DXP Enterprises, Inc. Aktie

Hello, everyone. Thank you for joining us, and welcome to DXP Enterprises First Quarter 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to David Little, CEO. David, please go ahead.

Yes. Actually, Samantha, this is Kent Yee, Chief Financial Officer. I'll walk through a few comments, and then we'll hand it over to David Little, our CEO and Chairman.

Before we get started, I want to remind you that today's call is being webcast and recorded and includes forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis are contained in our SEC filings. DXP assumes no obligation to update that information because of new information or future events.

During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our earnings press release. The press release and an accompanying investor presentation are now available on our website at ir.dxpe.com.

I will now turn the call over to David Little, our Chairman and CEO, to provide his thoughts and a summary of our first quarter performance and financial results. David?

Good afternoon, and thanks for joining us today on DXP's Fiscal 2026 First Quarter Conference Call. Well, we've delivered a slow start to 2026, especially sales in January, which improved in February and improved to a greater extent in March. We are not sure why sales in January were so soft, but glad to see the growth in the other 2 months and the growth in bookings during the quarter plus continuing in April. We also maintained gross margin discipline, generated meaningful free cash flow that gives us confidence in the quarters ahead.

From an earnings standpoint, the quarter included increased interest expense, amortization and a few discrete items in SG&A like health care, legal, audit-related costs tied to our acquisition activity, which we view are timing and will normalize and are not reflected of our underlying earning power. Our strategy remains simple and consistent: be customer-driven experts, execute operationally, grow where we have competitive advantage, allocate capital in a disciplined way. This quarter reflects steady execution across our diversified platforms. We grew sales nearly 10%, expanded gross profit margins, delivered EBITDA margins above 11%, all the while generating strong cash flow.

On behalf of the 3,497 DXPeople you can trust, I want to thank our customers, suppliers and shareholders for their continued trust and support. Our team continues to execute with consistency. We remain focused on profitable growth and cash generation. Consolidated performance in the first quarter, sales were $521.7 million, up 9.5% year-over-year. Sales per business day increased to $8.28 million from $7.57 million. Gross profit margins expanded 32.3%, nearly 80 basis points higher. Adjusted EBITDA was $57.8 million or 11.1% margin. Operating income totaled $42.5 million. Adjusted diluted earnings per share was $1.26. Free cash flow was $26.3 million.

These results are driven by a combination of organic growth, favorable mix, operating execution and contributions from accretive acquisitions. Margin performance reflects pricing discipline, cost controls and ongoing shift towards higher-value products, engineered solutions and services. SG&A was higher year-over-year due to several unique and some nonrecurring items, including health care, claims, volatility, legal and audit costs tied to acquisitions and other onetime expenses. We expected those to normalize as the year progresses, and we remain focused on managing SG&A while continuing to invest in growth initiatives that generate acceptable returns.

From a growth standpoint, we continue to lean into markets where demand is durable and where DXP's capabilities matter. water and wastewater, energy infrastructure, general industry. Selected technology-driven markets like data centers and air compression continue to provide attractive long-term demand drivers. Across DXP, growth is coming from several consistent themes: expanding technical and engineered solutions, broadening solutions around pumps, automation, filtration and process equipment, leveraging our decentralized model to pursue local growth opportunities and cross-selling across platforms and integrating acquisitions more effectively. We are not chasing volume for volume's sake. Growth is targeted at areas where we can maintain margins, generate cash and deepen our customer relationships.

Thank you, DXP sales and operational professionals for teaming up together and winning for our customers and stakeholders. Thank you to our corporate support for their efforts to support both internal and external customers. Segment performance, Innovative Pumping Solutions continues to deliver engineering solutions that matter. Sales increased 37.7% to $111.7 million. Growth was driven by energy-related and water and wastewater activity, along with contributions from recent acquisitions. Bookings and backlog in energy infrastructure remain above long-term averages, and we're encouraged by the traction we're seeing early in fiscal 2026. Many of these engineered solutions are large multi-quarter in nature, which support revenue visibility and backlog conversion moving forward.

