What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 75 added, 81 removed, 327 unchanged (32% 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 six months ended June 30, 2025 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.

together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") for the nine months ended September 30, 2025 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 U.S.

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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.

For the six months ended June 30, 2025, we had approximately $846.5 million in sales in our Service Centers and Innovative Pumping Solutions segments, an increase of approximately 15.9 percent compared to the six months ended June 30, 2024.

Our performance has been strengthened by price increases from our vendors and suppliers and the Company's acquisition activity.

During the six months ended June 30, 2025, $22.2 million in sales was associated with recent acquisitions in the water and wastewater markets.

For the nine months ended September 30, 2025, we had approximately $1.3 billion in sales in our Service Centers and Innovative Pumping Solutions segments, an increase of approximately 14.1 percent compared to the nine months ended September 30, 2024.

Our performance has been strengthened by our ability to maintain strong margins despite price increases from vendors and suppliers.

During the nine months ended September 30, 2025, $45.1 million in sales in our Service Centers (SC) segment and $29.0 million in sales in our Innovative Pumping Solutions (IPS) segment were associated with acquisition sales.

Supply Chain Services Segment

For the six months ended June 30, 2025, we had approximately $128.7 million in sales in our Supply Chain Services segment, an increase of approximately 0.8 percent compared to the six months ended June 30, 2024.

This is primarily due to new customer facilities, slightly offset by facility closures due to the inherent efficiencies we bring to customers as part of our value proposition.

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

For the nine months ended September 30, 2025, we had approximately $191.7 million in sales in our Supply Chain Services (SCS) segment, a decrease of approximately 1.1 percent compared to the nine months ended September 30, 2024.

Matters Affecting Comparability

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Accordingly, the results of acquisitions are included subsequent to their respective acquisition dates and the Company provides detail around Organic and Acquisition Sales as defined in our Key Business Metrics.

During the six months ended June 30, 2025, acquisition sales were $55.7 million compared to $35.2 million for the six months ended June 30, 2024.

During the nine months ended September 30, 2025, acquisition sales were $74.1 million compared to $63.7 million for the nine months ended September 30, 2024.

From time to time, typically based upon a leap year, our comparable business days may not equal each other.

There were 126 business days during the six months ended June 30, 2025 and 127 business days during the six months ended June 30, 2024.

As such, during the second quarter, there was one less business day compared to the prior year's corresponding period.

There were 190 business days during the nine months ended September 30, 2025 and 191 business days during the nine months ended September 30, 2024.

Key Business Metrics

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GAAP measures.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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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.

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, 2025 compared to Three Months Ended June 30, 2024

Three Months Ended June 30,

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

Three Months Ended September 30, 2025 compared to Three Months Ended September 30, 2024

Three Months Ended September 30,

2025 % 2024 %

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14,894 2.9% 15,716 3.3%

Other income, net

Other (income) expense, net

(648) (0.1)% 160 —%

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$ 1.31 $ 1.27

The following tables sets forth the disaggregation of revenue from sales associated with acquisitions for the three and six months ended June 30, 2025 and 2024 (in thousands) :

The following tables sets forth the disaggregation of revenue from sales associated with acquisitions for the three and nine months ended September 30, 2025 and 2024 (in thousands) :

Sales Acquisition Sales Organic Sales

Three Months Ended June 30, 2025

Three Months Ended September 30, 2025

Service Centers $ 350,179 $ 11,658 $ 338,521

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Total Sales $ 513,724 $ 18,403 $ 495,321

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Service Centers $ 316,831 $ 12,969 $ 303,862

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Total % Change 8.6 % (35.5) % 11.5 %

Sales for the three months ended June 30, 2025 increased $53.1 million, or 11.9 percent, to approximately $498.7 million from $445.6 million for the prior year's corresponding period, of which acquisitions contributed $24.6 million.

Sales for the three months ended September 30, 2025 increased $40.8 million, or 8.6 percent, to approximately $513.7 million from $472.9 million for the prior year's corresponding period, of which acquisitions contributed $18.4 million.

Additionally, the overall increase in sales was the result of an increase in sales in our SC and IPS segments of $33.3 million and $10.7 million, slightly offset by a decrease in our SCS segment of $3.3 million.

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

GROSS PROFIT.

