Executive Summary

Mixed print vs consensus: revenue beat while EPS missed; Q3 sales were $513.7M (+8.6% Y/Y, +3.0% Q/Q) with Adjusted EBITDA of $56.5M (11.0% margin), but GAAP diluted EPS of $1.31 and Adjusted EPS of $1.34 came in below S&P EPS consensus of $1.565; revenue beat $498.8M consensus, EBITDA was roughly in line* .
Strength in Service Centers and IPS offset SES softness; gross margin held 31.4% (+50 bps Y/Y), with Service Centers up 10.5% Y/Y to $350.2M and IPS up 11.9% Y/Y to $100.6M; SES declined 5.0% Y/Y to $63.0M .
Non-operational SG&A pressures (insurance renewal timing, higher health claims, acquisition costs) weighed on EPS; management reiterated confidence in sustainable ~11% Adjusted EBITDA margins despite seasonal Q4 fewer billing days .
Strategy execution and M&A momentum continue, with two water/wastewater acquisitions post quarter-end (APSCO; Triangle Pump) bolstering the IPS water platform heading into 2026 .

What Went Well and What Went Wrong

What Went Well

Record quarterly sales and resilient gross margin: revenue hit a new high at $513.7M; consolidated gross margin was 31.39% (+50 bps Y/Y), supported by mix and accretive acquisitions .
Segment outperformance in Service Centers and IPS: Service Centers +10.5% Y/Y to $350.2M (14.7% OI margin), IPS +11.9% Y/Y to $100.6M (18.3% OI margin); both also grew sequentially (SC +3.1%, IPS +7.5%) .
Positive strategic tone and pipeline: “We continue to set new high watermarks… Adjusted EBITDA was $56.5 million in the quarter” (CEO) and “We have closed two acquisitions during the fourth quarter thus far with more to come” (CFO) .

What Went Wrong

EPS miss despite revenue strength: GAAP diluted EPS $1.31 and Adjusted EPS $1.34 vs S&P EPS consensus $1.565; non-operational SG&A factors elevated costs (insurance renewal timing, health claims, M&A fees) pressuring earnings* .
SES softness and seasonality: Supply Chain Services down 5% Y/Y and -3.7% Q/Q due to pullbacks at oil & gas and chemical sites, and expected Q4 seasonality with fewer billing days .
Early signs of moderation in IPS energy backlog: Q3 energy-related average backlog declined 3.3% (first decline in 10 quarters), though still above long-term averages; management will watch Q4/Q1 backlog trajectory .

Financial Results

Consolidated performance vs prior periods

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($M)	472.9	476.6	498.7	513.7
Gross Profit ($M)	146.1	150.3	157.8	161.3
Gross Margin (%)	30.9% (calc)	31.5% (calc)	31.7% (calc)	31.39%
Operating Income ($M)	39.6	40.5	46.0	43.7
Operating Margin (%)	8.4%	8.5%	9.2%	8.5%
Net Income ($M)	21.1	20.6	23.6	21.6
Diluted EPS (GAAP)	$1.27	$1.25	$1.43	$1.31
Adjusted EBITDA ($M)	52.4	52.5	57.3	56.5
Adjusted EBITDA Margin (%)	11.1%	11.0%	11.5%	11.0%

Notes: Gross margin Q/Q/Y/Y values for Q3 2025 per management 31.39% (+50 bps Y/Y) .

Segment breakdown

Segment	Q3 2024 Sales ($M)	Q2 2025 Sales ($M)	Q3 2025 Sales ($M)	Q3 2025 OI Margin
Service Centers	316.8	339.7	350.2	14.7%
Innovative Pumping Solutions (IPS)	89.8	93.5	100.6	18.3%
Supply Chain Services (SES)	66.3	65.4	63.0	8.4%

Sequential growth (management): Service Centers +3.1%, IPS +7.5%, SES -3.7% .

KPIs and balance sheet/cash flow

KPI	Q3 2024	Q2 2025	Q3 2025
Sales/Business Day ($M)	7.39	7.916	8.027
Organic Sales/Business Day ($M)	6.944	7.525	7.739
CFO ($M)	28.3	18.6	34.9
CapEx ($M)	4.0	10.3	6.7
FCF ($M)	24.4	8.3	28.1
Cash & Equivalents ($M)	—	112.9	123.8
Total Debt ($M)	—	626.8	644.0
Secured leverage (Net Debt/EBITDA)	—	2.4x	2.31x
ROIC	—	—	33%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA margin	Near-term	~11%+ sustainable (prior commentary)	Management “plenty comfortable with 11%… sustainable,” may adjust with more water M&A	Maintained
Q4 seasonal cadence	Q4 2025	—	Expect lighter quarter on fewer billing days; target ~11% EBITDA margin mix	New qualitative color
CapEx	1-2 quarters; 2026	—	CapEx to lessen over next 1-2 quarters; look to be less in 2026	New qualitative color
Acquisitions	2H25–Q1’26	Active pipeline	5 YTD through Q3 plus 2 post-quarter; aim to close at least 3 by end of Q1	Increased momentum

No quantitative revenue/EPS guidance was provided in the press release or call .

