DXP Enterprises Q3 sales rise 14.3% to $587M
On July 20, 2026, S&P upgraded DXP's issuer credit and issue-level ratings from B to B+.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
DXP Enterprises reported third-quarter sales of $587.2 million, up 14.3% from a year earlier, and net income of $26.9 million versus $21.6 million. Diluted earnings per share were $1.64, compared with $1.31. Gross margin was 30.7%, versus 31.4% a year earlier; DXP said higher input costs than the prior quarter reduced gross margin by 65 basis points.
For the nine months ended September 30, 2026, sales were $1,685.3 million, up 13.2%, and net cash from operating activities was $80.6 million versus $56.5 million; free cash flow was $70.5 million versus $19.5 million. Third-quarter net cash from operating activities was $18.7 million, down from $34.9 million. Acquisition sales were $139.4 million, and acquisition cash consideration, net of cash acquired, was $126.2 million.
At September 30, 2026, cash was $218.8 million, debt outstanding was $839.5 million, and ABL Revolver availability was $192.2 million. On October 28, 2026, DXP entered a repurchase program for up to $150.0 million or 1.0 million shares in open-market purchases over 24 months, at management's discretion. On November 1, 2026, DXP entered a purchase agreement to acquire MDS of Michigan, LLC; the acquisition was funded with cash on the balance sheet.
3 points · 0 major0 major · 1 point
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter sales increased 14.3% to $587.2 million.
- Moderate pointNine-month operating cash flow rose to $80.6 million from $56.5 million.
- Minor pointS&P upgraded issuer and issue-level ratings from B to B+.
Negative
- Moderate pointThird-quarter operating cash flow declined to $18.7 million from $34.9 million.
Filing Explained
At September 30, $811,965 thousand was scheduled to mature in 2030; DXP reported a 2.30-to-1.00 secured-leverage ratio, below the 5.75-to-1.00 limit.
This unaudited Form 10-Q reports that DXP Enterprises issued 9,456 common shares in
At
Third-quarter sales rose
Key Figures
Third-quarter sales: $587.2 million
Third-quarter net income: $26.9 million
Diluted earnings per share: $1.64
+5 more
8 metrics
Third-quarter sales
$587.2 million
Three months ended September 30, 2026; up 14.3% from a year earlier
Third-quarter net income
$26.9 million
Three months ended September 30, 2026, compared with $21.6 million in 2025
Diluted earnings per share
$1.64
Three months ended September 30, 2026, compared with $1.31 in 2025
Third-quarter operating cash flow
$18.7 million
Three months ended September 30, 2026, compared with $34.9 million in 2025
Nine-month sales
$1,685.3 million
Nine months ended September 30, 2026; up 13.2% from 2025
Nine-month operating cash flow
$80.6 million
Nine months ended September 30, 2026, compared with $56.5 million in 2025
Debt outstanding
$839.5 million
As of September 30, 2026
Issuer credit and issue-level ratings
B+
S&P upgraded the ratings from B on July 20, 2026
Key Terms
Organic Sales, Acquisition Sales, Free Cash Flow, Secured Leverage Ratio, +1 more
5 terms
Organic Sales financial
"Organic Sales are excluded from Acquisition Sales"
Organic sales are the change in a company’s revenue that comes from its existing business operations, excluding effects of acquisitions, divestitures, and currency swings. Think of it like measuring how much a garden grows from the plants you already tended, rather than adding new pots; investors use organic sales to judge whether demand and core business performance are genuinely improving or if growth is driven by one‑time deals or accounting shifts.
Acquisition Sales financial
"sales from acquisitions under ownership for less than twelve months"
Free Cash Flow financial
"net cash provided by operating activities less purchases of property and equipment"
Free cash flow is the amount of money a company has left over after paying all its expenses and investing in its business, like buying equipment or updating facilities. It shows how much cash is available to reward shareholders, pay down debt, or save for future growth. This helps investors understand if a company is financially healthy and able to grow.
Secured Leverage Ratio financial
"The Company's Secured Leverage Ratio as of September 30, 2026"
A secured leverage ratio compares the amount of a company’s debt that is backed by collateral (secured debt) to its ability to pay that debt, usually measured against cash flow or the value of assets. Think of it as the share of mortgages on a house compared with the owner’s income or home value — a higher ratio signals more debt burden and greater risk of lender action, tighter borrowing terms, and potential pressure on equity returns, all of which matter to investors.
Fixed Charge Coverage Ratio financial
"The Company's principal financial covenant under the ABL Credit Agreement"
A fixed charge coverage ratio measures how well a company's operating income can cover its fixed, recurring obligations like interest payments and lease costs. Think of it as a safety margin — the higher the number, the more comfortably a business can pay steady bills from its normal earnings, which matters to investors because it signals financial stability, lower default risk, and greater ability to withstand revenue dips.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were DXPE's third-quarter 2026 sales and earnings?
DXP reported third-quarter sales of $587.2 million and net income of $26.9 million. Sales were up 14.3% from a year earlier, and net income was compared with $21.6 million in the prior-year quarter. Diluted earnings per share were $1.64, compared with $1.31.
How did DXPE's operating cash flow compare in Q3 2026?
DXP reported $18.7 million of net cash from operating activities in the third quarter, compared with $34.9 million in the prior-year quarter. For the nine months ended September 30, 2026, net cash from operating activities was $80.6 million, compared with $56.5 million.
How many shares did DXPE issue in the Mequipco acquisition?
In August 2026, DXP issued 9,456 common shares to the sellers of Mequipco Ltd. as a portion of the acquisition consideration. The shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
What are the size and maturity of DXPE's ABL facility?
DXP's ABL facility provides for asset-based revolving loans in an aggregate principal amount of up to $225.0 million and matures on July 2, 2031. The facility may be increased by up to $50.0 million, in minimum increments of $10.0 million.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended | |||||||||||
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________ to __________ | |||||||||||
Commission file number 0-21513
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||||||
| (Address of principal executive offices, including zip code) | ||||||||||||||
(713 ) 996-4700
| (Registrant's telephone number, including area code) | ||
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of Each Class | Trading Symbol | Name of Exchange on which Registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of registrant's Common Stock, par value $0.01 per share outstanding as of November 2, 2026: 15,516,986 .