Gross profit margin for the three months ended June 30, 2025 was 31.6 percent compared to 30.9 percent for the prior year's corresponding period.

The gross profit margin for the three months ended June 30, 2025 was positively impacted by 70 basis points due to recent acquisitions and continuing margin expansion opportunities.

Service Centers segment.

Sales for the SC segment increased $33.2 million, or 10.8 percent, for the three months ended June 30, 2025, compared to the prior year's corresponding period.

Organic sales grew $26.4 million, this sales increase was the result of increases within our Ohio River Valley, California and South Central and Rockies regions totaling $12.4 million.

Additionally, the increase was also attributable to an overall increase in our rotating equipment and air compressors product categories totaling $14.6 million.

Sales attributable to recent acquisitions was $15.6 million during the period as compared to $8.7 million in the three months ended June 30, 2024.

Sales for the SC segment increased $33.3 million, or 10.5 percent, for the three months ended September 30, 2025, compared to the prior year's corresponding period.

Organic sales grew $34.7 million, this sales increase was the result of increases within our Ohio River Valley, California, South Central, and Rockies regions totaling $24.3 million offset by decreases in sales within Canada of $5.0 million.

Sales attributable to recent acquisitions was $11.7 million during the period as compared to $13.0 million in the three months ended September 30, 2024.

Innovative Pumping Solutions segment.

Sales for the IPS segment increased $20.2 million, or 27.5 percent, for the three months ended June 30, 2025, compared to the prior year's corresponding period.

Sales for the IPS segment increased $10.7 million, or 11.9 percent, for the three months ended September 30, 2025, compared to the prior year's corresponding period.

This sales increase was the result of increases within our fabrication, global solutions division, and our water and wastewater division totaling $19.5 million.

Sales attributable to recent acquisitions was $9.0 million during the period as compared to $14.7 million for the three months ended June 30, 2024.

Sales attributable to recent acquisitions was $6.7 million during the period as compared to $15.6 million for the three months ended September 30, 2024.

Supply Chain Services segment.

Sales for the SCS segment decreased by $0.3 million, or 0.4 percent, for the three months ended June 30, 2025, compared to the prior year's corresponding period.

Sales for the SCS segment decreased by $3.3 million, or 5.0 percent, for the three months ended September 30, 2025, compared to the prior year's corresponding period primarily due to customer facility closures.

GROSS PROFIT.

Gross profit margin for the three months ended September 30, 2025 was 31.4 percent compared to 30.9 percent for the prior year's corresponding period.

The gross profit margin for the three months ended September 30, 2025 was positively impacted by 50 basis points due to recent acquisitions and continuing margin expansion efforts.

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

SG&A for the three months ended June 30, 2025 increased by $11.4 million, or 11.3 percent, to $111.8 million from $100.4 million for the prior year's corresponding period.

SG&A for the three months ended September 30, 2025 increased by $11.1 million, or 10.4 percent, to $117.6 million from $106.5 million for the prior year's corresponding period.

The increase in SG&A is primarily the result of increased payroll related costs, depreciation and amortization, rent and IT expense.

OPERATING INCOME.

Operating income for the second quarter of 2025 increased by $8.6 million to $46.0 million, from $37.4 million in the prior year's corresponding period.

This increase in operating income was primarily driven by increases in our SC and IPS segments.

Operating income for the third quarter of 2025 increased by $4.1 million to $43.7 million, from $39.6 million in the prior year's corresponding period.

This increase in operating income was primarily driven by increases in our SC segment.

INTEREST EXPENSE.

Interest expense for the second quarter of 2025 decreased $0.6 million compared to the prior year's corresponding period.

Interest expense for the third quarter of 2025 decreased $0.8 million compared to the prior year's corresponding period.

This decrease was primarily due to the Company refinancing its Term Loan during the fourth quarter of 2024.

INCOME TAXES.

Our effective tax rate for continuing operations was 25.3 percent for the three months ended June 30, 2025, compared to 27.4 percent for the three months ended June 30, 2024.

Our effective tax rate for continuing operations was 26.6 percent for the three months ended September 30, 2025, compared to 11.1 percent for the three months ended September 30, 2024.