We also continue to build scale in water and wastewater markets within IPS, where municipal infrastructure investments and regulatory requirements create long-cycle demand for pumps and treatment solutions. Service Centers produced 3.3% total sales growth. This segment continues to benefit from its diversification across end markets and its product -- multi-product, MRO-focused model. Growing is coming from technical products such as automation, vacuum pumps, filtration, newer pump brands serving water and industrial applications. We are also seeing demand improvements in markets like air compression and data centers, where customers need reliable systems for pumping, cooling, power and filtration areas where DXP can provide bundled solutions rather than just individual components.

Supply Chain Services grew 2.7% year-over-year and 6.2% sequentially. This business continues to onboard new customers. As we have discussed before, implementation timing and facility level ramp-up can create temporary variability, but demand for US SCS' technology that enables integrated supply solutions continues to build. The sales pipeline remains encouraging, and we expect performance to improve gradually on onboarding mature and program volume scale.

Cash flow and capital discipline and balance sheet. Cash generation remains a core focus for DXP. In the first quarter, we generated $29.6 million in operating cash flow and $26.3 million of free cash flow, even while investing in working capital to support growth, particularly in IPS and our water-focused business. Our balance sheet remains strong with ample liquidity to fund organic growth initiatives, integrate recent acquisitions, pursue disciplined accretive M&A and maintain financial flexibility through different macro environments. We continue to emphasize cash conversion, working capital discipline and return on invested capital when making growth and acquisition decisions.

As we move through fiscal 2026, our priorities remain clear: drive organic growth in attractive end markets, maintain margin discipline and operational execution, execute strategic accretive acquisitions and generate cash and allocate capital thoughtfully. We like the current setup in our markets, especially water, general industry and energy-related infrastructure. Bookings are trending higher. Backlog remains healthy to higher. And based on current visibility, we're encouraged about the second quarter and the remainder of the year. DXP's diversified model, improving demand indicators and consistent operating discipline gives us confidence in our ability to execute through fiscal 2026.

In closing, I want to thank our DXPeople for their execution, teamwork and commitment. They continue to differentiate DXP in the markets we serve and create value for our customers and shareholders.

With that, I'll turn it over to Kent to walk you through the financial details.

Thank you, David, and thank you to everyone for joining us for our review of our first quarter of 2026 financial results. Q1 shows that we carried momentum from last year into fiscal 2026, but started off slower than anticipated. That said, at this time last year, we experienced a similar trend and finished 2025 strong. Likewise, we anticipate 2026 to be another strong year. Specifically in terms of Q1, we had strength in sales during the months of February and March, strong gross margin performance and good free cash flow generation.

To summarize the quarter, Q1 key takeaways are as follows: 9.5% sales growth with sales per business day showing 28% growth between January and March, strong gross margin performance with gross margin improvement sequentially and year-over-year and great quarterly free cash flow generation. In terms of our detailed results, total sales for the first quarter increased 9.5% year-over-year to $521.7 million. Acquisitions that have been with DXP for less than a year contributed $40.7 million in sales during the quarter. Average daily sales for the first quarter were $8.3 million per day versus $7.6 million per day in Q1 of 2025.

Adjusting for acquisitions, average daily sales were $7.6 million per day for the first quarter of 2026 versus $7.1 million per day during the first quarter of 2025. As is typical, sales accelerated through the quarter, with average daily sales increasing from $7.2 million per day in January to $9.2 million per day in March, reflecting a normal quarter end push, but highlighting strong acceleration coming into quarter end. In terms of our business segments and on a year-over-year basis, Innovative Pumping Solutions grew 37.7%. This was followed by Service Centers growing 3.3% and Supply Chain Services growing 2.7% year-over-year. In terms of our service centers, sales grew 3.3% year-over-year and declined 5.1% sequentially.

Regions that experienced sequential as well as year-over-year sales growth include our South Central, South Rockies and South Atlantic regions. From a product perspective, our Metalworking division also experienced sequential and year-over-year sales growth. From a segment operating income perspective, we have had 4 consecutive quarters of around 14% or greater, and we look for this to continue as we still believe there are regions that can enhance or become more consistent in their operating income margins.

