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DATE

Thursday, May 7, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

  • Chairman & Chief Executive Officer — David R. Little
  • Chief Financial Officer — Kent Yee

TAKEAWAYS

  • Revenue -- $521.7 million, representing 9.5% growth year over year with acquisitions less than one year old contributing $40.7 million.
  • Gross Margin -- 32.3%, which is a 79 basis point increase, driven by a tilt toward higher-margin Innovative Pumping Solutions and accretive acquisitions.
  • Adjusted EBITDA -- $57.8 million, equating to an 11.1% margin that management highlighted as being sustained over the past three quarters.
  • Operating Income -- $42.5 million, with combined business segment operating income margins up 105 basis points year over year.
  • Adjusted Diluted EPS -- $1.26, with GAAP diluted EPS at $1.22 partly impacted by a $1.8 million increase in interest expense and a $16.1 million rise in SG&A including one-time items.
  • Free Cash Flow -- $26.3 million, supported by operating cash flow of $29.8 million despite working capital investment.
  • Innovative Pumping Solutions Segment -- Sales up 37.7% to $111.7 million, with water accounting for 66% of segment sales and energy-related backlog up 2.1% sequentially.
  • Service Centers Segment -- Sales rose 3.3% year over year, while declining 5.1% sequentially; Metalworking division posted both sequential and year-over-year growth.
  • Supply Chain Services Segment -- Grew 2.7% year over year and 6.2% sequentially, with new customer onboarding noted as a growth driver.
  • Average Daily Sales Trend -- January was $7.2 million, February $8.4 million, March $9.2 million, and April $9.0 million per day; April was up 15% year over year.
  • Working Capital -- Increased by $17.9 million to $379.6 million, reaching 18.4% of sales, reflecting acquisition integration.
  • Balance Sheet Liquidity -- $213.4 million in cash and $153.3 million undrawn ABL availability for total liquidity of $366.7 million.
  • Recent Acquisitions -- Closed three deals (Mid Atlantic Storage Systems, Premier Flow, Ambiente H2O), with three more under letter of intent and two more nearing letter of intent.
  • Return on Invested Capital -- 34.1% at quarter-end, attributed by management to improved margins and operating leverage.

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RISKS

  • CEO David R. Little said, "January was surprisingly slow. I do not have a clue as to why—it was across the board: water, oil and gas, and general industry," acknowledging an unexplained demand weakness that negatively impacted early quarter results.
  • SG&A as a percentage of sales increased to 24.2%, with CFO Kent Yee attributing the rise to "unique and discrete one-time items, including elevated health care costs, excess legal and consulting costs, as well as one-time equipment and fleet costs."
  • Management noted "project and product delivery timelines stretch in our already long-cycle business" for water, signaling potential timing risk on revenue recognition in the IPS segment.

SUMMARY

DXP Enterprises (DXPE 17.38%) reported 9.5% revenue growth to $521.7 million, with notable acceleration in sales per business day throughout the quarter and into April. Adjusted EBITDA and free cash flow both reflected disciplined operational execution and margin expansion, aided by continued integration of accretive acquisitions. Sales momentum and backlog in key verticals, especially water, wastewater, and energy infrastructure, provide management with confidence on forward revenue visibility and opportunities for further operating leverage. Balance sheet strength is underpinned by $366.7 million in liquidity, supporting further M&A and organic investments.

  • Management stated that despite January’s softness, order bookings improved steadily through to April.
  • Kent Yee said, "average daily sales were $7.6 million per day for 2026 versus $7.1 million per day during 2025," illustrating underlying organic growth after excluding acquisition contributions.
  • Recent acquisition activity remains high, with management noting three closed deals and an active pipeline positioning the company for additional scale within strategic end markets.
  • Management identified expansion in higher-value engineered solutions and bundled offerings, particularly in IPS and Service Centers, as key drivers for gross margin and recurring customer business.
  • The company highlighted exposure to secular growth trends in water/wastewater and energy infrastructure as supportive of sustained demand.

INDUSTRY GLOSSARY

  • IPS (Innovative Pumping Solutions): Segment focused on engineered and custom pump packages, including water and wastewater, energy, and industrial markets.
  • MRO (Maintenance, Repair, and Operating): Industrial distribution of equipment and supplies needed to maintain and operate manufacturing or processing facilities.
  • ABL (Asset-Based Lending) Facility: Revolving credit line secured by company assets, used for liquidity and working capital needs.

