DXP Enterprises (NASDAQ: DXPE) lifts Q1 sales and cash flow
Filing Impact
Filing Sentiment
Form Type
10-Q
DXP Enterprises, Inc. delivered higher revenue in the first quarter of 2026 but slightly lower profit year over year. Sales rose to $521.7 million, up 9.5% from 2025, driven by growth in all three segments and $40.7 million of acquisition-related sales. Gross margin improved to 32.3%, yet operating margin eased to 8.1% as selling, general and administrative costs increased.
Net income was $20.0 million with diluted earnings per share of $1.22, compared with $1.25 a year earlier, reflecting higher interest expense on the refinanced Term Loan B. The company generated $26.3 million of free cash flow, a sharp improvement from negative free cash flow in the prior year period, while investing about $126.3 million to acquire three businesses.
DXP ended the quarter with $213.4 million of cash, $844.7 million of total debt, and availability of $153.3 million on its asset‑based revolver, resulting in a secured leverage ratio of 2.59 to 1. The company notes an ongoing IRS examination of research tax credits; if those credits are reduced or disallowed, it states this could have a material adverse effect on its business and financial condition.
Positive
- None.
Negative
- None.
Insights
Sales and cash flow improved, while leverage and tax-credit uncertainty remain key watch points.
DXP Enterprises increased Q1 2026 sales 9.5% to $521.7 million, aided by both organic growth and $40.7 million of acquisition sales. Gross margin expanded to 32.3%, helped by pricing and mix, though higher SG&A held operating margin to 8.1%, slightly below last year.
Net income of $20.0 million and diluted EPS of $1.22 were modestly below 2025 as interest expense rose on the refinanced Senior Secured Term Loan B. Free cash flow improved to $26.3 million, reflecting stronger operating cash generation and lower capital spending in the period.
On the balance sheet, cash of $213.4 million and ABL availability of $153.3 million provide liquidity against total debt of $844.7 million and a secured leverage ratio of 2.59 to 1. Management highlights $126.3 million spent on three acquisitions that added $56.3 million of goodwill. The filing also notes an IRS examination of $37.0 million in research tax credits, which the company indicates could adversely affect its financial condition if materially reduced.
Key Figures
Sales: $521.7M
Net income: $19.98M
Diluted EPS: $1.22/share
+5 more
8 metrics
Sales
$521.7M
Three months ended March 31, 2026
Net income
$19.98M
Three months ended March 31, 2026
Diluted EPS
$1.22/share
Three months ended March 31, 2026
Free Cash Flow
$26.28M
Three months ended March 31, 2026
Acquisition spend
$126.3M
Total purchase consideration Q1 2026
Cash balance
$213.4M
As of March 31, 2026
Total debt
$844.7M
As of March 31, 2026
Secured leverage ratio
2.59:1
Senior Secured Term Loan B covenant metric at March 31, 2026
Key Terms
Adjusted EBITDA, Free Cash Flow, Senior Secured Term Loan B, ABL Revolver, +1 more
5 terms
Adjusted EBITDA financial
"Adjusted EBITDA | $ | 57,812 | $ | 52,519 Adjusted EBITDA Margin"
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
Free Cash Flow financial
"Free Cash Flow | $ | 26,275 | $ | (16,941)"
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.
Senior Secured Term Loan B financial
"Senior Secured Term Loan B due October 13, 2030 (1) | 843,765"
A senior secured Term Loan B is a large, long-term loan that a company takes and backs with specific assets as collateral, and which ranks ahead of most other debt if the company cannot pay. Think of it like a mortgage held by a group of institutional lenders rather than a single bank: it gives those lenders stronger claims to repayment but usually carries higher interest than top-priority bank debt. Investors watch this loan because its size, cost and priority affect a company’s financial risk, cash available for dividends or growth, and how equity would be treated if trouble arises.
ABL Revolver financial
"ABL Revolver | $ | — | $ | — Senior Secured Term Loan B"
Organic Sales financial
"Organic Sales | $ | 480,913 | $ | 445,457"
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.
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 May 3, 2026: 15,505,312 .
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 | 19 | |||||||
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk | 29 | |||||||
ITEM 4. Controls and Procedures | 30 | |||||||
PART II: OTHER INFORMATION | 31 | |||||||
ITEM 1. Legal Proceedings | 31 | |||||||
ITEM 1A. Risk Factors | 31 | |||||||
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds | 31 | |||||||
ITEM 3. Default upon Senior Securities | 31 | |||||||
ITEM 4. Mine Safety Disclosures | 31 | |||||||
ITEM 5. Other Information | 32 | |||||||
ITEM 6. Exhibits | 33 | |||||||
SIGNATURES | 34 | |||||||
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 March 31, | |||||||||||||||||||||||
| 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)
| March 31, 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)
| Three Months Ended March 31, | |||||||||||
| 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 | ( | ||||||||||
| 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 | ( | ( | |||||||||
| 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 | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
6
DXP ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
DXP Enterprises, Inc. together with its subsidiaries (collectively "DXP," the "Company," "us," "we," or "our") was incorporated in Texas on July 26, 1996. The Company and its subsidiaries are engaged in the business of distributing maintenance, repair and operating ("MRO") products, and service to customers serving a variety of end markets. Additionally, the Company provides integrated, custom pump skid packages, pump remanufacturing and manufactures branded private label pumps to energy and industrial customers. The Company is organized into three business segments: Service Centers ("SC"), Innovative Pumping Solutions ("IPS"), and Supply Chain Services ("SCS"). See Note 11 - Segment Reporting for discussion of the business segments.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES
Basis of Presentation
The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). For interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission ("SEC") not all disclosures normally required in annual consolidated financial statements prepared in accordance with U.S. GAAP are required. The unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2025 that are included in our annual report on Form 10-K filed with the SEC on February 26, 2026 (“Annual Report”).