In terms of Innovative Pumping Solutions, we continue to experience strong backlogs in both our energy and water and wastewater businesses. Our Q1 2026 energy-related average backlog increased 2.1% sequentially, stemming the declines we saw in Q3 and Q4 of last year. As David mentioned and as we have been discussing on previous earnings calls, we have booked a few large engineered projects in both energy and water that we have recognized some revenue in 2025 and will continue into 2026.

The conclusion continues to remain that we are trending meaningfully above all notable sales levels based upon where our backlog stands today. Our DXP Water platform experienced our 14th consecutive quarter of sequential sales growth, and we look for this to continue as we move through 2026. That said, we are seeing project and product delivery time lines stretched in our already long-cycle business. We also see strength in our IPS Water backlog as it continues to grow due to a combination of organic and acquisition additions. It is worth noting that DXP Water was 66% of IPS sales in Q1. Supply Chain Services performance primarily reflects a 6.2% increase sequentially as well as growing 2.7% year-over-year. As we discussed during Q3 and Q4 of last year, we experienced an uptick in Supply Chain Services performance, which we are seeing here in Q1.

Interest and demand for SCS services is increasing because of the proven technology and efficiencies they perform for all their industrial customers, and we expect a stronger 2026 as we onboard new customers. In terms of turning to DXP's gross margins, DXP's total gross margins were 32.3%, a 79 basis point improvement over Q1 of 2025. This improvement is attributed to increased margins year-over-year across all 3 business segments and the contribution from acquisitions at a higher overall relative gross margin versus our DXP business. That said, from a segment mix sales contribution in Q1, Service Centers contributed 65%, Innovative Pumping Solutions was 23% and Supply Chain Services was 12% of sales.

With our mix increasing more towards Innovative Pumping Solutions, this continues to elevate DXP's gross margins. In terms of operating income, combined, all 3 business segments increased 105 basis points year-over-year in business segment operating income margins. This was driven by improvements in operating income margins across all 3 segments year-over-year and sequentially. Total DXP operating income was $42.5 million in Q1 of 2026. Our SG&A for the quarter increased $16.1 million from Q1 of 2025 and $6.2 million from Q4 of 2025 to $126.1 million. The increase reflects normal seasonal amounts in terms of payroll taxes, insurance and other administrative items as well as the growth in the business and associated incentive compensation.

Additionally, as David mentioned in his comments, the quarter included some unique and discrete onetime items, including elevated health care costs, excess legal and consulting costs as well as onetime equipment and fleet costs. SG&A as a percentage of sales increased 115 and 144 basis points year-over-year and sequentially to 24.2% of sales.

Turning to EBITDA. Q1 2026 adjusted EBITDA was $57.8 million. Adjusted EBITDA margins were 11.1%. It is worth noting that our adjusted EBITDA margins remain above 11% amidst our normal financial seasonality associated with higher payroll taxes, insurance and associated items. We continue to expect to benefit from the fixed cost SG&A leverage we experienced as we grow sales and anticipate there is further operating leverage as we move through fiscal 2026.

In terms of EPS, with a Q1 net income of $20 million, our earnings per diluted share for Q1 2026 was $1.22 per share versus $1.39 per share for Q4 of 2025. We would point out that in the fall, we repriced and raised an incremental $205 million in debt. Interest expense increased by $1.8 million compared to the first quarter of last year. Conservatively adjusting for some of the onetime acquisition and excess expense items, adjusted earnings per diluted share for Q1 of 2026 was $1.26 per share.

Turning to the balance sheet and cash flow. In terms of working capital, our working capital increased $17.9 million from December to $379.6 million. As a percentage of sales, this amounted to 18.4%. As mentioned during Q4, we will continue to grow into the working capital as a percentage of sales, specifically the impact from recent acquisitions. We do anticipate further acquisitions, however, which could cause us to move upwards, albeit we are focused on managing working capital as efficiently as possible as we scale and grow.

