What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-15 · 117 added, 78 removed, 114 unchanged (63% of the section changed)

1 unchanged sentence

The following management discussion and analysis ("MD&A") of the financial condition and results of operations of DXP Enterprises, Inc.

together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") for the three months ended March 31, 2023 should be read in conjunction with our previous Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q, and the consolidated financial statements and notes thereto included in such reports.

The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP").

together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") for the three and six months ended June 30, 2023 should be read in conjunction with our previous Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q, and the consolidated financial statements and notes thereto included in such reports.

The Company's consolidated financial statements are prepared in accordance with US GAAP.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Report") contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.

These forward-looking statements include without limitation those about the Company’s expectations regarding the long-term impacts of the COVID-19 pandemic, the prolonged Ukrainian/Russia conflict and its impact on commodity prices;

particularly oil and gas;

the Company’s business, the Company’s future profitability, cash flow, liquidity, and growth.

These forward-looking statements include without limitation those about the Company’s expectations regarding the Company’s business, the Company’s future profitability, cash flow, liquidity, and growth.

Such forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "might", "estimates", "will", "should", "could", "would", "suspect", "potential", "current", "achieve", "plans" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy.

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decreases in oil and natural gas industry capital expenditure levels, which may result from decreased oil and natural gas prices or other factors;

economic risks related to the long-term impact of COVID-19;

our ability to manage changes and the continued health or availability of management personnel;

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DXP Enterprises, Inc.

is a business-to-business distributor of MRO products and services to a variety of customers in different end markets primarily across North America.

is a business-to-business distributor of MRO products and services to a variety of customers in different end markets across North America and Dubai.

Additionally, we fabricate, remanufacture, and assemble custom pump packages along with manufacturing branded private label pumps.

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As a distributor, we often remain neutral to inflation as those costs are generally passed on to customers.

The Company was able to pass price increases on to customers and implement other strategies designed to mitigate some of the adverse effects of higher costs during the three months ended March 31, 2023.

Service Centers and Supply Chain Services Segments

The replacement and mission-critical nature of our products and services within the Company's Service Centers and Supply Chain Services business segments and industrial and manufacturing environments and processes drives a demand and outlook that are correlated with global, national and regional industrial production, capacity utilization and long-term GDP growth.

The Company was able to pass price increases on to customers and implement other strategies designed to mitigate some of the adverse effects of higher costs during the six months ended June 30, 2023.

Service Centers and Innovative Pumping Solutions Segments

The replacement and mission-critical nature of our products and services within the Company's Service Centers and Innovative Pumping Solutions business segments and industrial and manufacturing environments and processes drives a demand and outlook that are correlated with global, national and regional industrial production, capacity utilization and long-term GDP growth.

The Company's recent order activity improved as markets strengthened.

For the three months ended March 31, 2023, we had approximately $362.3 million in sales in our Service Centers and Supply Chain Services segments, an increase of approximately 36.0 percent compared to the three months ended March 31, 2022.

Our performance has been strengthened by price increases from our vendors and suppliers that we typically pass through to our customers.

During 2022 and into the first quarter of 2023 we have benefited from these price increases.

As we move into the second quarter and second half of 2023, we expect the impact of these price increases to moderate.

Innovative Pumping Solutions Segment

For the three months ended March 31, 2023, we had approximately $62.0 million in sales in our Innovative Pumping Solutions segment, an increase of approximately $8.9 million compared to the three months ended March 31, 2022, of which $3.3 million was associated with recent acquisitions in the water and wastewater markets.

Beginning in the second half of 2021, we began to see an improvement in the demand for oil and natural gas as the roll out of the COVID-19 vaccinations gradually improved around the globe and pandemic restrictions eased.

The increasing optimism related to oil and gas demand recovery led to higher commodity prices.

Although demand levels remained below pre-pandemic levels, there is growing confidence of returning to 2019 levels in the coming years.

In the first quarter of 2022, the Ukrainian-Russia conflict caused further disruption in the global oil and gas supply and spurred price increases around the world.

These forces contributed to higher spending by oil and gas producers, and thus, an increase in oil and gas projects within our Innovative Pumping Solutions segment.