At times, certain reclassifications may be made to the prior year’s unaudited condensed consolidated financial statements to conform to the current year's presentation. Such reclassifications do not have a material effect on our unaudited condensed consolidated statements of operations and comprehensive income, balance sheets, cash flows or equity.
The results of operations for the three months ended March 31, 2026 are not necessarily indicative of results expected for the full fiscal year. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for the fair statement of the Company's financial position, results of operations and cash flows for the interim periods presented.
All intercompany accounts and transactions have been eliminated in consolidation.
7
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
All new accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations.
Recently Adopted Accounting Pronouncements
In July 2025, the FASB issued Accounting Standards Update 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods in those years. We have elected to apply the practical expedient. There was no material impact to our unaudited condensed consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued Accounting Standards Update (“ASU”) No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU would result in additional disclosures being included in our consolidated financial statements, once adopted. We are currently evaluating the provisions of this ASU.
NOTE 4 - FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
Our acquisitions may include contingent consideration as part of the purchase price. The fair value of the contingent consideration is estimated as of the acquisition date based on the present value of the contingent payments to be made using a weighted probability of possible payments. The unobservable inputs used in the determination of the fair value of the contingent consideration include management's assumptions about the likelihood of payment based on the established benchmarks, discount rates, and an internal rate of return analysis. The fair value measurement includes inputs that are Level 3 inputs as they are not observable in the market. Should actual results increase or decrease as compared to the assumptions used in our analysis, the fair value of the contingent consideration obligations will increase or decrease, up to the contracted limit, as applicable. Changes in the fair value of the contingent consideration are measured each reporting period and reflected in our results of operations.
As of March 31, 2026, there was $29.1 million in other current and other long-term liabilities for contingent consideration.
The following table provides a reconciliation of the beginning and ending balances and gains or losses recognized during the three months ended March 31, 2026 (in thousands):
| Contingent Consideration | |||||
Balance at December 31, 2025 | $ | ||||
| Acquisitions and settlements: | |||||
Acquisitions (Note 12) | |||||
| Settlements | ( | ||||
| Total remeasurement adjustments: | |||||
Changes in fair value recorded in other expense (income), net | |||||
Balance at March 31, 2026 | $ | ||||
*Amounts included in other current liabilities were $ | |||||
8
Sensitivity to Changes in Significant Unobservable Inputs
The significant Level 3 unobservable inputs used in the fair value measurement of contingent consideration related to the acquisitions are annualized EBITDA forecasts developed by the Company's management and the probability of achievement of those EBITDA results. The discount rate used in the calculations was 8.0 percent. Changes in our unobservable inputs in isolation would result in a change to our fair value measurement. As of March 31, 2026, the maximum amount of contingent consideration payable under these arrangements is $32.5 million over three years .
Other financial instruments not measured at fair value on the Company's unaudited condensed consolidated balance sheets at March 31, 2026 and December 31, 2025, but which require disclosure of their fair values include: cash, restricted cash, accounts receivable, trade accounts payable and accrued expenses. The Company believes that the estimated fair value of such instruments at March 31, 2026 and December 31, 2025 approximates their carrying value as reported on the unaudited condensed consolidated balance sheets due to the relative short maturity of these instruments.
See Note 8 - Long-term Debt for fair value disclosures on our asset-backed line of credit and term loan debt under our syndicated credit agreement facilities.
NOTE 5 – INVENTORIES
Inventories are made up of equipment purchased for resale, and materials utilized in the fabrication of industrial and wastewater equipment stated at lower of cost or net realizable value, primarily determined using the weighted average cost method. The Company reviews inventory and records provisions for the difference between cost and net realizable value arising from excess and obsolete items on hand based upon the aging of the inventories, market trends, and continued demand.
The carrying values of inventories are as follows (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||
| Finished goods | $ | $ | |||||||||
| 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.
Costs and estimated profits on uncompleted contracts and related amounts billed were as follows (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||
| Costs incurred on uncompleted contracts | $ | $ | |||||||||
| 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 March 31, 2026 and December 31, 2025 under the following captions (in thousands):
9
| March 31, 2026 | December 31, 2025 | ||||||||||
| Costs and estimated profits in excess of billings | $ | $ | |||||||||
| Billings in excess of costs and estimated profits | ( | ( | |||||||||
| Net | $ | $ | |||||||||
During the three months ended March 31, 2026 and 2025, $0.8 million and $5.1 million of the balances that were previously classified as contract liabilities at the beginning of the period were recognized in revenues, respectively. Contract asset and liability changes were primarily due to normal activity and timing differences between our performance and customer payments.
NOTE 7 – INCOME TAXES
The following table presents provision for income taxes (in thousands, except for effective tax rate):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Income before provision for income taxes | $ | $ | |||||||||||||||||||||
| 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. The effective tax rate increased slightly, primarily due to discrete items, including a decrease in tax benefits related to stock-based compensation vested during the period, net of amounts limited by Section 162(m), a lower benefit from research and development tax credits, and an increase in non-deductible expenses.
While we believe that we have adequately provided for all uncertain tax positions, or tax positions where we believe it is not more-likely-than-not that the position will be sustained upon review, amounts asserted by tax authorities could be greater or less than our accrued position. Accordingly, our provisions on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or the underlying matters are settled or otherwise resolved with the respective tax authorities.
The Organization of Economic Cooperation and Development (“OECD”) continues to release additional guidance, including administrative guidance on how Pillar Two rules should be interpreted and applied by jurisdictions as they adopt Pillar Two. A number of countries have utilized the administrative guidance as a starting point for legislation that went into effect January 1, 2024. As of March 31, 2026, DXP anticipates the impact of Pillar Two to be immaterial to the Company based on current legislation that has been enacted to date.
