DXP ENTERPRISES INC 10-Q

ITEM 1: FINANCIAL STATEMENTS DXP ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands, except per share amounts) (unaudited) Three Months Ended March 31, 2026 2025 Sales $ 521,658 $ 476,569 Cost of sales 353,052 326,304 Gross profit 168,606 150,265 Selling, general and administrative expenses 126,132 109,750 Income from operations 42,474 40,515 Interest expense 16,443 14,660 Other income, net (Note 15) ( 594 ) ( 1,318 ) Income before income taxes 26,625 27,173 Provision for income taxes ( Note 7 ) 6,647 6,584 Net income 19,978 20,589 Preferred stock dividend 23 23 Net income attributable to common shareholders $ 19,955 $ 20,566 Net income $ 19,978 $ 20,589 Foreign currency translation adjustments ( 1,464 ) 86 Comprehensive income $ 18,514 $ 20,675 Earnings per share (Note 9) : Basic $ 1.28 $ 1.31 Diluted $ 1.22 $ 1.25 Weighted average common shares outstanding: Basic 15,531 15,698 Diluted 16,371 16,538 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 DXP ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) (unaudited) March 31, 2026 December 31, 2025 ASSETS Current assets: Cash $ 213,381 $ 303,783 Accounts receivable, net of allowance of $ 4,299 and $ 3,995 , respectively 420,246 397,502 Inventories 117,991 108,144 Costs and estimated profits in excess of billings 58,971 53,855 Prepaid expenses and other current assets 40,064 47,033 Total current assets 850,653 910,317 Property and equipment, net 117,361 114,822 Goodwill 550,758 494,561 Other intangible assets, net 122,818 81,351 Operating lease right of use assets, net 74,180 74,709 Other long-term assets 9,012 9,395 Total assets $ 1,724,782 $ 1,685,155 LIABILITIES AND EQUITY Current liabilities: Current maturities of debt $ 8,580 $ 8,580 Trade accounts payable 122,997 116,765 Accrued wages and benefits 45,411 51,180 Customer advances 13,110 15,460 Billings in excess of costs and estimated profits 25,325 15,689 Short-term operating lease liabilities 19,398 19,038 Other current liabilities 50,875 45,769 Total current liabilities 285,696 272,481 Long-term debt, net of unamortized debt issuance costs and discounts 817,360 818,476 Long-term operating lease liabilities 56,675 57,509 Other long-term liabilities 52,854 38,250 Total long-term liabilities 926,889 914,235 Total liabilities 1,212,585 1,186,716 Commitments and Contingencies ( Note 10 ) Shareholders' equity: Series A preferred stock, $ 1.00 par value; 1,000,000 shares authorized 1 1 Series B preferred stock, $ 1.00 par value; 1,000,000 shares authorized 15 15 Common stock, $ 0.01 par value, 100,000,000 shares authorized; 20,395,996 issued and 15,505,939 outstanding at March 31, 2026 and 20,403,647 issued and 15,513,590 outstanding at December 31, 2025 204 204 Additional paid-in capital 215,948 220,681 Retained earnings 498,212 478,257 Accumulated other comprehensive loss ( 32,071 ) ( 30,607 ) Treasury stock, at cost 4,890,057 and 4,890,057 shares, respectively ( 170,112 ) ( 170,112 ) Total DXP Enterprises, Inc. equity 512,197 498,439 Total liabilities and equity $ 1,724,782 $ 1,685,155 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 DXP ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three Months Ended March 31, 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 19,978 $ 20,589 Reconciliation of net income to net cash provided by operating activities: Depreciation 2,946 2,316 Amortization of intangibles and finance lease assets 9,105 6,818 Amortization of debt issuance costs 1,129 965 Loss (gain) on sale of property and equipment 455 ( 325 ) Provision for (recovery of) credit losses 279 ( 1,322 ) Fair value adjustment on contingent consideration 239 183 Restricted stock compensation expense 1,802 1,317 Deferred income taxes 2,945 3,943 Other non-cash items ( 2,140 ) ( 6,100 ) Changes in operating assets and liabilities, net of effects of businesses acquired: Accounts receivable ( 2,775 ) ( 13,202 ) Costs and estimated profits in excess of billings ( 1,096 ) 2,893 Inventories ( 7,654 ) ( 3,525 ) Prepaid expenses and other assets 4,991 ( 2,369 ) Trade accounts payable 904 6,505 Accrued expenses ( 7,864 ) ( 3,569 ) Billings in excess of costs and estimated profits 3,531 6,764 Income taxes 2,794 ( 18,908 ) Net cash provided by operating activities $ 29,569 $ 2,973 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 3,294 ) ( 19,914 ) Proceeds from the sale of property and equipment 9 2,699 Acquisition of businesses, net of cash acquired ( 102,702 ) ( 12,850 ) Net cash used in investing activities $ ( 105,987 ) $ ( 30,065 ) CASH FLOWS FROM FINANCING ACTIVITIES: Principal debt payments ( 2,120 ) ( 1,624 ) Debt issuance costs ( 125 ) ( 125 ) Payment for acquisition contingent consideration liability ( 2,250 ) ( 3,820 ) Preferred stock dividends paid ( 23 ) ( 23 ) Payment for employee taxes