DXP ENTERPRISES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
| Page | ||||||||
PART I: FINANCIAL INFORMATION | ||||||||
ITEM 1. Financial Statements | 3 | |||||||
a) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income | 3 | |||||||
b) Unaudited Condensed Consolidated Balance Sheets | 4 | |||||||
c) Unaudited Condensed Consolidated Statements of Cash Flows | 5 | |||||||
d) Unaudited Condensed Consolidated Statements of Equity | 6 | |||||||
e) Notes to Unaudited Condensed Consolidated Financial Statements | 7 | |||||||
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 23 | |||||||
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk | 36 | |||||||
ITEM 4. Controls and Procedures | 37 | |||||||
PART II: OTHER INFORMATION | 38 | |||||||
ITEM 1. Legal Proceedings | 38 | |||||||
ITEM 1A. Risk Factors | 38 | |||||||
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds | 38 | |||||||
ITEM 3. Default upon Senior Securities | 38 | |||||||
ITEM 4. Mine Safety Disclosures | 38 | |||||||
ITEM 5. Other Information | 38 | |||||||
ITEM 6. Exhibits | 39 | |||||||
SIGNATURES | 40 | |||||||
2
PART I: FINANCIAL INFORMATION
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
| Income from operations | |||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
Other income, net (Note 15) | ( | ( | ( | ( | |||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
Provision for income taxes (Note 7) | |||||||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Preferred stock dividend | |||||||||||||||||||||||
| Net income attributable to common shareholders | $ | $ | $ | $ | |||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
Earnings per share (Note 9): | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
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)
| September 30, 2026 | December 31, 2025 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash | $ | $ | |||||||||
Accounts receivable, net of allowance of $ | |||||||||||
| Inventories | |||||||||||
| Costs and estimated profits in excess of billings | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets, net | |||||||||||
| Operating lease right of use assets, net | |||||||||||
| Other long-term assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current maturities of debt | $ | $ | |||||||||
| Trade accounts payable | |||||||||||
| Accrued wages and benefits | |||||||||||
| Customer advances | |||||||||||
| Billings in excess of costs and estimated profits | |||||||||||
| Short-term operating lease liabilities | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
Long-term debt, net of unamortized debt issuance costs and discounts | |||||||||||
| Long-term operating lease liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Total long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and Contingencies (Note 10) | |||||||||||
| Shareholders' equity: | |||||||||||
Series A preferred stock, $ | |||||||||||
Series B preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
Treasury stock, at cost | ( | ( | |||||||||
| Total DXP Enterprises, Inc. equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
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)
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | $ | |||||||||
| Reconciliation of net income to net cash provided by operating activities: | |||||||||||
| Depreciation | |||||||||||
Amortization of intangibles and finance lease assets | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Loss (gain) on sale of property and equipment | ( | ||||||||||
| Provision for (recovery of) credit losses | |||||||||||
| Payment of contingent consideration liability in excess of acquisition-date fair value | ( | ( | |||||||||
| Fair value adjustment on contingent consideration | |||||||||||
| Restricted stock compensation expense | |||||||||||
| Deferred income taxes | |||||||||||
| Other non-cash items | ( | ( | |||||||||
Changes in operating assets and liabilities, net of effects of businesses acquired: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Costs and estimated profits in excess of billings | ( | ( | |||||||||
| Inventories | ( | ( | |||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||
Trade accounts payable | |||||||||||
Accrued expenses | |||||||||||
| Billings in excess of costs and estimated profits | |||||||||||
| Income taxes | ( | ||||||||||
| Net cash provided by operating activities | $ | $ | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Purchase of property and equipment | ( | ( | |||||||||
| Proceeds from the sale of property and equipment | |||||||||||
| Acquisition of businesses, net of cash acquired | ( | ( | |||||||||
| Net cash used in investing activities | $ | ( | $ | ( | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Principal debt payments | ( | ( | |||||||||
| Debt issuance costs | ( | ( | |||||||||
| Shares repurchased held in treasury | ( | ||||||||||
| Payment for acquisition contingent consideration liability | ( | ( | |||||||||
| Preferred stock dividends paid | ( | ( | |||||||||
| Payment for employee taxes withheld from stock awards | ( | ( | |||||||||
| Principal payments on finance leases | ( | ( | |||||||||
| Net cash used in financing activities | $ | ( | $ | ( | |||||||
| Effect of foreign currency on cash | ( | ||||||||||
| Net change in cash and restricted cash | ( | ( | |||||||||
| Cash and restricted cash at beginning of period | |||||||||||
| Cash and restricted cash at end of period | $ | $ | |||||||||
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 | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| Preferred dividends paid | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
Compensation expense for restricted stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Tax related items for share based awards | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| Preferred dividends paid | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
Compensation expense for restricted stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Tax related items for share based awards | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| Preferred dividends paid | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
Compensation expense for restricted stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Tax related items for share based awards | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Issuance of shares of common stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||
| Preferred dividends paid | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Compensation expense for restricted stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Tax related items for share based awards | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Excise tax on share repurchases | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||
| Preferred dividends paid | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Compensation expense for restricted stock | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Tax related items for share based awards | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||
| Preferred dividends paid | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Tax related items for share based awards | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Repurchases of shares | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||
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"). In accordance 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 for interim reporting periods. 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 and nine months ended September 30, 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 ("ASU") 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.
In September 2025, the FASB issued ASU 2025-06, “Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software”. The ASU amends the existing standard to remove all references to prescriptive and sequential software development project stages. Under this guidance, eligible software development costs will begin capitalization when management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. In evaluating whether it is probable the project will be completed; management is required to consider whether there is significant uncertainty associated with the development activities of the software. This guidance is effective for all annual periods beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted. The adoption did not have a material impact to our unaudited condensed consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued 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 and discount rates. 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 September 30, 2026, there was $30.7 million in other current and other long-term liabilities for contingent consideration.
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The following table provides a reconciliation of the beginning and ending balances and gains or losses recognized during the nine months ended September 30, 2026 (in thousands):
| Contingent Consideration | |||||
Balance at December 31, 2025(1) | $ | ||||
| Acquisitions and settlements: | |||||
Acquisitions(2) (Note 12) | |||||
| Settlements | ( | ||||
| Total remeasurement adjustments: | |||||
| Changes in fair value recorded in other income, net | |||||
Balance at September 30, 2026(1) | $ | ||||
(1). Amounts included in other current liabilities were $ | |||||
| (2). Includes immaterial impacts from currency translation adjustments. | |||||
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 8.6 percent as of September 30, 2026. Changes in our unobservable inputs in isolation would result in a change to our fair value measurement. As of September 30, 2026, the maximum amount of contingent consideration payable under these arrangements is $34.0 million over three years .
Other financial instruments not measured at fair value on the Company's unaudited condensed consolidated balance sheets at September 30, 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 September 30, 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):
| September 30, 2026 | December 31, 2025 | ||||||||||
| Finished goods | $ | $ | |||||||||
| Work in process | |||||||||||
| Inventories | $ | $ | |||||||||
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.
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Costs and estimated profits on uncompleted contracts and related amounts billed were as follows (in thousands):
| September 30, 2026 | December 31, 2025 | ||||||||||
| Costs incurred on uncompleted contracts | $ | $ | |||||||||
| Estimated profits, thereon | |||||||||||
| Total costs and estimated profits on uncompleted contracts | |||||||||||
| Less: billings to date | |||||||||||
| Net | $ | $ | |||||||||
Such amounts were included in the accompanying unaudited condensed consolidated balance sheets for September 30, 2026 and December 31, 2025 under the following captions (in thousands):
| September 30, 2026 | December 31, 2025 | ||||||||||
| Costs and estimated profits in excess of billings | $ | $ | |||||||||
| Billings in excess of costs and estimated profits | ( | ( | |||||||||
| Net | $ | $ | |||||||||
During the nine months ended September 30, 2026 and 2025, $4.5 million and $7.9 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 rates):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Income before provision for income taxes | $ | $ | $ | $ | |||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Effective tax rate | % | % | % | % | |||||||||||||||||||
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. For the nine months ended September 30, 2026, our effective tax rate increased primarily due to discrete tax items, including an increase in reserves for research and development tax credits and related accrued interest, lower tax benefits from stock-based compensation, net of limitations under Section 162(m), reduced current-year research and development tax credits, and higher nondeductible expenses. For the three months ended September 30, 2026, our effective tax rate decreased compared to the same period in 2025, primarily due to a reduction in reserves for prior-year research and development tax credits and related accrued interest, partially offset by lower tax benefits from stock-based compensation, net of Section 162(m) limitations.
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 September 30, 2026, the impact of Pillar Two is expected to be immaterial to the Company based on current legislation enacted to date.
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NOTE 8 – LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| ABL Revolver | $ | $ | |||||||||||||||||||||
Senior Secured Term Loan B due October 13, 2030(1) | |||||||||||||||||||||||
| Promissory Note due November 1, 2029 | |||||||||||||||||||||||
Total debt | |||||||||||||||||||||||
Less: current maturities | ( | ( | |||||||||||||||||||||
Total long-term debt | $ | $ | |||||||||||||||||||||
Unamortized discount and debt issuance costs | |||||||||||||||||||||||
Long-term debt, net of unamortized discount and debt issuance costs | $ | $ | |||||||||||||||||||||
(1) The fair value of the Amended Term Loan B due October 13, 2030 using level 2 input values was $ | |||||||||||||||||||||||
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 September 30, 2026, there was $839.5 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 Secured Overnight Financing Rate ("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 7.15 percent and 7.17 percent as of September 30, 2026 and December 31, 2025, respectively.
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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 September 30, 2026 to be less than 5.75 to 1.00.
As of September 30, 2026, the Company’s Secured Leverage Ratio was 2.30 to 1.00.
ABL Revolver:
On July 19, 2022, the Company entered into an Amended and Restated Loan and Security Agreement (the “ABL Credit Agreement”) that provided for a $135.0 million asset-backed revolving line of credit (the "ABL Revolver"). 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.
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 from $135.0 million to $185.0 million.
