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DXP ENTERPRISES INC (DXPE)·Q1 2025 Earnings Summary

Executive Summary

  • Solid print with broad-based growth: revenue $476.6M (+15.5% YoY; +1.2% QoQ) and GAAP diluted EPS $1.25; adjusted diluted EPS $1.26; adjusted EBITDA $52.5M (11.0% margin) .
  • Versus S&P Global consensus, EPS beat (+$0.05 vs $1.20*) while revenue was essentially in line/slightly below ($476.6M vs $477.0M*)—a modest quality beat aided by mix and acquisition accretion ; GetEstimates*.
  • Mix and pricing supported 31.5% gross margin (+151 bps YoY) and operating leverage; IPS drove +38.5% YoY with record Service Centers sales; backlog trends remain constructive in energy and water .
  • Watch items: FCF was -$16.9M on higher capex and working capital/DSO timing; management expects FCF to turn positive through the rest of 2025; tariffs being passed through with no demand impact to date .

What Went Well and What Went Wrong

  • What Went Well

    • Strong topline and profitability: Sales $476.6M (+15.5% YoY), adjusted EBITDA $52.5M (11.0%), adjusted EPS $1.26; CEO: “resilience and durability” with “strength in gross profit margins” .
    • Segment breadth: IPS +38.5% YoY, Service Centers +13.4%, SCS +2.1%; Service Centers set a new sales watermark; IPS backlog at all-time high, water platform with 10 consecutive quarters of sequential growth .
    • Margin execution: Gross margin 31.5% (+151 bps YoY) on mix and accretive acquisitions; CFO: “continued gross margin strength and stability” .

  • What Went Wrong

    • Free cash flow negative: FCF -$16.9M on capex ($19.9M) and working capital build; DSO rose to ~70 days; CFO expects FCF to normalize positive as year progresses .
    • Working capital and liquidity optics: Working capital +$34.3M QoQ; cash declined to $114.3M post-Arroyo acquisition and capex, though liquidity remains solid at $223.2M .
    • SCS only modest growth (+2.1% YoY) with elongated sales cycles; management targeting new customer additions in 2025 .

Financial Results

MetricQ1 2024Q4 2024Q1 2025Consensus Q1 2025
Revenue ($M)$412.6 $470.9 $476.6 $477.0*
GAAP Diluted EPS ($)$0.67 $1.29 $1.25 $1.20*
Adjusted Diluted EPS ($)$0.70 $1.38 $1.26 —
Gross Profit ($M)$123.9 $148.5 $150.3 —
Gross Margin (%)30.0% (calc. from 412.6/123.9) 31.6% (calc. from 470.9/148.5) 31.5% —
Operating Income ($M)$29.1 $39.3 $40.5 —
EBIT Margin (%)7.1% 8.3% 8.5% —
Net Income ($M)$11.3 $21.4 $20.6 —
Adjusted EBITDA ($M)$40.3 $50.3 $52.5 —
Adjusted EBITDA Margin (%)9.8% 10.7% 11.0% —
  • EPS and revenue compared to S&P Global consensus: GAAP EPS beat (+$0.05), revenue essentially in line/slightly below (-$0.4M). Note: S&P “actual” EPS prints at $1.26 (aligned with adjusted), while GAAP diluted EPS was $1.25 ; GetEstimates*.
  • YoY sales +15.5% and sequential sales +1.2% cited by management .

Segment performance (Q1 2025):

  • Sales and operating income margin by segment
SegmentSales Q1 2024 ($M)Sales Q1 2025 ($M)Op Inc Margin Q1 2025
Service Centers$288.4 $327.1 14.4%
Innovative Pumping Solutions$62.2 $86.2 15.6%
Supply Chain Services$62.0 $63.3 8.8%

Key KPIs (Q1 2025):

  • Sales per business day: $7.565M; Organic $7.071M
  • Free Cash Flow: -$16.941M; CFO: cash from ops $2.973M, capex $19.914M
  • Cash: $114.3M; Total Debt: $647.3M; Secured leverage ~2.5x
  • Liquidity: ~$223.2M; ABL availability $108.9M; LOC $26.1M
  • DSO: ~70 days (from 68.7), working capital +$34.3M to $325.3M (17.4% of sales)

Non-GAAP notes:

  • Adjusted EBITDA adds back stock comp ($1.317M) and other non-recurring items ($0.235M) in Q1 2025 .

Guidance Changes

DXP does not provide formal quantitative guidance; management offered qualitative color for FY 2025.

