Dxp enterprises reports second quarter 2022 results
Houston--(business wire)--dxp enterprises, inc. (nasdaq: dxpe) today announced financial results for the second quarter ended june 30, 2022. the following are results for the three and six months ended june 30, 2022, compared to the three and six months ended june 30, 2021 and sequentially for the three months ended march 31, 2022, where appropriate. a reconciliation of the non-gaap financial measures can be found in the back of this press release. second quarter 2022 financial highlights: sales increased 28.7 percent to $367.8 million, compared to $285.7 million for the second quarter of 2021 and approximately 15.2 percent compared to $319.4 million for the first quarter of 2022. earnings per diluted share for the second quarter were $0.74 based upon 19.6 million diluted shares, compared to earnings of $0.41 per share in the second quarter of june 30, 2021, based on 20.1 million diluted shares. net income for the second quarter was $14.4 million, compared to $8.1 million for the corresponding prior-year period. adjusted earnings before interest, taxes, depreciation and amortization and other non-cash charges (adjusted ebitda) for the second quarter of 2022 was $32.6 million compared to $28.3 million for the first quarter of 2022 and $22.7 million for the second quarter of 2021. david r. little, chairman and ceo remarked, “our second quarter financial results reflect broad based strength across dxp. we are pleased with our sequential and year-over-year sales growth and continual strength in ebitda margins. we have underlying business momentum while our industry continues to effectively manage through inflationary pressures. this resulted in operating leverage that produced earnings per share of $0.74. dxp's second quarter 2022 sales were $367.8 million, or a 28.7 percent increase over the second quarter of 2021. organic sales for the quarter were $346.5 million and acquisitions contributed $21.3 million in sales. adjusted ebitda grew 43.8 percent. during the second quarter, sales were $251.1 million for service centers, $57.8 million for innovative pumping solutions and $58.9 million for supply chain services. while the macro-environment continues to remain dynamic, we still see a strong second half of 2022 with good demand trends, acquisitions and strategic initiatives that will allow us to finish 2022 strong and position us for a better 2023. thank you to all our customers and dxpeople." kent yee, cfo, remarked, “we are pleased that we achieved diluted eps of $0.74, with 80.5 percent year-over-year growth and adjusted ebitda of $32.6 million for the second quarter. our second quarter year-over-year and sequential financial results continue to reflect the growth we have been experiencing over the last four quarters and reflect our financial goals to grow organically and through acquisition while diversifying our end market and business model exposure. total debt outstanding as of june 30, 2022 was $354.2 million . dxp's secured leverage ratio or net debt to ebitda ratio was 3.1:1.0 with a covenant ebitda of $106.7 million for the last twelve months ending june 30, 2022. we expect to finish 2022 with strong momentum.” non-gaap financial measures dxp supplements reporting of net income with non-gaap measurements, including ebitda, adjusted ebitda, free cash flow, non-gaap net income and net debt. this supplemental information should not be considered in isolation or as a substitute for the unaudited gaap measurements. additional information regarding ebitda, adjusted ebitda, free cash flow and non-gaap net income 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. free cash flow reconciles to the most directly comparable gaap financial measure of cash flows from operations as provided below. we believe free cash flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to fund acquisitions, make investments, repay debt obligations, repurchase company shares, and for certain other activities. 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 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. these forward-looking statements include without limitation those about the company’s expectations regarding the impact of the covid-19 pandemic and the impact of low commodity prices of oil and gas; the company's expectations regarding the filing of the form 10-q; the description of the anticipated changes in the company's consolidated balance sheet and the results of operations and the company's assessment of the impact of such anticipated changes; the company’s business, the company’s future profitability, cash flow, liquidity, and growth. 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; decreases in oil and natural gas prices; decreases in oil and natural gas industry expenditure levels, which may result from decreased oil and natural gas prices or other factors; inability of the company or its independent auditors to complete the work necessary in order to file the form 10-q, in the expected time frame; unanticipated changes to the company's operating results in the form 10-q as filed or in relation to prior periods, including as compared to the anticipated changes stated here; unanticipated impact of such changes and its materiality; ability to obtain needed capital, dependence on existing management, leverage and debt service, domestic or global economic conditions, economic risks related to the impact of covid-19, ability to manage changes and the continued health or availability of management personnel 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. more information on these risks and other potential factors that could affect the company’s business and financial results is included in the company’s filings with the sec, including in the “risk factors” and “management’s discussion and analysis of financial condition and results of operations” sections of the company’s most recently filed periodic reports on form 10-k and form 