Full Conference Call Transcript

David Little: Good afternoon. Thanks for joining us today on DXP Enterprises, Inc.'s fiscal 2026 first quarter conference call. Well, we delivered a slow start to 2026, especially sales in January, which improved in February and improved to a greater extent in March. We are not sure why sales in January were so soft, but we are glad to see the growth in the other two months and the growth in bookings during the quarter plus continuing in April. We also maintained gross margin discipline and generated meaningful free cash flow that gives us confidence in the quarters ahead.

From an earnings standpoint, the quarter included increased interest expense amortization and a few discrete items in SG&A, like health care, legal, and audit-related costs tied to our acquisition activity, which we view as timing-related and will normalize and are not reflective of our underlying earning power. Our strategy remains simple and consistent: be customer-driven experts, execute operationally, grow where we have competitive advantage, and allocate capital in a disciplined way. This quarter reflects steady execution across our diversified platforms. We grew sales nearly 10%, expanded gross profit margins, delivered EBITDA margins above 11%, all the while generating strong cash flow.

On behalf of the 3,497 DXP Enterprises, Inc. people you can trust, I want to thank our customers, suppliers, and shareholders for their continued trust and support. Our team continues to execute with consistency. We remain focused on profitable growth and cash generation. Consolidated performance in the first quarter: sales were $521.7 million, up 9.5% year over year. Sales per business day increased to $8.28 million from $7.57 million. Gross profit margins expanded to 32.3%, nearly 80 basis points higher. Adjusted EBITDA was $57.8 million, or an 11.1% margin. Operating income totaled $42.5 million. Adjusted diluted earnings per share was $1.26. Free cash flow was $26.3 million.

These results are driven by a combination of organic growth, favorable mix, operating execution, and contributions from accretive acquisitions. Margin performance reflects pricing discipline, cost controls, and an ongoing shift towards higher-value products, engineered solutions, and services. SG&A was higher year over year due to several unique and some nonrecurring items, including health care claims volatility, and legal and audit costs tied to acquisitions, and other one-time expenses. We expect those to normalize as the year progresses, and we remain focused on managing SG&A while continuing to invest in growth initiatives that generate acceptable returns. From a growth standpoint, we continue to lean into markets where demand is durable and where DXP Enterprises, Inc.'s capabilities matter.

Water and wastewater, energy infrastructure, general industry, and selected technology-driven markets like data centers and air compression continue to provide attractive long-term demand drivers. Across DXP Enterprises, Inc., growth is coming from several consistent things: expanding technical and engineered solutions; broadening solutions around pumps, automation, filtration, and process equipment; leveraging our decentralized model to pursue local growth opportunities; and cross-selling across platforms and integrating acquisitions more effectively. We are not chasing volume for volume’s sake. Growth is targeted at areas where we can maintain margins, generate cash, and deepen our customer relationships. Thank you, DXP Enterprises, Inc. sales and operational professionals, for teaming up together and winning for our customers and stakeholders.

Thank you to our corporate support for their efforts to support both internal and external customers. Segment performance: Innovative Pumping Solutions continues to deliver engineering solutions that matter. Sales increased 37.7% to $111.7 million. Growth was driven by energy-related and water and wastewater activity, along with contributions from recent acquisitions. Bookings and backlog in energy infrastructure remain above long-term averages, and we are encouraged by the traction we are seeing early in fiscal 2026. Many of these engineered solutions are large, multi-quarter in nature, which support revenue visibility and backlog conversion moving forward.

We also continue to build scale in water and wastewater markets within IPS, where municipal infrastructure investments and regulatory requirements create long-cycle demand for pumps and treatment solutions. Service Centers produced 3.3% total sales growth. This segment continues to benefit from its diversification across end markets and its multi-product MRO-focused model. Growth is coming from technical products such as automation, vacuum pumps, filtration, and newer pump brands serving water and industrial applications. We are also seeing demand improvements in markets like air compression and data centers where customers need reliable systems for pumping, cooling, power, and filtration—areas where DXP Enterprises, Inc. can provide bundled solutions rather than just individual components.

Supply Chain Services grew 2.7% year over year and 6.2% sequentially. This business continues to onboard new customers. As we have discussed before, implementation timing and facility-level ramp-up can create temporary variability, but demand for SCS’s technology that enables integrated supply solutions continues to build. The sales pipeline remains encouraging, and we expect performance to improve gradually as onboarding matures and program volume scales. Cash flow, capital discipline, and balance sheet: cash generation remains a core focus for DXP Enterprises, Inc. In the first quarter, we generated $29.6 million in operating cash flow and $26.3 million of free cash flow, even while investing in working capital to support growth, particularly in IPS and our water-focused business.

