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Item 1. Business

2025-03-10 compared with 2024-03-11 · 80 added, 80 removed, 301 unchanged (35% of the section changed)

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Financial Statements and Supplementary Data .

Summary Sales and Operating Income by Business Segment

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Our total sales have increased from $125 million in 1996 to $1.8 billion in 2024 through a combination of internal growth and business acquisitions.

At December 31, 2023, we operated from 183 locations which included 37 states in the United States ("U.S."), 9 provinces in Canada and one location in Dubai serving customers and becoming customer driven experts in maintenance, repair and operating solutions.

The following table shows, as of the end of the last 10 fiscal years, our consolidated sales;

total number of locations;

the number of SC locations, IPS facilities, SCS customer sites, and the corresponding sales and average sales per business segment location:

the number of SC facilities, IPS facilities, SCS customer sites;

and the corresponding sales and average sales per business segment location:

Ten Year Consolidated and Business Segment Summary

($ in millions) 2024 2023 2022 2021 2020 2019 2018 2017 2016 2015

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$ 1,223 $ 1,200 $ 1,041 $ 816 $ 663 $ 762 $ 750 $ 641 $ 621 $ 827

SC facilities

161 161 160 152 158 145 155 165 167 179

SC sales/location

SC sales/facility

$ 7.6 $ 7.5 $ 6.5 $ 5.4 $ 4.2 $ 5.3 $ 4.8 $ 3.9 $ 3.7 $ 4.6

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$ 3.0 $ 3.2 $ 2.5 $ 1.9 $ 2.0 $ 2.3 $ 2.1 $ 2.4 $ 2.3 $ 2.4

Geographic Reach

At December 31, 2024, our operations covered 279 locations including 193 facilities within our SC and IPS segment and 86 customer sites in our SCS segment.

Our SC and IPS segment operations include 38 states in the United States (“U.S.”), nine provinces in Canada, one city in the United Arab Emirates (“U.A.E”), one city in India, and one city in Saudi Arabia.

Geographic Footprint

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Our principal executive office is located at 5301 Hollister St., Houston, Texas 77040 and our telephone number is (713) 996-4700.

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

Our segments provides the Chief Operating Decision Maker ("CODM") with a comprehensive financial view of our key businesses.

Our CODM is our Chief Executive Officer.

Our segments provide our Chief Executive Officer, who is our chief operating decision maker (“CODM”) with a comprehensive financial view of our key businesses.

The segments enable the alignment of strategies and objectives and provide a framework for timely and rational allocation of resources within our businesses.

In addition to the three business segments, our consolidated financial results include "Corporate and other expenses" which includes costs related to our centralized support functions, consisting, of accounting and finance, information technology, marketing, human resources, legal, inventory management & procurement and other support services and removes inter-company transactions.

The following table sets forth the Company’s sales by business segments as of December 31, 2023.

In addition to the three business segments, our consolidated financial results include corporate and other expenses which includes costs related to our centralized support functions.

These costs typically include accounting and finance, information technology, marketing, human resources, legal, inventory management & procurement and other support services, interest expense, and removes inter-company transactions.

The following chart represents financial information for the last three years and the key end markets we currently serve.

See Results of Operations under Item 7.

Management Discussion and Analysis of Financial Condition and Results of Operations for further information on our segments’ financial results.

Segment 2023 Sales (in millions)

% of Sales End Markets Locations Employees

SC $1,145 68% General Industrial, Oil & Gas, Food & Beverage, Water & Wastewater, Chemical, Transportation, Aerospace & Other

157 service centers, 4 distribution centers

IPS $273 16% Oil & Gas, Mining, Chemical, Water & Wastewater and Utilities

16 fabrication facilities, 6 wastewater locations

SCS $260 16% Food & Beverage, Transportation, Oil & Gas, General Industrial & Chemical 81 customer sites

Consolidated Financial Summary and End Markets

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($ in millions) 2024 2023 2022

Sales $ 1,802 $ 1,679 $ 1,481

Operating Income $ 145 $ 139 $ 98

% Margin 8.1 % 8.3 % 6.6 %

EBITDA $ 182 $ 170 $ 124

% Margin 10.1 % 10.1 % 8.3 %

DXPeople 3,028 2,837 2,675

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Service Centers

The Service Centers (“SC”) are engaged in providing MRO products, equipment and services, including technical expertise and logistics capabilities, to a variety of customers serving varied end markets with the ability to provide same day delivery.