In terms of cash, we had $213.4 million in cash on the balance sheet as of March 31. This is a decrease of $90.4 million compared to the end of Q4, and this primarily reflects the acquisition of Mid Atlantic Storage Systems, PREMIERflow and Ambiente H2O. In terms of CapEx, CapEx in the first quarter was $3.3 million or essentially flat compared to Q4 of 2025 and a decrease of $16.6 million compared to the first quarter of 2025. As we have discussed, we were making investments in the business as we grow, and this began to taper during the second half of last year, and we see our current levels at less than 1% of sales as more of what we would expect in terms of maintenance capital expenditures.

Turning to free cash flow. Cash flow from operations was $29.8 million in Q1 of this year versus Q1 of last year, was $3 million. As a reminder, during Q1 of 2025, we included tax payments, which were deferred from Q2 of last year due to storms that were paid in Q1 of 2025. That said, we continue investing in projects and experienced an uptick in receivable days during Q1. As we move through 2026, this should balance out, and we should see a decrease in receivable days. We continue to focus tightly on managing projects from a cash flow perspective and look to align billings with the investments.

Return on invested capital, or ROIC, at the end of the first quarter was 34.1% and is consistent with DXP driving margins, operating leverage and improving our run rate EBITDA. As of March 31, our fixed charge coverage ratio was 2.5:1, and our secured leverage ratio was 2.6:1 with a covenant EBITDA for the last 12 months of $243.9 million. Total debt outstanding on March 31 was $844.7 million. In terms of liquidity, as of the first quarter, we were undrawn on our ABL with $31.7 million in letters of credit or $153.3 million in availability and liquidity of $366.7 million, which includes $213.4 million in cash.

DXP is poised to execute our acquisition strategy and would anticipate closing another 1 to 2 acquisitions before the second quarter ends. In terms of acquisitions, we closed on 3 during the quarter, Mid Atlantic Storage Systems, PREMIERflow and Ambiente H2O. DXP's acquisition pipeline continues to remain active, and the market continues to present compelling opportunities. As we discussed during the Q4 earnings call, we anticipated closing 1 to 3 acquisitions before midyear, and we have closed 3 deals year-to-date. We have another 3 under letter of intent and another 2 closely to coming under letter of intent. That said, we are stressing sustainable performance with our acquisitions and remain comfortable with our ability to execute on our pipeline.

Heading into 2026, we refreshed our balance sheet, which has allowed us to continue to invest in the business, both organically and through acquisitions while also returning capital to shareholders. We are excited about the future. We are excited because there is still substantial value embedded in DXP. We look forward with great confidence to a future of sustained growth and market outperformance. Our resilient and critical MRO and supply chain solutions, combined with our engineered solution capabilities and exposure to secular trends, including water and wastewater will continue to drive our future sales and profitability. We are excited about the future.

I will now turn the call over for questions.

[Operator Instructions] Your first question comes from the line of Zach Marriott with Stephens.

So I heard you give the January and March daily sales number. Could you please just fill us in for February and then Q2 thus far?

Yes. No, absolutely. And I'll just kind of go from the beginning of the year. January was $7.2 million per day. February was $8.4 million per day. March was $9.2 million per day, and then April was $9 million per day.

Noted. And then is there anything that should drive a meaningful margin difference, whether up or down when comparing 2Q to 1Q?

Zach, obviously, there's SG&A leverage, which we talked about in our comments. And so as David mentioned, January was a light month. And so we came in at around 11.1% EBITDA margins, and that's kind of where we've kind of been in the last 3 quarters or so. That said, I think we feel good going into Q2. We don't provide direct formal guidance, but I think we do believe there's more leverage in the business, and we believe margins could be higher.

So if that answers your question, I think, hey, if sales keep driving in the direction that the trends show -- and by the way, on a monthly year-over-year basis, that April number is 15% up year-over-year compared to April of last year. That's going to drive incremental margin to the bottom line as we kind of move forward. So...