Our balance sheet remains strong with ample liquidity to fund organic growth initiatives, integrate recent acquisitions, pursue disciplined accretive M&A, and maintain financial flexibility through different macro environments. We continue to emphasize cash conversion, working capital discipline, and return on invested capital when making growth and acquisition decisions. As we move through fiscal 2026, our priorities remain clear: drive organic growth in attractive end markets, maintain margin discipline and operational execution, execute strategic accretive acquisitions, and generate cash and allocate capital thoughtfully. We like the current setup in our markets: water, general industry, and energy-related infrastructure.

Bookings are trending higher, backlog remains healthy to higher, and based on current visibility, we are encouraged about the second quarter and the remainder of the year. DXP Enterprises, Inc.'s diversified model, improving demand indicators, and consistent operating discipline give us confidence in our ability to execute through fiscal 2026. In closing, I want to thank our DXP Enterprises, Inc. people for their execution, teamwork, and commitment. They continue to differentiate DXP Enterprises, Inc. in the markets we serve and create value for our customers and shareholders. With that, I will turn it over to Kent to walk you through the financial details.

Kent Yee: Thank you, David. And thank you to everyone for joining us for our review of our 2026 financial results. Q1 shows that we carried momentum from last year into fiscal 2026, but started off slower than anticipated. That said, at this time last year, we experienced a similar trend and finished 2025 strong. Likewise, we anticipate 2026 to be another strong year. Specifically for Q1, we had strength in sales during the months of February and March, strong gross margin performance, and good free cash flow generation.

To summarize the quarter, Q1 key takeaways are as follows: 9.5% sales growth, with sales per business day showing 28% growth between January and March; strong gross margin performance, with gross margin improvement sequentially and year over year; and great quarterly free cash flow generation. In terms of our detailed results, total sales for the first quarter increased 9.5% year over year to $521.7 million. Acquisitions that have been with DXP Enterprises, Inc. for less than a year contributed $40.7 million in sales during the quarter. Average daily sales for the first quarter were $8.3 million per day versus $7.6 million per day in 2025.

Adjusting for acquisitions, average daily sales were $7.6 million per day for 2026 versus $7.1 million per day during 2025. As is typical, sales accelerated through the quarter, with average daily sales increasing from $7.2 million per day in January to $9.2 million per day in March, reflecting a normal quarter-end push but highlighting strong acceleration coming into quarter end. In terms of our business segments and on a year-over-year basis, Innovative Pumping Solutions grew 37.7%, followed by Service Centers growing 3.3% and Supply Chain Services growing 2.7% year over year. In our Service Centers, sales grew 3.3% year over year and declined 5.1% sequentially.

Regions that experienced sequential as well as year-over-year sales growth include our South Central, South Rockies, and South Atlantic regions. From a product perspective, our Metalworking division also experienced sequential and year-over-year sales growth. From a segment operating income perspective, we have had four consecutive quarters of around 14% or greater, and we look for this to continue as we still believe there are regions that can enhance or become more consistent in their operating income margins. In terms of Innovative Pumping Solutions, we continue to experience strong backlogs in both our energy and water and wastewater businesses. Our Q1 2026 energy-related average backlog increased 2.1% sequentially, stemming the declines we saw in Q3 and Q4 of last year.

As David mentioned and as we have been discussing on previous earnings calls, we have booked a few large engineered projects in both energy and water that we recognized some revenue on in 2025 and will continue into 2026. The conclusion remains that we are trending meaningfully above all notable sales levels based upon where our backlog stands today. Our DXP Enterprises, Inc. Water platform experienced our fourteenth consecutive quarter of sequential sales growth, and we look for this to continue as we move through 2026. That said, we are seeing project and product delivery timelines stretch in our already long-cycle business.

We also see strength in our IPS water backlog as it continues to grow due to a combination of our organic and acquisition additions. It is worth noting that DXP Enterprises, Inc. Water was 66% of IPS sales in Q1. Supply Chain Services performance primarily reflects a 6.2% increase sequentially as well as 2.7% growth year over year. As we discussed during Q3 and Q4 of last year, we experienced an uptick in Supply Chain Services performance, which we are seeing again in Q1. Interest in and demand for SCS services is increasing because of the proven technology and the efficiencies they provide for industrial customers, and we expect a stronger 2026 as we onboard new customers.

Turning to our gross margins, DXP Enterprises, Inc.'s total gross margins were 32.3%, a 79 basis point improvement over 2025. This improvement is attributed to increased margins year over year across all three business segments and the contribution from acquisitions at a higher overall relative gross margin versus our base DXP Enterprises, Inc. business. That said, from a segment mix standpoint in Q1, Service Centers contributed 65%, Innovative Pumping Solutions was 23%, and Supply Chain Services was 12% of sales. With our mix increasing more towards Innovative Pumping Solutions, this continues to elevate DXP Enterprises, Inc.'s gross margins. In terms of operating income, combined, all three business segments increased 105 basis points year-over-year in business segment operating income margins.