We expect to benefit from the increased oil and gas activity throughout 2023.

For the three months ended June 30, 2023 and six months ended June 30, 2023, we had approximately $361.9 million and $719.1 million in sales in our Service Centers and Innovative Pumping Solutions segments, an increase of approximately 17.2 percent and 23.8 percent compared to the three months ended June 30, 2022 and the six months ended June 30, 2022, respectively.

Our performance has been strengthened by price increases from our vendors and suppliers During the six months ended June 30, 2023, $7.3 million was associated with recent acquisitions in the water and wastewater markets.

We expect to benefit from the increased oil and gas activity throughout the remainder of 2023.

Additionally, we expect to benefit from the recent water and wastewater acquisitions as we continue to scale this platform both organically and by positioning DXP Water to bid on projects that historically may have not been available to the separate acquisitions on a standalone basis.

Supply Chain Services Segment

For the three months ended June 30, 2023 and six months ended June 30, 2023, we had approximately $66.2 million and $133.2 million in sales in our Supply Chain Services segment, an increase of approximately 12.3 percent and 25.1 percent compared to the three months ended June 30, 2022 and the six months ended June 30, 2022, respectively.

Our performance compared to the previous six month period has benefited from the addition of a new diversified chemical customer that recently reach its one-year anniversary during the second quarter of 2023.

As we move forward, we expect our performance to be driven by either the addition of new customers or an increase in spend by our existing customers.

RESULTS OF OPERATIONS

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DXP is organized into three business segments:

Service Centers ("SC"), Supply Chain Services ("SCS") and Innovative Pumping Solutions ("IPS").

Service Centers ("SC"), Innovative Pumping Solutions ("IPS"), and Supply Chain Services ("SCS").

The Service Centers are engaged in providing MRO products, equipment and integrated services, including technical expertise and logistics capabilities, to industrial customers with the ability to provide same day delivery.

The Service Centers provide a wide range of MRO products and services in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply and safety product and service categories.

The SCS segment provides a wide range of MRO products and manages all or part of our customer's supply chain function, and inventory management.

The IPS segment provides products and services to the water and wastewater market and fabricates and assembles integrated pump system packages custom made to customer specifications, remanufactures pumps, and manufactures branded private label pumps.

Three Months Ended March 31,

The SCS segment provides a wide range of MRO products and manages all or part of our customer's supply chain function, and inventory management.

Three Months Ended June 30,

2023 % 2022 %

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Income before income taxes 25,859 6.0% 19,466 5.3%

Provision for income tax expense (benefit) 6,767 1.6 % 3,332 1.0 %

Provision for income tax expense 6,805 1.6% 4,973 1.4%

Net income 19,054 4.5% 14,493 3.9%

Net loss attributable to noncontrolling interest — — (113) —

Net income attributable to noncontrolling interest — — 60 —

Net income attributable to DXP Enterprises, Inc.

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Diluted earnings per share $ 1.06 $ 0.74

Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022

Sales for the three months ended March 31, 2023 increased $104.9 million, or 32.8 percent, to approximately $424.3 million from $319.4 million for the prior year's corresponding period.

Sales from businesses acquired in 2022 for three months ended March 31, 2023, accounted for $9.3 million of the sales.

This overall sales increase is the result of an increase in sales in our SC, IPS and SCS segments of $76.4 million, $8.9 million, and $19.5 million, respectively.

Three Months Ended June 30, 2023 compared to Three Months Ended June 30, 2022

Sales for the three months ended June 30, 2023 increased $60.2 million, or 16.4 percent, to approximately $428.0 million from $367.8 million for the prior year's corresponding period.

Sales from acquisitions for three months ended June 30, 2023, accounted for $7.3 million compared to $17.8 million for the three months ended June 30, 2022.

The overall increase in sales was the result of an increase in sales in our SC, IPS and SCS segments of $47.3 million, $5.7 million, and $7.2 million, respectively.

The fluctuations in sales are further explained in our business segment discussions below.

Three Months Ended March 31,

Three Months Ended June 30,

2023 2022 Change Change%

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Service Centers segment.

Sales for the SC segment increased by approximately $76.4 million, or 34.9 percent, for the three months ended March 31, 2023, compared to the prior year's corresponding period.

