What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-07 · 137 added, 53 removed, 273 unchanged (41% of the section changed)

1 unchanged sentence

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

together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") for the three months ended March 31, 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.

together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") for the six months ended June 30, 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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DXP Enterprises, Inc.

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

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

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

Additionally, we provide engineered solutions including, fabrication, remanufacturing, and assembling of custom pump packages along with manufacturing branded private label pumps.

CURRENT MARKET CONDITIONS AND OUTLOOK

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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 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.

For the six months ended June 30, 2026, we had approximately $967.3 million in sales in our Service Centers and Innovative Pumping Solutions segments, an increase of approximately 14.3 percent compared to the six months ended June 30, 2025.

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

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.

During the six months ended June 30, 2026, $8.6 million in sales in our Service Centers (SC) segment and $82.0 million in sales in our Innovative Pumping Solutions (IPS) segment were associated with recent acquisition.

Supply Chain Services Segment

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.

For the six months ended June 30, 2026, we had approximately $130.8 million in sales in our Supply Chain Services (SCS) segment, an increase of approximately 1.6 percent compared to the six months ended June 30, 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 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.

During the six months ended June 30, 2026, acquisition sales were $90.6 million compared to $55.7 million for the six months ended June 30, 2025.

Key Business Metrics

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GAAP measures.

Three Months Ended March 31,

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

2026 2025 2026 2025

Sales by Business Segment

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Income from Operations Margin

9.6 % 9.2 % 8.9 % 8.9 %

Net Income $ 28,708 $ 23,612 $ 48,686 $ 44,201

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

Three Months Ended March 31,

Three Months Ended June 30, 2026 compared to Three Months Ended June 30, 2025

Three Months Ended June 30,

2026 % 2025 %

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$ 1.76 $ 1.43

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) :

The following tables sets forth the disaggregation of revenue from sales associated with acquisitions for the three months ended June 30, 2026 and 2025 (in thousands) :

Sales Acquisition Sales Organic Sales

Three Months Ended March 31, 2026

Three Months Ended June 30, 2026

Service Centers $ 367,898 $ 2,870 $ 365,028

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Total Sales $ 576,461 $ 49,848 $ 526,613

Three Months Ended March 31, 2025

Three Months Ended June 30, 2025

Service Centers $ 339,731 $ 15,555 $ 324,176

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Total % Change 15.6 % 102.6 % 11.1 %

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.

Sales for the three months ended June 30, 2026 increased $77.8 million, or 15.6 percent, to approximately $576.5 million from $498.7 million for the prior year's corresponding period, of which recent acquisitions contributed $49.8 million.

Additionally, the overall increase in sales was the result of an increase in sales in our SC, IPS, and SCS segments of $28.2 million, $49.2 million, and $0.4 million, respectively.

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Service Centers segment.

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.

Sales for the SC segment increased $28.2 million, or 8.3 percent, for the three months ended June 30, 2026, compared to the prior year's corresponding period.

Excluding the impact of recent acquisitions, sales grew $40.9 million, this sales increase was the result of increases within our California, Gulf Coast, Southeast, North Texas, South Central and South Rockies regions totaling $31.9 million, offset by decreases in sales in our Southwest region.

Sales from recent acquisitions contributed $2.9 million during the period, compared to $15.6 million for the three months ended June 30, 2025.

Innovative Pumping Solutions segment.

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.

Sales for the IPS segment increased $49.2 million, or 52.6 percent, for the three months ended June 30, 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 $11.3 million, as well as strategic acquisitions within the IPS segment.

Sales from recent acquisitions contributed $47.0 million during the period, compared to $9.0 million, for the three months ended June 30, 2025.

Supply Chain Services segment.

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.

Sales for the SCS segment increased by $0.4 million, or 0.6 percent, for the three months ended June 30, 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 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.

Gross profit margin for the three months ended June 30, 2026 was 31.8 percent compared to 31.6 percent for the prior year's corresponding period.

The gross profit margin for the three months ended June 30, 2026 was positively impacted by 11 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 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.

SG&A for the three months ended June 30, 2026 increased by $15.7 million, or 14.1 percent, to $127.6 million from $111.8 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, insurance, and professional fees.

OPERATING INCOME.

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.

Operating income for the second quarter of 2026 increased by $9.5 million to $55.5 million, from $46.0 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.

INTEREST EXPENSE.

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

Interest expense for the second quarter of 2026 increased $2.1 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 25.0 percent for the three months ended March 31, 2026, compared to 24.2 percent for the three months ended March 31, 2025.

Our effective tax rate for continuing operations was 27.7 percent for the three months ended June 30, 2026, compared to 25.3 percent for the three months ended June 30, 2025.

Compared to the U.S.