This was driven by improvements in operating income margins across all three segments year over year and sequentially. Total DXP Enterprises, Inc. operating income was $42.5 million in 2026. Our SG&A for the quarter increased $16.1 million from 2025 and $6.2 million sequentially to $126.1 million. The increase reflects normal seasonal amounts in terms of payroll taxes, insurance, and other administrative items, as well as the growth in the business and associated incentive compensation. Additionally, as David mentioned in his comments, the quarter included some unique and discrete one-time items, including elevated health care costs, excess legal and consulting costs, as well as one-time equipment and fleet costs.

SG&A as a percentage of sales increased 115 and 144 basis points year over year and sequentially to 24.2% of sales. Turning to EBITDA, Q1 2026 adjusted EBITDA was $57.8 million. Adjusted EBITDA margins were 11.1%. It is worth noting that our adjusted EBITDA margins remain above 11% amidst our normal financial seasonality associated with higher payroll taxes, insurance, and associated items. We continue to expect to benefit from the fixed-cost SG&A leverage we experience as we grow sales and anticipate there is further operating leverage as we move through fiscal 2026.

In terms of EPS, with a Q1 net income of $20.0 million, our earnings per diluted share for Q1 2026 was $1.22 per share versus $1.39 per share for 2025. We would point out that in the fall, we repriced and raised an incremental $205 million in debt; interest expense increased by $1.8 million compared to the first quarter of last year. Conservatively adjusting for some of the one-time acquisition and excess expense items, adjusted earnings per diluted share for 2026 was $1.26 per share. Turning to the balance sheet and cash flow: in terms of working capital, our working capital increased $17.9 million from December to $379.6 million. As a percentage of sales, this amounted to 18.4%.

As mentioned during Q4, we will continue to grow into the working capital as a percentage of sales, specifically the impact from recent acquisitions. We do anticipate further acquisitions, however, which could cause us to move up, albeit we are focused on managing working capital as efficiently as possible as we scale and grow. In terms of cash, we had $213.4 million in cash on the balance sheet as of March 31. This is a decrease of $90.4 million compared to the end of Q4, and this primarily reflects the acquisition of Mid Atlantic Storage Systems, Premier Flow, and Ambiente H2O.

In terms of CapEx, CapEx in the first quarter was $3.3 million, essentially flat compared to 2025, and a decrease of $16.6 million compared to 2025. As we have discussed, we were making investments in the business as we grow, and this began to taper during the second half of last year. We see our current levels at less than 1% of sales as more of what we would expect in terms of maintenance capital expenditures. Turning to free cash flow, cash flow from operations was $29.8 million in Q1 of this year versus $3.0 million in Q1 of last year.

As a reminder, during 2025, we included tax payments which were deferred from Q2 of last year due to storms that were paid in 2025. That said, we continue investing in projects and experienced an uptick in receivable days during Q1. As we move through 2026, this should balance out, and we should see a decrease in receivable days. We continue to focus tightly on managing projects from a cash flow perspective and look to align billings with the investments. Return on invested capital, or ROIC, at the end of the first quarter was 34.1% and is consistent with DXP Enterprises, Inc. driving margins, operating leverage, and improving our run-rate EBITDA.

As of March 31, our fixed charge coverage ratio was 2.5 to 1 and our secured leverage ratio was 2.6 to 1, with a covenant EBITDA for the last twelve months of $243.9 million. Total debt outstanding on March 31 was $844.7 million. In terms of liquidity, as of the first quarter, we were undrawn on our ABL with $31.7 million in letters of credit, or $153.3 million in availability, and liquidity of $366.7 million, which includes $213.4 million in cash. DXP Enterprises, Inc. is poised to execute our acquisition strategy and we anticipate closing another one to two acquisitions before the second quarter ends.

In terms of acquisitions, we closed three during the quarter: Mid Atlantic Storage Systems, Premier Flow, and Ambiente H2O. DXP Enterprises, Inc.'s acquisition pipeline continues to remain active, and the market continues to present compelling opportunities. As we discussed during the Q4 earnings call, we anticipated closing one to three acquisitions before midyear, and we have closed three deals year to date. We have another three under letter of intent and another two close to coming under letter of intent. That said, we are stressing sustainable performance with our acquisitions and remain comfortable with our ability to execute on our pipeline.

