What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-07 compared with 2025-11-06 · 58 added, 134 removed, 268 unchanged (42% 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 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.

together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") for the three months ended March 31, 2026 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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We cannot assure that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors", in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 10, 2025.

We assume no obligation and do not intend to update these forward-looking statements.

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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 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.

For the three months ended March 31, 2026, we had approximately $456.6 million in sales in our Service Centers and Innovative Pumping Solutions segments, an increase of approximately 10.5 percent compared to the three months ended March 31, 2025.

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.

During the three months ended March 31, 2026, $5.7 million in sales in our Service Centers (SC) segment and $35.0 million in sales in our Innovative Pumping Solutions (IPS) segment were associated with acquisition sales.

Supply Chain Services Segment

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.

For the three months ended March 31, 2026, we had approximately $65.0 million in sales in our Supply Chain Services (SCS) segment, an increase of approximately 2.7 percent compared to the three months ended March 31, 2025.

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

During the three months ended March 31, 2026, acquisition sales were $40.7 million compared to $31.1 million for the three months ended March 31, 2025.

Key Business Metrics

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GAAP measures.

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

2025 2024 2025 2024

Three Months Ended March 31,

Sales by Business Segment

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Income from Operations Margin

8.5 % 8.4 % 8.7 % 8.0 %

Net Income $ 19,978 $ 20,589

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We define and calculate EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, and amortization.

We define and calculate Adjusted EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, and amortization minus stock-based compensation expense and all other non-cash charges, adjustments, and non-recurring items.

We define and calculate Adjusted EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, and amortization plus stock-based compensation expense and all other non-cash charges, adjustments, and non-recurring items.

We identify the impact of all other non-cash charges, adjustments and non-recurring items because we believe these items do not directly reflect our underlying operations.

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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,

Three Months Ended March 31, 2026 compared to Three Months Ended March 31, 2025

Three Months Ended March 31,

2026 % 2025 %

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$ 1.22 $ 1.25

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) :

The following tables sets forth the disaggregation of revenue from sales associated with acquisitions for the three months ended March 31, 2026 and 2025 (in thousands) :

Sales Acquisition Sales Organic Sales

Three Months Ended September 30, 2025

Three Months Ended March 31, 2026

Service Centers $ 337,976 $ 5,711 $ 332,265

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Total Sales $ 521,658 $ 40,745 $ 480,913

Three Months Ended September 30, 2024

Three Months Ended March 31, 2025

Service Centers $ 327,075 $ 17,941 $ 309,134

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Total % Change 9.5 % 31.0 % 8.0 %

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.

Sales for the three months ended March 31, 2026 increased $45.1 million, or 9.5 percent, to approximately $521.7 million from $476.6 million for the prior year's corresponding period, of which recent acquisitions contributed $40.7 million.

Additionally, the overall increase in sales was the result of an increase in sales in our SC, IPS, and SCS segments of $10.9 million, $32.5 million, and $1.7 million, respectively.

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

Service Centers segment.

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.

Sales for the SC segment increased $10.9 million, or 3.3 percent, for the three months ended March 31, 2026, compared to the prior year's corresponding period.

Excluding the impact of recent acquisitions, sales grew $23.1 million, this sales increase was the result of increases within our Ohio River Valley, California, South East, and Rockies regions as well as our metal working division totaling $24.7 million due to an increase in shipped product revenue during the period, offset by decreases in sales within our South West region of $4.1 million.

Sales from recent acquisitions contributed $5.7 million during the period compared to $17.9 million for the three months ended March 31, 2025.

Innovative Pumping Solutions segment.

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 $6.7 million during the period as compared to $15.6 million for the three months ended September 30, 2024.

Sales for the IPS segment increased $32.5 million, or 37.7 percent, for the three months ended March 31, 2026, compared to the prior year's corresponding period.

This sales increase was the result of increases within our water and wastewater division and increased production contracts totaling $10.6 million.

Sales from recent acquisitions contributed $35.0 million during the period as compared to $13.2 million for the three months ended March 31, 2025.

Supply Chain Services segment.

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.

Sales for the SCS segment increased by $1.7 million, or 2.7 percent, for the three months ended March 31, 2026, compared to the prior year's corresponding period.

This was primarily due to the onboarding of new customers and their related facilities, partially offset by decreased activity with existing customers.

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.

Gross profit margin for the three months ended March 31, 2026 was 32.3 percent compared to 31.5 percent for the prior year's corresponding period.

The gross profit margin for the three months ended March 31, 2026 was positively impacted by 79 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 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.

SG&A for the three months ended March 31, 2026 increased by $16.4 million, or 14.9 percent, to $126.1 million from $109.8 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 professional fees.

OPERATING INCOME.

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.

Operating income for the first quarter of 2026 increased by $2.0 million to $42.5 million, from $40.5 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 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.

Interest expense for the first quarter of 2026 increased $1.8 million compared to the prior year's corresponding period.

This increase was primarily due to the Company refinancing its Term Loan B during the fourth quarter of 2025.

INCOME TAXES.

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.

Our effective tax rate for continuing operations was 25.0 percent for the three months ended March 31, 2026, compared to 24.2 percent for the three months ended March 31, 2025.

Compared to the U.S.