Yes, that's responsive. And then just one more, if I could. Corporate expenses have fluctuated over the last year from as low as $20 million to up to $28 million this last quarter. So should we use the $28 million as the best proxy for 2Q and beyond? Or should this number just vary significantly over the balance of the year?

There is some variability. I mean, we -- Zach, we pointed out in our comments, but there were some, what we call discrete unique onetime items, including some consulting fees, some fleet costs that we normally wouldn't incur. That said, I do think there are some costs in there like our health care claims that we have control over, but you don't have control over if you understand kind of how those are driven, if you will. And so I think as we grow, as we add people, that's a category that naturally would increase. So from an absolute dollar perspective, I wouldn't sit here and say it would be $20 million, but it could surely be a blend of between the $20 million to $28 million here over the short to medium term.

But once again, as we grow, as we add acquisitions, as we add people, you're going to have increased health care claims and particularly. We're self-insured as a company. And so now we hope for a healthy employee base, and we have all those things. But the reality is you do provide people health insurance, and that's part of what you do. And so we've grown pretty significantly through acquisitions here recently. And so some of our costs have gone up correspondingly.

Your next question comes from the line of [indiscernible]

So I just would like to ask, I mean, are you seeing any changes in pricing dynamics across your key end markets, particularly in energy? And how is that impacting margins and demand?

So I believe the question was how is the war kind of affecting the oil and gas industry on margins and demand? Is that -- I missed the first part.

Yes, yes. Yes. Do you see any changes in pricing -- I mean, yes, particularly in energy?

Sure. Yes, our oil and gas business is doing good, and it's growing. And like we've said in the past, we have booked some really, really large orders. We've booked some very nice orders here recently. And there's still -- can be competitive or we also -- we do manufacturing of pumps. And so when we are able to sell those type of products, they're based on delivery, and we can produce pumps faster than anybody else can. So in that case, our margin goes up.

When speed to delivery matters, then our margin goes up. We're -- and so we have some very nice margins in that particular area. And then I would say, in general, demand, it's twofold. One is oil companies aren't going crazy just because oil prices are $100 or $100 and above because they feel like the war and things like that are going to be resolved at some point in time. So they can't count on those kind of prices. They expect them to come down some. And so they're not going crazy. But on the other hand, they have a lot of extra money, and so they're spending it. So demand is up in that sense. So it's up some. It's not -- just booming is how I would answer that.

Okay. That helps a lot. And my next question would be, you recently participated in DICE. So did you identify any meaningful opportunities either from a commercial or acquisition standpoint?

That question was around DICE, I guess. And did you say or...

Investment conference that you've participated. So did you identify any meaningful opportunities or I mean, from commercial or acquisition standpoint?

Yes. I think from an acquisition standpoint, hey, we're always out there as a business, whether in the field and/or us here at corporate, if you will. And so from a pipeline standpoint, as I mentioned in my comments, we have 3 letters of intent, if you will, in place today that we're working through due diligence. And then we have another 2 that are closely in the process to being under letter of intent. Point being, I guess, is, hey, we're still in acquisition mode. We think there's compelling opportunities out there.

Obviously, our recent focus has been on the water, wastewater side, and we're still finding opportunities in that space. And so as we always say, DXP is in the business of buying businesses. And so we're always finding opportunities. We spend a lot of time finding the right fit in particular.

We've reached the end of the Q&A session. I will now turn the call back to David Little for closing remarks.

I would just reiterate that January was just surprisingly slow. I'm not -- I have no clue as to why it was across the board. It was in water. It was in oil and gas. It was in general industry. It was in everything. So I really can't have -- I don't have anything to point to. And so that kind of threw us off stride a bit. And so we didn't produce great results. I think that's obvious. But with that said, bookings in January have kind of ticked up. They've ticked up higher in February, and they're ticking up higher in March. And so we feel good about what we're doing going forward. Sorry about January, but we feel good about the year. So we're looking forward to a great year and appreciate everybody hanging in there. Thanks.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the DXP Enterprises Fourth Quarter 2025 Earnings Release. [Operator Instructions] I will now hand the call over to David Little, CEO. Please go ahead.