NOTE 8 – LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| ABL Revolver | $ | $ | |||||||||||||||||||||
Senior Secured Term Loan B due October 13, 2030(1) | |||||||||||||||||||||||
| 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 $ | |||||||||||||||||||||||
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Senior Secured Term Loan B:
On December 16, 2025, the Company entered into an amendment (the “Term Loan Amendment”), by and among the Company, certain of the Company’s subsidiaries, as guarantors (the “Guarantors”), the incremental lenders party thereto and Goldman Sachs Bank USA as agent (the “Agent”).
The Term Loan Amendment amends and supplements the Term Loan and Security Agreement, dated as of December 23, 2020, by and among the Company, the Guarantors, the lenders party thereto and the Agent (as amended by Amendment No. 1 and Joinder Agreement to Term Loan and Security Agreement, dated as of November 22, 2022, as further amended by Amendment No. 2 and Joinder Agreement to Term Loan and Security Agreement, dated as of October 13, 2023, and as further amended by Amendment No. 3 and Joinder Agreement to Term Loan and Security Agreement, dated as of October 3, 2024, the “Existing Term Loan Agreement”; the Existing Term Loan Agreement, as further amended by the Term Loan Amendment, the “Term Loan Agreement”).
The Term Loan Amendment provides for, among other things, (i) adjustments to certain financial ratio covenant compliance dates and (ii) $205.0 million in new incremental term loan commitments (the “2025 Incremental Term Loans”) under the Term Loan Agreement, such that after giving effect to the Term Loan Amendment, including the 2025 Incremental Term Loans, the Company has $848.0 million in outstanding borrowings under the Term Loan Agreement.
The Senior Secured Term Loan B amortizes in equal quarterly installments of 0.25 percent, with the remaining balance being payable on October 13, 2030, when the facility matures.
As of March 31, 2026 there was $843.8 million outstanding under the Senior Secured Term Loan B.
Interest rate
Quarterly interest payments accrue on outstanding borrowings under the Senior Secured Term Loan B at a rate equal to Term SOFR (with a floor of 1.00 %) plus 3.25 %, or base rate plus 2.25 %. The Senior Secured Term Loan B is guaranteed by each of the Company’s direct and indirect material wholly owned subsidiaries, other than any of the Company’s Canadian subsidiaries and certain other excluded subsidiaries.
The interest rate for the Senior Secured Term Loan B was 6.92 percent and 7.17 percent as of March 31, 2026 and December 31, 2025, respectively.
Facility Size Increases
The Senior Secured Term Loan B allows for incremental increases in facility size up to an aggregate of $100 million.
Prepayments
We are required to repay the Senior Secured Term Loan B with the proceeds from certain asset sales, certain debt issuances, and certain insurance proceeds. In addition, on an annual basis, we are required to repay an amount equal to 50 percent of excess cash flow, as defined in the Senior Secured Term Loan B, reducing to 25 percent if our Total Leverage Ratio is less than or equal to 3.00 to 1.00. No payment of excess cash flow is required if the Total Leverage Ratio is less than or equal to 2.50 to 1.00.
Restrictive Covenants
The Company’s primary financial covenant under the Senior Secured Term Loan B is a Secured Leverage Ratio. The Senior Secured Term Loan B Agreement requires that the Company’s Secured Leverage Ratio as of March 31, 2026 to be less than 5.75 to 1.00.
As of March 31, 2026, the Company’s Secured Leverage Ratio was 2.59 to 1.00.
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ABL Revolver:
On July 1, 2025, the Company entered into an Increase Agreement (the “Increase Agreement”) to which the aggregate commitments under the Company's existing asset-based revolving credit facility (the "ABL Facility") were increased by $50 million. Following the effectiveness of the Increase Agreement, the total commitments under the ABL Facility increased from $135.0 million to $185.0 million. Subject to the conditions set forth in the ABL Credit Agreement, the ABL Revolver may be increased in increments of $10.0 million up to an aggregate of $50.0 million. The ABL Revolver matures on July 19, 2027. Interest accrues on outstanding borrowings at a rate equal to Secured Overnight Financing Rate (“SOFR”) or Canadian Dollar Offered Rate (“CDOR”) plus a margin ranging from 1.25 percent to 1.75 percent per annum, or at an alternate base rate, Canadian prime rate or Canadian base rate plus a margin ranging from 0.25 percent to 0.75 percent per annum, in each case, based upon the average daily excess availability under the ABL Revolver for the most recently completed calendar quarter. Fees payable on the unused portion of the facility range from 0.25 percent to 0.375 percent per annum. At March 31, 2026 the unused line fee was 0.375 percent and there were no amounts outstanding under the ABL Revolver.
Guarantees
Each of our current and future wholly owned material U.S. subsidiaries and DXP Enterprises, Inc. guarantees the obligations of our borrower under the ABL Revolver. Additionally, each of our Canadian subsidiaries guarantees the obligations of our Canadian borrower subsidiaries under the ABL Revolver.
Security
Obligations under the U.S. Borrowing Base are primarily secured, subject to certain exceptions, by a first-priority secure interest in the accounts receivable, inventory and related assets of our wholly owned, material U.S. subsidiaries. The security interest in accounts receivable, inventory, and related assets of the U.S. borrower subsidiaries ranks prior to the security interest in this collateral which secures the Term Loan B. The obligations under the Canadian Borrowing Base are primarily secured, subject to certain exceptions, by a first-priority secure interest in the accounts receivable, inventory and related assets of our wholly owned, material Canadian subsidiaries and our wholly owned material U.S. subsidiaries.
Excess Availability
The borrowing availability under our credit facility was $153.3 million and $153.5 million at March 31, 2026 and December 31, 2025, respectively.
Interest rate
The interest rate for the ABL Revolver was 7.00 percent and 7.00 percent as of March 31, 2026 and December 31, 2025, respectively.
