Companies: 10,793     total market cap: $134.669 T
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DXP Enterprises
DXPE
#4505
Rank
$2.23 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$142.75
Share price
-0.41%
Change (1 day)
95.12%
Change (1 year)
  1. DXP Enterprises
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2025 Q2

DXP Enterprises - 10-Q quarterly report FY2025 Q2


Text size:
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 For the quarterly period ended June 30, 2025
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from __________ to __________

Commission file number 0-21513
DXP Enterprises, Inc.
(Exact name of registrant as specified in its charter)
Texas 76-0509661
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)

5301 Hollister, Houston, Texas 77040
(Address of principal executive offices, including zip code)

(713) 996-4700
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each ClassTrading SymbolName of Exchange on which Registered
Common Stock par value $0.01DXPENASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐    Accelerated filer ☒    Non-accelerated filer ☐    Smaller reporting company ☐   
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of registrant's Common Stock, par value $0.01 per share outstanding as of August 4, 2025: 15,694,084.



DXP ENTERPRISES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS

 Page
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38


2

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

DXP ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(in thousands, except per share amounts) (unaudited)

 Three Months Ended June 30,Six Months Ended June 30,
 2025202420252024
Sales$498,682 $445,556 $975,251 $858,191 
Cost of sales340,869 307,763 667,173 596,516 
Gross profit157,813 137,793 308,078 261,675 
Selling, general and administrative expenses111,827 100,441 221,577 195,192 
Income from operations45,986 37,352 86,501 66,483 
Interest expense14,744 15,384 29,404 30,928 
Other income, net (Note 15)
(354)(1,035)(1,672)(3,004)
Income before income taxes31,596 23,003 58,769 38,559 
Provision for income taxes7,984 6,310 14,568 10,534 
Net income 23,612 16,693 44,201 28,025 
Preferred stock dividend22 22 45 45 
Net income attributable to common shareholders23,590 16,671 44,156 27,980 
Net income $23,612 $16,693 $44,201 $28,025 
Foreign currency translation adjustments2,563 93 2,649 (521)
Comprehensive income $26,175 $16,786 $46,850 $27,504 
Earnings per share (Note 9):
     Basic$1.50 $1.05 $2.81 $1.75 
     Diluted$1.43 $1.00 $2.67 $1.66 
Weighted average common shares outstanding:
     Basic15,694 15,868 15,696 15,998 
     Diluted16,534 16,708 16,536 16,838 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

DXP ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts) (unaudited)
June 30, 2025December 31, 2024
ASSETS 
Current assets:  
Cash$112,930 $148,320 
Restricted cash— 91 
Accounts receivable, net of allowance of $3,665 and $5,172, respectively
361,393 339,365 
Inventories110,758 103,113 
Costs and estimated profits in excess of billings57,260 50,735 
Prepaid expenses and other current assets41,320 20,250 
Total current assets683,661 661,874 
Property and equipment, net107,207 81,556 
Goodwill461,298 452,343 
Other intangible assets, net78,485 85,679 
Operating lease right of use assets, net60,835 46,569 
Other long-term assets20,908 21,473 
Total assets$1,412,394 $1,349,494 
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt$6,595 $6,595 
Trade accounts payable104,764 103,728 
Accrued wages and benefits37,449 41,650 
Customer advances16,018 13,655 
Billings in excess of costs and estimated profits22,906 12,662 
Short-term operating lease liabilities17,071 14,921 
Other current liabilities40,646 50,773 
Total current liabilities245,449 243,984 
Long-term debt, net of unamortized debt issuance costs and discounts
620,239 621,684 
Long-term operating lease liabilities45,402 33,159 
Other long-term liabilities33,212 27,879 
Total long-term liabilities698,853 682,722 
Total liabilities944,302 926,706 
Commitments and Contingencies (Note 10)
Shareholders' equity:
Series A preferred stock, $1.00 par value; 1,000,000 shares authorized
1 1
Series B preferred stock, $1.00 par value; 1,000,000 shares authorized
15 15 
Common stock, $0.01 par value, 100,000,000 shares authorized; 20,401,857 issued and 15,694,084 outstanding at June 30, 2025 and 20,402,861 issued and 15,695,088 outstanding at December 31, 2024
204 204 
Additional paid-in capital217,982 219,511 
Retained earnings433,826 389,670 
Accumulated other comprehensive loss(30,961)(33,610)
Treasury stock, at cost 4,707,773 and 4,707,773 shares, respectively
(152,975)(153,003)
Total DXP Enterprises, Inc. equity468,092 422,788 
Total liabilities and equity$1,412,394 $1,349,494 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

DXP ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
Six Months Ended June 30,
 20252024
CASH FLOWS FROM OPERATING ACTIVITIES: 
Net income $44,201 $28,025 
Reconciliation of net income to net cash provided by operating activities:
Depreciation4,836 4,456 
Amortization of intangibles and finance lease assets
13,788 11,209 
Amortization of debt issuance costs1,927 1,788 
Gain on sale of property and equipment(332)— 
Recovery of credit losses(1,085)(771)
Payment of contingent consideration liability in excess of acquisition-date fair value(333)(17)
Fair value adjustment on contingent consideration728 (305)
Restricted stock compensation expense2,800 2,076 
Deferred income taxes7,036 (4,944)
Other non-cash items(4,999)(87)
Changes in operating assets and liabilities, net of effects of businesses acquired:
Accounts receivable(15,972)(3,085)
Costs and estimated profits in excess of billings(6,443)5,561 
Inventories(4,336)2,548 
Prepaid expenses and other assets(3,250)(4,128)
Trade accounts payable
(3,159)(3,454)
Accrued expenses
3,675 749 
Billings in excess of costs and estimated profits9,823 2,591 
Income taxes(27,286)(488)
Net cash provided by operating activities$21,619 $41,724 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment(30,260)(11,719)
Proceeds from the sale of property and equipment2,715 — 
Acquisition of businesses, net of cash acquired(13,860)(119,017)
Net cash used in investing activities$(41,405)$(130,736)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal debt payments(3,248)(2,750)
Debt issuance costs(125)— 
Shares repurchased held in treasury — (23,978)
Payment for acquisition contingent consideration liability(5,145)(4,483)
Preferred stock dividends paid(45)(45)
Payment for employee taxes withheld from stock awards(4,330)(1,755)
Principal payments on finance leases(3,701)(1,992)
Net cash used in financing activities
$(16,594)$(35,003)
Effect of foreign currency on cash899 830 
Net change in cash and restricted cash(35,481)(123,185)
Cash and restricted cash at beginning of period148,411 173,211 
Cash and restricted cash at end of period$112,930 $50,026 
Supplemental cash flow information (Note 14)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

DXP ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(in thousands) (unaudited)


Series A preferred stockSeries B preferred stockCommon stockPaid-in capitalRetained earningsAccum other comp lossTreasury StockTotal equity
Balance at December 31, 2024$1 $15 $204 $219,511 $389,670 $(33,610)$(153,003)$422,788 
Preferred dividends paid— — — — (23)— — (23)
Compensation expense for restricted stock
— — — 1,317 — — — 1,317 
Tax related items for share based awards— — — (126)— — — (126)
Currency translation adjustment— — — — — 86 — 86 
Excise tax on share repurchases— — — — — — 28 28 
Net income
— — — — 20,589 — — 20,589 
Balance at March 31, 2025$1 $15 $204 $220,702 $410,236 $(33,524)$(152,975)$444,659 
Preferred dividends paid— — — — (22)— — (22)
Compensation expense for restricted stock
— — — 1,483 — — — 1,483 
Tax related items for share based awards— — — (4,203)— — — (4,203)
Currency translation adjustment— — — — — 2,563 — 2,563 
Net income
— — — — 23,612 — — 23,612 
Balance at June 30, 2025$1 $15 $204 $217,982 $433,826 $(30,961)$(152,975)$468,092 


Series A preferred stockSeries B preferred stockCommon stockPaid-in capitalRetained earningsAccum other comp lossTreasury StockTotal equity
Balance at December 31, 2023$1 $15 $345 $216,482 $319,271 $(31,240)$(123,995)$380,879 
Preferred dividends paid— — — — (23)— — (23)
Compensation expense for restricted stock— — — 864 — — — 864 
Tax related items for share based awards— — — (54)— — — (54)
Currency translation adjustment— — — — — (614)— (614)
Repurchases of shares — — — — — — (16,805)(16,805)
Excise tax on share repurchases— — — — — — (115)(115)
Net income
— — — — 11,332 — — 11,332 
Balance at March 31, 2024$1 $15 $345 $217,292 $330,580 $(31,854)$(140,915)$375,464 
Preferred dividends paid— — — — (22)— — (22)
Compensation expense for restricted stock— — — 1,212 — — — 1,212 
Tax related items for share based awards— — — (1,701)— — — (1,701)
Currency translation adjustment— — — — — 93 — 93 
Repurchases of shares— — — — — — (6,992)(6,992)
Excise tax on share repurchases— — — — — — (66)(66)
Net income
— — — — 16,693 — — 16,693 
Balance at June 30, 2024$1 $15 $345 $216,803 $347,251 $(31,761)$(147,973)$384,681 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements



6


DXP ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - THE COMPANY

DXP Enterprises, Inc. together with its subsidiaries (collectively "DXP," the "Company," "us," "we," or "our") was incorporated in Texas on July 26, 1996. DXP Enterprises, Inc. and its subsidiaries are engaged in the business of distributing maintenance, repair and operating ("MRO") products and services to a variety of end markets and business-to-business customers. Additionally, DXP provides integrated, custom pump skid packages, pump remanufacturing and manufactures branded private label pumps to energy and broad industrial customers. The Company is currently organized into three business segments: Service Centers ("SC"), Innovative Pumping Solutions ("IPS"), and Supply Chain Services ("SCS"). See Note 11 - Segment Reporting for discussion of the business segments.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES

Basis of Presentation
The Company's financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission ("SEC") not all disclosures normally required in annual consolidated financial statements prepared in accordance with U.S. GAAP are required. The unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2024 that are included in our annual report on Form 10-K filed with the SEC on March 10, 2025 (“Annual Report”).