On July 2, 2026, the Company entered into a Second Amended and Restated Loan and Security Agreement (the “Second A&R Credit Agreement”). The Second A&R Credit Agreement provides for asset-based revolving loans ("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. Interest shall accrue on outstanding borrowings at a rate equal to Term Secured SOFR or Term Canadian Overnight Repo Rate Average ("CORRA") plus a margin ranging from 1.25 % to 1.75 % per annum, or at an alternate base rate, Canadian prime rate or Canadian base rate plus a margin ranging from 0.25 % to 0.75 % per annum, in each case, based upon the average daily excess availability under the ABL Facility for the most recently completed calendar quarter. The ABL Facility will mature on July 2, 2031. At September 30, 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 security 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 security 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 $192.2 million and $153.5 million at September 30, 2026 and December 31, 2025, respectively.
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Interest rate
The interest rate for the ABL Revolver was 7.25 percent and 7.00 percent as of September 30, 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 September 30, 2026, the Company's Fixed Charge Coverage Ratio was 2.98 to 1.00.
The Company was in compliance with all financial covenants as of September 30, 2026.
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 %.
As of September 30, 2026, the remaining principal of $0.9 million related to the promissory note was paid in full.
Maturities of Debt
As of September 30, 2026, the maturities of long-term debt for the next five years were as follows (in thousands):
| Amount | ||||||||
| 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Total | $ | |||||||
Interest Expense:
During the three and nine months ended September 30, 2026, the Company incurred total interest expense of $16.9 million and $50.2 million, respectively, of which $15.2 million and $45.2 million is related to interest on the asset-based credit facilities and the term loan. Debt issuance costs and discounts are amortized as interest expense over the life of the debt. Amortization expense related to debt issuance costs and discounts was $1.1 million and $3.4 million for the three and nine months ended September 30, 2026, respectively. The remaining $0.6 million and $1.6 million of interest expense is primarily related to interest attributable to finance leases for the three and nine months ended September 30, 2026, respectively.
13
During the three and nine months ended September 30, 2025, the Company incurred total interest expense of $14.9 million and $44.3 million, respectively, of which $13.5 million and $40.3 million related to interest on the asset-based credit facilities and the term loan, respectively. Debt issuance costs and discounts are amortized as interest expense over the life of the debt. Amortization expense related to debt issuance costs and discounts was $1.0 million and $2.9 million for the three and nine months ended September 30, 2025, respectively. The remaining $0.4 million and $1.1 million of interest expense is primarily related to interest attributable to finance leases for the three and nine months ended September 30, 2025, respectively.
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Basic earnings per share: | |||||||||||||||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||||
| Net income attributable to DXP Enterprises, Inc. | $ | $ | $ | $ | |||||||||||||||||||
| Convertible preferred stock dividend | |||||||||||||||||||||||
| Net income attributable to common shareholders | $ | $ | $ | $ | |||||||||||||||||||
| Per share amount | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per share: | |||||||||||||||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||||
| Assumed conversion of convertible preferred stock | |||||||||||||||||||||||
| Total dilutive shares | |||||||||||||||||||||||
| Net income attributable to common shareholders | $ | $ | $ | $ | |||||||||||||||||||
| Convertible preferred stock dividend | |||||||||||||||||||||||
| Net income attributable to DXP Enterprises, Inc. | $ | $ | $ | $ | |||||||||||||||||||
| Per share amount | $ | $ | $ | $ | |||||||||||||||||||
As of September 30, 2026 and 2025, the weighted average of the unvested restricted stock awards were 153,447 and 241,742 shares, respectively. The preferred stock is convertible into 840,000 shares of common stock.
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.
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NOTE 11 - SEGMENT REPORTING
We have three
The Service Centers segment supplies industrial customers with maintenance support, MRO products and equipment, and logistics services. The Service Centers segment provides a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply, safety products and safety services categories.
The Innovative Pumping Solutions segment fabricates and assembles custom-made engineered solutions including pump packages, re-manufactured pumps, manufacturing of 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 by 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 September 30, 2026, there was no change to our reportable segment composition.
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The following table sets forth financial information related to the Company's segments (in thousands):
| Three Months Ended September 30, 2026 | Service Center | Innovative Pumping Solutions | Supply Chain Services | Total Reportable Segments | Corporate | Total | |||||||||||||||||
Sales | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Other expenses | |||||||||||||||||||||||
| Depreciation | |||||||||||||||||||||||
Amortization of finance lease assets | |||||||||||||||||||||||
Other(1) | |||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Other income, net | ( | ( | |||||||||||||||||||||
| Income (loss) before income taxes | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | |||||||||||||||||
(1). Other primarily includes selling, general and administrative expenses of $ | |||||||||||||||||||||||
| Three Months Ended September 30, 2025 | Service Center | Innovative Pumping Solutions | Supply Chain Services | Total Reportable Segments | Corporate | Total | |||||||||||||||||
Sales | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Other expenses | |||||||||||||||||||||||
| Depreciation | |||||||||||||||||||||||
Amortization of finance lease assets | |||||||||||||||||||||||
Other(1) | |||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Other income, net | ( | ( | |||||||||||||||||||||
| Income (loss) before income taxes | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | |||||||||||||||||
(1). Other primarily includes selling, general and administrative expenses of $ | |||||||||||||||||||||||
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| Nine Months Ended September 30, 2026 | Service Center | Innovative Pumping Solutions | Supply Chain Services | Total Reportable Segments | Corporate | Total | |||||||||||||||||
Sales | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Other expenses | |||||||||||||||||||||||
| Depreciation | |||||||||||||||||||||||
Amortization of finance lease assets | |||||||||||||||||||||||
Other(1) | |||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Other income, net | ( | ( | |||||||||||||||||||||
| Income (loss) before income taxes | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | |||||||||||||||||
(1). Other primarily includes selling, general and administrative expenses of $ | |||||||||||||||||||||||
| Nine Months Ended September 30, 2025 | Service Center | Innovative Pumping Solutions | Supply Chain Services | Total Reportable Segments | Corporate | Total | |||||||||||||||||
Sales | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Operating expenses | |||||||||||||||||||||||
| Other Expenses | |||||||||||||||||||||||
| Depreciation | |||||||||||||||||||||||
Amortization of finance lease assets | |||||||||||||||||||||||
Other(1) | |||||||||||||||||||||||
| Operating income (loss) | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Other income, net | ( | ( | |||||||||||||||||||||
| Income (loss) before income taxes | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||
| Capital expenditures | $ | $ | $ | $ | $ | $ | |||||||||||||||||
(1). Other primarily includes selling, general and administrative expenses of $ | |||||||||||||||||||||||
The following table sets forth total assets related to the Company's segments (in thousands):
| September 30, 2026 | December 31, 2025 | ||||||||||
| Service Centers | $ | $ | |||||||||
| Innovative Pumping Solutions | |||||||||||
Supply Chain Services | |||||||||||
Total Reportable Segments Assets | $ | $ | |||||||||
| Corporate | |||||||||||
| Total Assets | $ | $ | |||||||||
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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.
A summary of the preliminary allocation of the total purchase consideration of our business acquisitions during the nine months ended September 30, 2026 is presented as follows (in thousands):
Acquisition 1 | All Other Acquisitions Q1 2026 | Total for Q1 2026 | Q2 2026 Acquisition | Q3 2026 Acquisition | Total | |||||||||||||||||||||||||||||||||
| Total Acquisitions | ||||||||||||||||||||||||||||||||||||||
| Cash payments | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Stock consideration | ||||||||||||||||||||||||||||||||||||||
Contingent consideration | ||||||||||||||||||||||||||||||||||||||
| Total purchase price consideration | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Tangible assets acquired | ||||||||||||||||||||||||||||||||||||||
| Intangible assets acquired | ||||||||||||||||||||||||||||||||||||||
| Total assets acquired | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Total liabilities assumed | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Net assets acquired | ||||||||||||||||||||||||||||||||||||||
| Goodwill | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
The Company acquired these businesses to expand its water and wastewater platform, expand into new territories, and to maintain its leading position as the largest distributor of rotating equipment in North America.
