DXP ENTERPRISES INC (DXPE)·Q2 2025 Earnings Summary

Executive Summary

• Strong print with record sales and record Adjusted EBITDA margin: revenue $498.7M (+11.9% y/y, +4.6% q/q), diluted EPS $1.43, and Adjusted EBITDA $57.3M (11.5% margin) driven by IPS strength, resilient Service Centers, and improving gross margin mix .
• Versus S&P Global consensus, EPS modest beat (actual $1.43 vs $1.39*), revenue in line/slight miss ($498.7M vs $499.0M*), and EBITDA slight beat (EBITDA $55.8M vs $55.0M*) as mix and operating leverage improved; coverage remains thin (1 estimate) .
• Segment highlights: IPS revenue +27.5% y/y with 19.9% operating margin; Service Centers +10.8% y/y with 14.8% margin; SCS essentially flat y/y with 8.0% margin and a large new contract moving above breakeven in July .
• Capital and M&A cadence supportive: Cash $112.9M, secured leverage ratio ~2.4x; company closed two acquisitions in H1 and one post quarter and “anticipates at least three or four more” in H2; ABL increased by $50M post quarter .

What Went Well and What Went Wrong

• What Went Well

  • IPS-led growth and backlog: IPS sales +27.5% y/y; IPS energy backlog at “all-time high,” with energy-related average backlog +4.9% q/q; DXP Water marked its 11th consecutive quarter of sequential growth .
  • Margin execution: Gross margin improved to 31.65% and Adjusted EBITDA margin reached 11.5% (record), aided by mix and operating leverage .
  • Commercial momentum and diversification: Sequential organic sales +12.3% ($51.9M) plus $24.6M from acquisitions; management emphasized reduced energy exposure and strength in newer verticals (e.g., water, data centers, e-commerce) .

• What Went Wrong

  • SCS profitability ramp: SCS revenue flat y/y; a large new contract was initially loss-making in Q2 before moving above breakeven in July, underscoring ramp complexity and pricing timing in SCS .
  • Product write-offs: Company recorded ~$2M write-offs on two unsuccessful new product developments within PumpWorks, not adjusted out of EBITDA, modestly pressuring results .
  • Debt figure discrepancy: Press release cites total debt of $626.8M as of 6/30, while the call referenced $645.6M; management also disclosed $219M liquidity and an undrawn ABL (with $28.7M LCs) before a $50M ABL upsizing post quarter .

Financial Results

• Company-level results

• Segment sales

• Segment operating income margins (where disclosed)

• KPIs and business-day metrics

• Liquidity and leverage

Note: CFO also referenced total debt of $645.6M and liquidity of $219M (undrawn ABL with $28.7M LCs) as of Q2; ABL capacity was increased by $50M after quarter end .

Guidance Changes

DXP did not provide formal quantitative forward guidance (revenue, EPS, margins, tax, or segment ranges) in the Q2 press release or call; management emphasized backlog strength, continued margin execution, near-term capex moderation, and accelerated M&A cadence.

Earnings Call Themes & Trends

Management Commentary

• “DXP delivered another quarter of strong results… another quarter of both sales growth and 11% plus adjusted EBITDA margins… diluted earnings per share of $1.43… sales… $498.7 million… average of $7.9 million per business day” .
• “IPS led the way… energy… up 37.3% y/y… IPS energy backlog… at an all-time high… DXP Water… eleventh consecutive quarter of sequential sales growth… wrote off $2 million [two] unsuccessful new product developments in Q2” .
• “Record… adjusted EBITDA margins at 11.5%. Gross margins improving to 31.65%… IPS grew 27.5% y/y; Service Centers +10.8% y/y; SCS flat y/y… Average daily sales $7.92M (Q2)” .
• “Working capital… $349M (18.2% of LTM sales)… liquidity of $219M… undrawn ABL… increased our ABL by $50M post quarter… anticipate at minimum closing another three to four acquisitions during the second half” .

Q&A Highlights

• Monthly sales cadence: April $7.81M/day, May $7.55M/day, June $8.37M/day; July tracking ~$7.25M/day (seasonality/quarter-end push noted) .
• Margin outlook: Positive bias from accretive acquisitions (higher gross/EBITDA margins in water/wastewater and rotating equipment) as new deals roll in .
• Macro/tariffs: Management not seeing hesitation to spend; bookings-to-billings > 1.0; backlog “as high as it’s ever been” .

Estimates Context

• Q2 2025 vs S&P Global consensus: EPS beat; revenue in line/slight miss; EBITDA slight beat.

Coverage note: 1 estimate for EPS and Revenue in Q2 (thin coverage) [GetEstimates].
Values marked with * are from S&P Global consensus. Values retrieved from S&P Global.

Key Takeaways for Investors

• Quality beat with record Adjusted EBITDA margin (11.5%) and solid EPS beat; operating leverage and mix (IPS, water) are working, supporting a higher-through-cycle margin profile .
• IPS backlog and bookings suggest durable revenue visibility into H2’25/H1’26; DXP Water’s 11th consecutive sequential growth underscores diversification beyond energy .
• SCS is turning the corner as a large contract moves above breakeven; expect improving contribution as pricing resets and ramps complete .
• Capital deployment remains an upside catalyst: at least 3–4 more acquisitions targeted for H2 alongside expanded ABL capacity; historically accretive deals should aid margin mix .
• Liquidity ample (cash $112.9M; undrawn ABL; $219M liquidity), leverage manageable (~2.4x), enabling continued M&A while pursuing ROIC above cost of capital .
• Watch list: reconcile total debt disclosures (press release $626.8M vs call $645.6M); monitor gross margin sustainability, SCS ramp, and July sales seasonality into Q3 .
• Estimate revisions likely modestly upward on EPS/EBITDA given execution and margin trajectory, though revenue was essentially in line amid thin coverage .

Sources: Q2 2025 8‑K/press release and exhibits ; Q2 2025 earnings call transcript ; Q1 2025 press release ; Q4 2024 press release ; Q2 2025 earnings press release (Business Wire) ; Earnings call logistics PR .