Certain reclassifications were made to the prior year’s consolidated financial statements to conform to the current year presentation. Such reclassifications did not have a material effect on our consolidated statements of operations and comprehensive income, balance sheets, cash flows or equity.

The results of operations for the six months ended June 30, 2025 are not necessarily indicative of results expected for the full fiscal year. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for the fair statement of the Company's financial position, results of operations and cash flows for the interim periods presented.

All intercompany accounts and transactions have been eliminated in consolidation.

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

All new accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations.

Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU would result in additional disclosures being included in our consolidated financial statements, once adopted. We are currently evaluating the provisions of this ASU.

7

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted. We are currently evaluating the provisions of this ASU.

NOTE 4 - FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Our acquisitions may include contingent consideration as part of the purchase price. The fair value of the contingent consideration is estimated as of the acquisition date based on the present value of the contingent payments to be made using a weighted probability of possible payments. The unobservable inputs used in the determination of the fair value of the contingent consideration include management's assumptions about the likelihood of payment based on the established benchmarks, discount rates, and an internal rate of return analysis. The fair value measurement includes inputs that are Level 3 inputs as they are not observable in the market. Should actual results increase or decrease as compared to the assumptions used in our analysis, the fair value of the contingent consideration obligations will increase or decrease, up to the contracted limit, as applicable. Changes in the fair value of the contingent consideration are measured each reporting period and reflected in our results of operations.

As of June 30, 2025, there was $11.9 million in other current and other long-term liabilities for contingent consideration.

The following table provides a reconciliation of the beginning and ending balances and gains or losses recognized during the six months ended June 30, 2025 (in thousands):
 Contingent Consideration
*Beginning balance at December 31, 2024$16,322 
Acquisitions and settlements:
   Acquisitions (Note 12)
— 
   Settlements(5,145)
Total remeasurement adjustments:
Changes in fair value recorded in other expense (income), net
728 
*Ending Balance at June 30, 2025$11,905 
*Amounts included in other current liabilities were $7.3 million and $8.0 million for the periods ending June 30, 2025 and December 31, 2024, respectively. Amounts included in other long-term liabilities were $4.6 million and $8.3 million for the periods ending June 30, 2025 and December 31, 2024, respectively.

Sensitivity to Changes in Significant Unobservable Inputs

The significant Level 3 unobservable inputs used in the fair value measurement of contingent consideration related to the acquisitions are annualized EBITDA forecasts developed by the Company's management and the probability of achievement of those EBITDA results. The discount rate used in the calculations was 9.8 percent. Changes in our unobservable inputs in isolation would result in a change to our fair value measurement. As of June 30, 2025, the maximum amount of contingent consideration payable under these arrangements is $13.2 million over three years.

Other financial instruments not measured at fair value on the Company's unaudited condensed consolidated balance sheets at June 30, 2025 and December 31, 2024, but which require disclosure of their fair values include: cash, restricted cash, accounts receivable, trade accounts payable and accrued expenses. The Company believes that the estimated fair value of such instruments at June 30, 2025 and December 31, 2024 approximates their carrying value as reported on the unaudited condensed consolidated balance sheets due to the relative short maturity of these instruments.

See Note 8 - Long-term Debt for fair value disclosures on our asset-backed line of credit and term loan debt under our syndicated credit agreement facilities.

8

NOTE 5 – INVENTORIES

Inventories are made up of equipment purchased for resale, and materials utilized in the fabrication of industrial and wastewater equipment stated at lower of cost or net realizable value, primarily determined using the weighted average cost method. The Company reviews inventory and records provisions for the difference between cost and net realizable value arising from excess and obsolete items on hand based upon the aging of the inventories, market trends, and continued demand.

The carrying values of inventories are as follows (in thousands):
June 30, 2025December 31, 2024
Finished goods$96,290 $89,780 
Work in process14,468 13,333 
Inventories$110,758 $103,113 

NOTE 6 – CONTRACT ASSETS AND LIABILITIES

Under our customized pump production and water and wastewater project contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets presented as "Costs and estimated profits in excess of billings". However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities that are presented as "Billings in excess of costs and estimated profits" on our unaudited condensed consolidated balance sheets.

Costs and estimated profits on uncompleted contracts and related amounts billed were as follows (in thousands):

 June 30, 2025December 31, 2024
Costs incurred on uncompleted contracts$136,025 $122,951 
Estimated profits, thereon64,324 58,373 
Total costs and estimated profits on uncompleted contracts200,349 181,324 
Less: billings to date165,995 143,251 
Net$34,354 $38,073 

Such amounts were included in the accompanying unaudited condensed consolidated balance sheets for June 30, 2025 and December 31, 2024 under the following captions (in thousands):

 June 30, 2025December 31, 2024
Costs and estimated profits in excess of billings$57,260 $50,735 
Billings in excess of costs and estimated profits(22,906)(12,662)
Net$34,354 $38,073 

During the six months ended June 30, 2025 and 2024, $3.1 million and $2.9 million of the balances that were previously classified as contract liabilities at the beginning of the period were recognized in revenues, respectively. Contract asset and liability changes were primarily due to normal activity and timing differences between our performance and customer payments.

9

NOTE 7 – INCOME TAXES

The following table presents provision for income taxes (in thousands, except for effective tax rate):  

Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Income before provision for income taxes$31,596 $23,003 $58,769 $38,559 
Provision for income taxes7,984 6,310 14,568 10,534 
Effective tax rate25.3 %27.4 %24.8 %27.3 %

We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in determining our provision for income taxes and evaluating our uncertain tax positions. The effective tax rate decreased primarily due to a higher tax benefit from stock compensation vested during the period, a higher benefit from state income taxes, and higher tax benefits from research and development tax credits (R&D). These benefits were partially offset by recognition of uncertain tax positions related to R&D tax credits.

While we believe that we have adequately provided for all uncertain tax positions, or tax positions where we believe it is not more-likely-than-not that the position will be sustained upon review, amounts asserted by tax authorities could be greater or less than our accrued position. Accordingly, our provisions on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or the underlying matters are settled or otherwise resolved with the respective tax authorities.

On July 4th, 2025, the One Big Beautiful Bill Act (“OBBB”) was signed into law. The OBBB makes changes to U.S. tax law and includes provisions that beginning in January 2025, make permanent full expensing of tangible personal property, restores EBITDA-based calculations for purposes of the business interest deduction and allows for current expensing of R&D expenditures. ASC 740-10 requires the impact of changes to tax law to be recorded in the period of enactment, which will be reflected in our third quarter financial statements. We expect that OBBB will provide some reductions in cash taxes, however we do not anticipate the OBBB to materially impact income tax expense. Management will continue to monitor U.S. Treasury Department and IRS implementation of the OBBB and will apply applicable guidance and rulemaking as it becomes available.

The Organization of Economic Cooperation and Development (“OECD”) continues to release additional guidance, including administrative guidance on how Pillar Two rules should be interpreted and applied by jurisdictions as they adopt Pillar Two. A number of countries have utilized the administrative guidance as a starting point for legislation that went into effect January 1, 2024. As of June 30, 2025, DXP anticipates the impact of Pillar Two to be immaterial to the Company based on current legislation that has been enacted to date.

NOTE 8 – LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):
 June 30, 2025December 31, 2024
ABL Revolver$— $— 
Amended Senior Secured Term Loan B due October 13, 2030(1)
644,629 647,876 
Promissory Note due November 1, 20291,000 1,000 
Total debt
645,629 648,876 
Less: current maturities
(6,595)(6,595)
Total long-term debt
$639,034 $642,281 
Unamortized discount and debt issuance costs
18,795 20,597 
Long-term debt, net of unamortized discount and debt issuance costs
$620,239 $621,684 
(1) The fair value of the Amended Term Loan B due October 13, 2030 using level 2 input values was $643.8 million and $657.6 million as of June 30, 2025 and December 31, 2024, respectively.