The total purchase consideration related to our acquisitions for the nine months ended September 30, 2026 consisted primarily of cash and contingent consideration. The total cash and cash equivalents acquired for these acquisitions was $6.7 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 $1.6 million as of September 30, 2026.
The goodwill total of approximately $76.4 million for the nine months ended September 30, 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 $54.5 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 nine months ended September 30, 2026.
Of the $53.6 million of acquired intangible assets, $0.6 million was provisionally assigned to non-compete agreements that are subject to amortization over 5 years, $46.1 million was assigned to customer relationships and vendor relationships and will be amortized over a period of 8 years through 9 years, and $6.9 million was assigned to trade names and will be amortized over a period of 10 years.
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Pro Forma Results of Operations (unaudited)
The following unaudited supplemental pro forma results of operations for the Company incorporate the acquisitions completed during 2025 and through September 30, 2026. The unaudited pro forma results are presented for illustrative purposes only and are not necessarily indicative of the results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the future (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Sales | $ | $ | $ | $ | |||||||||||||||||||
| Net income attributable to common shareholders | $ | $ | $ | $ | |||||||||||||||||||
The pro forma combined results of operations for the three and nine months ended September 30, 2026 and 2025 were prepared by adjusting the historical results of the Company to include the historical results of the acquired businesses before their respective acquisitions dates.
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. The Company completed the program in August 2026.
The following table represents total number of shares purchased, the amount paid, and the average price paid per share under share repurchase programs authorized by our Board of Directors:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(in thousands, except per share data) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Total number of shares purchased | |||||||||||||||||||||||
| Amount paid | $ | $ | $ | $ | |||||||||||||||||||
| Average price paid per share | $ | $ | $ | $ | |||||||||||||||||||
NOTE 14 - SUPPLEMENTAL CASH FLOW INFORMATION
| Nine Months Ended September 30, | |||||||||||
(in thousands) | 2026 | 2025 | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes | |||||||||||
Non-cash investing and financing activities: | |||||||||||
| Shares issued for acquisitions | $ | $ | |||||||||
Treasury shares repurchase accruals | $ | $ | ( | ||||||||
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NOTE 15 - OTHER INCOME AND EXPENSES
The components of other (income) expense were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Interest income | $ | ( | $ | ( | ( | ( | |||||||||||||||||
| Change in fair value of contingent consideration | |||||||||||||||||||||||
| Other, net | ( | ( | ( | ||||||||||||||||||||
| Total | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
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, 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 areas based on location of the facility shipping products or providing services.
The Company’s revenues by geographical location are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| United States | $ | $ | $ | $ | |||||||||||||||||||
| Canada | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
20
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 set forth the disaggregation of sales associated with Acquisition and Organic sales for the three and nine months ended September 30, 2026 and 2025 (in thousands):
| Sales | Acquisition Sales | Organic Sales | ||||||||||||||||||
| Three Months Ended September 30, 2026 | ||||||||||||||||||||
| Service Centers | $ | $ | $ | |||||||||||||||||
| Innovative Pumping Solutions | ||||||||||||||||||||
| Supply Chain Services | ||||||||||||||||||||
| Total Sales | $ | $ | $ | |||||||||||||||||
| Three Months Ended September 30, 2025 | ||||||||||||||||||||
| Service Centers | $ | $ | $ | |||||||||||||||||
| Innovative Pumping Solutions | ||||||||||||||||||||
| Supply Chain Services | ||||||||||||||||||||
| Total Sales | $ | $ | $ | |||||||||||||||||
| $ Change | ||||||||||||||||||||
| Service Centers | $ | $ | ( | $ | ||||||||||||||||
| Innovative Pumping Solutions | ||||||||||||||||||||
| Supply Chain Services | ||||||||||||||||||||
| Total $ Change | $ | $ | $ | |||||||||||||||||
| % Change | ||||||||||||||||||||
| Service Centers | % | ( | % | % | ||||||||||||||||
| Innovative Pumping Solutions | % | % | % | |||||||||||||||||
| Supply Chain Services | % | N/A | % | |||||||||||||||||
| Total % Change | % | % | % | |||||||||||||||||
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| Sales | Acquisition Sales | Organic Sales | ||||||||||||||||||
| Nine Months Ended September 30, 2026 | ||||||||||||||||||||
| Service Centers | $ | $ | $ | |||||||||||||||||
| Innovative Pumping Solutions | ||||||||||||||||||||
| Supply Chain Services | ||||||||||||||||||||
| Total Sales | $ | $ | $ | |||||||||||||||||
| Nine Months Ended September 30, 2025 | ||||||||||||||||||||
| Service Centers | $ | $ | $ | |||||||||||||||||
| Innovative Pumping Solutions | ||||||||||||||||||||
| Supply Chain Services | ||||||||||||||||||||
| Total Sales | $ | $ | $ | |||||||||||||||||
| $ Change | ||||||||||||||||||||
| Service Centers | $ | $ | ( | $ | ||||||||||||||||
| Innovative Pumping Solutions | ||||||||||||||||||||
| Supply Chain Services | ||||||||||||||||||||
| Total $ Change | $ | $ | $ | |||||||||||||||||
| % Change | ||||||||||||||||||||
| Service Centers | % | ( | % | % | ||||||||||||||||
| Innovative Pumping Solutions | % | % | % | |||||||||||||||||
| Supply Chain Services | % | N/A | % | |||||||||||||||||
| Total % Change | % | % | % | |||||||||||||||||
NOTE 17 - SUBSEQUENT EVENT
On October 28, 2026, the Company entered into a new stock repurchase program under which up to $150.0 million or 1.0 million shares of its outstanding common stock may be acquired in the open market over the next 24 months at the discretion of management. The previous stock repurchase program, which authorized the repurchase of up to $85.0 million or 2.5 million shares of common stock, concluded in August 2026.
On November 1, 2026, the Company entered into a purchase agreement to acquire the issued and outstanding equity interests of MDS of Michigan, LLC. The acquisition was funded with cash on the balance sheet.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, 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. GAAP.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this "Report") contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include without limitation those about the Company’s expectations regarding the Company’s business, the Company’s future profitability, cash flow, liquidity, and growth. Such forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "might", "estimates", "will", "should", "could", "would", "suspect", "potential", "current", "achieve", "plans" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and actual results may vary materially from those discussed in the forward-looking statements or historical performance as a result of various factors. These factors include, but are not limited to, the effectiveness of management's strategies and decisions; our ability to implement our internal growth and acquisition growth strategies; general economic and business conditions specific to our primary customers; changes in government regulations; our ability to effectively integrate businesses we may acquire; new or modified statutory or regulatory requirements; availability of materials and labor; inability to obtain or delay in obtaining government or third-party approvals and permits; non-performance by third parties of their contractual obligations; unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response thereto; cyber-attacks adversely affecting our operations; other geological, operating and economic considerations and declining prices and market conditions, including reduced oil and gas prices and supply or demand for maintenance, repair and operating products, equipment and service; decreases in oil and natural gas industry capital expenditure levels, which may result from decreased oil and natural gas prices or other factors; our ability to manage changes and the continued health or availability of management personnel; and our ability to obtain financing on favorable terms or amend our credit facilities, as needed. This Report identifies other factors that could cause such differences. 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 February 26, 2026. We assume no obligation and do not intend to update these forward-looking statements. Unless the context otherwise requires, references in this Report to the "Company", "DXP", "we" or "our" shall mean DXP Enterprises, Inc., a Texas corporation, together with its subsidiaries.
NON-GAAP FINANCIAL MEASURES
In an effort to provide investors with additional information regarding our results of operations as determined by U.S. GAAP, we disclose non-GAAP financial measures. The non-GAAP financial measures we provide in this report should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S. GAAP.
Our primary non-GAAP financial measures are organic sales ("Organic Sales"), sales per business day ("Sales per Business Day"), organic sales per business day ("Organic Sales per Business Day"), free cash flow ("Free Cash Flow"), earnings before interest, taxes, depreciation and amortization ("EBITDA") adjusted EBITDA ("Adjusted EBITDA"), EBITDA Margin, and Adjusted EBITDA Margin. The non-GAAP financial measures presented may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures in the same way. These measures are not substitutes for their comparable U.S. GAAP financial measures.