Financial Covenant
The Company's principal financial covenant under the ABL Credit Agreement include a Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio under the ABL Credit Agreement is defined as the ratio for the most recently completed four-fiscal quarter period, of (a) EBITDA minus capital expenditures (excluding those financed or funded with debt (other than the ABL Loans), (ii) the portion thereof funded with the net proceeds from asset dispositions of equipment or real property which the Company is permitted to reinvest pursuant to the Term Loan and the portion thereof funded with the net proceeds of casualty insurance or condemnation awards in respect of any equipment and real estate which DXP is not required to use to prepay the ABL Loans pursuant to the Term Loan B Agreement or with the proceeds of casualty insurance or condemnation awards in respect of any other property) minus cash taxes paid (net of cash tax refunds received during such period), to (b) fixed charges. The Company is restricted from allowing its fixed charge coverage ratio to be less than 1.00 to 1.00 during a compliance period, which is triggered when the availability under the ABL Revolver falls below a threshold set forth in the ABL Credit Agreement. As of March 31, 2026, the Company's Fixed Charge Coverage Ratio was 2.54 to 1.00.
The Company was in compliance with all financial covenants as of March 31, 2026.
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Promissory Note:
On November 1, 2024, in connection with an acquisition, the Company signed a promissory note for the loan amount of $1.0 million. The promissory note has a maturity date of November 1, 2029. The promissory note shall be payable in four equal consecutive annual installments of $0.1 million on November 1 of each year commencing on November 1, 2025, provided that all amounts outstanding under this promissory note, including all accrued and unpaid interest and other amounts payable under the promissory note, shall be due and payable in full on November 1, 2029. The Company may prepay the promissory note in
whole or in part at any time or from time to time without penalty or premium by paying the principal amount to be prepaid together with accrued interest thereon to the date of the prepayment. Interest is payable quarterly, starting with the quarter ending January 31, 2025 on outstanding borrowings at a rate of 5 %.
Maturities of Debt
As of March 31, 2026, the maturities of long-term debt for the next five years were as follows (in thousands):
| Amount | ||||||||
| 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Total | $ | |||||||
NOTE 9 - EARNINGS PER SHARE
Basic earnings per share is computed based on weighted average shares outstanding and excludes dilutive securities. Diluted earnings per share is computed including the impacts of all potentially dilutive securities.
The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Basic earnings per share: | |||||||||||||||||||||||
| Weighted average shares outstanding | |||||||||||||||||||||||
| 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 March 31, 2026 and 2025, the weighted average of the unvested restricted stock awards were 219,904 and 302,647 shares, respectively. The preferred stock is convertible into 840,000 shares of common stock.
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NOTE 10 - COMMITMENTS AND CONTINGENCIES
From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. While DXP is unable to predict the outcome or estimate the financial impact of these disputes, it believes that the ultimate resolution will not have, either individually or in the aggregate, a material adverse effect on DXP's consolidated financial position, cash flows, or results of operations.
NOTE 11 - SEGMENT REPORTING
We have three
The Service Centers segment is engaged in providing maintenance, MRO products and equipment, including logistics capabilities, to industrial customers. The Service Centers segment provides a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, fastener, industrial supply, safety products and safety services categories.
The Innovative Pumping Solutions segment fabricates and assembles custom-made pump packages, re-manufactures pumps, manufactures branded private label pumps, and provides products and process lines for the water and wastewater treatment industries.
The Supply Chain Services segment provides a wide range of MRO products and manages all or part of a customer's supply chain, including warehouse and inventory management.
Sales are shown net of intersegment eliminations.
Segment information is prepared on the same basis that our Chief Executive Officer, who is our chief operating decision maker (“CODM”), manages the segments, evaluates financial results, and makes key operating decisions.
These segments were determined primarily on the distribution channels of the products and services offered and the nature of the customer markets and the primary driver of the customers spend. The Company's CODM directs the allocation of resources to these segments based upon historical and current revenue, direct operating expenses, operating income, and capital expenditures of each respective segment. The allocation of resources across these segments is dependent upon, among other factors, the segments' historical or future expected operating margins; the segments' historical or future expected returns on capital; outlook within a specific market; opportunities to grow profitability; new products, services or new customer accounts; confidence in management; and competitive landscape and intensity.
As a part of the Company's annual business planning, the CODM reviews our reportable segment composition and financial performance. As of March 31, 2026, there was no change to our reportable segment composition.
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The following table sets forth financial information related to the Company's segments (in thousands):
| Three Months Ended March 31, 2026 | Service Center | Innovative Pumping Solutions | Supply Chain Services | Total Reportable Segments | Corporate | Total | |||||||||||||||||
Sales | $ | $ | $ | $ | $ | $ | |||||||||||||||||
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 March 31, 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):
| March 31, 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.
During the first quarter of 2026, the Company acquired three businesses for a total of $126.3 million. The Company acquired these businesses to expand its platforms and to maintain its leading position as the largest distributor of rotating equipment in North America.
A summary of the preliminary allocation of the total purchase consideration of our business acquisition during the three months ended March 31, 2026 is presented as follows (in thousands):
Acquisition 1 | All Other | Total | ||||||||||||||||||||||||||||||
| Cash payments | $ | $ | $ | |||||||||||||||||||||||||||||
Contingent consideration | ||||||||||||||||||||||||||||||||
| Total purchase price consideration | $ | $ | $ | |||||||||||||||||||||||||||||
| Tangible assets acquired | ||||||||||||||||||||||||||||||||
| Intangible assets acquired | ||||||||||||||||||||||||||||||||
| Total assets acquired | $ | $ | $ | |||||||||||||||||||||||||||||
| Total liabilities assumed | ( | ( | ( | |||||||||||||||||||||||||||||
| Net assets acquired | ||||||||||||||||||||||||||||||||
| Goodwill | $ | $ | $ | |||||||||||||||||||||||||||||
The total purchase consideration related to our acquisitions for the three months ended March 31, 2026 consisted primarily of cash consideration. The total cash and cash equivalents acquired for these acquisitions was $6.2 million. Transaction-related costs for acquisitions consummated during the period and included within selling, general, and administrative expenses in the consolidated statements of operations was $0.8 million as of March 31, 2026.