withheld from stock awards ( 6,535 ) ( 126 ) Principal payments on finance leases ( 2,063 ) ( 1,365 ) Net cash used in financing activities $ ( 13,116 ) $ ( 7,083 ) Effect of foreign currency on cash ( 868 ) 47 Net change in cash and restricted cash ( 90,402 ) ( 34,128 ) Cash and restricted cash at beginning of period 303,783 148,411 Cash and restricted cash at end of period $ 213,381 $ 114,283 Supplemental cash flow information ( Note 14 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 DXP ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (in thousands) (unaudited) Series A preferred stock Series B preferred stock Common stock Paid-in capital Retained earnings Accum other comp loss Treasury Stock Total equity Balance at December 31, 2025 $ 1 $ 15 $ 204 $ 220,681 $ 478,257 $ ( 30,607 ) $ ( 170,112 ) $ 498,439 Preferred dividends paid — — — — ( 23 ) — — ( 23 ) Compensation expense for restricted stock — — — 1,802 — — — 1,802 Tax related items for share based awards — — — ( 6,535 ) — — — ( 6,535 ) Currency translation adjustment — — — — — ( 1,464 ) — ( 1,464 ) Net income — — — — 19,978 — — 19,978 Balance at March 31, 2026 $ 1 $ 15 $ 204 $ 215,948 $ 498,212 $ ( 32,071 ) $ ( 170,112 ) $ 512,197 Series A preferred stock Series B preferred stock Common stock Paid-in capital Retained earnings Accum other comp loss Treasury Stock Total equity Balance at December 31, 2024 $ 1 $ 15 $ 204 $ 219,511 $ 389,670 $ ( 33,610 ) $ ( 153,003 ) $ 422,788 Preferred dividends paid — — — — ( 23 ) — — ( 23 ) Compensation expense for restricted stock — — — 1,317 — — — 1,317 Tax related items for share based awards — — — ( 126 ) — — — ( 126 ) Currency translation adjustment — — — — — 86 — 86 Excise tax on share repurchases — — — — — — 28 28 Net income — — — — 20,589 — — 20,589 Balance at March 31, 2025 $ 1 $ 15 $ 204 $ 220,702 $ 410,236 $ ( 33,524 ) $ ( 152,975 ) $ 444,659 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 6 DXP ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - THE COMPANY DXP Enterprises, Inc. together with its subsidiaries (collectively "DXP," the "Company," "us," "we," or "our") was incorporated in Texas on July 26, 1996. The Company and its subsidiaries are engaged in the business of distributing maintenance, repair and operating ("MRO") products, and service to customers serving a variety of end markets. Additionally, the Company provides integrated, custom pump skid packages, pump remanufacturing and manufactures branded private label pumps to energy and industrial customers. The Company is organized into three business segments: Service Centers ("SC"), Innovative Pumping Solutions ("IPS"), and Supply Chain Services ("SCS"). See Note 11 - Segment Reporting for discussion of the business segments. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES Basis of Presentation The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). For interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission ("SEC") not all disclosures normally required in annual consolidated financial statements prepared in accordance with U.S. GAAP are required. The unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2025 that are included in our annual report on Form 10-K filed with the SEC on February 26, 2026 (“Annual Report”). At times, certain reclassifications may be made to the prior year’s unaudited condensed consolidated financial statements to conform to the current year's presentation. Such reclassifications do not have a material effect on our unaudited condensed consolidated statements of operations and comprehensive income, balance sheets, cash flows or equity. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of results expected for the full fiscal year. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for the fair statement of the Company's financial position, results of operations and cash flows for the interim periods presented. All intercompany accounts and transactions have been eliminated in consolidation. 7 NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS All new accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations. Recently Adopted Accounting Pronouncements In July 2025, the FASB issued Accounting Standards Update 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods in those years. We have elected to apply the practical expedient. There was no material impact to our unaudited condensed consolidated financial statements. Accounting Pronouncements Not Yet Adopted In November 2024, the FASB issued Accounting Standards Update (“ASU”) No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU would result in additional disclosures being included in our consolidated financial statements, once adopted. We are currently evaluating the provisions of this ASU. NOTE 4 - FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES Our acquisitions may include contingent consideration as part of the purchase price. The fair value of the contingent consideration is estimated as of the acquisition date based on the present value of the contingent payments to be made using a weighted probability of possible payments. The unobservable inputs used in the determination of the fair value of the contingent consideration include management's assumptions about the likelihood of payment based on the established benchmarks, discount rates, and an internal rate of return analysis. The fair value measurement includes inputs that are Level 3 inputs as they are not observable in the market. Should actual results increase or decrease as compared to the assumptions used in our analysis, the fair value of the contingent consideration obligations will increase or decrease, up to the contracted limit, as applicable. Changes in the fair value of the contingent consideration are measured each reporting period and reflected in our results of operations. As of March 31, 2026, there was $ 29.1 million in other current and other long-term liabilities for contingent consideration. The following table provides a reconciliation of the beginning and ending balances and gains or losses recognized during the three months ended March 31, 2026 ( in thousands ): Contingent Consideration Balance at December 31, 2025 $ 13,775 Acquisitions and settlements: Acquisitions ( Note 12 ) 17,342 Settlements ( 2,250 ) Total remeasurement adjustments: Changes in fair value recorded in other expense (income), net 239 Balance at March 31, 2026 $ 29,106 *Amounts included in other current liabilities were $ 13.1 million and $ 9.4 million for the periods ending March 31, 2026 and December 31, 2025, respectively. Amounts included in other long-term liabilities were $ 16.0 million and $ 4.4 million for the periods ending March 31, 2026 and December 31, 2025, respectively. 8 Sensitivity to Changes in Significant Unobservable Inputs The significant Level 3 unobservable inputs used in the fair value measurement of contingent consideration related to the acquisitions are annualized EBITDA forecasts developed by the Company's management and the probability of achievement of those EBITDA results. The discount rate used in the calculations was 8.0 percent. Changes in our unobservable inputs in isolation would result in a change to our fair value measurement. As of March 31, 2026, the maximum amount of contingent consideration payable under these arrangements is $ 32.5 million over three years . Other financial instruments not measured at fair value on the Company's unaudited condensed consolidated balance sheets at March 31, 2026 and December 31, 2025, but which require disclosure of their fair values include: cash, restricted cash, accounts receivable, trade accounts payable and accrued expenses. The Company believes that the estimated fair value of such instruments at March 31, 2026 and December 31, 2025 approximates their carrying value as reported on the unaudited condensed consolidated balance sheets due to the relative short maturity of these instruments. See Note 8 - Long-term Debt for fair value disclosures on our asset-backed line of credit and term loan debt under our syndicated credit agreement facilities. NOTE 5 – INVENTORIES Inventories are made up of equipment purchased for resale, and materials utilized in the fabrication of industrial and wastewater equipment stated at lower of cost or net realizable value, primarily determined using the weighted average cost method. The Company reviews inventory and records provisions for the difference between cost and net realizable value arising from excess and obsolete items on hand based upon the aging of the inventories, market trends, and continued demand. The carrying values of inventories are as follows ( in thousands ): March 31, 2026 December 31, 2025 Finished goods $ 106,746 $ 98,089 Work in process 11,245 10,055 Inventories $ 117,991 $ 108,144 NOTE 6 – CONTRACT ASSETS AND LIABILITIES Under our customized pump production and water and wastewater project contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets presented as "Costs and estimated profits in excess of billings." However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities that are presented as "Billings in excess of costs and estimated profits" on our unaudited condensed consolidated balance sheets. Costs and estimated profits on uncompleted contracts and related amounts billed were as follows ( in thousands ): March 31, 2026 December 31, 2025 Costs incurred on uncompleted contracts $ 232,496 $ 147,866 Estimated profits, thereon 112,709 71,260 Total costs and estimated profits on uncompleted contracts 345,205 219,126 Less: billings to date 311,559 180,960 Net $ 33,646 $ 38,166 Such amounts were included