |
699,962 |
|
|
|
|
|
||||
LIABILITIES AND EQUITY |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Current maturities of long-term debt |
$ |
2,500 |
|
|
$ |
3,407 |
|
Trade accounts payable |
83,174 |
|
|
87,407 |
|
||
Accrued wages and benefits |
20,242 |
|
|
21,275 |
|
||
Customer advances |
4,606 |
|
|
3,223 |
|
||
Billings in excess of costs and estimated profits |
7,201 |
|
|
10,696 |
|
||
Short-term operating lease liability |
17,711 |
|
|
— |
|
||
Other current liabilities |
16,544 |
|
|
17,269 |
|
||
Total current liabilities |
151,978 |
|
|
143,277 |
|
||
Long-term debt, less unamortized debt issuance costs |
235,576 |
|
|
236,979 |
|
||
Long-term operating lease liability |
49,602 |
|
|
— |
|
||
Other long-term liabilities |
951 |
|
|
2,819 |
|
||
Deferred income taxes |
11,056 |
|
|
8,633 |
|
||
Total long-term liabilities |
297,185 |
|
|
248,431 |
|
||
Total Liabilities |
449,163 |
|
|
391,708 |
|
||
Equity: |
|
|
|
||||
Total DXP Enterprises, Inc. equity |
341,157 |
|
|
306,848 |
|
||
Non-controlling interest |
1,234 |
|
|
1,406 |
|
||
Total Equity |
342,391 |
|
|
308,254 |
|
||
Total liabilities and equity |
$ |
791,554 |
|
|
$ |
699,962 |
|
Unaudited Reconciliation of Non-GAAP Financial Information |
($ thousands, unaudited) |
The following table is a reconciliation of free cash flow, a non-GAAP financial measure, to cash flow from operating activities, calculated and reported in accordance with U.S. GAAP.
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
|
|
|
|
|
|
|
|
||||||||
Net cash provided by operating activities |
$ |
10,943 |
|
|
$ |
16,825 |
|
|
$ |
7,483 |
|
|
$ |
9,842 |
|
Less: capital expenditures |
(5,663 |
) |
|
(2,189 |
) |
|
(14,247 |
) |
|
(7,705 |
) |
||||
|
|
|
|
|
|
|
|
||||||||
Free cash flow |
$ |
5,280 |
|
|
$ |
14,636 |
|
|
$ |
(6,764 |
) |
|
$ |
2,137 |
|