Well, thank you, Jade. This is actually Kent Yee. I'll jump in here and have a small disclaimer in front of the call, and then I'll turn it over to David Little, our CEO and Chairman.

This is Kent Yee, and welcome to DXP's Q4 2025 Conference Call to discuss our results for the Fourth Quarter and Fiscal Year Ending December 31, 2025. As I mentioned, joining me today is our Chairman and CEO, David Little.

Before we get started, I want to remind you that today's call is being webcast and recorded and includes forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis are contained in our SEC filings. DXP assumes no obligation to update that information as a result of new information or future events.

During this call, we may refer both GAAP and non-GAAP financial measures. Reconciliation of GAAP to non-GAAP measures is included in our earnings press release. The press release and an accompanying investor presentation are now available on our website at ir.dxpe.com.

I will now turn the call over to David Little, our Chairman and CEO, to provide his thoughts and a summary of our fourth quarter and fiscal 2025 performance and financial results. David?

Thanks, Kent, and thank you to everyone who is joining us today for DXP's Fourth Quarter and Fiscal 2025 Earnings Call. I am pleased to report that 2025 was an exciting year for DXP with strong performance across all our key financial metrics, including sales, sales per business day, gross profit margins and adjusted EBITDA margins. These results reflect the continued strength of our DXPeople, products and operating model and our ability to serve customers across a broad and diverse set of end markets. On behalf of more than 3,286 DXPeople you can trust, I want to thank our customers, suppliers and shareholders for their continued trust and support.

Fiscal 2025 was a year of execution, and our results demonstrated the benefits of diversification, scale and disciplined capital allocation. For 2025, DXP sales grew 11.9% to $2 billion, while gross profit margins expanded 67 basis points to 31.5%. Adjusted EBITDA reached $22.3 million -- $225.3 million with an 11.2% margin. This was a record year for both sales and adjusted EBITDA margins, and it marked an important milestone as we continue to scale the business.

Operating income increased 21.7% year-over-year to $176.9 million. And diluted earnings per share improved to $5.37, up from $4.22 in fiscal 2024. Sales per business day continued to improve throughout the year, averaging $7.57 million in the first quarter and increasing to $8.51 million by the fourth quarter and fiscal year 2025 average sales per business day of $8 million as compared to $7.1 million in fiscal year 2024. These results reflect solid organic growth and contributions from accretive acquisitions, all while maintaining a focus on operating efficiencies.

A core component of our strategy continues to be diversification of end market exposure while building scale in markets where we have a strong competitive position. At the physical -- at our fiscal 2025, energy represented 22% of DXP sales, followed by water and wastewater at 15%, general industry at 15%, chemical at 10%, and food and beverage at 7%. This diversification has meaningfully reduced our cyclicality and helped drive more consistent performance over the last several years. We are encouraged by the interplay of these markets as we move into fiscal '26.

Note that over the last few years, energy market has been flat and our other markets like water and wastewater have grown substantially. We continue to pursue growth markets and battle increased market share on our other markets. Thank you, DXP sales and operation professionals for teaming up together and winning for our customers and stakeholders. Thank you to our corporate support team for their efforts to support both our internal and external customers. Thank you, DXP, for an awesome year.

During the year, we continued to execute on our capital allocation priorities. We completed 6 acquisitions, including Arroyo, McBride, Moores Pump, APSCO, Triangle Pump and Pump Solutions, all of which strengthened our capabilities and expanded our reach. We also continue to execute on our share repurchase program, returning $17 million in capital to shareholders, and we refinanced our debt in the fourth quarter, improving flexibility and positioning DXP for both growth and acquisition growth and organic growth and acquisition growth in 2026.