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 %

Sales $ 1,488,975 100.0% $ 1,331,126 100.0%

Cost of sales 1,019,638 68.5% 923,341 69.4%

Gross profit 469,337 31.5% 407,785 30.6%

Selling, general and administrative expenses 339,138 22.8% 301,694 22.7%

Income from operations 130,199 8.7% 106,091 8.0%

Interest expense

44,298 3.0% 46,644 3.5%

Other income, net

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

Income before income taxes 88,221 5.9% 62,291 4.7%

Provision for income taxes 22,389 1.5% 13,165 1.0%

$ 65,832 4.4% $ 49,126 3.7%

Earnings per share:

$ 4.19 $ 3.08

$ 3.98 $ 2.93

The following table sets forth the reconciliation of Acquisition Sales and Organic Sales to the most comparable U.S.

GAAP financial measure (in thousands) :

Sales Acquisition Sales Organic Sales

Nine Months Ended September 30, 2025

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

Innovative Pumping Solutions 280,273 28,966 251,307

Supply Chain Services 191,717 — 191,717

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

Nine Months Ended September 30, 2024

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

Innovative Pumping Solutions 225,417 40,526 184,891

Supply Chain Services 193,926 — 193,926

Total Sales $ 1,331,126 $ 63,713 $ 1,267,413

Service Centers $ 105,202 $ 21,967 $ 83,235

Innovative Pumping Solutions 54,856 (11,560) 66,416

Supply Chain Services (2,209) — (2,209)

Total $ Change $ 157,849 $ 10,407 $ 147,442

Service Centers 11.5 % 94.7 % 9.4 %

Innovative Pumping Solutions 24.3 % (28.5) % 35.9 %

Supply Chain Services (1.1) % N/A (1.1) %

Total % Change 11.9 % 16.3 % 11.6 %

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.

Service Centers segment.

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 Canada compared to the prior year's corresponding period.

Innovative Pumping Solutions segment .

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 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 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 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 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 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.

statutory rate for the three months ended March 31, 2025, the effective tax rate increased slightly, primarily due to discrete items, including a decrease in tax benefits related to stock-based compensation vested during the period, net of amounts limited by Section 162(m), a lower benefit from research and development tax credits, and an increase in non-deductible expenses.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

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GAAP financial measure (in thousands) :

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

2025 2024 2025 2024

Three Months Ended March 31,

Sales by Business Segment

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We define and calculate EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, and amortization.

We identify the impact of all other non-cash charges, adjustments and non-recurring items because we believe these items do not directly reflect our underlying operations.

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GAAP financial measure (in thousands) :

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

2025 2024 2025 2024

Three Months Ended March 31,

Net income attributable to DXP Enterprises, Inc.

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Provision for income tax expense

7,821 2,631 22,389 13,165

Depreciation and amortization

9,920 8,720 28,544 24,385

EBITDA $ 55,119 $ 50,967

other non-recurring items (1)

757 2,950 992 4,292

stock compensation expense 1,802 1,317

other non-recurring items (1)

Adjusted EBITDA $ 57,812 $ 52,519

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GAAP financial measure (in thousands) :

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

2025 2024 2025 2024

Three Months Ended March 31,

Net cash provided by operating activities

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

As of March 31, 2026, we had available cash of $213.4 million and credit facility availability of $153.3 million.

We have a $185.0 million asset-backed line of credit (the "ABL Revolver"), partially offset by letters of credit of $31.7 million.

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

We had no borrowings outstanding on our ABL Revolver as of March 31, 2026.

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) :

Nine Months Ended September 30,

Three Months Ended March 31,

Net Cash Provided by (Used in):

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Operating Activities

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.

The Company generated $29.6 million of cash from operating activities during the three months ended March 31, 2026 compared to $3.0 million of cash generated during the prior year's corresponding period.

The increase of $26.6 million was primarily due to income tax payments in 2025 compared to 2026.

Investing Activities

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.

For the three months ended March 31, 2026, net cash used in investing activities was $106.0 million compared to a $30.1 million use of cash during the prior year’s corresponding period.

This $75.9 million increase was primarily driven by increased acquisition activity during the three months ended March 31, 2026.

Total consideration, was $102.7 million compared to $12.9 million for the three months ended March 31, 2025.

Financing Activities

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.

For the three months ended March 31, 2026, net cash used in financing activities was $13.1 million, compared to net cash used in financing activities of $7.1 million during the prior year’s corresponding period.

The decrease was primarily due to the timing of shares withheld for taxes relating to shares vesting compared to prior corresponding period.

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

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.

At March 31, 2026, our total outstanding debt was $844.7 million, or 62.3 percent of total capitalization (total debt plus shareholders' equity) of $1.4 billion.

$843.8 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):

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Total borrowing capacity $ 185,000 $ 185,000

Outstanding letters of credit

31,731 31,472

Total amount available $ 153,269 $ 153,528

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.

At March 31, 2026, the Company had $366.7 million of liquidity including $213.4 million in cash and $153.3 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.

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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 September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

Net cash provided by operating activities $ 29,569 $ 2,973

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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.

Net working capital as of March 31, 2026 was $379.6 million, an increase of $17.9 million compared to $361.7 million as of December 31, 2025.

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

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Business Acquisitions .

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

During March 31, 2026 and 2025, the Company invested $102.7 million and $12.9 million, respectively, in acquisitions.

Capital Expenditures

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.

The Company's capital expenditures was $3.3 million and $19.9 million for the three months ended March 31, 2026 and 2025 respectively.

This includes continued facility upgrades and enhancements, tools and equipment, and enhancements across the Company.

DISCUSSION OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES

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The accompanying unaudited Condensed Consolidated Financial Statements have been prepared on substantially the same basis as our annual Consolidated Financial Statements and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025.

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

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 February 26, 2026.

The results of operations for the three months ended March 31, 2026 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