Compared to the U.S.

statutory rate for the three months ended June 30, 2024, the effective tax rate decreased primarily due to a higher tax benefit from stock compensation vested during the period, a higher benefit from state income taxes, and higher tax benefits from research and development tax credits (R&D).

These benefits were partially offset by recognition of uncertain tax positions related to R&D tax credits.

Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024

Six Months Ended June 30,

statutory rate for the three months ended September 30, 2024, the effective tax rate increased primarily due to a lower tax benefit from research and development tax credits, lower tax benefit from stock compensation vested during the period, partially offset by a higher benefit for state income taxes.

Nine Months Ended September 30, 2025 compared to Nine Months Ended September 30, 2024

Nine Months Ended September 30,

2025 % 2024 %

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44,298 3.0% 46,644 3.5%

Other (income) expense, net

Other income, net

(2,320) (0.2)% (2,844) (0.2)%

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Sales Acquisition Sales Organic Sales

Six Months Ended June 30, 2025

Nine Months Ended September 30, 2025

Service Centers $ 1,016,985 $ 45,154 $ 971,831

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Total Sales $ 1,488,975 $ 74,120 $ 1,414,855

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Service Centers $ 911,783 $ 23,187 $ 888,596

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Total % Change 11.9 % 16.3 % 11.6 %

Sales for the six months ended June 30, 2025 increased $117.1 million, or 13.6 percent, to approximately $975.3 million from $858.2 million for the prior year's corresponding period, of which acquisitions contributed $55.7 million.

Additionally, the overall increase in sales was the result of an increase in sales within our SC, IPS, and SCS segments of $71.9 million, $44.1 million, and $1.1 million, respectively.

Sales for the nine months ended September 30, 2025 increased $157.8 million, or 11.9 percent, to approximately $1.5 billion from $1.3 billion for the prior year's corresponding period, of which acquisitions contributed $74.1 million during the year.

Additionally, the overall increase in sales was the result of an increase in sales within our SC and IPS segments of $105.2 million and $54.9 million, offset by decreases of $2.2 million in our SCS segment.

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

GROSS PROFIT.

Gross profit margin for the six months ended June 30, 2025 was 31.6 percent compared to 30.5 percent for the prior year's corresponding period.

The gross profit margin for the six months ended June 30, 2025 was positively impacted by 110 basis points due to recent acquisitions and continuing margin expansion opportunities.

Service Centers segment.

Sales for the SC segment increased by $71.9 million, or 12.1 percent for the six months ended June 30, 2025, compared to the prior year's corresponding period.

Sales from acquisitions for the SC segment contributed $33.5 million during the period as compared to $10.2 million during the six months ended June 30, 2024.

Sales for the SC segment increased by $105.2 million, or 11.5 percent for the nine months ended September 30, 2025, compared to the prior year's corresponding period.

Sales from acquisitions for the SC segment contributed $45.2 million during the period as compared to $23.2 million during the nine months ended September 30, 2024.

Total sales for the SC segment excluding acquisitions increased $83.2 million from the prior year's corresponding period.

This sales increase was primarily the result of increased business activity within the majority of our regions, offset by a decrease in our North Rockies region compared to the prior year's corresponding period.

This sales increase was primarily the result of increased business activity within the majority of our regions, offset by a decrease in Canada compared to the prior year's corresponding period.

Innovative Pumping Solutions segment .

Sales for the IPS segment increased by $44.1 million, or 32.5 percent for the six months ended June 30, 2025 compared to the prior year's corresponding period.

Sales from acquisitions for the IPS segment contributed $22.2 million during the period compared to $25.0 million during the six months ended June 30, 2024.

Additionally, organic sales increased within our fabrication and global solutions division, and our water and wastewater end market, partially offset by a decrease due to the timing of project related jobs totaling $46.9 million compared to the prior year's corresponding period.

Sales for the IPS segment increased by $54.9 million, or 24.3 percent for the nine months ended September 30, 2025 compared to the prior year's corresponding period.

Sales from acquisitions for the IPS segment contributed $29.0 million during the period compared to $40.5 million during the nine months ended September 30, 2024.

Additionally, organic sales increased within our fabrication and global solutions division, and our water and wastewater end market, partially offset by a decrease due to the timing of projects compared to the prior year's corresponding period.

Supply Chain Services segment.