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.

statutory rate for the three months ended June 30, 2025, the effective tax rate increased primarily due to discrete items, including updates to the tax reserves, which reflect our ongoing assessment of uncertain tax positions, including research and development tax credits for which we believe our position is supportable and intend to dispute any proposed IRS adjustments, a decrease in tax benefits related to stock-based compensation vested during the period, net of amounts limited by Section 162(m), and an increase in non-deductible expenses.

Six Months Ended June 30, 2026 compared to Six Months Ended June 30, 2025

Six Months Ended June 30,

2026 % 2025 %

Sales $ 1,098,119 100.0% $ 975,251 100.0%

Cost of sales 746,446 68.0% 667,173 68.4%

Gross profit 351,673 32.0% 308,078 31.6%

Selling, general and administrative expenses 253,706 23.1% 221,577 22.7%

Income from operations 97,967 8.9% 86,501 8.9%

Interest expense

33,274 3.0% 29,404 3.0%

Other income, net

(1,653) (0.2)% (1,672) (0.2)%

Income before income taxes 66,346 6.0% 58,769 6.0%

Provision for income taxes 17,660 1.6% 14,568 1.5%

$ 48,686 4.4% $ 44,201 4.5%

Earnings per share:

$ 3.13 $ 2.81

$ 2.98 $ 2.67

The following tables sets forth the disaggregation of revenue from sales associated with acquisitions for the six months ended June 30, 2026 and 2025 (in thousands) :

Sales Acquisition Sales Organic Sales

Six Months Ended June 30, 2026

Service Centers $ 705,874 $ 8,581 $ 697,293

Innovative Pumping Solutions 261,399 82,012 179,387

Supply Chain Services 130,846 — 130,846

Total Sales $ 1,098,119 $ 90,593 $ 1,007,526

Six Months Ended June 30, 2025

Service Centers $ 666,806 $ 33,496 $ 633,310

Innovative Pumping Solutions 179,722 22,221 157,501

Supply Chain Services 128,723 — 128,723

Total Sales $ 975,251 $ 55,717 $ 919,534

Service Centers $ 39,068 $ (24,915) $ 63,983

Innovative Pumping Solutions 81,677 59,791 21,886

Supply Chain Services 2,123 — 2,123

Total $ Change $ 122,868 $ 34,876 $ 87,992

Service Centers 5.9 % (74.4) % 10.1 %

Innovative Pumping Solutions 45.4 % 269.1 % 13.9 %

Supply Chain Services 1.6 % N/A 1.6 %

Total % Change 12.6 % 62.6 % 9.6 %

Sales for the six months ended June 30, 2026 increased $122.9 million, or 12.6 percent, to approximately $1.1 billion from $1.0 billion for the prior year's corresponding period, of which recent acquisitions contributed $90.6 million during the year.

Additionally, the overall increase in sales was the result of an overall increase in sales within our SC, IPS, and SCS segments of $39.1 million, $81.7 million, and $2.1 million.

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

Service Centers segment.

Sales for the SC segment increased by $39.1 million, or 5.9 percent for the six months ended June 30, 2026, compared to the prior year's corresponding period.

Sales from recent acquisitions for the SC segment contributed $8.6 million during the period as compared to $33.5 million during the six months ended June 30, 2025.

Total sales for the SC segment excluding acquisitions increased $64.0 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 project-related work compared to the prior year's corresponding period.

Innovative Pumping Solutions segment .

Sales for the IPS segment increased by $81.7 million, or 45.4 percent for the six months ended June 30, 2026 compared to the prior year's corresponding period.

Sales from acquisitions for the IPS segment contributed $82.0 million during the period compared to $22.2 million during the six months ended June 30, 2025.

Excluding the impact of recent acquisitions, sales increased within our water and wastewater end market, due to the increased projects compared to the prior year's corresponding period.

Supply Chain Services segment.

Sales for the SCS segment increased by $2.1 million, or 1.6 percent, for the six months ended June 30, 2026, compared to the prior year's corresponding period.

GROSS PROFIT.

Gross profit margin for the six months ended June 30, 2026 was 32.0 percent compared to 31.6 percent for the prior year's corresponding period.

The gross profit margin for the six months ended June 30, 2026 was positively impacted by 44 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, 2026 increased by approximately $32.1 million, or 14.5 percent, to $253.7 million from $221.6 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, insurance, and professional fees.

OPERATING INCOME.

Operating income for the six months ended June 30, 2026 increased by $11.5 million or 13.3 percent to $98.0 million from $86.5 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.

INTEREST EXPENSE.

Interest expense for the six months ended June 30, 2026 increased $3.9 million compared with 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 from continuing operations was a tax expense of 26.6 percent for the six months ended June 30, 2026, compared to a tax expense of 24.8 percent for the six months ended June 30, 2025.