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Management uses these non-GAAP financial measures to assist in comparing our performance on a consistent basis for purposes of business decision making by removing the impact of certain items that management believes do not directly reflect our underlying operations. Management believes that presenting our non-GAAP financial measures are useful to investors because it (i) provides investors with meaningful supplemental information regarding financial performance by excluding certain items, (ii) permits investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating our results. We believe that the presentation of these non-GAAP financial measures, when considered together with the corresponding U.S. GAAP financial measures and the reconciliations to those measures, provides investors with additional understanding of the factors and trends affecting our business than could be obtained absent these disclosures.
Refer to the Non-GAAP Financial Measures and Reconciliation section below for detailed reconciliations of our non-GAAP financial measures.
GENERAL BUSINESS OVERVIEW
Overview
DXP Enterprises, Inc. 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
The global economy continues to experience elevated levels of volatility and uncertainty, driven by a combination of geopolitical developments and macroeconomic factors. Recent imposition of new and expanded tariffs have further contributed to disruptions in the capital markets and global supply chains. These developments may impact the Company’s operations, financial condition, and results of operations.
The Company is actively monitoring economic conditions in the U.S. and internationally, including the potential ramifications of evolving trade policies, changes in interest rates, inflationary pressures, and the risk of a global or regional economic recession. In response to these factors, the Company is continuously reviewing various strategies designed to mitigate certain adverse effects of changing inflationary conditions and supply chain challenges, while continuing to maintain market price competitiveness.
Historically, the Company's broad and diverse customer base and the generally non-discretionary nature of its products have provided a degree of resilience during periods of economic contraction in the industrial MRO market. However, the ultimate impact of ongoing macroeconomic conditions, including recent tariff-related developments, remains uncertain and cannot be predicted at this time.
For further discussion of the Company's risks and uncertainties, see Part I, Item 1A: Risk Factors in the Company’s 2025 Form 10-K.
Service Centers and Innovative Pumping Solutions Segments
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, 2026, we had approximately $1.5 billion in sales in our Service Centers and Innovative Pumping Solutions segments, an increase of approximately 14.7 percent compared to the nine months ended September 30, 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, 2026, $8.6 million in sales in our Service Centers (SC) segment and $130.8 million in sales in our Innovative Pumping Solutions (IPS) segment were associated with recent acquisitions.
Supply Chain Services Segment
For the nine months ended September 30, 2026, we had approximately $197.3 million in sales in our Supply Chain Services (SCS) segment, an increase of approximately 2.9 percent compared to the nine months ended September 30, 2025.
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Matters Affecting Comparability
Our results of operations are not directly comparable on a year-over-year basis due to various prior acquisitions and the varying size and number of acquisitions in any comparable period. 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, 2026, acquisition sales were $139.4 million compared to $74.1 million for the nine months ended September 30, 2025.
Key Business Metrics
We regularly monitor several financial and operating metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. Our key non-GAAP business metrics may be calculated in a different manner than similarly titled metrics used by other companies. See “Non-GAAP Financial Measures and Reconciliations” for additional information on non-GAAP financial measures and a reconciliation to the most comparable U.S. GAAP measures.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Sales by Business Segment | |||||||||||||||||||||||
| Service Centers | $ | 376,637 | $ | 350,179 | $ | 1,082,511 | $ | 1,016,985 | |||||||||||||||
| Innovative Pumping Solutions | 144,115 | 100,551 | 405,514 | 280,273 | |||||||||||||||||||
| Supply Chain Services | 66,428 | 62,994 | 197,274 | 191,717 | |||||||||||||||||||
| Total DXP Sales | $ | 587,180 | $ | 513,724 | $ | 1,685,299 | $ | 1,488,975 | |||||||||||||||
| Acquisition Sales | $ | 48,832 | $ | 18,403 | $ | 139,425 | $ | 74,120 | |||||||||||||||
| Organic Sales | $ | 538,348 | $ | 495,321 | $ | 1,545,874 | $ | 1,414,855 | |||||||||||||||
| Business Days | 64 | 64 | 190 | 190 | |||||||||||||||||||
| Sales per Business Day | $ | 9,175 | $ | 8,027 | $ | 8,870 | $ | 7,837 | |||||||||||||||
| Organic Sales per Business Day | $ | 8,412 | $ | 7,739 | $ | 8,136 | $ | 7,447 | |||||||||||||||
| Gross Profit | $ | 180,508 | $ | 161,259 | $ | 532,181 | $ | 469,337 | |||||||||||||||
| Gross Profit Margin | 30.7 | % | 31.4 | % | 31.6 | % | 31.5 | % | |||||||||||||||
Income from Operations | $ | 52,462 | $ | 43,698 | $ | 150,429 | $ | 130,199 | |||||||||||||||
Income from Operations Margin | 8.9 | % | 8.5 | % | 8.9 | % | 8.7 | % | |||||||||||||||
| Net Income | $ | 26,870 | $ | 21,631 | $ | 75,556 | $ | 65,832 | |||||||||||||||
| Net Income Margin | 4.6 | % | 4.2 | % | 4.5 | % | 4.4 | % | |||||||||||||||
| EBITDA | $ | 65,767 | $ | 54,266 | $ | 189,641 | $ | 161,063 | |||||||||||||||
| EBITDA Margin | 11.2 | % | 10.6 | % | 11.3 | % | 10.8 | % | |||||||||||||||
| Adjusted EBITDA | $ | 67,256 | $ | 56,501 | $ | 195,444 | $ | 166,333 | |||||||||||||||
| Adjusted EBITDA Margin | 11.5 | % | 11.0 | % | 11.6 | % | 11.2 | % | |||||||||||||||
Net cash provided by operating activities | $ | 18,686 | $ | 34,886 | $ | 80,641 | $ | 56,505 | |||||||||||||||
Free Cash Flow | $ | 14,448 | $ | 28,146 | $ | 70,488 | $ | 19,505 | |||||||||||||||
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Organic Sales and Acquisition Sales
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.
Business Days
"Business Days" are days of the week, excluding Saturdays, Sundays, and holidays, that our locations are open during the year. Depending on the location and the season, our branches may be open on Saturdays and Sundays; however, for consistency, those days have been excluded from the calculation of Business Days.
Sales per Business Day
We define and calculate Sales per Business Day as sales divided by the number of Business Days in the relevant reporting period.
Organic Sales per Business Days
We define and calculate Organic Sales per Business Day as Organic Sales divided by the number of Business Days in the relevant reporting period.
EBITDA and Adjusted EBITDA
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 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.
EBITDA Margin and Adjusted EBITDA Margin
We define and calculate EBITDA Margin as EBITDA divided by sales. We define and calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by sales.
Free Cash Flow
We define and calculate free cash flow as net cash (used in) provided by operating activities less purchases of property and equipment.
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RESULTS OF OPERATIONS
(in thousands, except percentages and per share data)
DXP is organized into three business segments: Service Centers, Innovative Pumping Solutions, and Supply Chain Services. The Service Centers are engaged in providing MRO products, equipment and integrated services, including technical expertise and logistics capabilities, to industrial customers with the ability to provide same day delivery. The Service Centers provide a wide range of MRO products and services in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply and safety product and service categories. The IPS segment provides products and services to the water and wastewater market and fabricates and assembles integrated pump system packages custom made to customer specifications, remanufactures pumps, and manufactures branded private label pumps. The SCS segment provides a wide range of MRO products and manages all or part of our customers' supply chain function, and inventory management.
