The analyst inquired whether the 12% EBITDA margin achieved in Q2 was sustainable or if it would revert closer to the previous 11% range.

Kent Yee stated that while Q2 was the first time hitting 12%, the increased contribution from the higher-margin water and wastewater business within IPS suggests a chance of repeating it, and they believe the business can sustainably reach 12% longer term. “Zach, part of that is obviously mix. The thing I'd point out with an IPS segment is 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 in an overall average higher operating income margin in water and wastewater would suggest we have a chance of repeating that. This is our first quarter to 12%. So I don't want to promise anything. And as you know, we don't give direct guidance, but we do believe longer term, the business easily can get to that 12% on a sustainable basis. But this is our first quarter hitting it.”

The analyst asked for details on the elevated capital expenditures made in the previous year.

Kent Yee explained that last year's elevated CapEx included investments in software, facilities, equipment, and patterns for their private label pumps, supporting their growth and position as a leading rotating equipment provider. “Yes. No problem, Zach. And 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 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 source and make our own branded private label pumps. And so those were the investments we were making that continue to help us to be the leading rotating equipment provider in North America.”

DXPE

DXP Enterprises (DXPE) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Aug 6, 2026

Source: earnings call transcript

Executive summary

DXP Enterprises Q2 FY26 — Strong Sales Growth and Record Profitability

DXP Enterprises delivered a strong second quarter, driven by robust organic growth and successful acquisitions, particularly within its Innovative Pumping Solutions and Water and Wastewater platforms. The company achieved record adjusted EBITDA margins and significant free cash flow generation, underscoring the effectiveness of its customer-driven strategy and disciplined capital allocation. Management expressed confidence in sustaining growth and market outperformance, leveraging its diversified end markets and engineered solution capabilities.

Highlights

Total sales increased 15.6% year-over-year to $576.5 million.
Organic sales grew 11.1% year-over-year to $526.6 million.
Adjusted EBITDA reached a new high watermark of $70.4 million, with margins improving to 12.2%.
Diluted EPS increased to $1.76, up from $1.43 in Q2 2025.
Free cash flow for the first half of 2026 was $56 million, a significant improvement from negative $8.6 million in H1 2025.

Concerns

Broader economy volatility
Tariffs, inflation, interest rates, and geopolitical uncertainty

Guidance & targets

Category	Target	Timeline	Confidence
Adjusted EBITDA margin	12% on a sustainable basis high materiality	Longer term	Medium
DXP Water sales growth	continue sequential sales growth medium materiality	Second half of 2026 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Innovative Pumping Solutions (IPS) Growth driven by increased activity in water and wastewater, production contracts, and strategic acquisitions. Segment operating income increased from $18.6 million in Q2 FY25. Organic sales growth: $11.3 million or 13.3%Water and wastewater contribution: approaching 70% of segment salesAcquisition sales: $47 million (Q2 FY26) vs $9.1 million (Q2 FY25)	$142.7 million	52.6%	20.3%	$26.7 million (Operating Income)
DXP Water Driven by municipal infrastructure investments, regulatory requirements, and customer demand for reliable pumping and treating solutions. 15th consecutive quarter of sequential sales growthYear-to-date sales: $175.5 million, up 85.6% year-over-year	$97.3 million	Nearly doubling	—	—
Service Centers Growth driven by increased business activity across multiple regions including California, Gulf Coast, Southeast, North Texas, South Central, and South Rockies. Reflects continued strength and consistency in the core MRO business. Organic sales growth: $40.9 million	$367.9 million	8.3%	8.9%	$54.2 million (Operating Income)
Supply Chain Services (SCS) Performance reflects onboarding of new customers and facilities, partially offset by decreased activity with certain existing customers. Segment operating income improved from $5.2 million in Q2 FY25 despite flat sales.	$65.8 million	0.6%	1.2%	$6.5 million (Operating Income)

Orderbook & backlog

IPS average backlog strong, increased Q2 FY26

increased compared to prior period and Q1

Reflects continued demand for engineered pumping solutions, water and wastewater projects, and production-related work.

IPS energy-related average backlog grew 7.3% sequentially Q2 FY26

7.3% sequential growth

Continues to stem declines seen in Q3 and Q4 of last year.

IPS backlog (excluding large engineered projects) up 10% Q2 FY26

up 10% from Q1

Indicates underlying strength beyond specific large projects.

Deals & partnerships

Multiple unnamed businesses Expand water and wastewater platform, enhance capabilities, extend geographic reach, reinforce position as leading distributor of rotating equipment. $135.6 million (total consideration for 4 businesses)

Acquired 3 businesses in Q1 FY26 and 1 additional business in Q2 FY26.