The following chart represents financial information for the last three years and the key end markets our SC segment currently serves:

Service Centers’ Financial Summary and End Markets

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($ in millions) 2024 2023 2022

Sales $ 1,223 $ 1,200 $ 1,041

Operating Income $ 175 $ 172 $ 132

% Margin 14.3 % 14.3 % 12.7 %

EBITDA $ 182 $ 178 $ 135

% Margin 14.9 % 14.8 % 13.0 %

SC Employees 1,843 1,723 1,651

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We offer our customers a single source of supply on an efficient and competitive basis by being a first-tier distributor that can purchase products directly from manufacturers.

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Sales are directly solicited from customers by our sales force.

The Company's Service Centers are stocked and staffed with knowledgeable sales associates and backed by a centralized customer service team of experienced industry professionals.

At December 31, 2023, our Service Centers’ products and services were distributed from 157 service centers and 4 distribution centers.

The Company's Service Centers facilities are stocked and staffed with knowledgeable sales associates and backed by a centralized customer service team of experienced industry professionals.

At December 31, 2024, our Service Centers’ products and services were distributed from 157 service center facilities and 4 distribution centers.

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

We currently serve as a first-tier distributor of more than 1,000,000 items of which more than 60,000 are stock keeping units (SKUs) for use primarily by customers engaged in the oil and gas, food and beverage, chemical and petrochemical, transportation and other general industrial industries.

Other industries served by our Service Centers include mining, construction, chemical, municipal water and wastewater, agriculture and pulp and paper.

The Service Centers segment’s long-lived assets are located in the U.S., Canada and Dubai.

We currently serve as a first-tier distributor of more than 1,000,000 items of which more than 60,000 are stock keeping units (SKUs) for use primarily by customers engaged in the oil and gas, general industrial, manufacturing, chemical, food and beverage, refining, water & wastewater, fabrication & construction and other industries.

The Service Centers segment’s long-lived assets are located in the U.S., Canada and the U.A.E.

Approximately 6.1% of the Service Centers segment’s revenues were in Canada and the remainder was virtually all in the U.S.

Our foreign operations are subject to certain unique risks, which are more fully disclosed in Item 1A " Risk Factors, " " Ris ks Associated with Legal and Regulatory Matters " .

Our foreign operations are subject to certain unique risks, which are more fully disclosed in Item 1A “ Risk Factors, ” “ Risks Associated with Legal and Regulatory Matters ”.

At December 31, 2024, the Service Centers segment had 1,843 employees, all of whom were full-time.

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The Company's Innovative Pumping Solutions (“IPS”) segment provides integrated, custom pump skid packages, pump remanufacturing and manufactures branded private label pumps to meet the capital equipment needs of our global customer base.

The following chart represents financial information for the last three years and the key end markets our IPS segment currently serves:

Innovative Pumping Solutions’ Financial Summary and End Markets

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($ in millions) 2024 2023 2022

Sales $ 323 $ 219 $ 199

Operating Income $ 54 $ 35 $ 25

% Margin 16.6 % 16.1 % 12.5 %

EBITDA $ 58 $ 39 $ 36

% Margin 18.0 % 17.8 % 18.1 %

IPS Employees 462 383 337

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Additionally, our IPS segment provides project solutions and capital equipment to the water and wastewater treatment markets including potable water, bio-solid and residual management and wastewater treatment.

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All of the IPS segment’s long-lived assets are located in the U.S.

Approximately 4.8% of the IPS segment’s 2023 revenues were recognized in Canada and 95.2% were in the U.S.

At December 31, 2024, the IPS segment had 462 employees, all of whom were full-time.