Three Months Ended September 30, 2026 compared to Three Months Ended September 30, 2025
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | % | 2025 | % | ||||||||||||||||||||
| Sales | $ | 587,180 | 100.0% | $ | 513,724 | 100.0% | |||||||||||||||||
| Cost of sales | 406,672 | 69.3% | 352,465 | 68.6% | |||||||||||||||||||
| Gross profit | 180,508 | 30.7% | 161,259 | 31.4% | |||||||||||||||||||
| Selling, general and administrative expenses | 128,046 | 21.8% | 117,561 | 22.9% | |||||||||||||||||||
| Income from operations | 52,462 | 8.9% | 43,698 | 8.5% | |||||||||||||||||||
Interest expense | 16,949 | 2.9% | 14,894 | 2.9% | |||||||||||||||||||
Other (income) expense, net | (950) | (0.2)% | (648) | (0.1)% | |||||||||||||||||||
| Income before income taxes | 36,463 | 6.2% | 29,452 | 5.7% | |||||||||||||||||||
| Provision for income tax expense | 9,593 | 1.6% | 7,821 | 1.5% | |||||||||||||||||||
| Net income | $ | 26,870 | 4.6% | $ | 21,631 | 4.2% | |||||||||||||||||
Earnings per share: | |||||||||||||||||||||||
Basic | $ | 1.73 | $ | 1.38 | |||||||||||||||||||
Diluted | $ | 1.64 | $ | 1.31 | |||||||||||||||||||
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The following table sets forth the disaggregation of revenue from sales associated with acquisitions for the three months ended September 30, 2026 and 2025 (in thousands):
| Sales | Acquisition Sales | Organic Sales | ||||||||||||||||||
| Three Months Ended September 30, 2026 | ||||||||||||||||||||
| Service Centers | $ | 376,637 | $ | — | $ | 376,637 | ||||||||||||||
| Innovative Pumping Solutions | 144,115 | 48,832 | 95,283 | |||||||||||||||||
| Supply Chain Services | 66,428 | — | 66,428 | |||||||||||||||||
| Total Sales | $ | 587,180 | $ | 48,832 | $ | 538,348 | ||||||||||||||
| Three Months Ended September 30, 2025 | ||||||||||||||||||||
| Service Centers | $ | 350,179 | $ | 11,658 | $ | 338,521 | ||||||||||||||
| Innovative Pumping Solutions | 100,551 | 6,745 | 93,806 | |||||||||||||||||
| Supply Chain Services | 62,994 | — | 62,994 | |||||||||||||||||
| Total Sales | $ | 513,724 | $ | 18,403 | $ | 495,321 | ||||||||||||||
| $ Change | ||||||||||||||||||||
| Service Centers | $ | 26,458 | $ | (11,658) | $ | 38,116 | ||||||||||||||
| Innovative Pumping Solutions | 43,564 | 42,087 | 1,477 | |||||||||||||||||
| Supply Chain Services | 3,434 | — | 3,434 | |||||||||||||||||
| Total $ Change | $ | 73,456 | $ | 30,429 | $ | 43,027 | ||||||||||||||
| % Change | ||||||||||||||||||||
| Service Centers | 7.6 | % | (100.0) | % | 11.3 | % | ||||||||||||||
| Innovative Pumping Solutions | 43.3 | % | 624.0 | % | 1.6 | % | ||||||||||||||
| Supply Chain Services | 5.5 | % | N/A | 5.5 | % | |||||||||||||||
| Total % Change | 14.3 | % | 165.3 | % | 8.7 | % | ||||||||||||||
SALES. Sales for the three months ended September 30, 2026 increased $73.5 million, or 14.3 percent, to approximately $587.2 million from $513.7 million for the prior year's corresponding period, of which recent acquisitions contributed $48.8 million. Additionally, the overall increase in sales was the result of an increase in sales in our SC, IPS, and SCS segments of $26.5 million, $43.6 million, and $3.4 million, respectively. The fluctuations in sales are further explained in our business segment discussions below.
Service Centers segment. Sales for the SC segment increased $26.5 million, or 7.6 percent, for the three months ended September 30, 2026, compared to the prior year's corresponding period. Excluding the impact of recent acquisitions, sales grew $38.1 million. The current period included no acquisition sales, compared with $11.7 million for the three months ended September 30, 2025. Additionally, sales increased due to increased volume within our California, Gulf Coast, Alaska, and North Texas regions, offset by decreases in sales in our Ohio River Valley, South Central, and Southwest regions.
Innovative Pumping Solutions segment. Sales for the IPS segment increased $43.6 million, or 43.3 percent, for the three months ended September 30, 2026, compared to the prior year's corresponding period. This sales increase was the result of increases within our water and wastewater platform as well as strategic acquisitions within the IPS segment. Sales from recent acquisitions contributed $48.8 million during the period, compared to $6.7 million, for the three months ended September 30, 2025.
Supply Chain Services segment. Sales for the SCS segment increased by $3.4 million, or 5.5 percent, for the three months ended September 30, 2026, compared to the prior year's corresponding period. This was primarily due to the onboarding of new customers and their related facilities as well as increased net activity with existing customers.
GROSS PROFIT. Gross profit margin for the three months ended September 30, 2026 was 30.7 percent compared to 31.4 percent for the prior year's corresponding period. The gross profit margin for the three months ended September 30, 2026 was negatively impacted by 65 basis points primarily due to increased input costs compared to the last quarter.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"). SG&A for the three months ended September 30, 2026 increased by $10.5 million, or 8.9 percent, to $128.0 million from $117.6 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 third quarter of 2026 increased by $8.8 million to $52.5 million, from $43.7 million in the prior year's corresponding period primarily due to improved SG&A leverage on higher sales.
INTEREST EXPENSE. Interest expense for the third 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 26.3 percent for the three months ended September 30, 2026, compared to 26.6 percent for the three months ended September 30, 2025. Compared to the U.S. statutory rate for the three months ended September 30, 2025, The effective tax rate for the three months ended September 30, 2026, decreased compared to the same period in 2025, primarily due to discrete tax benefits associated with a reduction in the reserve for prior-year research and development tax credits and related accrued interest, partially offset by lower tax benefits from stock-based compensation vesting during the period, net of limitations under Section 162(m).
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Nine Months Ended September 30, 2026 compared to Nine Months Ended September 30, 2025
| Nine Months Ended September 30, | ||||||||||||||||||||||||||
| 2026 | % | 2025 | % | |||||||||||||||||||||||
| Sales | $ | 1,685,299 | 100.0% | $ | 1,488,975 | 100.0% | ||||||||||||||||||||
| Cost of sales | 1,153,118 | 68.4% | 1,019,638 | 68.5% | ||||||||||||||||||||||
| Gross profit | 532,181 | 31.6% | 469,337 | 31.5% | ||||||||||||||||||||||
| Selling, general and administrative expenses | 381,752 | 22.7% | 339,138 | 22.8% | ||||||||||||||||||||||
| Income from operations | 150,429 | 8.9% | 130,199 | 8.7% | ||||||||||||||||||||||
Interest expense | 50,223 | 3.0% | 44,298 | 3.0% | ||||||||||||||||||||||
Other income, net | (2,603) | (0.2)% | (2,320) | (0.2)% | ||||||||||||||||||||||
| Income before income taxes | 102,809 | 6.1% | 88,221 | 5.9% | ||||||||||||||||||||||
| Provision for income taxes | 27,253 | 1.6% | 22,389 | 1.5% | ||||||||||||||||||||||
Net income | $ | 75,556 | 4.5% | $ | 65,832 | 4.4% | ||||||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||||
Basic | $ | 4.87 | $ | 4.19 | ||||||||||||||||||||||
Diluted | $ | 4.62 | $ | 3.98 | ||||||||||||||||||||||
The following table sets forth the disaggregation of revenue from sales associated with acquisitions for the nine months ended September 30, 2026 and 2025 (in thousands):
| Sales | Acquisition Sales | Organic Sales | ||||||||||||||||||
| Nine Months Ended September 30, 2026 | ||||||||||||||||||||
| Service Centers | $ | 1,082,511 | $ | 8,581 | $ | 1,073,930 | ||||||||||||||
| Innovative Pumping Solutions | 405,514 | 130,844 | 274,670 | |||||||||||||||||
| Supply Chain Services | 197,274 | — | 197,274 | |||||||||||||||||
| Total Sales | $ | 1,685,299 | $ | 139,425 | $ | 1,545,874 | ||||||||||||||
| 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 | ||||||||||||||
| $ Change | ||||||||||||||||||||
| Service Centers | $ | 65,526 | $ | (36,573) | $ | 102,099 | ||||||||||||||
| Innovative Pumping Solutions | 125,241 | 101,878 | 23,363 | |||||||||||||||||
| Supply Chain Services | 5,557 | — | 5,557 | |||||||||||||||||
| Total $ Change | $ | 196,324 | $ | 65,305 | $ | 131,019 | ||||||||||||||
| % Change | ||||||||||||||||||||
| Service Centers | 6.4 | % | (81.0) | % | 10.5 | % | ||||||||||||||
| Innovative Pumping Solutions | 44.7 | % | 351.7 | % | 9.3 | % | ||||||||||||||
| Supply Chain Services | 2.9 | % | N/A | 2.9 | % | |||||||||||||||
| Total % Change | 13.2 | % | 88.1 | % | 9.3 | % | ||||||||||||||
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SALES. Sales for the nine months ended September 30, 2026 increased $196.3 million, or 13.2 percent, to approximately $1.7 billion from $1.5 billion for the prior year's corresponding period, of which recent acquisitions contributed $139.4 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 $65.5 million, $125.2 million, and $5.6 million. The fluctuations in sales are further explained in our business segment discussions below.