in the accompanying unaudited condensed consolidated balance sheets for March 31, 2026 and December 31, 2025 under the following captions ( in thousands ): 9 March 31, 2026 December 31, 2025 Costs and estimated profits in excess of billings $ 58,971 $ 53,855 Billings in excess of costs and estimated profits ( 25,325 ) ( 15,689 ) Net $ 33,646 $ 38,166 During the three months ended March 31, 2026 and 2025, $ 0.8 million and $ 5.1 million of the balances that were previously classified as contract liabilities at the beginning of the period were recognized in revenues, respectively. Contract asset and liability changes were primarily due to normal activity and timing differences between our performance and customer payments. NOTE 7 – INCOME TAXES The following table presents provision for income taxes (in thousands, except for effective tax rate): Three Months Ended March 31, 2026 2025 Income before provision for income taxes $ 26,625 $ 27,173 Provision for income taxes 6,647 6,584 Effective tax rate 25.0 % 24.2 % We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in determining our provision for income taxes and evaluating our uncertain tax positions. 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. While we believe that we have adequately provided for all uncertain tax positions, or tax positions where we believe it is not more-likely-than-not that the position will be sustained upon review, amounts asserted by tax authorities could be greater or less than our accrued position. Accordingly, our provisions on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or the underlying matters are settled or otherwise resolved with the respective tax authorities. The Organization of Economic Cooperation and Development (“OECD”) continues to release additional guidance, including administrative guidance on how Pillar Two rules should be interpreted and applied by jurisdictions as they adopt Pillar Two. A number of countries have utilized the administrative guidance as a starting point for legislation that went into effect January 1, 2024. As of March 31, 2026, DXP anticipates the impact of Pillar Two to be immaterial to the Company based on current legislation that has been enacted to date. NOTE 8 – LONG-TERM DEBT Long-term debt consisted of the following ( in thousands ): March 31, 2026 December 31, 2025 ABL Revolver $ — $ — Senior Secured Term Loan B due October 13, 2030 (1) 843,765 845,885 Promissory Note due November 1, 2029 900 900 Total debt 844,665 846,785 Less: current maturities ( 8,580 ) ( 8,580 ) Total long-term debt $ 836,085 $ 838,205 Unamortized discount and debt issuance costs 18,725 19,729 Long-term debt, net of unamortized discount and debt issuance costs $ 817,360 $ 818,476 (1) The fair value of the Amended Term Loan B due October 13, 2030 using level 2 input values was $ 849.0 million and $ 854.3 million as of March 31, 2026 and December 31, 2025, respectively. 10 Senior Secured Term Loan B: On December 16, 2025, the Company entered into an amendment (the “Term Loan Amendment”), by and among the Company, certain of the Company’s subsidiaries, as guarantors (the “Guarantors”), the incremental lenders party thereto and Goldman Sachs Bank USA as agent (the “Agent”). The Term Loan Amendment amends and supplements the Term Loan and Security Agreement, dated as of December 23, 2020, by and among the Company, the Guarantors, the lenders party thereto and the Agent (as amended by Amendment No. 1 and Joinder Agreement to Term Loan and Security Agreement, dated as of November 22, 2022, as further amended by Amendment No. 2 and Joinder Agreement to Term Loan and Security Agreement, dated as of October 13, 2023, and as further amended by Amendment No. 3 and Joinder Agreement to Term Loan and Security Agreement, dated as of October 3, 2024, the “Existing Term Loan Agreement”; the Existing Term Loan Agreement, as further amended by the Term Loan Amendment, the “Term Loan Agreement”). The Term Loan Amendment provides for, among other things, (i) adjustments to certain financial ratio covenant compliance dates and (ii) $ 205.0 million in new incremental term loan commitments (the “2025 Incremental Term Loans”) under the Term Loan Agreement, such that after giving effect to the Term Loan Amendment, including the 2025 Incremental Term Loans, the Company has $ 848.0 million in outstanding borrowings under the Term Loan Agreement. The Senior Secured Term Loan B amortizes in equal quarterly installments of 0.25 percent, with the remaining balance being payable on October 13, 2030, when the facility matures. As of March 31, 2026 there was $ 843.8 million outstanding under the Senior Secured Term Loan B. Interest rate Quarterly interest payments accrue on outstanding borrowings under the Senior Secured Term Loan B at a rate equal to Term SOFR (with