Excluding $6.0 million of SC segment sales associated with acquisitions in the prior period, sales increased $70.4 million from the prior year's corresponding period.

This sales increase is primarily the result of increased sales of rotating equipment and bearings and power transmission products to customers engaged in variety of markets.

Sales for the SC segment increased by approximately $47.3 million, or 18.9 percent, for the three months ended June 30, 2023, compared to the prior year's corresponding period.

Sales from acquisitions for the SC segment was $4.5 million during the three months ended June 30, 2023 compared to $12.5 million for the three months ended June 30, 2022.

Total sales for the SC segment excluding acquisitions increased $55.4 million from the prior year's corresponding period.

This sales increase is primarily the result of increased sales of rotating equipment and bearings and power transmission products to customers engaged in a variety of end markets.

Innovative Pumping Solutions segment .

Sales for the IPS segment increased by $8.9 million, or 16.9 percent, for the three months ended March 31, 2023, compared to the prior year's corresponding period.

Excluding $3.3 million of IPS segment sales from acquisitions in the prior period, IPS segment sales increased $5.6 million from the prior year's corresponding period.

This increase was primarily the result of an increase in the capital spending by oil and gas producers and related businesses.

Sales for the IPS segment increased by $5.7 million, or 9.8 percent, for the three months ended June 30, 2023, compared to the prior year's corresponding period.

Sales from acquisitions for the IPS segment was $2.8 million during the three months ended June 30, 2023 compared to $5.3 million for the three months ended June 30, 2022.

Total sales for the IPS segment excluding acquisitions increased $8.1 million from the prior year's corresponding period.

This increase was primarily the result of an increase in the capital spending by oil and gas producers and renewable sectors.

Supply Chain Services segment.

Sales for the SCS segment increased by $19.5 million, or 41.0 percent, for the three months ended March 31, 2023, compared to the prior year's corresponding period.

Sales for the SCS segment increased by $7.2 million, or 12.3 percent, for the three months ended June 30, 2023, compared to the prior year's corresponding period.

The improved sales are primarily related to the addition of a new customer in the diversified chemicals market, as well as sales increases in the medical technology, food and beverage and oil and gas markets.

GROSS PROFIT.

Gross profit as a percentage of sales for the three months ended March 31, 2023 was 29.5 percent versus 29.7 percent in the prior year's corresponding period.

Excluding the impact of the businesses acquired in the prior period, gross profit as a percentage of sales was 29.2 percent.

The decrease in the gross profit percentage excluding the businesses acquired is primarily the result of a decrease in gross profit within our SCS segment.

Gross profit as a percentage of sales for the three months ended June 30, 2023 was 30.8 percent versus 28.3 percent in the prior year's corresponding period.

The increase in the gross profit percentage is primarily the result of an increase in gross profit within our IPS segment in our water/wastewater division.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A").

SG&A for the three months ended June 30, 2023 increased by approximately $16.0 million, or 20.5 percent, to $94.4 million from $78.3 million for the prior year's corresponding period.

The increase in SG&A is primarily the result of increased payroll, incentive compensation and related taxes and 401(k) expenses as a result of increased business activity.

OPERATING INCOME.

Operating income for the second quarter of 2023 increased by $11.6 million to $37.5 million, from $25.9 million in the prior year's corresponding period.

This increase in operating income is related to the aforementioned increase in business activity across all segments.

INTEREST EXPENSE.

Interest expense for the second quarter of 2023 increased $6.2 million compared to the prior year's corresponding period.

This increase was primarily due to the Company borrowing an additional $105.0 million on its Term Loan during the fourth quarter of 2022 and incurring higher than average interest rates on such debt due to changes in the macroeconomic environment and the associated increasing interest rate policy by the U.S.

Federal Reserve Bank.

INCOME TAXES.

Our effective tax rate from continuing operations was a tax expense of 26.3 percent for the three months ended June 30, 2023, compared to a tax expense of 25.5 percent for the three months ended June 30, 2022.

Compared to the U.S.

statutory rate for the three months ended June 30, 2023, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits and was partially offset by research and development tax credits and other tax credits.

Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022

Six Months Ended June 30,

2023 % 2022 %

Sales $ 852,307 100.0% $ 687,223 100.0%

Cost of sales 595,414 69.9% 488,076 71.0%

Gross profit $ 256,893 30.1% $ 199,147 29.0%

Selling, general and administrative expenses 184,014 21.6% 151,667 22.1%

Income from operations $ 72,879 8.6% $ 47,480 6.9%

Other (income) expense, net (712) (0.1)% 1,377 0.2%

Interest expense 23,384 2.7% 10,777 1.6%

Income before income taxes $ 50,207 5.9% $ 35,326 5.1%

Provision for income taxes 13,573 1.6% 8,305 1.2%

Net income $ 36,634 4.3% $ 27,021 3.9%

Net loss attributable to noncontrolling interest — — (53) —%

Net income attributable to DXP Enterprises, Inc.

$ 36,634 4.3% $ 27,074 3.9%

Per share amounts attributable to DXP Enterprises, Inc.

Basic earnings per share $ 2.10 $ 1.45

Diluted earnings per share $ 2.01 $ 1.39

Sales for the six months ended June 30, 2023 increased $165.1 million, or 24.0 percent, to approximately $852.3 million from $687.2 million for the prior year's corresponding period.

Sales from businesses acquired accounted for $26.4 million of sales for the six months ended June 30, 2023 compared to $30.9 million for the six months ended June 30, 2022 .

The overall increase in sales was the result of an increase in sales within our SC, IPS and SCS segments of $123.8 million, $14.6 million and $26.7 million, respectively.

The fluctuations in sales are further explained in our business segment discussions below.

Six Months Ended June 30,

2023 2022 Change Change%

Sales by Business Segment (in thousands, except change %)

Service Centers 593,658 469,894 $ 123,764 26.3 %

Innovative Pumping Solutions 125,439 110,846 14,593 13.2 %

Supply Chain Services 133,210 106,483 26,727 25.1 %

Total DXP Sales $ 852,307 $ 687,223 $ 165,084 24.0 %

Service Centers segment.

As a percentage of sales, for the three months ended March 31, 2023 gross profit percentage for the SC segment increased approximately 20 basis points.

Excluding for the businesses acquired in the prior period, gross profit as a percentage of sales decreased approximately 30 basis points from the prior year's corresponding period.

This was primarily the result of product mix.

Gross profit for the SC segment, excluding businesses acquired in the prior period, increased $20.9 million, or 30.9 percent, during the three months ended March 31, 2023 compared to the prior year’s corresponding period.

Sales for the SC segment increased by $123.8 million, or 26.3 percent for the six months ended June 30, 2023, compared to the prior year's corresponding period.

Sales from acquisitions for the SC segment was $19.1 million during the six months ended June 30, 2023 compared to $16.5 million for the six months ended June 30, 2022.

Total sales for the SC segment excluding acquisitions increased $121.2 million from the prior year's corresponding period.

This sales increase is primarily the result of increased sales of rotating equipment and bearings product lines to customers engaged in operating and maintenance services in the general industrial, diversified chemical, and oil & gas markets in connection with increased capital spending by oil and gas producers.

Innovative Pumping Solutions segment .

As a percentage of sales, for the three months ended March 31, 2023 gross profit percentage for the IPS segment increased approximately 185 basis points.

Excluding for the businesses acquired, gross profit as a percentage of sales increased approximately 235 basis points from the prior year's corresponding period.

The aforementioned increase in gross profit percentage as a percentage of sales is primarily due to the addition of higher water and wastewater projects versus lower margin oil and gas work and gross margin improvements within oil and gas.

Gross profit increased $3.1 million compared to the prior year corresponding period, excluding business acquired, primarily as a result of an increase in project work caused by an increase in capital spending by our customers.

Sales for the IPS segment increased by $14.6 million, or 13.2 percent for the six months ended June 30, 2023 compared to the prior year's corresponding period.

Sales from acquisitions for the IPS segment was $7.3 million during the six months ended June 30, 2023 compared to $14.4 million for the six months ended June 30, 2022.

Total sales for the IPS segment excluding acquisitions increased $21.7 million from the prior year's corresponding period.