Service Centers segment. Sales for the SC segment increased by $65.5 million, or 6.4 percent for the nine months ended September 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 $45.2 million during the nine months ended September 30, 2025. Total sales for the SC segment excluding acquisitions increased $102.1 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.
Innovative Pumping Solutions segment. Sales for the IPS segment increased by $125.2 million, or 44.7 percent for the nine months ended September 30, 2026 compared to the prior year's corresponding period. Sales from recent acquisitions for the IPS segment contributed $130.8 million during the period compared to $29.0 million during the nine months ended September 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 $5.6 million, or 2.9 percent, for the nine months ended September 30, 2026, compared to the prior year's corresponding period. This was primarily due to the onboarding of new customers and their related facilities as well as increased net activity with existing customers.
GROSS PROFIT. Gross profit margin for the nine months ended September 30, 2026 was 31.6 percent compared to 31.5 percent for the prior year's corresponding period. The gross profit margin for the nine months ended September 30, 2026 was positively impacted by 6 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, 2026 increased by approximately $42.6 million, or 12.6 percent, to $381.8 million from $339.1 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 nine months ended September 30, 2026 increased by $20.2 million or 15.5 percent to $150.4 million from $130.2 million in the prior year's corresponding period.
INTEREST EXPENSE. Interest expense for the nine months ended September 30, 2026 increased $5.9 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 for continuing operations was 26.5 percent for the nine months ended September 30, 2026, compared to 25.4 percent for the nine months ended September 30, 2025. Compared to the U.S. statutory rate for the nine months ended September 30, 2025, the effective tax rate was higher than the U.S. statutory tax rate primarily due to an increase in the reserve for research and development tax credits and related accrued interest, lower tax benefits from stock-based compensation vesting during the period, net of limitations under Section 162(m), a reduced benefit from current-year research and development tax credits, and an increase in nondeductible expenses.
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NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
Organic Sales and Acquisition Sales
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 table sets forth the reconciliation of Acquisition Sales and Organic Sales to the most comparable U.S. GAAP financial measure (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Sales by Business Segment | |||||||||||||||||||||||
| Service Centers | $ | 376,637 | $ | 350,179 | $ | 1,082,511 | $ | 1,016,985 | |||||||||||||||
| Innovative Pumping Solutions | 144,115 | 100,551 | 405,514 | 280,273 | |||||||||||||||||||
| Supply Chain Services | 66,428 | 62,994 | 197,274 | 191,717 | |||||||||||||||||||
| Total DXP Sales | $ | 587,180 | $ | 513,724 | $ | 1,685,299 | $ | 1,488,975 | |||||||||||||||
| Acquisition Sales | $ | 48,832 | $ | 18,403 | $ | 139,425 | $ | 74,120 | |||||||||||||||
| Organic Sales | $ | 538,348 | $ | 495,321 | $ | 1,545,874 | $ | 1,414,855 | |||||||||||||||
EBITDA, Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin
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 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.
We define and calculate EBITDA Margin as EBITDA divided by sales. We define and calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by sales.
The following table sets forth the reconciliation of EBITDA, EBITDA Margin, Adjusted EBITDA, and Adjusted EBITDA Margin to the most comparable U.S. GAAP financial measure (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Net income attributable to DXP Enterprises, Inc. | $ | 26,870 | $ | 21,631 | $ | 75,556 | $ | 65,832 | |||||||||||||||
| Plus: Interest expense | 16,949 | 14,894 | 50,223 | 44,298 | |||||||||||||||||||
Plus: Provision for income tax expense | 9,593 | 7,821 | 27,253 | 22,389 | |||||||||||||||||||
Plus: Depreciation and amortization | 12,355 | 9,920 | 36,609 | 28,544 | |||||||||||||||||||
| EBITDA | $ | 65,767 | $ | 54,266 | $ | 189,641 | $ | 161,063 | |||||||||||||||
| Plus: stock compensation expense | 1,489 | 1,478 | 4,757 | 4,278 | |||||||||||||||||||
Plus: other non-recurring items(1) | — | 757 | 1,046 | 992 | |||||||||||||||||||
| Adjusted EBITDA | $ | 67,256 | $ | 56,501 | $ | 195,444 | $ | 166,333 | |||||||||||||||
| Operating Income Margin | 8.9 | % | 8.5 | % | 8.9 | % | 8.7 | % | |||||||||||||||
| Net Income Margin | 4.6 | % | 4.2 | % | 4.5 | % | 4.4 | % | |||||||||||||||
| EBITDA Margin | 11.2 | % | 10.6 | % | 11.3 | % | 10.8 | % | |||||||||||||||
| Adjusted EBITDA Margin | 11.5 | % | 11.0 | % | 11.6 | % | 11.2 | % | |||||||||||||||
(1) Other non-recurring items includes unique acquisition integration costs and other non-cash, non-recurring costs. | |||||||||||||||||||||||
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Free Cash Flow
We define and calculate free cash flow as net cash (used in) provided by operating activities less purchases of property and equipment.
The following table sets forth the reconciliation of Free Cash Flow to the most comparable U.S. GAAP financial measure (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Net cash provided by operating activities | $ | 18,686 | $ | 34,886 | $ | 80,641 | $ | 56,505 | |||||||||||||||
| Less: purchases of property and equipment | (4,238) | (6,740) | (10,153) | (37,000) | |||||||||||||||||||
| Free Cash Flow | $ | 14,448 | $ | 28,146 | $ | 70,488 | $ | 19,505 | |||||||||||||||
LIQUIDITY AND CAPITAL RESOURCES
General Overview
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities. We continue to generate adequate cash from operating activities. We believe that our operating cash flow, cash on hand, and other sources of liquidity including our ABL and Term Loan B, will be sufficient to allow us to continue investing in the business including capital expenditures, strategic acquisitions and investments, paying interest and servicing debt, and repurchasing common stock when deemed appropriate.
Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt and existing cash balances. As a distributor of MRO products and services, we require certain amounts of working capital to primarily fund inventories and accounts receivables. Additional cash is required for capital items for information technology, warehouse equipment, leasehold improvements, pump manufacturing and safety services equipment. We also require cash to pay our lease obligations, fund project work-in-process and to service our debt.
Cash
As of September 30, 2026, we had available cash of $218.8 million and credit facility availability of $192.2 million. We have a $225.0 million asset-backed line of credit (the "ABL Revolver"), offset by letters of credit of $32.8 million. We had no borrowings outstanding on our ABL Revolver as of September 30, 2026.
Cash Flows
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, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net Cash Provided by (Used in): | |||||||||||
| Operating Activities | $ | 80,641 | $ | 56,505 | |||||||
| Investing Activities | (135,755) | (58,733) | |||||||||
| Financing Activities | (28,151) | (23,194) | |||||||||
| Effect of Foreign Currency | (1,684) | 840 | |||||||||
| Net Change in Cash | $ | (84,949) | $ | (24,582) | |||||||
Operating Activities
The Company generated $80.6 million of cash from operating activities during the nine months ended September 30, 2026 compared to $56.5 million of cash generated during the prior year's corresponding period. The increase of $24.1 million was primarily due to higher net income during the period and a reduction in tax payments compared to the prior corresponding period.