10-q and subsequent filings. the company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. dxp enterprises, inc. and subsidiaries unaudited condensed consolidated statements of operations ($ thousands, except for share and per share amounts) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 sales $ 367,812 $ 285,691 $ 687,223 $ 531,278 cost of sales 263,550 200,413 488,076 374,370 gross profit 104,262 85,278 199,147 156,908 selling, general and administrative expenses 78,342 70,432 151,667 135,829 operating income 25,920 14,846 47,480 21,079 other (income) loss 839 (105 ) 1,377 (535 ) interest expense 5,615 5,337 10,777 10,580 income before income taxes 19,466 9,614 35,326 11,034 provision for income taxes 4,973 1,684 8,305 2,945 net income 14,493 7,930 27,021 8,089 net income (loss) attributable to nci* 60 (189 ) (53 ) (401 ) net income attributable to dxp enterprises, inc. 14,433 8,119 27,074 8,490 preferred stock dividend 22 22 45 45 net income attributable to common shareholders $ 14,411 $ 8,097 $ 27,029 $ 8,445 diluted earnings per share attributable to dxp enterprises, inc. $ 0.74 $ 0.41 $ 1.39 $ 0.42 weighted average common shares and common equivalent shares outstanding 19,606 20,131 19,491 20,079 *nci represents non-controlling interest business segment financial highlights: service centers’ revenue for the second quarter was $251.1 million, a 14.8 percent sequential increase and an increase of 19.8 percent year-over-year with a 12.9 percent operating income margin. innovative pumping solutions’ revenue for the second quarter was $57.8 million, a sequential increase of 8.9 percent and an increase of 57.3 percent year-over-year with a 15.1 percent operating income margin. supply chain services’ revenue for the second quarter was $58.9 million, a 23.9 percent sequential increase and an increase of 49.8 percent year-over-year with a 8.4 percent operating income margin. segment data ($ thousands, unaudited) three months ended june 30, six months ended june 30, sales 2022 2021 2022 2021 service centers $ 251,098 $ 209,633 $ 469,894 $ 396,002 innovative pumping solutions 57,788 36,727 110,846 59,972 supply chain services 58,926 39,331 106,483 75,304 total dxp sales $ 367,812 $ 285,691 $ 687,223 $ 531,278 three months ended june 30, six months ended june 30, operating income 2022 2021 2022 2021 service centers $ 32,368 $ 26,300 $ 59,719 $ 48,437 innovative pumping solutions 8,726 4,803 15,795 5,751 supply chain services 4,958 3,488 8,978 5,810 total segments operating income $ 46,052 $ 34,591 $ 84,492 $ 59,998 reconciliation of operating income for reportable segments ($ thousands, unaudited) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 operating income for reportable segments $ 46,052 $ 34,591 $ 84,492 $ 59,998 adjustment for: amortization of intangibles 4,591 4,306 8,826 8,452 corporate expenses 15,541 15,439 28,186 30,467 total operating income $ 25,920 $ 14,846 $ 47,480 $ 21,079 interest expense 5,615 5,337 10,777 10,580 other (income) loss 839 (105 ) 1,377 (535 ) income before income taxes $ 19,466 $ 9,614 $ 35,326 $ 11,034 unaudited reconciliation of non-gaap financial information ($ thousands) the following table is a reconciliation of ebitda and adjusted ebitda, non-gaap financial measures, to income before taxes, calculated and reported in accordance with u.s. gaap. three months ended june 30, six months ended june 30, 2022 2021 2022 2021 income before income taxes 19,466 9,614 35,326 11,034 plus: interest expense 5,615 5,337 10,777 10,580 plus: depreciation and amortization 7,080 6,958 13,832 13,584 ebitda $ 32,161 $ 21,909 $ 59,935 $ 35,198 plus: nci income (loss) before tax* (45 ) 315 68 598 plus: stock compensation expense 493 460 863 840 adjusted ebitda $ 32,609 $ 22,684 $ 60,866 $ 36,636 * nci represents non-controlling interest dxp enterprises, inc. and subsidiaries unaudited condensed consolidated balance sheets ($ thousands) june 30, 2022 december 31, 2021 assets current assets: cash $ 20,574 $ 48,989 restricted cash 91 91 accounts receivable, net of allowances for doubtful accounts 273,310 218,137 inventories 119,694 100,894 costs and estimated profits in excess of billings 25,655 17,193 prepaid expenses and other current assets 13,645 9,522 income taxes receivable 316 9,748 total current assets $ 453,285 $ 404,574 property and equipment, net 49,974 51,880 goodwill 334,779 296,541 other intangible assets, net of accumulated amortization 83,131 79,205 operating lease right-of-use assets 59,898 57,221 other long-term assets 3,823 4,806 total assets $ 984,890 $ 894,227 liabilities and equity current liabilities: current maturities of debt $ 32,424 $ 3,300 trade accounts payable 103,641 77,842 accrued wages and benefits 28,749 23,006 customer advances 17,465 12,924 billings in excess of costs and estimated profits 2,076 3,581 federal income taxes payable 1,423 0 current-portion operating lease liabilities 18,418 18,203 other current liabilities 33,331 42,206 total current liabilities $ 237,527 $ 181,062 long-term debt, less unamortized debt issuance costs 314,663 315,397 long-term operating lease liabilities 42,316 39,922 other long-term liabilities 3,893 3,603 deferred income taxes 10,905 7,516 total long-term liabilities $ 371,777 $ 366,438 total liabilities $ 609,304 $ 547,500 equity: total dxp enterprises, inc. equity 375,586 346,674 non-controlling interest — 53 total equity $ 375,586 $ 346,727 total liabilities and equity $ 984,890 $ 894,227 unaudited reconciliation of non-gaap financial information ($ thousands) 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 june 30, six months ended june 30, 2022 2021 2022 2021 net cash from operating activities $ 3,005 $ 7,788 $ 5,686 $ 16,206 less: purchases of property and equipment (1,108 ) (846 ) (1,848 ) (1,526 ) plus: proceeds from sales of property & equipment — — — 1,297 free cash flow $ 1,897 $ 6,942 $ 3,838 $ 15,977 note: supplemental non-cash items include share repurchases which have been excluded.