The goodwill total of approximately $56.3 million for the three months ended March 31, 2026 assigned to our IPS segment was primarily attributable to expected synergies and the assembled workforce of the entities. The total amount of goodwill expected to be deductible for tax purposes is $52.5 million.
The acquisitions' operating results are included within the Company's consolidated statements of operations from the date of acquisition, which were not material for the three months ended March 31, 2026. Pro forma results of operations information have not been presented, as the effects of the acquisitions were not material to our financial results.
Of the $48.5 million of acquired intangible assets, $0.3 million was provisionally assigned to non-compete agreements that are subject to amortization over 5 years, $29.7 million was assigned to customer relationships and will be amortized over a period of 8 years, $6.9 million was assigned to trade names and will be amortized over a period of 10 years, and $11.6 million was assigned to dealer relationships and will be amortized over a period of 9 years.
NOTE 13 - SHARE REPURCHASES
On December 15, 2022, the Company announced a Share Repurchase Program pursuant to which it may repurchase up to $85.0 million worth, or 2.8 million shares, of the Company's outstanding common stock over the next 24 months from the date of the announcement. The Company completed the program in August 2024.
On August 28, 2024, the Company announced a new Share Repurchase Program pursuant to which we may repurchase up to $85.0 million worth, or 2.5 million shares of the Company's outstanding common stock over the next 24 months. Total consideration paid to repurchase the shares was recorded in shareholders’ equity as treasury stock.
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There were | |||||||||||||||||||||||
NOTE 14 - SUPPLEMENTAL CASH FLOW INFORMATION
| Three Months Ended March 31, | |||||||||||
(in thousands) | 2026 | 2025 | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes | |||||||||||
Non-cash investing and financing activities: | |||||||||||
Treasury shares repurchase accruals | $ | $ | ( | ||||||||
NOTE 15 - OTHER INCOME AND EXPENSES
The components of other (income) expense were as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
(in thousands) | 2026 | 2025 | |||||||||||||||||||||
| Interest income | $ | ( | $ | ( | |||||||||||||||||||
| 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 and commodity prices and exploration and production activity. As such, we believe this information is important in depicting the nature, timing and uncertainty of our contracts with customers. The following Geographical Information and Note 11 - Segment Reporting presents our disaggregated revenues.
Geographical Information
Revenues are presented in geographic area based on location of the facility shipping products or providing services.
The Company’s revenues by geographical location are as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | |||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| United States | $ | $ | |||||||||||||||||||||
| Canada | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
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Recent Acquisitions
We define and calculate organic sales to include locations and acquisitions under our ownership for at least twelve months. "Acquisition Sales" are sales from acquisitions that have been under our ownership for less than twelve months and are excluded in our calculation of Organic Sales.
The following tables sets forth the disaggregation of sales associated with Acquisition and Organic sales for the three months ended March 31, 2026 and 2025 (in thousands):
| Sales | Acquisition Sales | Organic Sales | ||||||||||||||||||
| Three Months Ended March 31, 2026 | ||||||||||||||||||||
| Service Centers | $ | $ | $ | |||||||||||||||||
| Innovative Pumping Solutions | ||||||||||||||||||||
| Supply Chain Services | ||||||||||||||||||||
| Total Sales | $ | $ | $ | |||||||||||||||||
| Three Months Ended March 31, 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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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 three months ended March 31, 2026 should be read in conjunction with our previous Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q, and the consolidated financial statements and notes thereto included in such reports. The Company's consolidated financial statements are prepared in accordance with U.S. 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
General
DXP Enterprises, Inc. is a business-to-business distributor of MRO products and services to a variety of customers in different end markets across North America and Dubai. Additionally, we fabricate, remanufacture, and assemble custom pump packages along with manufacturing branded private label pumps.
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 three months ended March 31, 2026, we had approximately $456.6 million in sales in our Service Centers and Innovative Pumping Solutions segments, an increase of approximately 10.5 percent compared to the three months ended March 31, 2025. Our performance has been strengthened by our ability to maintain strong margins despite price increases from vendors and suppliers. During the three months ended March 31, 2026, $5.7 million in sales in our Service Centers (SC) segment and $35.0 million in sales in our Innovative Pumping Solutions (IPS) segment were associated with acquisition sales.
Supply Chain Services Segment
For the three months ended March 31, 2026, we had approximately $65.0 million in sales in our Supply Chain Services (SCS) segment, an increase of approximately 2.7 percent compared to the three months ended March 31, 2025.
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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 three months ended March 31, 2026, acquisition sales were $40.7 million compared to $31.1 million for the three months ended March 31, 2025.
Key Business Metrics
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 March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Sales by Business Segment | |||||||||||||||||||||||
| Service Centers | $ | 337,976 | $ | 327,075 | |||||||||||||||||||
| Innovative Pumping Solutions | 118,660 | 86,182 | |||||||||||||||||||||
| Supply Chain Services | 65,022 | 63,312 | |||||||||||||||||||||
| Total DXP Sales | $ | 521,658 | $ | 476,569 | |||||||||||||||||||
| Acquisition Sales | $ | 40,745 | $ | 31,112 | |||||||||||||||||||
| Organic Sales | $ | 480,913 | $ | 445,457 | |||||||||||||||||||
| Business Days | 63 | 63 | |||||||||||||||||||||
| Sales per Business Day | $ | 8,280 | $ | 7,565 | |||||||||||||||||||
| Organic Sales per Business Day | $ | 7,634 | $ | 7,071 | |||||||||||||||||||
| Gross Profit | $ | 168,606 | $ | 150,265 | |||||||||||||||||||
| Gross Profit Margin | 32.3 | % | 31.5 | % | |||||||||||||||||||
Income from Operations | $ | 42,474 | $ | 40,515 | |||||||||||||||||||
Income from Operations Margin | 8.1 | % | 8.5 | % | |||||||||||||||||||
| Net Income | $ | 19,978 | $ | 20,589 | |||||||||||||||||||
| Net Income Margin | 3.8 | % | 4.3 | % | |||||||||||||||||||
| EBITDA | $ | 55,119 | $ | 50,967 | |||||||||||||||||||
| EBITDA Margin | 10.6 | % | 10.7 | % | |||||||||||||||||||
| Adjusted EBITDA | $ | 57,812 | $ | 52,519 | |||||||||||||||||||
| Adjusted EBITDA Margin | 11.1 | % | 11.0 | % | |||||||||||||||||||
Net cash provided by operating activities | $ | 29,569 | $ | 2,973 | |||||||||||||||||||
Free Cash Flow | $ | 26,275 | $ | (16,941) | |||||||||||||||||||
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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.