Sales for the SCS segment increased by $1.1 million, or 0.8 percent, for the six months ended June 30, 2025, compared to the prior year's corresponding period.

Sales for the SCS segment decreased by $2.2 million, or 1.1 percent, for the nine months ended September 30, 2025, compared to the prior year's corresponding period.

GROSS PROFIT.

Gross profit margin for the nine months ended September 30, 2025 was 31.5 percent compared to 30.6 percent for the prior year's corresponding period.

The gross profit margin for the nine months ended September 30, 2025 was positively impacted by 90 basis points due to recent acquisitions and continuing margin expansion efforts.

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

SG&A for the six months ended June 30, 2025 increased by approximately $26.4 million, or 13.5 percent, to $221.6 million from $195.2 million for the prior year's corresponding period.

SG&A for the nine months ended September 30, 2025 increased by approximately $37.4 million, or 12.4 percent, to $339.1 million from $301.7 million for the prior year's corresponding period.

The increase in SG&A is primarily the result of increased payroll related costs, depreciation and amortization, rent and IT expense.

OPERATING INCOME.

Operating income for the six months ended June 30, 2025 increased by $20.0 million or 30.1 percent to $86.5 million from $66.5 million in the prior year's corresponding period.

This increase in operating income was primarily driven by increases in our SC, IPS, and SCS segments.

Operating income for the nine months ended September 30, 2025 increased by $24.1 million or 22.7 percent to $130.2 million from $106.1 million in the prior year's corresponding period.

This increase in operating income was primarily driven by increases in our SC and IPS segments.

INTEREST EXPENSE.

Interest expense for the six months ended June 30, 2025 decreased $1.5 million compared with the prior year's corresponding period.

Interest expense for the nine months ended September 30, 2025 decreased $2.3 million compared with the prior year's corresponding period.

This decrease was primarily due to the Company refinancing its Term Loan during the fourth quarter of 2024.

INCOME TAXES.

Our effective tax rate from continuing operations was a tax expense of 24.8 percent for the six months ended June 30, 2025, compared to a tax expense of 27.3 percent for the six months ended June 30, 2024, the effective tax rate decreased primarily due to an increase in changes of income earned by jurisdiction, a higher tax benefit from stock compensation vested during the period, a higher benefit from state income taxes, and higher tax benefits from research and development tax credits (R&D).

These benefits were partially offset by recognition of uncertain tax positions related to R&D tax credits.

Our effective tax rate from continuing operations was a tax expense of 25.4 percent for the nine months ended September 30, 2025, compared to a tax expense of 21.1 percent for the nine months ended September 30, 2024, the effective tax rate increased primarily due to a lower tax benefit from research and development tax credits, lower tax benefit from stock compensation vested during the period, partially offset by a higher benefit for state income taxes.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

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GAAP financial measure (in thousands) :

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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GAAP financial measure (in thousands) :

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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GAAP financial measure (in thousands) :

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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We also require cash to pay our lease obligations, fund project work-in-process and to service our debt.

As of June 30, 2025, we had available cash of $112.9 million and credit facility availability of $106.3 million.

As of September 30, 2025, we had available cash of $123.8 million and credit facility availability of $153.4 million.

We have a $185.0 million asset-backed line of credit (the "ABL Revolver"), partially offset by letters of credit of $31.6 million.

We had no borrowings outstanding on our ABL Revolver as of June 30, 2025.

We had no borrowings outstanding on our ABL Revolver as of September 30, 2025.

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

Six Months Ended June 30,

Nine Months Ended September 30,

Net Cash Provided by (Used in):

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Operating Activities

The Company generated $21.6 million of cash from operating activities during the six months ended June 30, 2025 compared to $41.7 million of cash generated during the prior year's corresponding period.

The Company generated $56.5 million of cash from operating activities during the nine months ended September 30, 2025 compared to $70.1 million of cash generated during the prior year's corresponding period.

The decrease of $13.6 million was primarily due to the higher payment of income taxes in 2025 compared to 2024.

Investing Activities

For the six months ended June 30, 2025, net cash used in investing activities was $41.4 million compared to a $130.7 million use of cash during the prior year’s corresponding period.

This $89.3 million decrease was primarily driven by lower acquisition activity during the six months ended June 30, 2025.