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The Company's Supply Chain Services (“SCS”) segment manages all or part of its customers’ supply chains, including procurement and inventory management.

The following chart represents financial information for the last three years and the key end markets our SCS segment currently serves:

Supply Chain Services’ Financial Summary and End Markets

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($ in millions) 2024 2023 2022

Sales $ 256 $ 260 $ 240

Operating Income $ 22 $ 22 $ 20

% Margin 8.5 % 8.3 % 8.1 %

EBITDA $ 22 $ 22 $ 20

% Margin 8.6 % 8.5 % 8.3 %

SCS Employees 397 419 409

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The SCS segment enters into long-term contracts with its customers that can be canceled on little or no notice under certain circumstances.

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As a first-tier distributor, our network of service and distribution centers stock more than 60,000 SKUs and provide customers with access to more than 1,000,000 items.

Given our breadth of product and our industrial distribution customers’ focus around specific product categories, we have become customer driven experts in five key product categories.

Our business is supported by the following five key product categories:

The Company tailors its inventory and leverages product experts to meet the needs of its local customers.

Given our breadth of product and our industrial distribution customers’ focus around specific product categories, we have become customer driven experts in the following five key product categories:

1.) rotating equipment;

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and 5.) safety products & services.

The Company tailors its inventory and leverages product experts to meet the needs of its local customers.

Our key product categories include:

Consolidated Sales by Product Category

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Rotating Equipment .

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All of our distribution authorizations are subject to cancellation by the manufacturer, some upon little or no notice.

For the last three fiscal years, no manufacturer accounted for 10% or more of our revenues.

For the last three fiscal years, no customer accounted for 10% or more of our revenues.

Over 90% of our business relates to sales of products.

Service revenues are less than 10% of sales.

The Company has operations in the U.S., Canada, Mexico, and Dubai.

The Company has operations in the U.S., Canada, Mexico, and the U.A.E.

Information regarding financial data by geographic areas is set forth in Note 19 - Revenue of the Notes to Consolidated Financial Statements.

Recent Acquisitions

A key component of our growth strategy includes acquiring businesses with complementary or desirable product lines, locations or customers.

A key component of our growth strategy includes acquiring businesses with complementary and desirable product lines, locations, or customers in order to maintain our leading position as the largest distributor of rotating equipment in North America.

Since 2004, we have completed 58 acquisitions.

The following briefly describes the Company’s acquisition activity for the years ended December 31, 2023 and December 31, 2022.

On November 1, 2023, the Company completed the acquisition of Alliance Pump & Mechanical Service, Inc.

(“Alliance”).

Alliance is a leading municipal and industrial pump sales, service, and repair business.

Alliance is included within our SC business segment.

Total consideration for the transaction was approximately $1.7 million, funded with a mixture of cash on hand of $1.5 million and contingent consideration of $0.2 million.

Goodwill for the transaction totaled approximately $1.3 million.

On May 1, 2023, the Company completed the acquisition of Florida Valve & Equipment, LLC and Environmental MD, Inc.

(collectively, “Florida Valve EMD”), a leading provider of valve and related products and services for the municipal water markets in the state of Florida.

Florida Valve EMD is included within our IPS business segment.

Total consideration for the transaction was approximately $3.3 million, funded with a mixture of cash on hand of $3.0 million and contingent consideration of $0.3 million.

Goodwill for the transaction totaled approximately $2.4 million.

On May 1, 2023, the Company completed the acquisition of Riordan Materials Corporation (“Riordan”), a leading provider of products for water treatment, wastewater treatment, odor control, solids handling, pumping and bio solid processes in the states of Maryland, New Jersey, Pennsylvania, Delaware and Virginia.

Riordan is included within our IPS business segment.

Total consideration for the transaction was approximately $8.4 million, funded with a mixture of cash on hand of $6.2 million and contingent consideration of $2.2 million.

Goodwill for the transaction totaled approximately $6.1 million.

On September 1, 2022, the Company completed the acquisition of Sullivan Environmental Technologies, Inc.