22
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 March 31, 2026 compared to Three Months Ended March 31, 2025
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | % | 2025 | % | ||||||||||||||||||||
| Sales | $ | 521,658 | 100.0% | $ | 476,569 | 100.0% | |||||||||||||||||
| Cost of sales | 353,052 | 67.7% | 326,304 | 68.5% | |||||||||||||||||||
| Gross profit | 168,606 | 32.3% | 150,265 | 31.5% | |||||||||||||||||||
| Selling, general and administrative expenses | 126,132 | 24.2% | 109,750 | 23.0% | |||||||||||||||||||
| Income from operations | 42,474 | 8.1% | 40,515 | 8.5% | |||||||||||||||||||
Interest expense | 16,443 | 3.2% | 14,660 | 3.1% | |||||||||||||||||||
Other (income) expense, net | (594) | (0.1)% | (1,318) | (0.3)% | |||||||||||||||||||
| Income before income taxes | 26,625 | 5.1% | 27,173 | 5.7% | |||||||||||||||||||
| Provision for income tax expense | 6,647 | 1.3% | 6,584 | 1.4% | |||||||||||||||||||
| Net income | $ | 19,978 | 3.8% | $ | 20,589 | 4.3% | |||||||||||||||||
Earnings per share: | |||||||||||||||||||||||
Basic | $ | 1.28 | $ | 1.31 | |||||||||||||||||||
Diluted | $ | 1.22 | $ | 1.25 | |||||||||||||||||||
23
The following tables sets forth the disaggregation of revenue from sales associated with acquisitions for the three months ended March 31, 2026 and 2025 (in thousands) :
| Sales | Acquisition Sales | Organic Sales | ||||||||||||||||||
| Three Months Ended March 31, 2026 | ||||||||||||||||||||
| Service Centers | $ | 337,976 | $ | 5,711 | $ | 332,265 | ||||||||||||||
| Innovative Pumping Solutions | 118,660 | 35,034 | 83,626 | |||||||||||||||||
| Supply Chain Services | 65,022 | — | 65,022 | |||||||||||||||||
| Total Sales | $ | 521,658 | $ | 40,745 | $ | 480,913 | ||||||||||||||
| Three Months Ended March 31, 2025 | ||||||||||||||||||||
| Service Centers | $ | 327,075 | $ | 17,941 | $ | 309,134 | ||||||||||||||
| Innovative Pumping Solutions | 86,182 | 13,171 | 73,011 | |||||||||||||||||
| Supply Chain Services | 63,312 | — | 63,312 | |||||||||||||||||
| Total Sales | $ | 476,569 | $ | 31,112 | $ | 445,457 | ||||||||||||||
| $ Change | ||||||||||||||||||||
| Service Centers | $ | 10,901 | $ | (12,230) | $ | 23,131 | ||||||||||||||
| Innovative Pumping Solutions | 32,478 | 21,863 | 10,615 | |||||||||||||||||
| Supply Chain Services | 1,710 | — | 1,710 | |||||||||||||||||
| Total $ Change | $ | 45,089 | $ | 9,633 | $ | 35,456 | ||||||||||||||
| % Change | ||||||||||||||||||||
| Service Centers | 3.3 | % | (68.2) | % | 7.5 | % | ||||||||||||||
| Innovative Pumping Solutions | 37.7 | % | 166.0 | % | 14.5 | % | ||||||||||||||
| Supply Chain Services | 2.7 | % | N/A | 2.7 | % | |||||||||||||||
| Total % Change | 9.5 | % | 31.0 | % | 8.0 | % | ||||||||||||||
SALES. Sales for the three months ended March 31, 2026 increased $45.1 million, or 9.5 percent, to approximately $521.7 million from $476.6 million for the prior year's corresponding period, of which recent acquisitions contributed $40.7 million. Additionally, the overall increase in sales was the result of an increase in sales in our SC, IPS, and SCS segments of $10.9 million, $32.5 million, and $1.7 million, respectively. The fluctuations in sales are further explained in our business segment discussions below.
Service Centers segment. Sales for the SC segment increased $10.9 million, or 3.3 percent, for the three months ended March 31, 2026, compared to the prior year's corresponding period. Excluding the impact of recent acquisitions, sales grew $23.1 million, this sales increase was the result of increases within our Ohio River Valley, California, South East, and Rockies regions as well as our metal working division totaling $24.7 million due to an increase in shipped product revenue during the period, offset by decreases in sales within our South West region of $4.1 million. Sales from recent acquisitions contributed $5.7 million during the period compared to $17.9 million for the three months ended March 31, 2025.
Innovative Pumping Solutions segment. Sales for the IPS segment increased $32.5 million, or 37.7 percent, for the three months ended March 31, 2026, compared to the prior year's corresponding period. This sales increase was the result of increases within our water and wastewater division and increased production contracts totaling $10.6 million. Sales from recent acquisitions contributed $35.0 million during the period as compared to $13.2 million for the three months ended March 31, 2025.
Supply Chain Services segment. Sales for the SCS segment increased by $1.7 million, or 2.7 percent, for the three months ended March 31, 2026, compared to the prior year's corresponding period. This was primarily due to the onboarding of new customers and their related facilities, partially offset by decreased activity with existing customers.