Mico Limited Provides DXP with a beachhead to expand DXP Water in Canada.

Acquisition completed on August 1, 2026, funded with cash on the balance sheet and DXP stock. Based in Western Canada.

Unnamed lenders New restated loan and security agreement, increasing ABL capacity and extending maturity. $225 million (ABL increase) extended maturity to July 2031

Entered into agreement on July 2, 2026.

Risks & headwinds

Broader economy volatility Ongoing

Not quantified

Mitigation:Business resilience due to mission-critical products and services, diversified end markets, MRO and Supply Chain Solutions, and engineered solution capabilities.

Tariffs, inflation, interest rates, and geopolitical uncertainty Ongoing

Not quantified

Mitigation:DXP's essential products and services provide resilience, allowing DX people to demonstrate differentiation.

What to watch in Q3 FY26

Adjusted EBITDA margin sustainability

Next quarter

Current 12.2%

Target Sustain 12% or higher

Why it matters

Management believes the 12% margin is sustainable longer term, and its continuation would validate the positive mix shift and operating leverage.

But we do believe longer term, the business easily can get to that 12% on a sustainable basis. But this is our first quarter hitting it.

Find out whether DXPE delivers this. Inve re-checks your case every morning.

Q&A highlights

The analyst asked for the daily sales trend for May in Q2 and any available color for Q3.

Kent Yee provided a detailed breakdown of daily sales per business day for each month of Q1 and Q2 2026, but did not provide specific Q3 color, stating the company does not give direct guidance.

“Yes, and thank you, yes. 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, $9 million June $9.4 million. Year-to-date average just if you just want to average that out, that's $8.7 million per day for the full year-to-date average.”

asked by Zachary Marriott · answered by Kent Yee

2 min read 5 chapters

Detailed narrative

Strong Q2 Performance & Customer-Driven Strategy

DXP Enterprises reported a very strong second quarter for FY26, with total sales increasing 15.6% year-over-year to $576.5 million and organic sales growing 11.1% to $526.6 million. The company achieved a gross profit margin of 31.8% and adjusted EBITDA of $70.4 million, representing a record 12.2% margin.

This performance was attributed to the DXP people's focus on customer-driven expertise, solving problems, and providing technical solutions across various markets including water and wastewater, energy infrastructure, and data centers.

Innovative Pumping Solutions (IPS) Momentum

The Innovative Pumping Solutions segment was a key growth driver, with sales increasing 52.6% year-over-year and 20.3% sequentially to $142.7 million. This growth was fueled by increased activity in the water and wastewater division, production contracts, and strategic acquisitions. IPS organic sales grew $11.3 million or 13.3%, and its segment operating income rose to $26.7 million.

The average IPS backlog remained strong, increasing compared to both the prior period and Q1, with energy-related backlog growing 7.3% sequentially.

Water and Wastewater Platform Expansion

DXP Water continued its robust expansion, achieving its 15th consecutive quarter of sequential sales growth. Q2 sales reached $97.3 million, nearly doubling year-over-year, and year-to-date sales totaled $175.5 million, up 85.6% year-over-year. This growth is driven by municipal infrastructure investments, regulatory requirements, and strong customer demand for reliable pumping and treating solutions.

The company expects this momentum to continue through the second half of 2026, further strengthening its long-cycle opportunity in this market.

Acquisition Strategy and Integration

Acquisitions remain a critical component of DXP's growth strategy. The company acquired three businesses in Q1 and one additional business in Q2 2026, contributing $49.8 million in sales during the quarter. For the first six months of 2026, acquisitions contributed $90.6 million in sales.

Subsequent to quarter-end, DXP acquired Mico Limited, expanding its DXP Water platform into Western Canada. The focus is on disciplined acquisitions that fit the culture, strengthen technical capabilities, and enhance customer service, followed by efficient integration and cross-selling.

Financial Strength and Capital Structure

DXP demonstrated strong financial health, generating $29.8 million in free cash flow for Q2 and $56 million for the first half of 2026, a significant improvement from a negative free cash flow in the prior year. The company ended Q2 with $226.6 million in cash and $147.9 million in ABL availability, totaling $374.5 million in liquidity.

Capital expenditures were normalized at $2.6 million for Q2. DXP also increased its ABL to $225 million and extended its maturity to July 2031, and received an S&P Global Ratings upgrade to B+ with a stable outlook, reflecting its strengthened balance sheet and diversified market mix.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.