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Investing Activities
For the nine months ended September 30, 2026, net cash used in investing activities was $135.8 million compared to a $58.7 million use of cash during the prior year’s corresponding period. This $77.0 million increase was primarily driven by increased acquisition activity during the nine months ended September 30, 2026. Total consideration, net of cash acquired, was $126.2 million, compared to $24.4 million for the nine months ended September 30, 2025.
Financing Activities
For the nine months ended September 30, 2026, net cash used in financing activities was $28.2 million, compared to net cash used in financing activities of $23.2 million during the prior year’s corresponding period. The increase was primarily due to increased principal debt payments during the year.
We believe the Company has adequate funding to support its working capital needs within the business.
Debt
At September 30, 2026, our total outstanding debt was $839.5 million, or 59.5 percent of total capitalization (total debt plus shareholders' equity) of $1.4 billion. This debt bears interest at various floating rates. For a further discussion of the Company's debt refer to Note 8. Long-Term Debt.
Liquidity
We believe our cash generated from operations will meet our normal working capital needs during the next twelve months. However, we may require additional debt outside of our credit facilities or equity financing to fund potential acquisitions. Such additional financings may include additional bank debt or the public or private sale of debt or equity securities. In connection with any such financing, we may issue securities that substantially dilute the interests of our shareholders.
The following table summarizes the amount of borrowing capacity under our ABL Revolver (in thousands):
| September 30, 2026 | December 31, 2025 | ||||||||||||||||
| Total borrowing capacity | $ | 225,000 | $ | 185,000 | |||||||||||||
Less: Amount drawn | — | — | |||||||||||||||
Less: Outstanding letters of credit | 32,829 | 31,472 | |||||||||||||||
| Total amount available | $ | 192,171 | $ | 153,528 | |||||||||||||
At September 30, 2026, the Company had $411.0 million of liquidity including $218.8 million in cash and $192.2 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 Second A&R 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 Second A&R 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.
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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
We believe Free Cash Flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to fund acquisitions, make investments, repay debt obligations, repurchase shares of the Company's common stock, and for other activities.
Free Cash Flow is not a measure of liquidity under U.S. GAAP, and may not be defined and calculated by other companies in the same manner. Free Cash Flow should not be considered in isolation or as an alternative to net cash provided by operating activities. Free Cash Flow reconciles to the most directly comparable U.S. GAAP financial measure of cash flows from operations.
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, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net cash provided by operating activities | $ | 18,686 | $ | 34,886 | $ | 80,641 | $ | 56,505 | |||||||||||||||
| Less: purchases of property and equipment | (4,238) | (6,740) | (10,153) | (37,000) | |||||||||||||||||||
| Free Cash Flow | $ | 14,448 | $ | 28,146 | $ | 70,488 | $ | 19,505 | |||||||||||||||
Uses of Liquidity
Internally generated cash flows are the primary source of working capital and growth initiatives, including acquisitions and growth capital expenditures. The Company expects to continue to return excess capital to shareholders through share repurchases, when appropriate.
Working Capital
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, 2026 was $420.9 million, an increase of $59.2 million, compared to $361.7 million as of December 31, 2025. The increase was primarily due to sustained sales growth and acquisitions.
Acquisitions
For a discussion of the Company’s acquisitions refer to Note 12. Business Acquisitions. During the nine months ended September 30, 2026 and 2025, the Company invested $126.2 million and $24.4 million, respectively, in acquisitions.
Capital Expenditures
The Company's capital expenditures was $10.2 million and $37.0 million for the nine months ended September 30, 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
Critical accounting and business policies are those that are both most important to the portrayal of a company's financial position and results of operations, and require management's subjective or complex judgments. These policies have been discussed with the Audit Committee of the Board of Directors of DXP.
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The Company's unaudited condensed financial statements are prepared in accordance with U.S. GAAP. 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 February 26, 2026. The results of operations for the nine months ended September 30, 2026 are not necessarily indicative of results expected for the full fiscal year.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 3 - Recently Issued Accounting Pronouncements to the Condensed Consolidated Financial Statements for information regarding recent accounting pronouncements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
For quantitative and qualitative disclosures about market risk, see Item 7A, 'Quantitative and Qualitative Disclosures About Market Risk' of our Annual Report on Form 10-K for the year ended December 31, 2025. Our exposures to market risk have not changed materially since December 31, 2025.
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ITEM 4: CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
With the participation of management, our principal executive officer and principal financial officer carried out an evaluation, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2026.
Our management, including our principal executive officer and principal financial officer, has concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with GAAP for each of the periods presented.
Changes in Internal Control Over Financial Reporting
There were no changes in internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act identified in the evaluation for the quarter ended September 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
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 of these lawsuits, 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.
ITEM 1A. RISK FACTORS.
There have been no other changes to the risk factors as previously disclosed in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year end December 31, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Recent Sales of Unregistered Securities
In August 2026, in connection with the acquisition of Mequipco Ltd., the Company issued 9,456 shares of its common stock to the sellers of Mequipco Ltd. as a portion of consideration transferred.
These shares were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.
Purchases of Equity Securities
A summary of our repurchases of DXP Enterprises, Inc. common stock under our current share repurchase program and employee stock awards withheld for certain tax obligations during the third quarter of fiscal year 2026 is as follows:
| Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (2) | |||||||||||||||||||||||
| July 1 - July 31, 2026 | — | $ | — | — | $ | 68,006 | ||||||||||||||||||||
| August 1 – August 31, 2026 | — | — | — | — | ||||||||||||||||||||||
| September 1 – September 30, 2026 | 162 | 183.10 | — | — | ||||||||||||||||||||||
| Total | 162 | $ | 183.10 | — | $ | — | ||||||||||||||||||||
(1) There were 162 shares transferred from employees in satisfaction of minimum statutory tax withholding obligations upon the vesting of restricted stock during the three months ended September 30, 2026. | ||||||||||||||||||||||||||
(2) On August 28, 2024, the Company announced a new Share Repurchase Program pursuant to which it 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 at the discretion of management. The Company completed the program in August 2026. | ||||||||||||||||||||||||||
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
ITEM 5. OTHER INFORMATION.
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ITEM 6. EXHIBITS.
| 3.1 | Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form on Form S-8, filed with the Commission on August 20, 1998. File No. :333-61953). | ||||
| 3.2 | Bylaws of DXP Enterprises, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 10, 2018 File No. 000-21513), as amended on July 27, 2011. | ||||
| 3.3 | Amendment to Section 3.4 of the Bylaws of DXP Enterprises, Inc., effective January 1, 2022. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K File No. 000-21513 : 21860170, filed with the Commission on April 27, 2021). | ||||
| 10.14 | Second Amended and Restated Loan and Security Agreement, dated as of July 2, 2026, by and among the Company and the other persons party thereto, as borrowers, the other persons party thereto from time to time, as guarantors, Bank of America, N.A., as agent, certain financial institutions, as lenders, Bank of America, N.A., as sole lead arranger and sole bookrunner, and each of U.S. Bank, National Association and PNC Bank, National Association, as documentation agents (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K File No. 000-21513, filed with the SEC on July 10, 2026). | ||||
| * 22.1 | Subsidiary Guarantors of Guaranteed Securities. | ||||
| * 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended. | ||||
| * 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended. | ||||
| * 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||||
| * 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||||
| *101 | The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in Inline eXtensible Business Reporting Language (iXBRL), (i) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income, (ii) Unaudited Condensed Consolidated Balance Sheets, (iii) Unaudited Condensed Consolidated Statements of Cash Flows, (iv) Unaudited Condensed Consolidated Statements of Equity, and (v) Notes to Unaudited Condensed Consolidated Financial Statements. | ||||
| *104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 formatted in XBRL. | ||||
Exhibits designated by the symbol * are filed or furnished with this Quarterly Report on Form 10-Q. All exhibits not so designated are incorporated by reference to a prior filing with the Commission as indicated.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DXP ENTERPRISES, INC.
(Registrant)
By: /s/ Kent Yee
Kent Yee
Senior Vice President and Chief Financial Officer
(Duly Authorized Signatory and Principal Financial Officer)
Dated: November 5, 2026
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