a floor of 1.00 %) plus 3.25 %, or base rate plus 2.25 %. The Senior Secured Term Loan B is guaranteed by each of the Company’s direct and indirect material wholly owned subsidiaries, other than any of the Company’s Canadian subsidiaries and certain other excluded subsidiaries. The interest rate for the Senior Secured Term Loan B was 6.92 percent and 7.17 percent as of March 31, 2026 and December 31, 2025, respectively. Facility Size Increases The Senior Secured Term Loan B allows for incremental increases in facility size up to an aggregate of $ 100 million. Prepayments We are required to repay the Senior Secured Term Loan B with the proceeds from certain asset sales, certain debt issuances, and certain insurance proceeds. In addition, on an annual basis, we are required to repay an amount equal to 50 percent of excess cash flow, as defined in the Senior Secured Term Loan B, reducing to 25 percent if our Total Leverage Ratio is less than or equal to 3.00 to 1.00. No payment of excess cash flow is required if the Total Leverage Ratio is less than or equal to 2.50 to 1.00. Restrictive Covenants The Company’s primary financial covenant under the Senior Secured Term Loan B is a Secured Leverage Ratio. The Senior Secured Term Loan B Agreement requires that the Company’s Secured Leverage Ratio as of March 31, 2026 to be less than 5.75 to 1.00. As of March 31, 2026, the Company’s Secured Leverage Ratio was 2.59 to 1.00. 11 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. Subject to the conditions set forth in the ABL Credit Agreement, the ABL Revolver may be increased in increments of $ 10.0 million up to an aggregate of $ 50.0 million. The ABL Revolver matures on July 19, 2027. Interest accrues on outstanding borrowings at a rate equal to Secured Overnight Financing Rate (“SOFR”) or Canadian Dollar Offered Rate (“CDOR”) plus a margin ranging from 1.25 percent to 1.75 percent per annum, or at an alternate base rate, Canadian prime rate or Canadian base rate plus a margin ranging from 0.25 percent to 0.75 percent per annum, in each case, based upon the average daily excess availability under the ABL Revolver for the most recently completed calendar quarter. Fees payable on the unused portion of the facility range from 0.25 percent to 0.375 percent per annum. At March 31, 2026 the unused line fee was 0.375 percent and there were no amounts outstanding under the ABL Revolver. Guarantees Each of our current and future wholly owned material U.S. subsidiaries and DXP Enterprises, Inc. guarantees the obligations of our borrower under the ABL Revolver. Additionally, each of our Canadian subsidiaries guarantees the obligations of our Canadian borrower subsidiaries under the ABL Revolver. Security Obligations under the U.S. Borrowing Base are primarily secured, subject to certain exceptions, by a first-priority secure interest in the accounts receivable, inventory and related assets of our wholly owned, material U.S. subsidiaries. The security interest in accounts receivable, inventory, and related assets of the U.S. borrower subsidiaries ranks prior to the security interest in this collateral which secures the Term Loan B. The obligations under the Canadian Borrowing Base are primarily secured, subject to certain exceptions, by a first-priority secure interest in the accounts receivable, inventory and related assets of our wholly owned, material Canadian subsidiaries and our wholly owned material U.S. subsidiaries. Excess Availability The borrowing availability under our credit facility was $ 153.3 million and $ 153.5 million at March 31, 2026 and December 31, 2025, respectively. Interest rate The interest rate for the ABL Revolver was 7.00 percent and 7.00 percent as of March 31, 2026 and December 31, 2025, respectively. Financial Covenant The Company's principal financial covenant under the ABL Credit Agreement include a Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio under the ABL Credit Agreement is defined as the ratio for the most recently completed four-fiscal quarter period, of (a) EBITDA minus capital expenditures (excluding those financed or funded with debt (other than the ABL Loans), (ii) the portion thereof funded with the net proceeds from asset dispositions of equipment or real property which the Company is permitted to reinvest pursuant to the Term Loan and the portion thereof funded with the net proceeds of casualty insurance or condemnation awards in respect of any equipment and real estate which DXP is not required to use to prepay the ABL Loans pursuant to the Term Loan B Agreement or with the proceeds of casualty insurance or condemnation awards in respect of any other property) minus cash taxes paid (net of cash tax refunds received during such period), to (b) fixed charges. The Company is restricted from allowing its fixed charge coverage ratio to be less than 1.00 to 1.00 during a compliance period, which is triggered when the availability under the ABL Revolver falls below a threshold set forth in the ABL Credit Agreement. As of March 31, 2026, the Company's Fixed Charge Coverage Ratio was 2.54 to 1.00. The Company was in compliance with all financial covenants as of March 31, 2026. 