The effective tax rate increased primarily due to discrete items, including updates to the tax reserves, which reflect our ongoing assessment of uncertain tax positions, including research and development tax credits for which we believe our position is supportable and intend to dispute any proposed IRS adjustments, a decrease in tax benefits related to stock-based compensation vested during the period, net of amounts limited by Section 162(m), 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 March 31,

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

2026 2025 2026 2025

Sales by Business Segment

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GAAP financial measure (in thousands) :

Three Months Ended March 31,

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

2026 2025 2026 2025

Net income attributable to DXP Enterprises, Inc.

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Provision for income tax expense

11,013 7,984 17,660 14,568

Depreciation and amortization

12,203 9,490 24,254 18,624

EBITDA $ 68,755 $ 55,830 $ 123,874 $ 106,797

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other non-recurring items (1)

155 — 1,046 235

Adjusted EBITDA $ 70,376 $ 57,313 $ 128,188 $ 109,832

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GAAP financial measure (in thousands) :

Three Months Ended March 31,

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

2026 2025 2026 2025

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

As of June 30, 2026, we had available cash of $226.6 million and credit facility availability of $147.9 million.

We have a $185.0 million asset-backed line of credit (the "ABL Revolver"), partially offset by letters of credit of $37.1 million.

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

We had no borrowings outstanding on our ABL Revolver as of June 30, 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) :

Three Months Ended March 31,

Six Months Ended June 30,

Net Cash Provided by (Used in):

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Operating Activities

The Company generated $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.

The Company generated $62.0 million of cash from operating activities during the six months ended June 30, 2026 compared to $21.6 million of cash generated during the prior year's corresponding period.

The increase of $40.3 million was primarily due to higher net income during the period and a reduction in tax payments compared to the prior corresponding period.

Investing Activities

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.

For the six months ended June 30, 2026, net cash used in investing activities was $118.3 million compared to a $41.4 million use of cash during the prior year’s corresponding period.

This $76.9 million increase was primarily driven by increased acquisition activity during the six months ended June 30, 2026.

Total consideration, net of cash acquired, was $112.9 million, compared to $13.9 million for the six months ended June 30, 2025.

Financing Activities

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.

For the six months ended June 30, 2026, net cash used in financing activities was $19.0 million, compared to net cash used in financing activities of $16.6 million during the prior year’s corresponding period.

The increase was primarily due to increases in shares withheld for taxes relating to shares vesting compared to prior corresponding period and increased principal debt repayments.

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

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.

At June 30, 2026, our total outstanding debt was $842.5 million, or 60.9 percent of total capitalization (total debt plus shareholders' equity) of $1.4 billion.

$841.6 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):

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Total borrowing capacity $ 185,000 $ 185,000

2 unchanged sentences

Total amount available $ 147,883 $ 153,528

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.

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

At June 30, 2026, the Company had $374.5 million of liquidity including $226.6 million in cash and $147.9 million in availability under the ABL Revolver.

On July 2, 2026, the Company entered into a Second Amended and Restated Loan and Security Agreement (the “Second A&R Credit Agreement”).

The ABL Credit Agreement provides for asset-based revolving loans (the “ABL Loans”) in an aggregate principal amount of up to $225.0 million.

The ABL Facility may be increased by up to an aggregate of $50.0 million, in minimum increments of $10.0 million.

The ABL Credit Agreement amends and restates the Amended and Restated Loan and Security Agreement dated as of July 19, 2022.

The ABL Facility will mature on July 2, 2031.

For further discussion refer to Note 17.

Subsequent Events .

Credit Ratings

On July 20, 2026, we received an updated credit rating from Standard and Poor's ("S&P"), upgrading our issuer credit and issue-level rating from B to B+.

This upgrade provides the capital markets with an updated view on our comparative credit risk which can impact future borrowing costs, and our ability to access funding efficiently.

Free Cash Flow

6 unchanged sentences

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

Three Months Ended March 31,

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

2026 2025 2026 2025

Net cash provided by operating activities $ 32,386 $ 18,646 $ 61,955 $ 21,619

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

Net working capital as of June 30, 2026 was $393.3 million, an increase of $31.7 million, compared to $361.7 million as of December 31, 2025.

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

1 unchanged sentence

Business Acquisitions .

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

During June 30, 2026 and 2025, the Company invested $112.9 million and $13.9 million, respectively, in acquisitions.

Capital Expenditures

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

The Company's capital expenditures was $5.9 million and $30.3 million for the six months ended June 30, 2026 and 2025 respectively.

This includes continued facility upgrades and enhancements, tools and equipment, 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 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.

The results of operations for the six months ended June 30, 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