MetricPeriodPrevious GuidanceCurrent Guidance (Q1 call)Change
RevenueFY 2025No formal guidance “Second half of the year to drive growth” on backlog and diversification Qualitative positive
Gross MarginFY 2025No formal guidanceGross margin strength/stability; 31.5% in Q1; mix/acquisition accretion cited Maintained with positive color
Adjusted EBITDA MarginFY 202510%+ long-run goal; pursuit of 11% discussed in Q4 11.0% in Q1; expect 10%+ to continue Maintained/improving
SG&A/OpExFY 2025Invest for growth (Q4) Continued fixed-cost leverage as sales grow; some one-time items in Q1 Maintained
CapexFY 2025Elevated vs 2023 (Q4) $19.9M in Q1; expected to taper in back half Tapering H2
Free Cash FlowFY 2025Seasonally negative in Q1; positive thereafter (prior commentary) Q1 negative due to tax/DSO; “should turn free cash flow positive” in 2025 Maintained
Interest/LeverageFY 2025Repriced TLB (-100 bps) in Q4; secured leverage ~2.4x Secured leverage 2.5x; total debt $647.3M Stable
Tariffs/MacroFY 2025Inflation/tariffs manageable (Q4) Passing tariffs; no demand impact seen; aim for price/cost neutrality Clarified stance
DividendsFY 2025None discussedNone discussedNo change

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
Tariffs/MacroInflation manageable; margin focus; watch tariffs (Q4) Passing tariffs; no demand impact yet; monitoring Washington; target price/cost neutrality Neutral to slightly inflation-beneficial
Backlog/ProjectsIPS energy and water backlog elevated; large project to impact Q1/Q2’25 (Q3/Q4) Energy backlog avg +5.5% QoQ; water backlog growth; 10th straight sequential sales growth in DXP Water Strengthening
MarginsSustained >10% adj. EBITDA (Q3/Q4); aim for 11% (Q4) 11.0% adj. EBITDA in Q1; expect 10%+ to continue Stable to improving
Cash Flow/Working CapitalQ3 FCF $24.4M; 2024 FCF $77.1M (Q3/Q4) Q1 CFO: operating cash $3M; FCF negative on capex/DSO/taxes; expects FCF positive rest of year Seasonal dip, normalization expected
Acquisitions7 deals in 2024; active pipeline; refinance for dry powder (Q3/Q4) Closed Arroyo (FL) in Q1; 2-3 more by midyear targeted Ongoing bolt-ons

Management Commentary

  • CEO David Little: “First quarter results reflect the resilience and durability of DXP’s business… strength in our gross profit margins… operating leverage that produced earnings per share of $1.25” .
  • CFO Kent Yee: “Continued gross margin strength and stability… year-over-year improvement of 151 basis points to 31.5%… sustained adjusted EBITDA margins north of our 10%-plus goal” .
  • CEO on tariffs: “We’re not in the business of eating tariffs… we’re passing them all on… At this point… we have not seen any effect on demand” .
  • CFO on cash/FCF: “Cash flow from operations was $3 million… due to growth in accounts receivable… DSO… and deferred tax payments… As we move through 2025, this should balance out, and we should turn free cash flow positive” .

Q&A Highlights

  • Monthly cadence: Jan $6.8M/day, Feb $7.8M/day, Mar $8.1M/day; April tracking $7.8M/day .
  • Margins Q2 vs Q1: “No… there would not be anything substantive that would cause a difference” (mix shift noted over last year) .
  • Tariffs: Passing through; identifying alternates; no demand impact seen; some customers pausing pending clarity; company not absorbing tariffs .
  • Acquisition pipeline: Closed Arroyo in Q1; plan additional closings by end of Q2; sustained pipeline with reasonable valuations .
  • Working capital/DSO: DSO moved from 68.7 to ~70 days; working capital up; expect normalization .

Estimates Context

  • S&P Global consensus for Q1 2025: Revenue $477.0M (1 estimate), EPS $1.20 (1 estimate). Actuals: revenue $476.6M, GAAP EPS $1.25, adjusted EPS $1.26. Result: EPS beat; revenue essentially in line/slight miss. Note S&P “actual” EPS aligns to adjusted $1.26, while GAAP diluted EPS is $1.25 ; GetEstimates*.
  • Implications: Modest upward bias to EPS estimates if mix/gross margin strength persists; revenue trajectory supported by backlog/mid-year ramp (IPS, water), but quarterly cadence may remain project-driven .

Key Takeaways for Investors

  • Quality beat on EPS with resilient margins; revenue effectively in line—narrative supported by mix and acquisition accretion and broad end-market exposure .
  • Backlog strength (energy, water) and IPS momentum underpin 2H growth setup; Service Centers at new watermark enhances durability through cycles .
  • Cash conversion should improve as capex moderates and DSO/tax timing normalizes; management explicitly expects FCF positive for the rest of 2025—key for de‑leveraging and M&A capacity .
  • Tariffs currently neutral-to-positive via pass-through pricing; no demand impact observed—monitor policy clarity as potential volatility source .
  • Valuation catalysts: Continued >10% adj. EBITDA margins (path to sustained ~11%), incremental bolt-on M&A execution, and visible project conversion could drive estimate revisions and multiple support .
  • Risk checks: Project timing (IPS), SCS customer sales cycles, working capital discipline; watch quarterly FCF and DSO trend as litmus for execution .

Footnotes:

    • Values retrieved from S&P Global (consensus and “actual” in GetEstimates).