12 Promissory Note: On November 1, 2024, in connection with an acquisition, the Company signed a promissory note for the loan amount of $ 1.0 million. The promissory note has a maturity date of November 1, 2029. The promissory note shall be payable in four equal consecutive annual installments of $ 0.1 million on November 1 of each year commencing on November 1, 2025, provided that all amounts outstanding under this promissory note, including all accrued and unpaid interest and other amounts payable under the promissory note, shall be due and payable in full on November 1, 2029. The Company may prepay the promissory note in whole or in part at any time or from time to time without penalty or premium by paying the principal amount to be prepaid together with accrued interest thereon to the date of the prepayment. Interest is payable quarterly, starting with the quarter ending January 31, 2025 on outstanding borrowings at a rate of 5 %. Maturities of Debt As of March 31, 2026, the maturities of long-term debt for the next five years were as follows ( in thousands ): Amount 2026 $ 6,460 2027 8,580 2028 8,580 2029 9,080 2030 811,965 Total $ 844,665 NOTE 9 - EARNINGS PER SHARE Basic earnings per share is computed based on weighted average shares outstanding and excludes dilutive securities. Diluted earnings per share is computed including the impacts of all potentially dilutive securities. The following table sets forth the computation of basic and diluted earnings per share for the periods indicated ( in thousands, except per share data ): Three Months Ended March 31, 2026 2025 Basic earnings per share: Weighted average shares outstanding 15,531 15,698 Net income attributable to DXP Enterprises, Inc. $ 19,978 $ 20,589 Convertible preferred stock dividend 23 23 Net income attributable to common shareholders $ 19,955 $ 20,566 Per share amount $ 1.28 $ 1.31 Diluted earnings per share: Weighted average shares outstanding 15,531 15,698 Assumed conversion of convertible preferred stock 840 840 Total dilutive shares 16,371 16,538 Net income attributable to common shareholders $ 19,955 $ 20,566 Convertible preferred stock dividend 23 23 Net income attributable to DXP Enterprises, Inc. $ 19,978 $ 20,589 Per share amount $ 1.22 $ 1.25 As of March 31, 2026 and 2025, the weighted average of the unvested restricted stock awards were 219,904 and 302,647 shares, respectively. The preferred stock is convertible into 840,000 shares of common stock. 13 NOTE 10 - COMMITMENTS AND CONTINGENCIES From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. While DXP is unable to predict the outcome or estimate the financial impact of these disputes, it believes that the ultimate resolution will not have, either individually or in the aggregate, a material adverse effect on DXP's consolidated financial position, cash flows, or results of operations. NOTE 11 - SEGMENT REPORTING We have three reportable and operating segments: Service Centers, Innovative Pumping Solutions and Supply Chain Services. The Service Centers segment is engaged in providing maintenance, MRO products and equipment, including logistics capabilities, to industrial customers. The Service Centers segment provides a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, fastener, industrial supply, safety products and safety services categories. The Innovative Pumping Solutions segment fabricates and assembles custom-made pump packages, re-manufactures pumps, manufactures branded private label pumps, and provides products and process lines for the water and wastewater treatment industries. The Supply Chain Services segment provides a wide range of MRO products and manages all or part of a customer's supply chain, including warehouse and inventory management. Sales are shown net of intersegment eliminations. Segment information is prepared on the same basis that our Chief Executive Officer, who is our chief operating decision maker (“CODM”), manages the segments, evaluates financial results, and makes key operating decisions. These segments were determined primarily on the distribution channels of the products and services offered and the nature of the customer markets and the primary driver of the customers spend. The Company's CODM directs the allocation of resources to these segments based upon historical and current revenue, direct operating expenses, operating income, and capital expenditures of each respective segment. The allocation of resources across these segments is dependent upon, among other factors, the segments' historical or future expected operating margins; the segments' historical or future expected returns on capital; outlook within a specific market; opportunities to grow profitability; new products, services or new customer accounts; confidence in management; and competitive landscape and intensity. As a part of the Company's annual business planning, the CODM reviews our reportable segment composition and financial performance. As of March 31, 2026, there was no change to our reportable segment composition. 