10

Senior Secured Term Loan B:

On October 3, 2024, the Company entered into an amendment on its existing Senior Secured Term Loan B (the “Term Loan Amendment”), which provides for, among other things, an additional $105.0 million in new incremental commitments. The Term Loan Amendment refinanced the existing Senior Term Loan B and replaced it with an Amended Senior Secured Term Loan B with total borrowings of $649.5 million. The Senior Secured Term Loan B amortizes in equal quarterly installments of 0.25 percent, with the remaining balance being payable on October 13, 2030, when the facility matures.

As of June 30, 2025 there was $644.6 million outstanding under the Amended Senior Secured Term Loan B.

Interest rate

The interest rate for the Amended Senior Secured Term Loan B was 8.08 percent and 8.32 percent as of June 30, 2025 and December 31, 2024, respectively.

Facility Size Increases

The Senior Secured Term Loan B allows for incremental increases in facility size up to an aggregate of $100 million.

Prepayments

We are required to repay the Senior Secured Term Loan B with the proceeds from certain asset sales, certain debt issuances, and certain insurance proceeds. In addition, on an annual basis, we are required to repay an amount equal to 50 percent of excess cash flow, as defined in the Senior Secured Term Loan B, reducing to 25 percent if our Total Leverage Ratio is less than or equal to 3.00 to 1.00. No payment of excess cash flow is required if the Total Leverage Ratio is less than or equal to 2.50 to 1.00.

Restrictive Covenants

The Company’s primary financial covenant under the Term Loan B is a Secured Leverage Ratio. The Term Loan B Agreement requires that the Company’s Secured Leverage Ratio as of June 30, 2025 to be less than 5.50 to 1.00.

As of June 30, 2025, the Company’s Secured Leverage Ratio was 2.41 to 1.00.

ABL Revolver:

On July 19, 2022, the Company entered into an Amended and Restated Loan and Security Agreement (the “ABL Credit Agreement”) that provided for a $135.0 million asset-backed revolving line of credit (the "ABL Revolver"). Subject to the conditions set forth in the ABL Credit Agreement, the ABL Revolver may be increased in increments of $10.0 million up to an aggregate of $50.0 million. The ABL Revolver matures on July 19, 2027. Interest accrues on outstanding borrowings at a rate equal to SOFR plus a margin ranging from 1.25 percent to 1.75 percent per annum, or at an alternate base rate, Canadian prime rate or Canadian base rate plus a margin ranging from 0.25 percent to 0.75 percent per annum, in each case, based upon the average daily excess availability under the ABL Revolver for the most recently completed calendar quarter. Fees payable on the unused portion of the facility range from 0.25 percent to 0.375 percent per annum. At June 30, 2025 the unused line fee was 0.375 percent and there were no amounts outstanding under the ABL Revolver.

On July 1, 2025 the Company entered into an Increase Agreement (the “Increase Agreement”) that provided for a $185.0 million asset-backed revolving line of credit (the "ABL Revolver"). Please refer to Note. 17 - Subsequent Events for additional discussion.

Guarantees

Each of our current and future wholly owned material U.S. subsidiaries and DXP Enterprises, Inc. guarantees the obligations of our borrower under the ABL Revolver. Additionally, each of our Canadian subsidiaries guarantees the obligations of our Canadian borrower subsidiaries under the ABL Revolver.

11

Security

Obligations under the U.S. Borrowing Base are primarily secured, subject to certain exceptions, by a first-priority secure interest in the accounts receivable, inventory and related assets of our wholly owned, material U.S. subsidiaries. The security interest in accounts receivable, inventory, and related assets of the U.S. borrower subsidiaries ranks prior to the security interest in this collateral which secures the Term Loan B. The obligations under the Canadian Borrowing Base are primarily secured, subject to certain exceptions, by a first-priority secure interest in the accounts receivable, inventory and related assets of our wholly owned, material Canadian subsidiaries and our wholly owned material U.S. subsidiaries.
Excess Availability

The borrowing availability under our credit facility was $106.3 million and $125.6 million at June 30, 2025 and December 31, 2024, respectively.

Interest rate

The interest rate for the ABL Revolver was 7.75 percent and 7.75 percent as of June 30, 2025 and December 31, 2024, respectively.

Facility Size Increases

The ABL Credit Agreement allows for incremental increases in facility size up to an aggregate of $50 million.

Financial Covenant

The Company's principal financial covenant under the ABL Credit Agreement include a Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio under the ABL Credit Agreement is defined as the ratio for the most recently completed four-fiscal quarter period, of (a) EBITDA minus capital expenditures (excluding those financed or funded with debt (other than the ABL Loans), (ii) the portion thereof funded with the net proceeds from asset dispositions of equipment or real property which the Company is permitted to reinvest pursuant to the Term Loan and the portion thereof funded with the net proceeds of casualty insurance or condemnation awards in respect of any equipment and real estate which DXP is not required to use to prepay the ABL Loans pursuant to the Term Loan B Agreement or with the proceeds of casualty insurance or condemnation awards in respect of any other property) minus cash taxes paid (net of cash tax refunds received during such period), to (b) fixed charges. The Company is restricted from allowing its fixed charge coverage ratio be less than 1.00 to 1.00 during a compliance period, which is triggered when the availability under the ABL Revolver falls below a threshold set forth in the ABL Credit Agreement. As of June 30, 2025, the Company's Fixed Charge Coverage Ratio was 2.02 to 1.00.

The Company was in compliance with all financial covenants as of June 30, 2025.

As of June 30, 2025, the maturities of long-term debt for the next five years and thereafter were as follows (in thousands):

Amount
2025$3,348 
20266,595 
20276,595 
20286,595 
20297,095 
Thereafter615,401 
Total$645,629 

12

NOTE 9 - EARNINGS PER SHARE

Basic earnings per share is computed based on weighted average shares outstanding and excludes dilutive securities. Diluted earnings per share is computed including the impacts of all potentially dilutive securities.

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data):
 Three Months Ended June 30,Six Months Ended June 30,
 2025202420252024
Basic earnings per share:  
Weighted average shares outstanding15,694 15,868 15,696 15,998 
Net income attributable to DXP Enterprises, Inc.$23,612 $16,693 $44,201 $28,025 
Convertible preferred stock dividend22 22 45 45 
Net income attributable to common shareholders$23,590 $16,671 $44,156 $27,980 
Per share amount$1.50 $1.05 $2.81 $1.75 
Diluted earnings per share:
Weighted average shares outstanding15,694 15,868 15,696 15,998 
Assumed conversion of convertible preferred stock840 840 840 840 
Total dilutive shares16,534 16,708 16,536 16,838 
Net income attributable to common shareholders$23,590 $16,671 $44,156 $27,980 
Convertible preferred stock dividend22 22 45 45 
Net income attributable to DXP Enterprises, Inc. $23,612 $16,693 $44,201 $28,025 
Per share amount$1.43 $1.00 $2.67 $1.66 

As of June 30, 2025 and 2024, the weighted average of the unvested restricted stock awards ("RSAs") were 258,121 and 300,872 shares, respectively. The preferred stock is convertible into 840,000 shares of common stock.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. While DXP is unable to predict the outcome or estimate the financial impact of these disputes, it believes that the ultimate resolution will not have, either individually or in the aggregate, a material adverse effect on DXP's consolidated financial position, cash flows, or results of operations.

NOTE 11 - SEGMENT REPORTING

We have three reportable and operating segments: Service Centers, Innovative Pumping Solutions and Supply Chain Services.

The Service Centers segment is engaged in providing maintenance, MRO products and equipment, including logistics capabilities, to industrial customers. The Service Centers segment provides a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, fastener, industrial supply, safety products and safety services categories.

The Innovative Pumping Solutions segment fabricates and assembles custom-made pump packages, re-manufactures pumps, manufactures branded private label pumps, and provides products and process lines for the water and wastewater treatment industries.

The Supply Chain Services segment provides a wide range of MRO products and manages all or part of a customer's supply chain, including warehouse and inventory management.

Sales are shown net of intersegment eliminations.

13

Segment information is prepared on the same basis that our Chief Executive Officer, who is our chief operating decision maker (“CODM”), manages the segments, evaluates financial results, and makes key operating decisions.

These segments were determined primarily on the distribution channels of the products and services offered and the nature of the customer markets and the primary driver of the customers spend. The Company's CODM directs the allocation of resources to these segments based upon historical and current revenue, direct operating expenses, operating income, and capital expenditures of each respective segment. The allocation of resources across these segments is dependent upon, among other factors, the segments' historical or future expected operating margins; the segments' historical or future expected returns on capital; outlook within a specific market; opportunities to grow profitability; new products, services or new customer accounts; confidence in management; and competitive landscape and intensity.

As a part of the Company's annual business planning, the CODM reviews our reportable segment composition and financial performance. As a result of this review, on January 1st, 2025, we moved certain branch locations previously reported under our IPS segment to our SC segment. Prior period segment information has not been recast, as the changes to our segment composition did not have a material impact on the operating results of our reportable segments.

