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    DXPE
    Earnings call· Jun 2026(Q2 FY26)

    DXP ENTERPRISES Q2 FY26 earnings call DXPE

    Aug 6, 2026 Source

    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

    5

    • 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

    2

    • Broader economy volatility

    • Tariffs, inflation, interest rates, and geopolitical uncertainty

    Guidance & targets

    2
    CategoryTargetConfidence
    Adjusted EBITDA margin
    12% on a sustainable basis
    high materiality
    Medium
    DXP Water sales growth
    continue sequential sales growth
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    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 million52.6%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 millionNearly 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 million8.3%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 million0.6%1.2%$6.5 million (Operating Income)

    Operational metrics

    20
    Adjusted EBITDA
    $70.4 millionup from $57.3 million in Q2 FY25
    Q2 FY26

    Improvement reflects sales growth, gross margin strength, and fixed cost leverage.

    Diluted EPS
    $1.76vs $1.43 in Q2 FY25
    Q2 FY26

    Year-over-year improvement primarily reflects higher sales, improved gross profit, and stronger operating income, partially offset by higher interest expense and effective tax rate.

    Total sales
    $576.5 millionup 15.6% year-over-year
    Q2 FY26

    Includes acquisition sales of $49.8 million.

    Organic sales
    $526.6 millionup 11.1% year-over-year
    Q2 FY26

    Excludes the impact of acquisitions.

    Gross profit margin
    31.8%vs 31.6% in Q2 FY25
    Q2 FY26

    Improvement reflects continuing margin expansion efforts and positive contribution from recent acquisitions.

    SG&A expense
    $127.6 millionincreased $15.7 million from Q2 FY25
    Q2 FY26

    Increase reflects increased payroll-related costs, depreciation and amortization, rent, insurance, and professional fees. Improvement as percentage of sales reflects operating leverage.

    Operating leverage
    1.5x
    Q2 FY26

    Reflects the fixed cost leverage as sales increase.

    Net working capital
    $393.3 millionincreased $31.7 million compared to December 31, 2025
    as of June 30, 2026

    Increase primarily due to sustained sales growth and acquisitions.

    Cash on balance sheet
    $226.6 million
    as of June 30, 2026

    Part of total liquidity.

    ABL availability
    $147.9 million
    as of June 30, 2026

    Part of total liquidity.

    Total liquidity
    $374.5 million
    as of June 30, 2026

    Provides sufficient dry powder to pursue acquisitions.

    Capital expenditures
    $2.6 millionvs $10.3 million in Q2 FY25
    Q2 FY26

    Reflects a more normalized level of capital spending following elevated investments last year in software, facilities, equipment, and private label pump patterns.

    Fixed charge coverage ratio
    2.97:1
    as of June 30, 2026

    Indicates financial health and ability to cover fixed charges.

    Secured leverage ratio
    2.31%
    as of June 30, 2026

    Indicates leverage level.

    Covenant EBITDA
    $267 million
    LTM

    Used for covenant calculations.

    Total debt outstanding
    $842.5 million
    as of June 30, 2026

    Total debt balance at quarter end.

    Acquisition consideration
    $135.6 million
    H1 FY26

    Total consideration for acquisitions in the first half of 2026.

    Combined Service Centers and IPS sales
    $967.3 millionup 14.3% from prior year
    H1 FY26

    Reflects both organic execution and recent acquisitions.

    Operating income
    $55.5 millionincreased $9.5 million or 20.7%
    Q2 FY26

    Reflects improved profitability.

    Net income
    $28.7 million
    Q2 FY26

    Increased from prior year.

    Industry KPIs

    1
    MetricValueDetails
    Daily sales rate$9.15 millionUSD per day

    Orderbook & backlog

    3
    IPS average backlogstrong, increasedQ2 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 backloggrew 7.3% sequentiallyQ2 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

    3
    Multiple unnamed businessesExpand 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 LimitedProvides 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 lendersNew 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

    2
    Broader economy volatilityOngoing

    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 uncertaintyOngoing

    Not quantified

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

    What to watch in Q3 FY26

    4

    Adjusted EBITDA margin sustainability

    Next quarter
    Current12.2%
    TargetSustain 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.

    Q&A highlights

    3

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.