This increase was primarily the result of an increase in the capital spending by oil and gas producers and renewable

Supply Chain Services segment.

As a percentage of sales, for the three months ended March 31, 2023 gross profit percentage for the SCS segment decreased approximately 375 basis points compared to the prior year's corresponding period.

Gross profit for the first quarter of 2023 increased $2.1 million, or 18.8 percent, compared to the prior year's corresponding period primarily due to the addition of a new customer in the diversified chemicals market.

Sales for the SCS segment increased by $26.7 million, or 25.1 percent, for the six months ended June 30, 2023, compared to the prior year's corresponding period.

GROSS PROFIT.

Gross profit as a percentage of sales for the six months ended June 30, 2023 increased by approximately 116 basis points from the prior year's corresponding period.

The increase in the gross profit percentage is primarily the result of an approximate 113 basis points and 335 basis points increase in the gross profit percentage in our SC and IPS segments partially offset by an approximate 72 basis points decrease in our SCS segment, respectively.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A").

SG&A for the three months ended March 31, 2023 increased by approximately $16.3 million, or 22.3 percent, to $89.6 million from $73.3 million for the prior year's corresponding period.

SG&A from businesses acquired accounted for $2.0 million.

Excluding expenses from businesses acquired, SG&A for the quarter increased by $14.3 million, or 19.5 percent, compared to the prior year's corresponding period.

The increase in SG&A excluding businesses acquired is primarily the result of increased payroll, incentive compensation and related taxes and 401(k) expenses as a result of increased business activity.

SG&A for the six months ended June 30, 2023 increased by approximately $32.3 million, or 21.3 percent, to $184.0 million from $151.7 million for the prior year's corresponding period.

The increase in SG&A is primarily the result of increased payroll, incentive compensation and related taxes and 401(k) expenses as a result of increased business activity.

OPERATING INCOME.

Operating income for the first quarter of 2023 increased by $13.8 million to $35.4 million, from $21.6 million in the prior year's corresponding period.

This increase in operating income is related to the aforementioned increase in business activity across all segments and reduction in SG&A as a percentage of sales in the current period versus the prior year's corresponding period.

Operating income for the six months ended June 30, 2023 increased by $25.4 million or 53.5% to $72.9 million from $47.5 million in the prior year's corresponding period.

This increase in operating income is primarily related to the aforementioned increased business activity across all segments.

INTEREST EXPENSE.

Interest expense for the first quarter of 2023 increased $6.4 million compared to the prior year's corresponding period.

This increase was primarily due to the Company borrowing an additional $105.0 million on its Term Loan B during the fourth quarter of 2022 and incurring higher than average interest rates on such debt due to changes in the macroeconomic environment and the associated increasing interest rate policy by the U.S.

Interest expense for the six months ended June 30, 2023 increased $12.6 million compared with the prior year's corresponding period.

Federal Reserve Bank.

INCOME TAXES.

Our effective tax rate from continuing operations was a tax expense of 27.9 percent for the three months ended March 31, 2023, compared to a tax expense of 21.0 percent for the three months ended March 31, 2022.

Our effective tax rate from continuing operations was a tax expense of 27.0 percent for the six months ended June 30, 2023, compared to a tax expense of 23.5 percent for the six months ended June 30, 2022.

Compared to the U.S.

statutory rate for the three months ended March 31, 2023, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits and was partially offset by research and development tax credits and other tax credits.

statutory rate for the six months ended June 30, 2023, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits and was partially offset by research and development tax credits and other tax credits.

LIQUIDITY AND CAPITAL RESOURCES

General Overview

As of March 31, 2023, we had cash and restricted cash of $58.4 million and credit facility availability of $132.4 million.

We have a $135.0 million asset backed revolving line of credit (the "ABL Revolver"), partially offset by letters of credit of $2.6 million.

We had no borrowings outstanding on our ABL Revolver as of March 31, 2023.

We had $427.0 million in borrowings on our Term Loan B as of March 31, 2023.

On July 19, 2022, the Company amended and extended the maturity date of the ABL Revolver to July 19, 2027.