Total cash paid for acquisitions, net of cash acquired, was $13.9 million compared to $119.0 million for the six months ended June 30, 2024.

For the nine months ended September 30, 2025, net cash used in investing activities was $58.7 million compared to a $165.1 million use of cash during the prior year’s corresponding period.

This $106.4 million decrease was primarily driven by lower acquisition activity during the nine months ended September 30, 2025.

Total cash paid for acquisitions, net of cash acquired, was $24.4 million compared to $149.4 million for the nine months ended September 30, 2024.

Financing Activities

For the six months ended June 30, 2025, net cash used in financing activities was $16.6 million, compared to net cash used in financing activities of $35.0 million during the prior year’s corresponding period.

The decrease was primarily due to share repurchase activity during the six months ended June 30, 2024 with no comparable activity for the six months ended June 30, 2025.

For the nine months ended September 30, 2025, net cash used in financing activities was $23.2 million, compared to net cash used in financing activities of $42.4 million during the prior year’s corresponding period.

The decrease was primarily due to share repurchase activity of $2.0 million during the nine months ended September 30, 2025 compared to $28.8 million for the nine months ended September 30, 2024.

We believe the Company has adequate funding to support its working capital needs within the business.

At June 30, 2025, our total outstanding debt was $645.6 million, or 58.0 percent of total capitalization (total debt plus shareholders' equity) of $1.1 billion.

At September 30, 2025, our total outstanding debt was $644.0 million, or 56.9 percent of total capitalization (total debt plus shareholders' equity) of $1.1 billion.

$643.0 million of this outstanding debt bears interest at various floating rates.

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The following table summarizes the amount of borrowing capacity under our ABL Revolver as follows (in thousands):

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Total borrowing capacity $ 185,000 $ 135,000

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Total amount available $ 153,428 $ 125,646

At June 30, 2025, the Company had $219.2 million of liquidity including $112.9 million in cash and $106.3 million in availability under the ABL Revolver.

On July 1, 2025 the Company entered into an Increase Agreement (the “Increase Agreement”) that provided for a $185.0 million asset-backed revolving line of credit (the "ABL Revolver").

The aggregate commitments under the Company’s existing asset-based revolving credit facility (the “ABL Facility”) were increased by $50 million.

At September 30, 2025, the Company had $277.3 million of liquidity including $123.8 million in cash and $153.4 million in availability under the ABL Revolver.

On July 1, 2025, the Company entered into an Increase Agreement (the “Increase Agreement”) to which the aggregate commitments under the Company's existing asset-based revolving credit facility (the "ABL Facility") were increased by $50 million.

Following the effectiveness of the Increase Agreement, the total commitments under the ABL Facility increased from $135.0 million to $185.0 million.

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The following table sets forth the reconciliation of net cash provided by operating activities to Free Cash Flow (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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Working Capital

Working capital as of June 30, 2025 was $348.9 million, an increase of $58.0 million compared to $291.0 million as of December 31, 2024.

We monitor net working capital, which excludes cash and restricted cash, short-term debt obligations, and short-term operating leases.

Net working capital as of September 30, 2025 was $364.6 million, an increase of $73.6 million compared to $291.0 million as of December 31, 2024.

The increase was primarily due to sustained sales growth and acquisitions.

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Business Acquisitions .

During June 30, 2025 and 2024, the Company invested $13.9 million and $119.0 million, respectively, in acquisitions.

During September 30, 2025 and 2024, the Company invested $24.4 million and $149.4 million, respectively, in acquisitions.

Capital Expenditures

The Company's capital expenditures was $30.3 million and $11.7 million for the six months ended June 30, 2025 and 2024 respectively.

The Company's capital expenditures was $37.0 million and $15.7 million for the nine months ended September 30, 2025 and 2024 respectively.

This includes a purchase of a facility, continued facility upgrades and enhancements, tools and equipment, software and technology investments and enhancements across the Company.

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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 SEC on March 10, 2025.

The results of operations for the six months ended June 30, 2025 are not necessarily indicative of results expected for the full fiscal year.

The results of operations for the nine months ended September 30, 2025 are not necessarily indicative of results expected for the full fiscal year.

RECENT ACCOUNTING PRONOUNCEMENTS

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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