24
GROSS PROFIT. Gross profit margin for the three months ended March 31, 2026 was 32.3 percent compared to 31.5 percent for the prior year's corresponding period. The gross profit margin for the three months ended March 31, 2026 was positively impacted by 79 basis points due to recent acquisitions and continuing margin expansion efforts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"). SG&A for the three months ended March 31, 2026 increased by $16.4 million, or 14.9 percent, to $126.1 million from $109.8 million for the prior year's corresponding period. The increase in SG&A is primarily the result of increased payroll related costs, depreciation and amortization, rent and professional fees.
OPERATING INCOME. Operating income for the first quarter of 2026 increased by $2.0 million to $42.5 million, from $40.5 million in the prior year's corresponding period. This increase in operating income was primarily driven by increases in our SC segment.
INTEREST EXPENSE. Interest expense for the first quarter of 2026 increased $1.8 million compared to the prior year's corresponding period. This increase was primarily due to the Company refinancing its Term Loan B during the fourth quarter of 2025.
INCOME TAXES. Our effective tax rate for continuing operations was 25.0 percent for the three months ended March 31, 2026, compared to 24.2 percent for the three months ended March 31, 2025. Compared to the U.S. statutory rate for the three months ended March 31, 2025, the effective tax rate increased slightly, primarily due to discrete items, including a decrease in tax benefits related to stock-based compensation vested during the period, net of amounts limited by Section 162(m), a lower benefit from research and development tax credits, and an increase in non-deductible expenses.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
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 March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Sales by Business Segment | |||||||||||||||||||||||
| Service Centers | $ | 337,976 | $ | 327,075 | |||||||||||||||||||
| Innovative Pumping Solutions | 118,660 | 86,182 | |||||||||||||||||||||
| Supply Chain Services | 65,022 | 63,312 | |||||||||||||||||||||
| Total DXP Sales | $ | 521,658 | $ | 476,569 | |||||||||||||||||||
| Acquisition Sales | $ | 40,745 | $ | 31,112 | |||||||||||||||||||
| Organic Sales | $ | 480,913 | $ | 445,457 | |||||||||||||||||||
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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 March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
Net income attributable to DXP Enterprises, Inc. | $ | 19,978 | $ | 20,589 | |||||||||||||||||||
| Plus: Interest expense | 16,443 | 14,660 | |||||||||||||||||||||
Plus: Provision for income tax expense | 6,647 | 6,584 | |||||||||||||||||||||
Plus: Depreciation and amortization | 12,051 | 9,134 | |||||||||||||||||||||
| EBITDA | $ | 55,119 | $ | 50,967 | |||||||||||||||||||
| Plus: stock compensation expense | 1,802 | 1,317 | |||||||||||||||||||||
Plus: other non-recurring items(1) | 891 | 235 | |||||||||||||||||||||
| Adjusted EBITDA | $ | 57,812 | $ | 52,519 | |||||||||||||||||||
| Operating Income Margin | 8.1 | % | 8.5 | % | |||||||||||||||||||
| Net Income Margin | 3.8 | % | 4.3 | % | |||||||||||||||||||
| EBITDA Margin | 10.6 | % | 10.7 | % | |||||||||||||||||||
| Adjusted EBITDA Margin | 11.1 | % | 11.0 | % | |||||||||||||||||||
(1) Other non-recurring items includes unique acquisition integration costs and other non-cash, non-recurring costs. | |||||||||||||||||||||||
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 March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
Net cash provided by operating activities | $ | 29,569 | $ | 2,973 | |||||||||||||||||||
| Less: purchases of property and equipment | (3,294) | (19,914) | |||||||||||||||||||||
| Free Cash Flow | $ | 26,275 | $ | (16,941) | |||||||||||||||||||
26
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 March 31, 2026, we had available cash of $213.4 million and credit facility availability of $153.3 million. We have a $185.0 million asset-backed line of credit (the "ABL Revolver"), partially offset by letters of credit of $31.7 million. We had no borrowings outstanding on our ABL Revolver as of March 31, 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):
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net Cash Provided by (Used in): | |||||||||||
| Operating Activities | $ | 29,569 | $ | 2,973 | |||||||
| Investing Activities | (105,987) | (30,065) | |||||||||
| Financing Activities | (13,116) | (7,083) | |||||||||
| Effect of Foreign Currency | (868) | 47 | |||||||||
| Net Change in Cash | $ | (90,402) | $ | (34,128) | |||||||
Operating Activities
The Company generated $29.6 million of cash from operating activities during the three months ended March 31, 2026 compared to $3.0 million of cash generated during the prior year's corresponding period. The increase of $26.6 million was primarily due to income tax payments in 2025 compared to 2026.
Investing Activities
For the three months ended March 31, 2026, net cash used in investing activities was $106.0 million compared to a $30.1 million use of cash during the prior year’s corresponding period. This $75.9 million increase was primarily driven by increased acquisition activity during the three months ended March 31, 2026. Total consideration, was $102.7 million compared to $12.9 million for the three months ended March 31, 2025.
27
Financing Activities
For the three months ended March 31, 2026, net cash used in financing activities was $13.1 million, compared to net cash used in financing activities of $7.1 million during the prior year’s corresponding period. The decrease was primarily due to the timing of shares withheld for taxes relating to shares vesting compared to prior corresponding period.
We believe the Company has adequate funding to support its working capital needs within the business.
Debt
At March 31, 2026, our total outstanding debt was $844.7 million, or 62.3 percent of total capitalization (total debt plus shareholders' equity) of $1.4 billion. $843.8 million of this outstanding debt bears interest at various floating rates. 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 as follows (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||||||||
| Total borrowing capacity | $ | 185,000 | $ | 185,000 | |||||||||||||
Less: Amount drawn | — | — | |||||||||||||||
Less: Outstanding letters of credit | 31,731 | 31,472 | |||||||||||||||
| Total amount available | $ | 153,269 | $ | 153,528 | |||||||||||||
At March 31, 2026, the Company had $366.7 million of liquidity including $213.4 million in cash and $153.3 million in availability under the ABL Revolver.