The following table sets out financial information related to the Company's segments (in thousands):

Three Months Ended June 30, 2025
Service Center
Innovative Pumping Solutions
Supply Chain Services
Total Reportable Segments
Corporate
Total
Sales
$339,731 $93,540 $65,411 $498,682 $— $498,682 
Operating expenses
287,875 73,897 60,135 421,907 — 421,907 
Other expenses
Depreciation932 767 8 1,707 812 2,519 
Amortization of finance lease assets
753 234 39 1,026 616 1,642 
Other(1)
— — — — 26,628 26,628 
Operating Income$50,171 $18,642 $5,229 $74,042 $(28,056)$45,986 
Interest expense— — — — 14,744 14,744 
Other income, net— — — — (354)(354)
Income before income taxes$50,171 $18,642 $5,229 $74,042 $(42,446)$31,596 
Capital expenditures461 $912 $— 1,373 $8,973 $10,346 
(1). Other primarily includes selling, general and administrative expenses of $21.3 million and amortization of intangible assets of $5.3 million.
Three Months Ended June 30, 2024
Service Center
Innovative Pumping Solutions
Supply Chain Services
Total Reportable Segments
Corporate
Total
Sales
$306,516 $73,377 $65,663 $445,556 $— $445,556 
Operating expenses
260,929 59,068 59,800 379,797 — 379,797 
Other expenses
Depreciation785 846 8 1,639 607 2,246 
Amortization of finance lease assets
947 97 32 1,076 84 1,160 
Other(1)
— — — — 25,001 25,001 
Operating Income$43,855 $13,366 $5,823 $63,044 $(25,692)$37,352 
Interest expense— — — — 15,384 15,384 
Other income, net— — — — (1,035)(1,035)
Income before income taxes$43,855 $13,366 $5,823 $63,044 $(40,041)$23,003 
Capital expenditures$1,149 $1,004 $— $2,153 $6,672 $8,825 
(1). Other primarily includes selling, general and administrative expenses of $20.3 million and amortization of intangible assets of $4.7 million.

14

Six Months Ended June 30, 2025
Service Center
Innovative Pumping Solutions
Supply Chain Services
Total Reportable Segments
Corporate
Total
Sales
$666,806 $179,722 $128,723 $975,251 $— $975,251 
Operating expenses
565,832 145,685 117,835 829,352 — 829,352 
Other expenses
Depreciation1,869 1,562 16 3,447 1,389 4,836 
Amortization of finance lease assets
1,890 426 80 2,396 708 3,104 
Other(1)
— — — — 51,458 51,458 
Operating Income$97,215 $32,049 $10,792 $140,056 $(53,555)$86,501 
Interest expense— — — — 29,404 29,404 
Other income, net— — — — (1,672)(1,672)
Income before income taxes$97,215 $32,049 $10,792 $140,056 $(81,287)$58,769 
Capital expenditures$2,498 $1,486 $— $3,984 $26,276 $30,260 
(1). Other primarily includes selling, general and administrative expenses of $40.8 million and amortization of intangible assets of $10.7 million.

Six Months Ended June 30, 2024
Service Center
Innovative Pumping Solutions
Supply Chain Services
Total Reportable Segments
Corporate
Total
Sales
$594,952 $135,592 $127,647 $858,191 $— $858,191 
Operating expenses
507,531 113,366 116,484 737,381 — 737,381 
Other Expenses
Depreciation1,527 1,699 16 3,242 1,214 4,456 
Amortization of finance lease assets
1,719 191 62 1,972 149 2,121 
Other(1)
— — — — 47,750 47,750 
Operating Income$84,175 $20,336 $11,085 $115,596 $(49,113)$66,483 
Interest expense— — — — 30,928 30,928 
Other income, net— — — — (3,004)(3,004)
Income before income taxes$84,175 $20,336 $11,085 $115,596 $(77,037)$38,559 
Capital expenditures$2,055 $1,644 $13 $3,712 $8,007 $11,719 
(1). Other primarily includes selling, general and administrative expenses of $38.7 million and amortization of intangible assets of $9.1 million.
 June 30, 2025December 31, 2024
Service Centers$793,446 $764,533 
Innovative Pumping Solutions315,224 311,429 
Supply Chain Services
87,774 62,760 
Total Reportable Segments Assets
$1,196,444 $1,138,722 
Corporate 215,950 210,772 
Total Assets$1,412,394 $1,349,494 
15

NOTE 12 - BUSINESS ACQUISITIONS

The Company enters into strategic acquisitions in an effort to better service existing customers and to attract new customers.

The Company makes an initial allocation of the purchase price at the date of acquisition based upon its estimate of the fair value of the acquired assets and assumed liabilities. The Company obtains the information used for the purchase price allocation during due diligence and through other sources. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized. Final determination of the fair values may result in further adjustments.

During the first quarter of 2025, the Company acquired one business for a total of $12.9 million. We acquired this company to expand our platforms and to maintain our leading position as the largest distributor of rotating equipment in North America.

During the second quarter of 2025, the Company acquired one business for a total of $1.0 million. We acquired this company to expand our geographic coverage and to maintain our leading position as the largest distributor of rotating equipment in North America.

A summary of the preliminary allocation of the total purchase consideration of our business acquisition during the six months ended June 30, 2025 is presented as follows (in thousands):

 Q1 2025Q2 2025Total
Total Acquisitions112
  
Cash payments $12,851 $1,009 $13,860 
Total purchase price consideration $12,851 $1,009 $13,860 
Tangible assets acquired8,030 909 8,939 
Intangible assets acquired3,284 203 3,487 
Total assets acquired$11,314 $1,112 $12,426 
Total liabilities assumed(4,983)(508)(5,491)
Net assets acquired6,331 604 6,935 
Goodwill$6,520 $405 $6,925 

The total purchase consideration related to our acquisitions for the six months ended June 30, 2025 consisted of cash consideration. The total cash and cash equivalents acquired for these acquisitions was $0.1 million. Transaction-related costs included within selling, general, and administrative expenses in the consolidated statements of operations was $0.5 million for the six months ended June 30, 2025.

The goodwill total of approximately $6.9 million for the six months ended June 30, 2025 assigned to our SC segment was primarily attributable to expected synergies and the assembled workforce of the entities. The total amount of goodwill expected to be deductible for tax purposes is $6.5 million.

The acquisitions' operating results are included within the Company's consolidated statements of operations from the date of acquisition, which were not material for the six months ended June 30, 2025. Pro forma results of operations information have not been presented, as the effects of the acquisitions were not material to our financial results.

Of the $3.5 million of acquired intangible assets, $0.2 million was provisionally assigned to non-compete agreements that are subject to amortization over 5 years, and $3.3 million was assigned to customer relationships and will be amortized over a period of 8 years.

NOTE 13 - SHARE REPURCHASES

On December 15, 2022, the Company announced a Share Repurchase Program pursuant to which it may repurchase up to $85.0 million worth, or 2.8 million shares, of the Company's outstanding common stock over the next 24 months from the date of the announcement. The Company completed the program in August 2024.

On August 28, 2024, the Company announced a new Share Repurchase Program pursuant to which we may repurchase up to $85.0 million worth, or 2.5 million shares of the Company's outstanding common stock over the next 24 months.
16

Total consideration paid to repurchase the shares was recorded in shareholders’ equity as treasury stock.

The following table represents total number of shares purchased, the amount paid, and the average price paid per share under share repurchase programs authorized by our Board of Directors:

Three Months Ended June 30,Six Months Ended June 30,
(in thousands, except per share data)
2025202420252024
Total number of shares purchased— 139.4 — 465.8 
Amount paid$— $6,992 $— $23,798 
Average price paid per share$— $50.15 $— $51.09 

NOTE 14 - SUPPLEMENTAL CASH FLOW INFORMATION
Six Months Ended June 30,
(in thousands)
20252024
Supplemental disclosures of cash flow information:
Cash paid for interest$26,698 $29,140 
Cash paid for income taxes33,948 15,456 
Non-cash investing and financing activities:
Treasury shares repurchase accruals
$(28)$— 

NOTE 15 - OTHER INCOME AND EXPENSES

The components of other (income) expense were as follows:

Three Months Ended June 30,Six Months Ended June 30,
(in thousands)
2025202420252024
Interest income(765)(1,192)(1,797)(3,065)
Change in fair value of contingent consideration545 (111)728 (305)
Other, net(134)268 (603)366 
Total(354)(1,035)(1,672)(3,004)

17

NOTE 16 - REVENUE

The Company disaggregates revenue based upon our geography and our reportable segments - Service Centers, Innovative Pumping Solutions and Supply Chain Services. Each of our geographic and reportable business segments are impacted and influenced by varying factors, including the macroeconomic environment, maintenance and capital spending and commodity prices and exploration and production activity. As such, we believe this information is important in depicting the nature, timing and uncertainty of our contracts with customers. The following Geographical Information and Note 11 - Segment Reporting present our revenue disaggregated by source.

Geographical Information
Revenues are presented in geographic area based on location of the facility shipping products or providing services.

