DXP Enterprises Reports Strong Start to 2025

DXP Enterprises ((DXPE)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for DXP Enterprises painted a picture of a robust start to 2025, characterized by impressive sales growth and strategic acquisitions. Despite some concerns about tariffs and increased working capital impacting cash flow, the overall sentiment was one of optimism, with expectations for continued growth and market resilience.

Strong Financial Performance

DXP Enterprises reported a strong financial performance in the first quarter, with an adjusted EBITDA of $52.5 million and adjusted diluted earnings per share of $1.26. The company achieved a year-over-year sales growth of 15.5% and a sequential sales growth of 1.2%, underscoring its solid market position.

Successful Acquisition Strategy

The company’s acquisition strategy proved fruitful, with the closure of Arroyo Process Equipment contributing $31.1 million in sales. DXP anticipates completing two more acquisitions by the end of the second quarter, further bolstering its growth trajectory.

Innovative Pumping Solutions Growth

The Innovative Pumping Solutions segment was a standout performer, achieving a remarkable 38.5% year-over-year sales growth. This was driven by strong performance in DXP Water and an increased energy backlog, highlighting the segment’s strategic importance.

Service Centers Sales Record

DXP’s Service Centers set a new sales record, reaching $327 million, a 13.4% increase year-over-year. This achievement underscores the strength and resilience of the company’s service offerings.

Gross Margin Improvement

The company reported a gross margin improvement of 151 basis points to 31.5% year-over-year, reflecting strong segment performance and favorable contributions from acquisitions.

Tariff Uncertainty

Rising tariff uncertainties pose a potential risk, with concerns that high tariffs, such as those reaching 145%, could impact purchasing decisions and demand.

Working Capital Increase

DXP experienced an increase in working capital by $34.3 million, with accounts receivable growing and DSO days extending to 70 days, indicating a need for careful cash flow management.

Negative Free Cash Flow

The company reported a negative free cash flow, with cash flow from operations at $3 million in Q1, significantly lower than the $27 million reported in the same quarter last year. This decline was mainly due to increased receivables and deferred tax payments.

Forward-Looking Guidance

Looking ahead, DXP Enterprises remains focused on strategic investments to drive long-term shareholder value. The company expects continued robust demand across its industrial markets, supported by an average daily sales rate of $7.6 million per business day. Despite macroeconomic challenges, DXP is committed to maintaining its growth momentum through strategic acquisitions and market expansion.

In summary, DXP Enterprises’ earnings call highlighted a strong start to 2025, with significant sales growth and successful acquisition strategies. While challenges such as tariff uncertainties and increased working capital were noted, the company’s optimistic outlook and strategic focus on growth and market resilience were clear takeaways.