Heading into 2026, we refreshed our balance sheet, which has allowed us to continue to invest in the business both organically and through acquisitions while also returning capital to shareholders. We are excited about the future. We are excited because there is still substantial value embedded in DXP Enterprises, Inc. We look forward with great confidence to a future of sustained growth and market outperformance. Our resilient and critical MRO and supply chain solutions combined with our engineered solution capabilities and exposure to secular trends, including water and wastewater, will continue to drive our future sales and profitability. We are excited about the future. We will now open the call for questions.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from the line of Zach Marriott with Stephens. Zach, line is open. Please go ahead.

Zachary Ryan Marriott: Good afternoon, and thank you for taking my questions. I heard you give the January and March daily sales numbers thus far. Could you please fill us in for February and then Q2? And is there anything that should drive a meaningful margin difference, whether up or down, when comparing Q2 to Q1? And then just one more if I could: corporate expenses have fluctuated over the last year from as low as $20 million to up to $28 million this last quarter. Should we use the $28 million as the best proxy for Q2 and beyond, or should this number vary significantly over the balance of the year?

Kent Yee: Absolutely. I will go from the beginning of the year. January was $7.2 million per day. February was $8.4 million per day. March was $9.2 million per day. And then April was $9.0 million per day. On margins, there is SG&A leverage, which we discussed in our comments. January was a light month, and we came in around 11.1% EBITDA margins, which is where we have been the last three quarters or so. That said, we feel good going into Q2. We do not provide direct formal guidance, but we believe there is more leverage in the business and margins could be higher.

If sales keep trending as they have—by the way, on a monthly year-over-year basis, that April number is up 15% year over year compared to April last year—that is going to drive incremental margin to the bottom line as we move forward. On corporate expenses, we pointed out in our comments that there were some discrete, unique one-time items, including consulting fees and fleet costs that we normally would not incur. There are also costs like health care claims that we do not fully control, and as we grow and add people, that category naturally increases.

From an absolute dollar perspective, I would not say it would be $20 million, but it could be a blend between the $20 to $28 million range in the short to medium term. As we grow through acquisitions and add people, you are going to have increased health care claims in particular—we are self-insured as a company. We hope for a healthy employee base, but the reality is costs scale with headcount, and we have grown significantly through acquisitions recently, so some costs have gone up correspondingly.

Operator: Your next question comes from the line of Diletta Sayobayeva. Diletta, your line is open. Please go ahead.

Diletta Sayobayeva: Yep. Hello? Can you hear me?

Kent Yee: Yes, we can hear you.

Diletta Sayobayeva: Hello, everyone. Are you seeing any changes in pricing dynamics across your key end markets, particularly in energy? And how is that impacting margins and demand? And then you recently participated in DICE, the investment conference. Did you identify any meaningful opportunities, either from a commercial or acquisition standpoint?

David Little: I believe the question was about pricing and demand in oil and gas. Our oil and gas business is doing well, and it is growing. As we have said in the past, we have booked some really large orders, and we have booked some very nice orders recently. It can be competitive, but we also do remanufacturing of pumps, and when we are able to sell those types of products, they are based on delivery. We can produce pumps faster than anybody else can. When speed to delivery matters, our margin goes up. We have some very nice margins in that area. In general, demand is up, but it is twofold.

Oil companies are not going crazy just because oil prices are $100 or above. They feel like the war and things like that will be resolved at some point, so they cannot count on those prices and expect them to come down some, so they are not going crazy. On the other hand, they have a lot of cash flow, and they are spending it. So demand is up, but it is not booming—that is how I would answer that.

Kent Yee: On DICE and opportunities, from an acquisition standpoint, we are always out there as a business—both in the field and here at corporate. As I mentioned in my comments, we have three letters of intent in place today that we are working through due diligence, and we have another two that are close to being under letter of intent. We are still in acquisition mode. There are compelling opportunities out there. Our recent focus has been on the water and wastewater side, and we are still finding opportunities in that space. As we always say, DXP Enterprises, Inc. is in the business of buying businesses, and we spend a lot of time finding the right fit.

Operator: We have reached the end of the Q&A session. I will now turn the call back to David Little for closing remarks.

David Little: I would reiterate that January was surprisingly slow. I do not have a clue as to why—it was across the board: water, oil and gas, and general industry. I do not have anything to point to, and that threw us off stride a bit, and we did not produce great results. With that said, bookings in January ticked up, higher in February, and higher in March. We feel good about what we are doing going forward. Sorry about January, but we feel good about the year. We are looking forward to a great year, and appreciate everybody hanging in there. Thanks.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.