DXP Enterprises, Inc. Q3 FY2025 earnings call

• End market demand and DXP's performance continued at record levels in Q3, with sales, operating income and earnings per share all up over prior year. • Innovative Pumping Solutions saw DXP Water as 54% of its sales year-to-date vs 47% last year, with energy-related bookings and backlog resilient. • Service Centers had consistent top line growth with regional strength in South Central, California, etc., and strength in air compressors and U.S. Safety Services divisions. • Supply Chain Services sales declined due to pullback in oil and gas and diversified chemical customer sites, but demand for services increasing. • Overall gross profit margins were 31.4%, a 50 basis point improvement over 2024. SG&A increased $11 million vs Q3 2024, but adjusted EBITDA was $56.5 million in Q3 2025 with 11% margin.

In terms of Q3 financial results from segment perspective, Innovative Pumping Solutions led the way, growing sales 11.9% year-over-year to $100.6 million. Service Centers grew sales 10.5% year-over-year to $350.2 million. Supply Chain Services declined 5% year-over-year to $63 million. From a segment mix sales contribution, Service Centers contributed 68.16%; Innovative Pumping Solutions, 19.57%; and Supply Chain Services was 12.26%.

• Expect Q4 to be impacted by seasonality with fewer billing days, but expect profitability to remain around 11%. • 11% adjusted EBITDA margins are sustainable for now, but may adjust in 2026 with more acquisitions, especially in water space. • Insurance renewal change and claims, as well as acquisitive nature, may affect corporate expenses in coming quarters.

• Supply Chain Services sales affected by reduced spending from existing customers due to efficiency drives. • Insurance premiums have gone up, including a midyear renewal causing elevated costs in Q3. • Health insurance claims created elevated corporate SG&A costs in Q3, uncertainty around future claims. • Oil and gas market still struggling for growth, need to convert quotes to bookings.

Q: So sorry, I missed the daily sales number for June. If you could just quickly walk through Q3 again? And then any color you could share on Q4 thus far?

A: Yes. I'll just walk through each month in Q3 and then kind of give you our flash look at October for Q4. July was $7.26 million per day, August, $7.95 million per day, September $8.9 million per day and October was $7.59 million per day. Q4 is a lighter quarter due to seasonality with fewer billing days from holidays, but expect profitability to remain around 11%.

Q: Understood. That's responsive. And then corporate expenses aren't something we talk about too much, but there has been some variability just worth asking about today. The Q3 number you just reported was just under $26 million. Is that a fair proxy for what we should assume going forward? And what might bias that number higher or lower as you move through the coming quarters?

A: Yes. There was a couple of unique things in there. First, flipped insurance renewal from calendar year to midyear causing elevated July premiums. Also, health insurance claims created elevated cost in Q3. Acquisitive nature led to higher professional fees in Q3, which will continue in Q4 and Q1 due to active acquisition pipeline.

Q: Last one for me. Can you please touch on any data center exposure or opportunities you guys may have?

A: Sure. We're looking at a lot of different avenues based on the products we represent. We represent pumps, water, filtration, etc. We have opportunity in data centers but it's not been a big win yet. We're attacking the market hard across the country to tap into data center projects.