On July 1, 2025, the Company entered into an Increase Agreement (the “Increase Agreement”) to which the aggregate commitments under the Company's existing asset-based revolving credit facility (the "ABL Facility") were increased by $50 million. Following the effectiveness of the Increase Agreement, the total commitments under the ABL Facility increased from $135.0 million to $185.0 million.
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.
28
The following table sets forth the reconciliation of net cash provided by operating activities to Free Cash Flow (in thousands):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Net cash provided by operating activities | $ | 29,569 | $ | 2,973 | |||||||||||||||||||
| Less: purchases of property and equipment | (3,294) | (19,914) | |||||||||||||||||||||
| Free Cash Flow | $ | 26,275 | $ | (16,941) | |||||||||||||||||||
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 March 31, 2026 was $379.6 million, an increase of $17.9 million compared to $361.7 million as of December 31, 2025. The increase was primarily due to sustained sales growth and acquisitions.
Acquisitions
For a discussion of the Company’s acquisitions refer to Note 12. Business Acquisitions. During March 31, 2026 and 2025, the Company invested $102.7 million and $12.9 million, respectively, in acquisitions.
Capital Expenditures
The Company's capital expenditures was $3.3 million and $19.9 million for the three months ended March 31, 2026 and 2025 respectively. This includes continued facility upgrades and enhancements, tools and equipment, and enhancements across the Company.
DISCUSSION OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES
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.
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 three months ended March 31, 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.
29
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 March 31, 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 March 31, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
30
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.
The Company regularly claims federal income tax credits for the research activities it conducts related to its manufacturing activities. The Company has recognized a total of $37.0 million as of the third quarter of 2025 in federal income tax credits for the research activities from 2015 thru 2025. The Internal Revenue Service (“IRS”) is conducting an examination of the Company’s U.S. federal income tax returns for its 2018 tax year. The Company received Notices of Proposed Adjustment in October 2024, which if sustained, would result in a loss of federal income tax credits for research activities claimed by the Company during that tax year. The Company intends to vigorously defend its reported positions. The Company has currently accrued a reserve relating to the potential tax adjustments. However, the outcome of this dispute involves a number of uncertainties, including those relating to the application of the Internal Revenue Code and other federal income tax authorities and judicial precedent. Accordingly, there can be no assurance that the dispute with the IRS will be resolved favorably. If the IRS materially reduces or disallows our federal income tax credits for research activities, it may have a material adverse effect on our business and financial condition.
Other than the risk factors noted above, 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
The Company did not sell any unregistered securities during the three months ended March 31, 2026.
Issuer 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 first 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) | |||||||||||||||||||||||
| January 1 - January 31, 2026 | — | $ | — | — | $ | 68,006 | ||||||||||||||||||||
| February 1 – February 28, 2026 | 1,240 | 136.50 | — | 68,006 | ||||||||||||||||||||||
| March 1 – March 31, 2026 | 45,883 | 139.53 | — | 68,006 | ||||||||||||||||||||||
| Total | 47,123 | $ | 139.45 | — | $ | 68,006 | ||||||||||||||||||||
(1) There were 47,123 shares transferred from employees in satisfaction of minimum statutory tax withholding obligations upon the vesting of restricted stock during the three months ended March 31, 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. As of March 31, 2026, approximately $68.0 million worth of, or approximately 2.3 million, shares remained available under the $85.0 million Share Repurchase Program. | ||||||||||||||||||||||||||
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
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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). | ||||
| * 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 March 31, 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 March 31, 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: May 7, 2026
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FAQ
How did DXP Enterprises (DXPE) perform financially in Q1 2026?
DXP Enterprises grew Q1 2026 sales to $521.7 million, up 9.5% year over year. Net income was $20.0 million with diluted EPS of $1.22. Gross margin improved to 32.3%, while operating margin was 8.1%.
What drove DXP Enterprises (DXPE) revenue growth in Q1 2026?
Revenue growth came from all segments and recent acquisitions. Service Centers sales rose to $338.0 million, Innovative Pumping Solutions to $118.7 million, and Supply Chain Services to $65.0 million. Acquisitions contributed $40.7 million of sales during the quarter.
How much did DXP Enterprises (DXPE) invest in acquisitions in Q1 2026?
DXP Enterprises acquired three businesses for total consideration of $126.3 million in Q1 2026. Cash payments were $108.9 million and contingent consideration was valued at $17.3 million, adding $56.3 million of goodwill, mainly to the IPS segment.
What is DXP Enterprises’ (DXPE) debt and leverage position as of March 31, 2026?
As of March 31, 2026, DXP had total debt of $844.7 million, mostly its Senior Secured Term Loan B. The company reported a secured leverage ratio of 2.59 to 1.00 and confirmed compliance with all financial covenants.
What is DXP Enterprises’ (DXPE) liquidity at the end of Q1 2026?
DXP Enterprises ended Q1 2026 with $213.4 million in cash and $153.3 million available under its $185.0 million ABL revolver. Total liquidity was about $366.7 million, supporting working capital, acquisitions, and other corporate needs.
How did DXP Enterprises’ (DXPE) free cash flow change in Q1 2026?
Free cash flow improved significantly to $26.3 million in Q1 2026, from negative $16.9 million a year earlier. Net cash from operating activities was $29.6 million, while capital expenditures were $3.3 million during the quarter.
What tax-related risk does DXP Enterprises (DXPE) highlight in this filing?
DXP reports that the IRS is examining its 2018 federal return and research tax credits, part of $37.0 million in credits claimed from 2015–2025. The company states that a material reduction or disallowance could adversely affect its business and financial condition.