14 The following table sets forth financial information related to the Company's segments ( in thousands ): Three Months Ended March 31, 2026 Service Center Innovative Pumping Solutions Supply Chain Services Total Reportable Segments Corporate Total Sales $ 337,976 $ 118,660 $ 65,022 $ 521,658 $ — $ 521,658 Operating expenses 285,714 95,794 58,529 440,037 — 440,037 Other expenses Depreciation 1,027 872 7 1,906 1,040 2,946 Amortization of finance lease assets 1,560 322 72 1,954 134 2,088 Other (1) — — — — 34,113 34,113 Operating income (loss) $ 49,675 $ 21,672 $ 6,414 $ 77,761 $ ( 35,287 ) $ 42,474 Interest expense — — — — 16,443 16,443 Other income, net — — — — ( 594 ) ( 594 ) Income (loss) before income taxes $ 49,675 $ 21,672 $ 6,414 $ 77,761 $ ( 51,136 ) $ 26,625 Capital expenditures 1,721 $ 651 $ — 2,372 $ 922 $ 3,294 (1). Other primarily includes selling, general and administrative expenses of $ 27.1 million and amortization of intangible assets of $ 7.0 million. Three Months Ended March 31, 2025 Service Center Innovative Pumping Solutions Supply Chain Services Total Reportable Segments Corporate Total Sales $ 327,075 $ 86,182 $ 63,312 $ 476,569 $ — $ 476,569 Operating expenses 277,956 71,789 57,699 407,444 — 407,444 Other expenses Depreciation 937 795 8 1,740 576 2,316 Amortization of finance lease assets 1,137 192 41 1,370 93 1,463 Other (1) — — — — 24,831 24,831 Operating income (loss) $ 47,045 $ 13,406 $ 5,564 $ 66,015 $ ( 25,500 ) $ 40,515 Interest expense — — — — 14,660 14,660 Other income, net — — — — ( 1,318 ) ( 1,318 ) Income (loss) before income taxes $ 47,045 $ 13,406 $ 5,564 $ 66,015 $ ( 38,842 ) $ 27,173 Capital expenditures $ 2,037 $ 574 $ — $ 2,611 $ 17,303 $ 19,914 (1). Other primarily includes selling, general and administrative expenses of $ 19.4 million and amortization of intangible assets of $ 5.4 million. The following table sets forth total assets related to the Company's segments ( in thousands ): March 31, 2026 December 31, 2025 Service Centers $ 832,375 $ 820,289 Innovative Pumping Solutions 516,902 383,201 Supply Chain Services 101,627 95,045 Total Reportable Segments Assets $ 1,450,904 $ 1,298,535 Corporate 273,878 386,620 Total Assets $ 1,724,782 $ 1,685,155 15 NOTE 12 - BUSINESS ACQUISITIONS The Company enters into strategic acquisitions in an effort to better service existing customers and to attract new customers. The Company makes an initial allocation of the purchase price at the date of acquisition based upon its estimate of the fair value of the acquired assets and assumed liabilities. The Company obtains the information used for the purchase price allocation during due diligence and through other sources. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized. Final determination of the fair values may result in further adjustments. During the first quarter of 2026, the Company acquired three businesses for a total of $ 126.3 million. The Company acquired these businesses to expand its platforms and to maintain its leading position as the largest distributor of rotating equipment in North America. A summary of the preliminary allocation of the total purchase consideration of our business acquisition during the three months ended March 31, 2026 is presented as follows ( in thousands ): Acquisition 1 All Other Total Cash payments $ 86,959 $ 21,982 $ 108,941 Contingent consideration 13,843 3,499 17,342 Total purchase price consideration $ 100,802 $ 25,481 $ 126,283 Tangible assets acquired 29,368 8,528 37,896 Intangible assets acquired 43,361 5,123 48,484 Total assets acquired $ 72,729 $ 13,651 $ 86,380 Total liabilities assumed ( 14,313 ) ( 2,070 ) ( 16,383 ) Net assets acquired 58,416 11,581 69,997 Goodwill $ 42,386 $ 13,900 $ 56,286 The total purchase consideration related to our acquisitions for the three months ended March 31, 2026 consisted primarily of cash consideration. The total cash and cash equivalents acquired for these acquisitions was $ 6.2 million. Transaction-related costs for acquisitions consummated during the period and included within selling, general, and administrative expenses in the consolidated statements of operations was $ 0.8 million as of March 31, 2026. The goodwill total of approximately $ 56.3 million for the three months ended March 31, 2026 assigned to our IPS segment was primarily attributable to expected synergies and the assembled workforce of the entities. The total amount of goodwill expected to be deductible for tax purposes is $ 52.5 million. The acquisitions' operating results are included within the Company's consolidated statements of operations from the date of acquisition, which were not material for the three months ended March 31, 2026. Pro forma results of operations information have not been presented, as the effects of the acquisitions were not material to our financial results. Of the $ 48.5 million of acquired intangible assets, $ 0.3 million was provisionally assigned to non-compete agreements that are subject to amortization over 5 years, $ 29.7 million was assigned to customer relationships and will be amortized over a period of 8 years, $ 6.9 million was assigned to trade names and will be amortized over a period of 10 years, and $ 11.6 million was assigned to dealer relationships and will be amortized over a period of 9 years. NOTE 13 - SHARE REPURCHASES On December 15, 2022, the Company announced a Share Repurchase Program pursuant to which it may repurchase up to $ 85.0 million worth, or 2.8 million shares, of the Company's outstanding common stock over the next 24 months from the date of the announcement. The Company completed the program in August 2024. On August 28, 2024, the Company announced a new Share Repurchase Program pursuant to which we may repurchase up to $ 85.0 million worth, or 2.5 million shares of the Company's outstanding common stock over the next 24 months. Total consideration paid to repurchase the shares was recorded in shareholders’ equity as treasury stock. 16 There were no shares repurchased under the new Share Repurchase Program for the three months ended March 31, 2026 and 2025, respectively. NOTE 14 - SUPPLEMENTAL CASH FLOW INFORMATION Three Months Ended March 31, (in thousands) 2026 2025 Supplemental disclosures of cash flow information: Cash paid for interest $ 14,950 $ 13,695 Cash paid for income taxes 653 20,334 Non-cash investing and financing activities: Treasury shares repurchase accruals $ — $ ( 28 ) NOTE 15 - OTHER INCOME AND EXPENSES The components of other (income) expense were as follows: Three Months Ended March 31, (in thousands) 2026 2025 Interest income $ ( 1,258 ) $ ( 1,032 ) Change in fair value of contingent consideration 239 183 Other, net 425 ( 469 ) Total $ ( 594 ) $ ( 1,318 ) NOTE 16 - REVENUE The Company disaggregates revenue based upon our geography and our reportable segments - Service Centers, Innovative Pumping Solutions and Supply Chain Services. Each of our geographic and reportable business segments are impacted and influenced by varying factors, including the macroeconomic environment, maintenance and capital spending and commodity prices and exploration and production activity. As such, we believe this information is important in depicting the nature, timing and uncertainty of our contracts with customers. The following Geographical Information and Note 11 - Segment Reporting presents our disaggregated revenues. Geographical Information Revenues are presented in geographic area based on location of the facility shipping products or providing services. The Company’s revenues by geographical location are as follows: Three Months Ended March 31, (in thousands) 2026 2025 Revenues United States $ 505,388 $ 457,240 Canada 15,956 18,988 Other 314 341 Total $ 521,658 $ 476,569 17 Recent Acquisitions We define and calculate organic sales to include locations and acquisitions under our ownership for at least twelve months. "Acquisition Sales" are sales from acquisitions that have been under our ownership for less than twelve months and are excluded in our calculation of Organic Sales. The following tables sets forth the disaggregation of sales associated with Acquisition and Organic sales for the three months ended March 31, 2026 and 2025 (in thousands) : Sales Acquisition Sales Organic Sales Three Months Ended March 31, 2026 Service Centers $ 337,976 $ 5,711 $ 332,265 Innovative Pumping Solutions 118,660 35,034 83,626 Supply Chain Services 65,022 — 65,022 Total Sales $ 521,658 $ 40,745 $ 480,913 Three Months Ended March 31, 2025 Service Centers $ 327,075 $ 17,941 $ 309,134 Innovative Pumping Solutions 86,182 13,171 73,011 Supply Chain Services 63,312 — 63,312 Total Sales $ 476,569 $ 31,112 $ 445,457 $ Change Service Centers $ 10,901 $ ( 12,230 ) $ 23,131 Innovative Pumping Solutions 32,478 21,863 10,615 Supply Chain Services 1,710 — 1,710 Total $ Change $ 45,089 $ 9,633 $ 35,456 % Change Service Centers 3.3 % ( 68.2 ) % 7.5 % Innovative Pumping Solutions 37.7 % 166.0 % 14.5 % Supply Chain Services 2.7 % N/A 2.7 % Total % Change 9.5 % 31.0 % 8.0 % 18