The Company’s revenues by geographical location are as follows:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2025202420252024
Revenues
United States$478,864 $423,621 $936,104 $818,500 
Canada19,369 21,144 38,357 38,219 
Other
449 791 790 1,472 
Total$498,682 $445,556 $975,251 $858,191 



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Recent Acquisitions
We define and calculate organic sales to include locations and acquisitions under our ownership for at least twelve months. "Acquisition Sales" are sales from acquisitions that have been under our ownership for less than twelve months and are excluded in our calculation of Organic Sales.
The following tables sets forth the disaggregation of revenue from sales associated with recent acquisitions for the three and six months ended June 30, 2025 and 2024 (in thousands):


SalesAcquisition SalesOrganic Sales
Three Months Ended June 30, 2025
Service Centers$339,731 $15,555 $324,176 
Innovative Pumping Solutions93,540 9,050 84,490 
Supply Chain Services65,411 — 65,411 
Total Sales$498,682 $24,605 $474,077 
Three Months Ended June 30, 2024
Service Centers$306,516 $8,708 $297,808 
Innovative Pumping Solutions73,377 14,695 58,682 
Supply Chain Services65,663 — 65,663 
Total Sales$445,556 $23,403 $422,153 
$ Change
Service Centers$33,215 $6,847 $26,368 
Innovative Pumping Solutions20,163 (5,645)25,808 
Supply Chain Services(252)— (252)
Total $ Change$53,126 $1,202 $51,924 
% Change
Service Centers10.8 %78.6 %8.9 %
Innovative Pumping Solutions27.5 %(38.4)%44.0 %
Supply Chain Services(0.4)%N/A(0.4)%
Total % Change11.9 %5.1 %12.3 %
19

SalesAcquisition SalesOrganic Sales
Six Months Ended June 30, 2025
Service Centers$666,806 $33,496 $633,310 
Innovative Pumping Solutions179,722 22,221 157,501 
Supply Chain Services128,723 — 128,723 
Total Sales$975,251 $55,717 $919,534 
Six Months Ended June 30, 2024
Service Centers$594,952 $10,219 $584,733 
Innovative Pumping Solutions135,592 24,959 110,633 
Supply Chain Services127,647 — 127,647 
Total Sales$858,191 $35,178 $823,013 
$ Change
Service Centers$71,854 $23,277 $48,577 
Innovative Pumping Solutions44,130 (2,738)46,868 
Supply Chain Services1,076 — 1,076 
Total $ Change$117,060 $20,539 $96,521 
% Change
Service Centers12.1 %227.8 %8.3 %
Innovative Pumping Solutions32.5 %(11.0)%42.4 %
Supply Chain Services0.8 %N/A0.8 %
Total % Change13.6 %58.4 %11.7 %

NOTE 17 - SUBSEQUENT EVENT

On July 1, 2025 the Company entered into an Increase Agreement (the “Increase Agreement”) that provided for a $185.0 million asset-backed revolving line of credit (the "ABL Revolver"). The aggregate commitments under the Company’s existing asset-based revolving credit facility (the “ABL Facility”) were increased by $50 million. Following the effectiveness of the Increase Agreement, the total commitments under the ABL Facility increased from $135 million to $185 million.

On July 1, 2025, the Company completed the acquisition of Moore's Pump & Services. The acquisition was funded with cash on the balance sheet.


20

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management discussion and analysis ("MD&A") of the financial condition and results of operations of DXP Enterprises, Inc. together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") for the six months ended June 30, 2025 should be read in conjunction with our previous Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q, and the consolidated financial statements and notes thereto included in such reports. The Company's consolidated financial statements are prepared in accordance with U.S. GAAP.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Report") contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include without limitation those about the Company’s expectations regarding the Company’s business, the Company’s future profitability, cash flow, liquidity, and growth. Such forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "might", "estimates", "will", "should", "could", "would", "suspect", "potential", "current", "achieve", "plans" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and actual results may vary materially from those discussed in the forward-looking statements or historical performance as a result of various factors. These factors include, but are not limited to, the effectiveness of management's strategies and decisions; our ability to implement our internal growth and acquisition growth strategies; general economic and business conditions specific to our primary customers; changes in government regulations; our ability to effectively integrate businesses we may acquire; new or modified statutory or regulatory requirements; availability of materials and labor; inability to obtain or delay in obtaining government or third-party approvals and permits; non-performance by third parties of their contractual obligations; unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response thereto; cyber-attacks adversely affecting our operations; other geological, operating and economic considerations and declining prices and market conditions, including reduced oil and gas prices and supply or demand for maintenance, repair and operating products, equipment and service; decreases in oil and natural gas industry capital expenditure levels, which may result from decreased oil and natural gas prices or other factors; our ability to manage changes and the continued health or availability of management personnel; and our ability to obtain financing on favorable terms or amend our credit facilities, as needed. This Report identifies other factors that could cause such differences. We cannot assure that these are all of the factors that could cause actual results to vary materially from the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors", in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 10, 2025. We assume no obligation and do not intend to update these forward-looking statements. Unless the context otherwise requires, references in this Report to the "Company", "DXP", "we" or "our" shall mean DXP Enterprises, Inc., a Texas corporation, together with its subsidiaries.

NON-GAAP FINANCIAL MEASURES

In an effort to provide investors with additional information regarding our results of operations as determined by U.S. GAAP, we disclose non-GAAP financial measures. The non-GAAP financial measures we provide in this report should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S. GAAP.

Our primary non-GAAP financial measures are organic sales ("Organic Sales"), sales per business day ("Sales per Business Day"), organic sales per business day ("Organic Sales per Business Day"), free cash flow ("Free Cash Flow"), earnings before interest, taxes, depreciation and amortization ("EBITDA") adjusted EBITDA ("Adjusted EBITDA"), EBITDA Margin, and Adjusted EBITDA Margin. The non-GAAP financial measures presented may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures in the same way. These measures are not substitutes for their comparable U.S. GAAP financial measures.

21

Management uses these non-GAAP financial measures to assist in comparing our performance on a consistent basis for purposes of business decision making by removing the impact of certain items that management believes do not directly reflect our underlying operations. Management believes that presenting our non-GAAP financial measures are useful to investors because it (i) provides investors with meaningful supplemental information regarding financial performance by excluding certain items, (ii) permits investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating our results. We believe that the presentation of these non-GAAP financial measures, when considered together with the corresponding U.S. GAAP financial measures and the reconciliations to those measures, provides investors with additional understanding of the factors and trends affecting our business than could be obtained absent these disclosures.

Refer to the Non-GAAP Financial Measures and Reconciliation section below for detailed reconciliations of our non-GAAP financial measures.

GENERAL BUSINESS OVERVIEW

General

DXP Enterprises, Inc. is a business-to-business distributor of MRO products and services to a variety of customers in different end markets across North America and Dubai. Additionally, we fabricate, remanufacture, and assemble custom pump packages along with manufacturing branded private label pumps.

CURRENT MARKET CONDITIONS AND OUTLOOK

The global economy continues to experience elevated levels of volatility and uncertainty, driven by a combination of geopolitical developments and macroeconomic factors. Recent imposition of new and expanded tariffs have further contributed to disruptions in the capital markets and global supply chains. These developments may impact the Company’s operations, financial condition, and results of operations.

The Company is actively monitoring economic conditions in the U.S. and internationally, including the potential ramifications of evolving trade policies, changes in interest rates, inflationary pressures, and the risk of a global or regional economic recession. In response to these factors, the Company is continuously reviewing various strategies designed to mitigate certain adverse effects of changing inflationary conditions and supply chain challenges, while continuing to maintain market price competitiveness.

Historically, the Company's broad and diverse customer base and the generally non-discretionary nature of its products have provided a degree of resilience during periods of economic contraction in the industrial MRO market. However, the ultimate impact of ongoing macroeconomic conditions, including recent tariff-related developments, remains uncertain and cannot be predicted at this time.

For further discussion of the Company's risks and uncertainties, see Part I, Item 1A: Risk Factors in the Company’s 2024 Form 10-K.

Service Centers and Innovative Pumping Solutions Segments

The replacement and mission-critical nature of our products and services within the Company's Service Centers and Innovative Pumping Solutions business segments and industrial and manufacturing environments and processes drives a demand and outlook that are correlated with global, national and regional industrial production, capacity utilization and long-term GDP growth. For the six months ended June 30, 2025, we had approximately $846.5 million in sales in our Service Centers and Innovative Pumping Solutions segments, an increase of approximately 15.9 percent compared to the six months ended June 30, 2024. Our performance has been strengthened by price increases from our vendors and suppliers and the Company's acquisition activity. During the six months ended June 30, 2025, $22.2 million in sales was associated with recent acquisitions in the water and wastewater markets.

Supply Chain Services Segment

For the six months ended June 30, 2025, we had approximately $128.7 million in sales in our Supply Chain Services segment, an increase of approximately 0.8 percent compared to the six months ended June 30, 2024. This is primarily due to new customer facilities, slightly offset by facility closures due to the inherent efficiencies we bring to customers as part of our value proposition. As we move forward and given our increasing demand, we expect our performance to be driven by either the addition of new customers or an increase in spend by our existing customers.

22

Matters Affecting Comparability

Our results of operations are not directly comparable on a year-over-year basis due to various prior acquisitions and the varying size and number of acquisitions in any comparable period. Accordingly, the results of acquisitions are included subsequent to their respective acquisition dates and the Company provides detail around Organic and Acquisition Sales as defined in our Key Business Metrics. During the six months ended June 30, 2025, acquisition sales were $55.7 million compared to $35.2 million for the six months ended June 30, 2024.

From time to time, typically based upon a leap year, our comparable business days may not equal each other. There were 126 business days during the six months ended June 30, 2025 and 127 business days during the six months ended June 30, 2024. As such, during the second quarter, there was one less business day compared to the prior year's corresponding period.

Key Business Metrics

We regularly monitor several financial and operating metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. Our key non-GAAP business metrics may be calculated in a different manner than similarly titled metrics used by other companies. See “Non-GAAP Financial Measures and Reconciliations” for additional information on non-GAAP financial measures and a reconciliation to the most comparable U.S. GAAP measures.
Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Sales by Business Segment
Service Centers$339,731 $306,516 $666,806 $594,952 
Innovative Pumping Solutions93,540 73,377 179,722 135,592 
Supply Chain Services65,411 65,663 128,723 127,647 
Total DXP Sales$498,682 $445,556 $975,251 $858,191 
Acquisition Sales$24,605 $23,403 $55,717 35,178 
Organic Sales$474,077 $422,153 $919,534 $823,013 
Business Days6364126127
Sales per Business Day$7,916 $6,962 $7,740 $6,757 
Organic Sales per Business Day$7,525 $6,596 $7,298 $6,480 
Gross Profit$157,812 $137,793 $308,078 $261,675 
Gross Profit Margin31.6 %30.9 %31.6 %30.5 %
Income from Operations
$45,986 $37,352 $86,501 $66,483 
Income from Operations Margin
9.2 %8.4 %8.9 %7.7 %
Net Income$23,612 $16,693 $44,201 $28,025 
Net Income Margin4.7 %3.7 %4.5 %3.3 %
EBITDA$55,830 $46,514 $106,797 $85,152 
EBITDA Margin11.2 %10.4 %11.0 %9.9 %
Adjusted EBITDA$57,313 $48,226 $109,832 $88,570 
Adjusted EBITDA Margin11.5 %10.8 %11.3 %10.3 %
Net cash provided by operating activities
$18,646 $14,735 $21,619 $41,724 
Free Cash Flow
$8,300 $5,910 $(8,641)$30,005 


23

Organic Sales and Acquisition Sales

We define and calculate organic sales to include locations and acquisitions under our ownership for at least twelve months. "Acquisition Sales" are sales from acquisitions that have been under our ownership for less than twelve months and are excluded in our calculation of Organic Sales.

Business Days

"Business Days" are days of the week, excluding Saturdays, Sundays, and holidays, that our locations are open during the year. Depending on the location and the season, our branches may be open on Saturdays and Sundays; however, for consistency, those days have been excluded from the calculation of Business Days.

Sales per Business Day

We define and calculate Sales per Business Day as sales divided by the number of Business Days in the relevant reporting period.

Organic Sales per Business Days

We define and calculate Organic Sales per Business Day as Organic Sales divided by the number of Business Days in the relevant reporting period.

EBITDA and Adjusted EBITDA

We define and calculate EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, and amortization. We define and calculate Adjusted EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, and amortization minus stock-based compensation expense and all other non-cash charges, adjustments, and non-recurring items. We identify the impact of all other non-cash charges, adjustments and non-recurring items because we believe these items do not directly reflect our underlying operations.

EBITDA Margin and Adjusted EBITDA Margin

We define and calculate EBITDA Margin as EBITDA divided by sales. We define and calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by sales.

Free Cash Flow

We define and calculate free cash flow as net cash (used in) provided by operating activities less purchases of property and equipment.

24

RESULTS OF OPERATIONS

(in thousands, except percentages and per share data)

DXP is organized into three business segments: Service Centers, Innovative Pumping Solutions, and Supply Chain Services. The Service Centers are engaged in providing MRO products, equipment and integrated services, including technical expertise and logistics capabilities, to industrial customers with the ability to provide same day delivery. The Service Centers provide a wide range of MRO products and services in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply and safety product and service categories. The IPS segment provides products and services to the water and wastewater market and fabricates and assembles integrated pump system packages custom made to customer specifications, remanufactures pumps, and manufactures branded private label pumps. The SCS segment provides a wide range of MRO products and manages all or part of our customer's supply chain function, and inventory management.

Three Months Ended June 30, 2025 compared to Three Months Ended June 30, 2024

 Three Months Ended June 30,
 2025%2024%
Sales$498,682 100.0%$445,556 100.0%
Cost of sales340,869 68.4%307,763 69.1%
Gross profit157,813 31.6%137,793 30.9%
Selling, general and administrative expenses111,827 22.4%100,441 22.5%
Income from operations45,986 9.2%37,352 8.4%
Interest expense
14,744 3.0%15,384 3.5%
Other income, net
(354)(0.1)%(1,035)(0.2)%
Income before income taxes31,596 6.3%23,003 5.2%
Provision for income tax expense7,984 1.6%6,310 1.4%
Net income $23,612 4.7%$16,693 3.7%
Earnings per share:
Basic
$1.50 $1.05 
Diluted
$1.43 $1.00 

25

The following tables sets forth the disaggregation of revenue from sales associated with acquisitions for the three and six months ended June 30, 2025 and 2024 (in thousands) :

SalesAcquisition SalesOrganic Sales
Three Months Ended June 30, 2025
Service Centers$339,731 $15,555 $324,176 
Innovative Pumping Solutions93,540 9,050 84,490 
Supply Chain Services65,411 — 65,411 
Total Sales$498,682 $24,605 $474,077 
Three Months Ended June 30, 2024
Service Centers$306,516 $8,708 $297,808 
Innovative Pumping Solutions73,377 14,695 58,682 
Supply Chain Services65,663 — 65,663 
Total Sales$445,556 $23,403 $422,153 
$ Change
Service Centers$33,215 $6,847 $26,368 
Innovative Pumping Solutions20,163 (5,645)25,808 
Supply Chain Services(252)— (252)
Total $ Change$53,126 $1,202 $51,924 
% Change
Service Centers10.8 %78.6 %8.9 %
Innovative Pumping Solutions27.5 %(38.4)%44.0 %
Supply Chain Services(0.4)%N/A(0.4)%
Total % Change11.9 %5.1 %12.3 %

SALES. Sales for the three months ended June 30, 2025 increased $53.1 million, or 11.9 percent, to approximately $498.7 million from $445.6 million for the prior year's corresponding period, of which acquisitions contributed $24.6 million. Additionally, the overall increase in sales was the result of an increase in sales in our SC and IPS segments of $33.2 million and $20.2 million, slightly offset by a decrease in our SCS segment of $0.3 million. The fluctuations in sales are further explained in our business segment discussions below.

GROSS PROFIT. Gross profit margin for the three months ended June 30, 2025 was 31.6 percent compared to 30.9 percent for the prior year's corresponding period. The gross profit margin for the three months ended June 30, 2025 was positively impacted by 70 basis points due to recent acquisitions and continuing margin expansion opportunities.

Service Centers segment. Sales for the SC segment increased $33.2 million, or 10.8 percent, for the three months ended June 30, 2025, compared to the prior year's corresponding period. Organic sales grew $26.4 million, this sales increase was the result of increases within our Ohio River Valley, California and South Central and Rockies regions totaling $12.4 million. Additionally, the increase was also attributable to an overall increase in our rotating equipment and air compressors product categories totaling $14.6 million. Sales attributable to recent acquisitions was $15.6 million during the period as compared to $8.7 million in the three months ended June 30, 2024.

Innovative Pumping Solutions segment. Sales for the IPS segment increased $20.2 million, or 27.5 percent, for the three months ended June 30, 2025, compared to the prior year's corresponding period. This sales increase was the result of increases within our fabrication, global solutions division, and our water and wastewater division totaling $25.8 million. Sales attributable to recent acquisitions was $9.0 million during the period as compared to $14.7 million for the three months ended June 30, 2024.
26


Supply Chain Services segment. Sales for the SCS segment decreased by $0.3 million, or 0.4 percent, for the three months ended June 30, 2025, compared to the prior year's corresponding period.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"). SG&A for the three months ended June 30, 2025 increased by $11.4 million, or 11.3 percent, to $111.8 million from $100.4 million for the prior year's corresponding period. The increase in SG&A is primarily the result of increased payroll related costs, depreciation and amortization, rent and IT expense.

OPERATING INCOME. Operating income for the second quarter of 2025 increased by $8.6 million to $46.0 million, from $37.4 million in the prior year's corresponding period. This increase in operating income was primarily driven by increases in our SC and IPS segments.

INTEREST EXPENSE. Interest expense for the second quarter of 2025 decreased $0.6 million compared to the prior year's corresponding period. This decrease was primarily due to the Company refinancing its Term Loan during the fourth quarter of 2024.

INCOME TAXES. Our effective tax rate for continuing operations was 25.3 percent for the three months ended June 30, 2025, compared to 27.4 percent for the three months ended June 30, 2024. Compared to the U.S. statutory rate for the three months ended June 30, 2024, the effective tax rate decreased primarily due to a higher tax benefit from stock compensation vested during the period, a higher benefit from state income taxes, and higher tax benefits from research and development tax credits (R&D). These benefits were partially offset by recognition of uncertain tax positions related to R&D tax credits.

27

Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024

 Six Months Ended June 30,
 2025%2024%
Sales$975,251 100.0%$858,191 100.0%
Cost of sales667,173 68.4%596,516 69.5%
Gross profit308,078 31.6%261,675 30.5%
Selling, general and administrative expenses221,577 22.7%195,192 22.7%
Income from operations86,501 8.9%66,483 7.7%
Interest expense
29,404 3.0%30,928 3.6%
Other (income) expense, net
(1,672)(0.2)%(3,004)(0.4)%
Income before income taxes58,769 6.0%38,559 4.5%
Provision for income taxes 14,568 1.5%10,534 1.2%
Net income
$44,201 4.5%$28,025 3.3%
Earnings per share:
Basic
$2.81 $1.75 
Diluted
$2.67 $1.66 

The following table sets forth the reconciliation of Acquisition Sales and Organic Sales to the most comparable U.S. GAAP financial measure (in thousands):

SalesAcquisition SalesOrganic Sales
Six Months Ended June 30, 2025
Service Centers$666,806 $33,496 $633,310 
Innovative Pumping Solutions179,722 22,221 157,501 
Supply Chain Services128,723 — 128,723 
Total Sales$975,251 $55,717 $919,534 
Six Months Ended June 30, 2024
Service Centers$594,952 $10,219 $584,733 
Innovative Pumping Solutions135,592 24,959 110,633 
Supply Chain Services127,647 — 127,647 
Total Sales$858,191 $35,178 $823,013 
$ Change
Service Centers$71,854 $23,277 $48,577 
Innovative Pumping Solutions44,130 (2,738)46,868 
Supply Chain Services1,076 — 1,076 
Total $ Change$117,060 $20,539 $96,521 
% Change
Service Centers12.1 %227.8 %8.3 %
Innovative Pumping Solutions32.5 %(11.0)%42.4 %
Supply Chain Services0.8 %N/A0.8 %
Total % Change13.6 %58.4 %11.7 %


28

SALES. Sales for the six months ended June 30, 2025 increased $117.1 million, or 13.6 percent, to approximately $975.3 million from $858.2 million for the prior year's corresponding period, of which acquisitions contributed $55.7 million. Additionally, the overall increase in sales was the result of an increase in sales within our SC, IPS, and SCS segments of $71.9 million, $44.1 million, and $1.1 million, respectively. The fluctuations in sales are further explained in our business segment discussions below.

GROSS PROFIT. Gross profit margin for the six months ended June 30, 2025 was 31.6 percent compared to 30.5 percent for the prior year's corresponding period. The gross profit margin for the six months ended June 30, 2025 was positively impacted by 110 basis points due to recent acquisitions and continuing margin expansion opportunities.

Service Centers segment. Sales for the SC segment increased by $71.9 million, or 12.1 percent for the six months ended June 30, 2025, compared to the prior year's corresponding period. Sales from acquisitions for the SC segment contributed $33.5 million during the period as compared to $10.2 million during the six months ended June 30, 2024. Total sales for the SC segment excluding acquisitions increased $48.6 million from the prior year's corresponding period. This sales increase was primarily the result of increased business activity within the majority of our regions, offset by a decrease in our North Rockies region compared to the prior year's corresponding period.

Innovative Pumping Solutions segment. Sales for the IPS segment increased by $44.1 million, or 32.5 percent for the six months ended June 30, 2025 compared to the prior year's corresponding period. Sales from acquisitions for the IPS segment contributed $22.2 million during the period compared to $25.0 million during the six months ended June 30, 2024. Additionally, organic sales increased within our fabrication and global solutions division, and our water and wastewater end market, partially offset by a decrease due to the timing of project related jobs totaling $46.9 million compared to the prior year's corresponding period.

Supply Chain Services segment. Sales for the SCS segment increased by $1.1 million, or 0.8 percent, for the six months ended June 30, 2025, compared to the prior year's corresponding period.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"). SG&A for the six months ended June 30, 2025 increased by approximately $26.4 million, or 13.5 percent, to $221.6 million from $195.2 million for the prior year's corresponding period. The increase in SG&A is primarily the result of increased payroll related costs, depreciation and amortization, rent and IT expense.

OPERATING INCOME. Operating income for the six months ended June 30, 2025 increased by $20.0 million or 30.1 percent to $86.5 million from $66.5 million in the prior year's corresponding period. This increase in operating income was primarily driven by increases in our SC, IPS, and SCS segments.

INTEREST EXPENSE. Interest expense for the six months ended June 30, 2025 decreased $1.5 million compared with the prior year's corresponding period. This decrease was primarily due to the Company refinancing its Term Loan during the fourth quarter of 2024.

INCOME TAXES. Our effective tax rate from continuing operations was a tax expense of 24.8 percent for the six months ended June 30, 2025, compared to a tax expense of 27.3 percent for the six months ended June 30, 2024, the effective tax rate decreased primarily due to an increase in changes of income earned by jurisdiction, a higher tax benefit from stock compensation vested during the period, a higher benefit from state income taxes, and higher tax benefits from research and development tax credits (R&D). These benefits were partially offset by recognition of uncertain tax positions related to R&D tax credits.

29

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
Organic Sales and Acquisition Sales
We define and calculate organic sales to include locations and acquisitions under our ownership for at least twelve months. "Acquisition Sales" are sales from acquisitions that have been under our ownership for less than twelve months and are excluded in our calculation of Organic Sales.
The following table sets forth the reconciliation of Acquisition Sales and Organic Sales to the most comparable U.S. GAAP financial measure (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Sales by Business Segment
Service Centers$339,731 $306,516 $666,806 $594,952 
Innovative Pumping Solutions93,540 73,377 179,722 135,592 
Supply Chain Services65,411 65,663 128,723 127,647 
Total DXP Sales$498,682 $445,556 $975,251 $858,191 
Acquisition Sales$24,605 $23,403 $55,717 35,178 
Organic Sales$474,077 $422,153 $919,534 $823,013 

EBITDA, Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin

We define and calculate EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, and amortization. We define and calculate Adjusted EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, and amortization minus stock-based compensation expense and all other non-cash charges, adjustments, and non-recurring items. We identify the impact of all other non-cash charges, adjustments and non-recurring items because we believe these items do not directly reflect our underlying operations.

We define and calculate EBITDA Margin as EBITDA divided by sales. We define and calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by sales.

The following table sets forth the reconciliation of EBITDA, EBITDA Margin, Adjusted EBITDA, and Adjusted EBITDA Margin to the most comparable U.S. GAAP financial measure (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Net income attributable to DXP Enterprises, Inc.
$23,612 $16,693 $44,201 $28,025 
Plus: Interest expense14,744 15,384 29,404 30,928 
Plus: Provision for income tax expense
7,984 6,310 14,568 10,534 
Plus: Depreciation and amortization
9,490 8,127 18,624 15,665 
EBITDA$55,830 $46,514 $106,797 $85,152 
Plus: other non-recurring items(1)
— 500 235 1,342 
Plus: stock compensation expense1,483 1,212 2,800 2,076 
Adjusted EBITDA$57,313 $48,226 $109,832 $88,570 
Operating Income Margin9.2 %8.4 %8.9 %7.7 %
Net Income Margin4.7 %3.7 %4.5 %3.3 %
EBITDA Margin11.2 %10.4 %11.0 %9.9 %
Adjusted EBITDA Margin11.5 %10.8 %11.3 %10.3 %
(1) Other non-recurring items includes unique acquisition integration costs and other non-cash, non-recurring costs.

30

Free Cash Flow
We define and calculate free cash flow as net cash (used in) provided by operating activities less purchases of property and equipment.

The following table sets forth the reconciliation of Free Cash Flow to the most comparable U.S. GAAP financial measure (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Net cash provided by operating activities
$18,646 $14,735 $21,619 $41,724 
Less: purchases of property and equipment(10,346)(8,825)(30,260)(11,719)
Free Cash Flow$8,300 $5,910 $(8,641)$30,005 

LIQUIDITY AND CAPITAL RESOURCES

General Overview

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. We continue to generate adequate cash from operating activities. We believe that our operating cash flow, cash on hand, and other sources of liquidity including our ABL and Term Loan B, will be sufficient to allow us to continue investing in the business including capital expenditures, strategic acquisitions and investments, paying interest and servicing debt, and repurchasing common stock when deemed appropriate.

Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt and existing cash balances. As a distributor of MRO products and services, we require certain amounts of working capital to primarily fund inventories and accounts receivables. Additional cash is required for capital items for information technology, warehouse equipment, leasehold improvements, pump manufacturing and safety services equipment. We also require cash to pay our lease obligations, fund project work-in-process and to service our debt.

Cash

As of June 30, 2025, we had available cash of $112.9 million and credit facility availability of $106.3 million. We have a $135.0 million asset-backed line of credit (the "ABL Revolver"), partially offset by letters of credit of $28.7 million. We had no borrowings outstanding on our ABL Revolver as of June 30, 2025.

Cash Flows

The following table summarizes our net cash flows provided by and used in operating activities, investing activities and financing activities for the periods presented (in thousands):
 Six Months Ended June 30,
20252024
Net Cash Provided by (Used in):
Operating Activities$21,619 $41,724 
Investing Activities(41,405)(130,736)
Financing Activities(16,594)(35,003)
Effect of Foreign Currency899 830 
Net Change in Cash$(35,481)$(123,185)

Operating Activities

The Company generated $21.6 million of cash from operating activities during the six months ended June 30, 2025 compared to $41.7 million of cash generated during the prior year's corresponding period. The decrease of $20.1 million was primarily due to the higher payment of income taxes in 2025 compared to 2024.

31

Investing Activities

For the six months ended June 30, 2025, net cash used in investing activities was $41.4 million compared to a $130.7 million use of cash during the prior year’s corresponding period. This $89.3 million decrease was primarily driven by lower acquisition activity during the six months ended June 30, 2025. Total cash paid for acquisitions, net of cash acquired, was $13.9 million compared to $119.0 million for the six months ended June 30, 2024.

Financing Activities

For the six months ended June 30, 2025, net cash used in financing activities was $16.6 million, compared to net cash used in financing activities of $35.0 million during the prior year’s corresponding period. The decrease was primarily due to share repurchase activity during the six months ended June 30, 2024 with no comparable activity for the six months ended June 30, 2025.

We believe the Company has adequate funding to support its working capital needs within the business.

Debt

At June 30, 2025, our total outstanding debt was $645.6 million, or 58.0 percent of total capitalization (total debt plus shareholders' equity) of $1.1 billion. $644.6 million of this outstanding debt bears interest at various floating rates. For a further discussion of the Company's debt refer to Note 8. Long-Term Debt.

Liquidity

We believe our cash generated from operations will meet our normal working capital needs during the next twelve months. However, we may require additional debt outside of our credit facilities or equity financing to fund potential acquisitions. Such additional financings may include additional bank debt or the public or private sale of debt or equity securities. In connection with any such financing, we may issue securities that substantially dilute the interests of our shareholders.

The following table summarizes the amount of borrowing capacity under our ABL Revolver as follows (in thousands):

June 30, 2025December 31, 2024
Total borrowing capacity$135,000 $135,000 
Less: Amount drawn
— — 
Less: Outstanding letters of credit
28,692 9,354 
Total amount available$106,308 $125,646 

At June 30, 2025, the Company had $219.2 million of liquidity including $112.9 million in cash and $106.3 million in availability under the ABL Revolver.

On July 1, 2025 the Company entered into an Increase Agreement (the “Increase Agreement”) that provided for a $185.0 million asset-backed revolving line of credit (the "ABL Revolver"). The aggregate commitments under the Company’s existing asset-based revolving credit facility (the “ABL Facility”) were increased by $50 million. Following the effectiveness of the Increase Agreement, the total commitments under the ABL Facility increased from $135 million to $185 million.

Free Cash Flow

We believe Free Cash Flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to fund acquisitions, make investments, repay debt obligations, repurchase shares of the Company's common stock, and for other activities.

Free Cash Flow is not a measure of liquidity under U.S. GAAP, and may not be defined and calculated by other companies in the same manner. Free Cash Flow should not be considered in isolation or as an alternative to net cash provided by operating activities. Free Cash Flow reconciles to the most directly comparable U.S. GAAP financial measure of cash flows from operations.


32

The following table sets forth the reconciliation of net cash provided by operating activities to Free Cash Flow (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2025202420252024
Net cash provided by operating activities$18,646 $14,735 $21,619 $41,724 
Less: purchases of property and equipment(10,346)(8,825)(30,260)(11,719)
Free Cash Flow$8,300 $5,910 $(8,641)$30,005 

Uses of Liquidity

Internally generated cash flows are the primary source of working capital and growth initiatives, including acquisitions and growth capital expenditures. The Company expects to continue to return excess capital to shareholders through share repurchases, when appropriate.

Working Capital

Working capital as of June 30, 2025 was $348.9 million, an increase of $58.0 million compared to $291.0 million as of December 31, 2024. The increase was primarily due to sustained sales growth and acquisitions.

Acquisitions

For a discussion of the Company’s acquisitions refer to Note 12. Business Acquisitions. During June 30, 2025 and 2024, the Company invested $13.9 million and $119.0 million, respectively, in acquisitions.

Capital Expenditures

The Company's capital expenditures was $30.3 million and $11.7 million for the six months ended June 30, 2025 and 2024 respectively. This includes a purchase of a facility, continued facility upgrades and enhancements, tools and equipment, software and technology investments and enhancements across the Company.

DISCUSSION OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES

Critical accounting and business policies are those that are both most important to the portrayal of a company's financial position and results of operations, and require management's subjective or complex judgments. These policies have been discussed with the Audit Committee of the Board of Directors of DXP.

The Company's unaudited condensed financial statements are prepared in accordance with U.S. GAAP. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared on substantially the same basis as our annual Consolidated Financial Statements and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024. For a more complete discussion of our significant accounting policies and business practices, refer to the consolidated Annual Report on Form 10-K filed with the SEC on March 10, 2025. The results of operations for the six months ended June 30, 2025 are not necessarily indicative of results expected for the full fiscal year.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 3 - Recently Issued Accounting Pronouncements to the Condensed Consolidated Financial Statements for information regarding recent accounting pronouncements.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

For quantitative and qualitative disclosures about market risk, see Item 7A, 'Quantitative and Qualitative Disclosures About Market Risk' of our Annual Report on Form 10-K for the year ended December 31, 2024. Our exposures to market risk have not changed materially since December 31, 2024.

33

ITEM 4: CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

With the participation of management, our principal executive officer and principal financial officer carried out an evaluation, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2025.

Our management, including our principal executive officer and principal financial officer, has concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with GAAP for each of the periods presented.

Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act identified in the evaluation for the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

34

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. While DXP is unable to predict the outcome of these lawsuits, it believes that the ultimate resolution will not have, either individually or in the aggregate, a material adverse effect on DXP's consolidated financial position, cash flows, or results of operations.

ITEM 1A. RISK FACTORS.

A reduction of our federal income tax research activities credits may have a material adverse effect on our business and financial condition.

The Company regularly claims federal income tax credits for the research activities it conducts related to its manufacturing activities. The Company has recognized a total of $38.0 million as of the second quarter of 2025 in federal income tax credits for the research activities from 2015 thru 2025. The Internal Revenue Service (“IRS”) is conducting an examination of the Company’s U.S. federal income tax returns for its 2018 tax year. The Company received Notices of Proposed Adjustment in October 2024, which if sustained, would result in a loss of federal income tax credits for research activities claimed by the Company during that tax year. The Company intends to vigorously defend its reported positions. The Company has currently accrued a reserve relating to the potential tax adjustments. However, the outcome of this dispute involves a number of uncertainties, including those relating to the application of the Internal Revenue Code and other federal income tax authorities and judicial precedent. Accordingly, there can be no assurance that the dispute with the IRS will be resolved favorably. If the IRS materially reduces or disallows our federal income tax credits for research activities, it may have a material adverse effect on our business and financial condition.

Other than the risk factors noted above, there have been no other material changes to the risk factors as previously disclosed in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year end December 31, 2024.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Recent Sales of Unregistered Securities

The Company did not sell any unregistered securities during the three months ended June 30, 2025.

Issuer Purchases of Equity Securities

A summary of our repurchases of DXP Enterprises, Inc. common stock under our current share repurchase program and employee stock awards withheld for certain tax obligations during the second quarter of fiscal year 2025 is as follows:

Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (2)
April 1 - April 30, 202575 $82.90 — $85,000 
May 1 – May 31, 2025265 83.60 — 85,000 
June 1 – June 30, 2025— — — 85,000 
Total340 $83.45 — $85,000 
(1) There were 340 shares transferred from employees in satisfaction of minimum statutory tax withholding obligations upon the vesting of restricted stock during the three months ended June 30, 2025.
(2) On August 28, 2024, the Company announced a new Share Repurchase Program pursuant to which it may repurchase up to $85.0 million worth, or 2.5 million shares, of the Company's outstanding common stock over the next 24 months at the discretion of management. As of June 30, 2025, approximately $85.0 million worth of, or approximately 2.5 million, shares remained available under the $85.0 million Share Repurchase Program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

35

ITEM 4. MINE SAFETY DISCLOSURES.

None.

ITEM 5. OTHER INFORMATION.

None.

36

ITEM 6. EXHIBITS.


Exhibits designated by the symbol * are filed or furnished with this Quarterly Report on Form 10-Q. All exhibits not so designated are incorporated by reference to a prior filing with the Commission as indicated.
37

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DXP ENTERPRISES, INC.
(Registrant)
By: /s/ Kent Yee
Kent Yee
Senior Vice President and Chief Financial Officer
(Duly Authorized Signatory and Principal Financial Officer)

Dated: August 7, 2025
38

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