("Sullivan").

Sullivan is a leading distributor for the municipal and industrial water and wastewater treatment industries in Ohio, Kentucky, and Indiana.

Sullivan is included within our IPS business segment.

Total consideration for the transaction was approximately $6.5 million, funded with a mixture of cash on hand of $4.6 million, the Company's common stock valued at approximately $0.9 million and contingent consideration of $1.0 million.

Goodwill for the transaction totaled approximately $2.5 million.

On May 2, 2022, the Company completed the acquisition of Cisco Air Systems, Inc.

Cisco is a leading distributor of air compressors and related products and services focused on serving the food and beverage, transportation and general industrial markets in the Northern California and Nevada territories.

Cisco is included within our SC business segment.

Total consideration for the transaction was approximately $52.3 million, funded with a mixture of cash on hand of $32 million, the Company's common stock valued at approximately $4.4 million, approximately $11 million on the ABL and contingent consideration of $4.5 million.

Goodwill for the transaction totaled approximately $30.5 million.

On March 1, 2022, the Company completed the acquisition of Drydon Equipment, Inc.

("Drydon"), a distributor and manufacturers’ representative of pumps, valves, controls and process equipment focused on serving the water and wastewater industry in the Midwest.

Drydon is included within our IPS business segment.

The Company paid approximately $7.9 million, funded with a mixture of cash on hand of $4.9 million, the Company's common stock valued at approximately $0.4 million and contingent consideration of $2.6 million.

Goodwill for the transaction totaled approximately $5.3 million.

On March 1, 2022, the Company completed the acquisition of certain assets of Burlingame Engineers, Inc.

("Burlingame"), a provider of water and wastewater equipment in the industrial and municipal sectors.

Burlingame is included within our SC business segment.

The Company paid approximately $1.1 million including cash, the Company's common stock and contingent consideration.

Goodwill for the transaction totaled approximately $0.5 million.

We continue to evaluate opportunities to acquire businesses and companies that complement and enable further investment in our key priority areas.

The risks associated with acquisitions are more fully discussed in “Item 1A.

Risk Factors.” including the risk factory entitled “Risks associated with executing our acquisition strategy.”.

In 2024 we completed seven acquisitions for a combined total of $174.9 million.

See Note 16 - Business Acquisition s for additional information.

Our business is highly competitive.

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Corporate 326 Total Employees 3,028

Total Employees 2,837 (1) Includes employees located in Mexico and Dubai.

Total Employees 3,028 (1) Includes employees located in Mexico and the U.A.E.

Executive Officers

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Jeffery 57 Senior Vice President/Supply Chain Services

Todd Hamlin (1)

52 Senior Vice President/Service Centers

David Molero Santos

43 Vice President/Chief Accounting Officer

(1) On January 26, 2024 Mr.

Hamlin departed the Company.

Little has served as Chairman of the Board, President and Chief Executive Officer of DXP since its organization in 1996 and also has held these positions with SEPCO Industries, Inc., predecessor to the Company (“SEPCO”), since he acquired a controlling interest in SEPCO in 1986.

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He holds a Bachelor of Science in Industrial Distribution from Texas A&M University and is also a graduate of the Executive Business Program at Rice University.

Hamlin was appointed Senior Vice President of DXP Service Centers in June of 2010.

Hamlin joined the Company in 1995.

From February 2006 until June 2010 he served as Regional Vice President of the Gulf Coast Region.

Prior to serving as Regional Vice President of the Gulf Coast Region he served in various capacities, including application engineer, product specialist and sales representative.

From April 2005 through February 2006, Mr.

Hamlin worked as a sales manager for the UPS Supply Chain Services division of United Parcel Service, Inc.

He holds a Bachelor’s of Science in Industrial Distribution from Texas A&M University and a Master in Distribution from Texas A&M University.

Hamlin serves on the Advisory Board for Texas A&M’s Master in Distribution degree program.

Hamlin was elected to the Bearing Specialists Association’s Board of Directors.

David Molero Santos.

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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-K

Item 1. Business