Earnings Call Themes & Trends

Topic	Q1 2025 (prior mentions)	Q2 2025 (prior mentions)	Q3 2025 (current)	Trend
IPS backlog (Energy & Water)	Building platform; strong Y/Y IPS growth	IPS +27.5% Y/Y sales; LTM covenant EBITDA rising	Energy backlog -3.3% Q/Q (first decline in 10 quarters) but still above averages; Water backlog +7% Q/Q	Still elevated; watching moderation
Gross margin	Strength in GM% supporting leverage	“Strength in our gross profit margins”	31.39% GM; +50 bps Y/Y; acquisitions accretive	Improving/holding
SG&A / cost inflation	Investments in people/tech	—	Insurance renewal timing, higher health claims, M&A costs elevated SG&A	Temporary headwinds
SES (Supply Chain Services)	+2.1% Y/Y in Q1	-0.4% Y/Y in Q2	-5% Y/Y; -3.7% Q/Q; seasonality expected in Q4; stronger 2026	Near-term soft; improving setup
M&A / DXP Water	Arroyo closed in Q1	3 acquisitions by early Q3	APSCO & Triangle post-Q3; robust pipeline	Accelerating
Data center exposure	—	—	Small today; targeted opportunity across pumps/water/filtration	Early-stage

Management Commentary

CEO: “We continue to set new high watermarks… Adjusted EBITDA was $56.5 million in the quarter… sales were $350.2M (SC), $100.6M (IPS), and $63.0M (SES). Overall, we are very pleased with our performance” .
CFO: “We feel plenty comfortable with 11% [Adjusted EBITDA margin]… trending now at a sustainable 11%+… Q4 is lighter from fewer days but we still expect mix to get us to that 11%” .
CFO on SG&A: Elevated by mid-year insurance renewal timing, higher self-insured health claims, and higher professional fees tied to acquisitions; impact likely to persist near term given active pipeline .
CEO closing: “Record sales… Gross profit margins are… holding. Expenses were a little higher than expected, but… for the right reasons… Free cash flow improved to $28.2M… We continue to hit adjusted EBITDA margins of 11%” .

Q&A Highlights

Monthly cadence and Q4 start: July $7.26M/day, August $7.95M/day, September $8.9M/day; October at $7.59M/day reflecting typical Q4 seasonality .
EBITDA margin outlook: Sustainable ~11%+ near term; holiday-related fewer billing days in Q4 but mix expected to keep margins around target .
Corporate SG&A drivers: Insurance renewal timing/premium increases, self-insured health claims, acquisition-related professional fees drove Q3 SG&A above run-rate .
Data centers: Limited contribution today; pursuing opportunities across pumps, water, filtration; diversified national efforts underway .

Estimates Context

Metric	Q1 2025 Consensus	Q1 2025 Actual	Beat/Miss	Q2 2025 Consensus	Q2 2025 Actual	Beat/Miss	Q3 2025 Consensus	Q3 2025 Actual	Beat/Miss
Revenue ($M)	477.0*	476.6	Miss	499.0*	498.7	In line	498.8*	513.7	Beat
Primary EPS (Adj)	1.20*	1.26 (Adj)	Beat	1.39*	1.43 (GAAP)	Beat	1.565*	1.34 (Adj)	Miss
EBITDA ($M)	52.0*	54.97 EBITDA	Beat	55.0*	55.83 EBITDA	In line	54.7*	54.27 EBITDA	In line

Notes: Consensus from S&P Global; Primary EPS reflects S&P “Primary EPS” (adjusted). Company-reported Adjusted Diluted EPS used for “Actual” EPS comparisons; company-reported EBITDA used for “Actual” EBITDA comparisons. Values retrieved from S&P Global.*

Implications: The Q3 revenue beat alongside an EPS miss suggests higher-than-modeled SG&A and/or mix headwinds (insurance/claims/M&A costs) suppressed EPS; estimates may shift lower on EPS/EBITDA margin while revenue trajectories likely move higher given September strength and M&A adds .

Key Takeaways for Investors

Revenue momentum intact; September sales/day acceleration and record Service Centers/IPS output, plus post-quarter M&A, support sustained top-line strength into 2026 .
Margin construct resilient at ~11% Adjusted EBITDA; management reiterated sustainability despite Q4 seasonality and SG&A timing effects .
Mixed print vs Street (rev beat, EPS miss) likely refocuses debate on SG&A normalization and acquisition cadence/integration benefits over coming quarters .
IPS water remains a structural tailwind; backlog and platform build-out reduce cyclicality vs legacy energy exposure, though energy backlog bears watching after a modest decline .
SES softness appears transitory/seasonal; management expects a stronger 2026 as new customer implementations scale and billing days normalize .
Balance sheet/liquidity provide dry powder (cash $123.8M; undrawn ABL; availability $153.4M; liquidity $277.3M) to continue tuck-ins while maintaining ~2.3x secured leverage .
Trading setup: near-term catalysts include Q4 seasonality outcomes vs 11% margin target and incremental water-platform M&A; watch SG&A normalization and backlog trajectory to gauge EPS recovery .

Appendix: Additional Detail

LTM covenant EBITDA $225.1M; total debt $644M; secured leverage 2.31x; liquidity $277.3M including $123.8M cash .
Free cash flow improved to $28.1M in Q3 on stronger operating cash flow and moderating CapEx .
Organic sales per business day rose to $7.739M (vs $6.944M in Q3’24), reflecting core demand strength .

Citations: Press release and 8‑K (financials): . Earnings call transcript: . Prior quarters’ releases: . Acquisitions (post-Q3): .

S&P Global disclaimer: Consensus estimate values and “Primary EPS Consensus Mean,” “Revenue Consensus Mean,” and “EBITDA Consensus Mean” are from S&P Global and marked with an asterisk (*).

DXP ENTERPRISES INC (DXPE)·Q3 2025 Earnings Summary