As of June 30, 2023, we had cash and restricted cash of $15.6 million and credit facility availability of $132.3 million.

We have a $135.0 million asset-backed line of credit (the "ABL Revolver"), partially offset by letters of credit of $2.7 million.

We had no borrowings outstanding on our ABL Revolver as of June 30, 2023.

We had $425.9 million in borrowings on our Term Loan as of June 30, 2023.

Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of financing.

As a distributor of MRO products and services and fabricator of custom pumps and packages, working capital can fluctuate as a result of changes in inventory levels, accounts receivable and costs in excess of billings for project work.

Additional cash is required for capital items for information technology, warehouse equipment, leasehold improvements, pump manufacturing equipment and safety services equipment.

Additional cash is required for capital items for information technology, warehouse equipment, leasehold improvements, pump manufacturing and safety services equipment.

We also require cash to pay our lease obligations and to service our debt.

The following table summarizes our net cash flows generated by operating activities, net cash used in investing activities and net cash used in financing activities for the periods presented (in thousands) :

Three Months Ended March 31,

Six Months Ended June 30,

Net Cash Provided by (Used in):

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Operating Activities

The Company generated $26.4 million of cash from operating activities during the three months ended March 31, 2023 compared to $2.7 million of cash generated during the prior year's corresponding period.

The $23.8 million increase in the amount of cash provided between the two periods was primarily due to increased business activity.

The Company generated $24.0 million of cash from operating activities during the six months ended June 30, 2023 compared to $5.7 million of cash generated during the prior year's corresponding period.

The $18.3 million increase in the amount of cash provided by operating activities between the two periods was primarily due to increased business activity and higher sales at a higher margin partially offset by a decrease of progress billings as compared to the prior period.

Investing Activities

For the three months ended March 31, 2023, net cash used in investing activities was $3.8 million compared to a $6.1 million use of cash during the prior year’s corresponding period.

This $2.3 million decrease was primarily driven by a reduction in the total purchase price paid for acquisitions during the three months ended March 31, 2022 of $5.3 million without comparable activity during the three months ended March 31, 2023.

The decrease was partially offset by purchases of property and equipment of $3.8 million for the three months ended March 31, 2023 compared to $740 thousand for the three months ended March 31, 2022.

For the six months ended June 30, 2023, net cash used in investing activities was $14.1 million compared to a $46.0 million use of cash during the prior year’s corresponding period.

This $31.9 million decrease was primarily driven by a reduction in the total purchase price paid for acquisitions during the six months ended June 30, 2023 of $8.5 million compared to $44.1 million during the six months ended June 30, 2022.

The decrease was partially offset by purchases of property and equipment of $5.6 million for the six months ended June 30, 2023 compared to $1.8 million for the six months ended June 30, 2022.

Financing Activities

For the three months ended March 31, 2023, net cash used in financing activities was $10.4 million, compared to net cash used in financing activities of $9.3 million during the prior year’s corresponding period.

The increase was primarily due to an increase of $0.8 million in share repurchases.

For the six months ended June 30, 2023, net cash used in financing activities was $40.2 million, compared to net cash provided by financing activities of $12.0 million during the prior year’s corresponding period.

The increase was primarily due to an increase of $33.6 million in share repurchases for the six months ended June 30, 2023 compared to $15.1 million for the six months ended June 30, 2022.

During the six months ended June 30, 2022, the Company had $29.1 million outstanding under the ABL Revolver compared to no borrowings outstanding during the six months ended June 30, 2023.

The Company paid contingent consideration of $4.0 million for the six months ended June 30, 2023 without comparable activity in the prior period.

Funding Commitments

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For a more complete discussion of our significant accounting policies and business practices, refer to the consolidated annual report on Form 10-K filed with the Securities and Exchange Commission on April 17, 2023.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of results expected for the full fiscal year.

The results of operations for the six months ended June 30, 2023 are not necessarily indicative of results expected for the full fiscal year.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 3 - Recent Accounting Pronouncements to the Condensed Consolidated Financial Statements for information regarding recent accounting pronouncements.

See Note 3 - Recently Issued Accounting Pronouncements to the Condensed Consolidated Financial Statements for information regarding recent accounting pronouncements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis