DXP Enterprises, Inc. Second Quarter 2026 Earnings Release

and the meaningful contribution from engineered solution capabilities. As it pertains specifically to our second quarter, DXP's financial results reflect sales growth of 15.6% year-over-year to 576.5 million, including 49.8 million of acquisition sales, organic sales growth of 11.1% year-over-year, reflecting strength across our core business continued strategic progress and water and wastewater supported by organic growth project activity and three water acquisitions through q2 operating income growth of 9.5 million or 20.7 percent to 55.5 million and adjusted EBITDA of 70.4 million with adjusted EBITDA margins improving to 12.2%, a new high watermark for DXP. In terms of our detailed financial results, total sales for the second quarter increased 15.6% year-over-year to $576.5 million. Acquisitions that have been with DXP for less than a year contributed 49.8 million sales during the quarter. Excluding the impact of acquisitions, organic sales were 526.6 million, representing 11.1% organic growth compared to the second quarter of 2025. Average daily sales for the second quarter were 9.15 million per day versus 7.92 million per day in Q2 of last year. Adjusting for acquisitions, organic average daily sales were $8.36 million per day versus $7.53 million per day in Q2 of 2025. As is typical, sales accelerated throughout the quarter, with average daily sales increasing from $9.07 million per day in April to $9.4 million per day in June, reflecting a normal quarter end push but highlighting strong acceleration coming into quarter in. In terms of our business segments, innovative pumping solutions grew 52.6 percent year-over-year, followed by service centers growing 8.3 percent, and supply chain services growing 0.6 percent year-over-year. Innovative pumping solutions sales increased 49.2 million, or 52.6 percent year-over-year, to 142.7 million. This growth reflects increased activity in our Water and Wastewater Division, increased production contracts, and strategic acquisitions within IPS. Recent acquisitions contributed $47 million of sales during the quarter, compared to $9.1 million in Q2 of last year. Excluding acquisitions, IPS organic sales grew $11.3 million, or 13.3%. Segment operating income for IPS was $26.7 million, up from $18.6 million in Q2 of last year. in terms of innovative pumping solutions backlog we experience increases in the in the energy and water and wastewater bookings and backlog our q2 energy related average backlog grew 7.3 sequentially and continues to stem declines we saw in q3 and q4 of last year that said as we have mentioned we continue to have some large engineered solutions or projects and we have continue to recognize revenue in Q2. Excluding some of these projects, our backlog is up 10% from Q1. The conclusion continues to remain that we are trending meaningfully above all notable sales levels, and our backlog has mitigated some declines we saw in the second half of 2025. Our DXP water platform experienced our 15th consecutive quarter of sequential sales growth with $97.3 million in sales during Q2 and year-to-date sales of $175.5 million, and we will look for this to continue during the second half of 2026. In terms of our service centers, service center sales increased $28.2 million, or 8.3% year-over-year, to $367.9 million. Excluding the impact of recent acquisitions, service centers grew $40.9 million organically. This growth was driven by increased business activity across multiple regions, including California, Gulf Coast, Southeast, North Texas, South Central, and South Rockies. From a segment operating income perspective, service centers generated $54.2 million of operating income in the quarter, reflecting continued strength and consistency in the core MRO business. We are building a larger, more diversified platform with attractive end-market demand, project opportunities, and recurring service potential. Supply chain services sales increased 0.4 million or 0.6% year-over-year to 65.8 million. Performance reflects the onboarding of new customers and related facilities, partially offset by decreased activity with certain existing customers. Segment operating income was $6.5 million compared to $5.2 million in the prior year period, reflecting improved profitability despite essentially sales being flat. Turning to gross margins, DXP's total gross margin was 31.8% for the second quarter, compared to 31.6% in Q2 of 2025. The improvement reflects continuing margin expansion efforts and a positive contribution from recent acquisitions. Our SG&A for the quarter increased $15.7 million from Q-TIV last year to $127.6 million. The increase reflects increased payroll-related costs, depreciation and amortization, rent, insurance, and professional fees. However, SG&A as a percentage of sales improved to 22.1% from 22.4% in Q2 of last year, reflecting operating leverage as sales increase. Turning to EBITDA, Q2 2026 adjusted EBITDA was 70.4 million compared to 57.3 million in Q2 of 2025. Adjusted EBITDA margins were 12.2% up from 11.5% last year. The improvement reflects sales growth, gross margin strength, and the fixed cost leverage we continue to see as we scale the business. For the quarter, this translated into 1.5 times operating leverage. In terms of EPS, our net income for Q2 was $28.7 million. Earnings per diluted share for Q2 2026 were $1.76 per share versus $1.43 per share last year. The year-over-year improvement primarily reflects higher sales, improved gross profit, and stronger operating income, partially offset by higher interest expense and a higher effective tax rate. Turning to the balance sheet and cash flow, in terms of working capital, net working capital as of June 30, 2026 was $393.3 million, an increase of $31.7 million compared to December 31, 2025. The increase was primarily due to due to sustained sales growth and acquisitions. In terms of cash, we had $226.6 million in cash on the balance sheet as of June 30. We also had $147.9 million of availability under our ABL, resulting in total liquidity of $374.5 million, providing DXP with sufficient dry powder to pursue acquisitions. CapEx in the second quarter was $2.6 million compared to $10.3 million in Q2 of last year. For the first six months of 2026, capital expenditures were $5.9 million compared to $30.3 million in the first six months of 2025. This reflects a more normalized level of capital spending following the elevated investments we made last year. Turning to free cash flow, free cash flow for the second quarter was $29.8 million versus $8.3 million in Q2 of 2025. For the first six months of 2026, free cash flow was $56 million compared to negative $8.6 million in the prior year period. Over the last four quarters, DXP has produced $118.7 million in free cash flow, creating a new fact pattern for DXP, consistently averaging $29 million in free cash flow per quarter while also growing the business or sales per business day. This improvement reflects increases in profitability, stronger operating cash flow, and a meaningful reduction in capital expenditures. As of June 30th, our fixed charge coverage ratio was 2.97 to 1, and our secured leverage ratio was 2.3 to 1, with a covenant EBITDA for the last 12 months of $267 million. Total debt outstanding on June 30 was $842.5 million. In terms of acquisitions, we acquired four businesses during the first half of 2026 for total consideration of $135.6 million. These acquisitions are directly aligned with our strategy to expand our water and wastewater platform, extend our geographic reach, and and support our position as a leading distributor of rotating equipment in North America. We continue to see acquisitions as a disciplined, repeatable growth lever for DXP, particularly where we can add strong teams, technical expertise, and market access in attractive end markets. As Nick mentioned, subsequent to quarter end, we also completed the acquisition of Maquico Limited, which is based in Western Canada and provides DXP with a beachhead to expand DXP water in Canada going forward. The acquisition was funded with cash on the balance sheet and DXP stock further demonstrated the strength of our pipeline and our ability to execute. On July 2nd, 2026, we entered into a new restated loan and security agreement, increasing our ABL to $225 million and extending the maturity to July 2031. This further enhances our financial flexibility as we continue to invest in the business organically and through acquisitions. Finally, on July 20th, S&P Global Ratings upgraded DXP's issuer credit rating and first lien term loan ratings to B plus from B with a stable outlook. We view this upgrade as external recognition of the progress we have made, strengthening the balance sheet, diversifying our end market mix, scaling EBITDA, and executing a disciplined acquisition strategy while maintaining financial flexibility. In summary, we are pleased with our second quarter and first half performance in 2026. We delivered strong sales growth, expanded margins, improved adjusted EBITDA, and generated significant free cash flow while continuing to execute on our acquisition strategy. The quarter reinforces that acquisitions and water and wastewater are becoming increasingly important contributors to DXP's growth profile. We believe DXP remains well positioned to continue creating value through our resilient MRO and supply chain solutions, engineered solution capabilities, disciplined acquisitions, and exposure to secular trends. We are excited about the future. We look forward with confidence to sustain growth and market outperformance. I will now turn the call over for questions.

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Zach Marriott with Stevens. Your line is open. Please go ahead.

Good morning and congrats on the solid quarter. I want to start with daily sales trends by month. Can you please fill in the gap for us in May for Q2 and then share what color you can for Q3 thus far?

Yeah, good morning, Zach, and thank you. Yes, you know, I'll walk through the sales per business day. I'll really just go through Q1 and Q2 so you just are clear on the full first half of 2026. January was $7.2 million per day. February, $8.4 million per day. March, $9.2 million per day. April, $9.1 million. May, $9 million. in June 9.4. Year-to-date average, if you just want to average that out, that's 8.7 million per day for the full year-to-date average.

Understood. Thank you. And on EBITDA margins, you have been in the 11% range pretty consistently and just reported a 12. As you look into Q3, is it more likely you'll stay at 12% or head back closer to 11%?

You know, Zach, hey, part of that is obviously mix. You know, the thing I point out within the IPS segment is, you know, water and wastewater is approaching 70% of the segment sales. And while we had great profitability on both sides of the business, meaning the energy side, as well as the water side, that increased contribution and an overall average higher operating income margin in water and wastewater would suggest um we have we have a chance of repeating that this is our first quarter at 12 percent so i don't i don't want to i don't want to promise anything and as you know we don't we don't give direct guidance but but we do believe um longer term the business easily can get to that 12 on a sustainable basis but this is our first quarter hitting it so understood thanks and last one if i could on capex i heard you that uh this year is a more normalized level

compared to last year. Could you please just touch on what those elevated investments from last year entailed?

Yeah, no problem, Zach. And, you know, big picture just in terms of CapEx, there's very little for us of maintenance CapEx. That said, just in terms of your specific question, last year we made investments in software facilities, equipment, a lot of different things, you know, as we often do when we get in a growth prospect. Additionally, on the rotating equipment side, we invest in patterns and different things because we do, you know, source and make our own branded private label pumps. And so those were the investments we were making that continued to help us to be the leading rotating equipment provider in North America.

Great. That's all I had, and I'll turn it back.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.