From a segment perspective, Innovative Pumping Solutions led the way, growing 26.4% year-over-year to $390.3 million. Growth was driven by strength in energy, water-related project activity, along with contributions from recent acquisitions. In terms of IPS, our Innovative Pumping Solutions, it bears repeating that we have 2 broad businesses tied to capital budgets or what we refer to as project work, DXP's heritage energy-related project work and DX Water. Within IPS, DXP's Water represented 55% of the segment sales in 2025, up from 46% last year. As we have grown this platform, we have seen improvements in both gross and operating income margins. The DXP Water backlog continues to grow organically and through acquisitions, including Triangle, APSCO and Pump Solutions. Energy-related bookings and backlog remain at an all-time at our long-term average, although they have pulled back in Q3 and Q4, and we look to Q1 to see if we have any trends emerging.

As we move to 2026, we feel good about how this backlog translates into revenue given the large projects that we are still in the process of completion. But we look to this quarter of 2026 to see if we get new bookings. Service Centers delivered 11% total sales growth, including 9.8% organic growth, driven by the diversity of end markets and our multiple product MRO-focused operating model. A few growth initiatives that are helping DXP growth percentages include technical products like automation, vacuum pumps, new pump brands for water and industrial markets, process equipment and filtration. New markets like data centers, need pumps, water, power, cooling, filtration, which DXP has continued to add and expand. We have added an e-commerce channel for the generation that wants to buy pumps and parts electronically, which had a record year for DXP in 2025.

Growth was broad-based geographically, but regions with experienced notable sales growth year-over-year included Ohio River Valley, Southeast, Texas Gulf Coast and California. We also had continued strength year-over-year in air compressors, U.S. Safety Services and metalworking.

Supply Chain Services experienced a modest decline year-over-year, primarily due to customer facility closures and reduced activity at certain energy-related sites. That said, SCS continues to invest in its customer care model and remote technologies, allowing us to expand service offering to customers with some smaller sites while improving efficiencies. We believe demand for SCS services is increasing and these capabilities gain traction, we will look for sales growth in 2026.

From a margin, cash flow and financial position standpoint, DXP's overall gross profit margins for the year were 31.5% or a 67 basis point improvement over 2024. IPS delivered the largest year-over-year expansion with 166 basis point improvement, followed by Supply Chain Services with 121 basis points and lastly, Service Centers with a 59 basis point improvement as compared to 2024. These gains reflect a combination of mix, pricing and execution as well as the impact of accretive acquisitions.

In terms of cash flow, we generated $94.3 million in cash from operating activities, which translated into $54 million of free cash flow during fiscal 2025. This reflects our focus on generating cash while continuing to invest in working capital and growth capital expenditures to support DXP. Our balance sheet remains strong, providing flexibility to continue executing on acquisitions and returning capital to stakeholders -- shareholders.

As we move into fiscal 2026, our focus remains on maintaining margin discipline while driving organic growth, executing on strategic acquisitions and improving operational efficiency as we scale. We continue to see constructive demand across energy, water and industrial markets, and we remain mindful of inflation dynamics and supply chains variability. Since 2022, DXP has grown sales at a 15% compounded annual growth rate, and we believe our strategies and our operating model positions us well to continue this trajectory over the long term.

In closing, I want to thank our DXPeople for their passion, teamwork and commitment. Their efforts continue to differentiate DXP and create value for our customers and stakeholders.

With that, I will now turn it to Kent to review the financial model in more detail.

Thank you, David, and thank you to everyone for joining us for our review of our fourth quarter and fiscal year 2025 financial results. Fiscal year 2025 was another record year for DXP, reaching new highs in sales, gross profit margins and adjusted EBITDA. It is also our first year of sustained 11% plus adjusted EBITDA margins and our third fiscal year of 10% plus adjusted EBITDA margins. We are excited to report this year's financial results. Additionally, with the consistent upward movement in our stock price and growth in our market capitalization, we are now an SEC large accelerated filer, and we are excited to report fiscal 2025 financial results under a quicker time frame. Thank you to everyone who made this happen.

Turning to our financial results. Fiscal year 2025 financial performance reflects our ability to drive the following: strong sales growth within IPS, along with an accelerating contribution from DXP Water, record Service Center performance marked by continued growth in sales from Q1 through Q4 and gross margin strength and stability, consistent consolidated gross margin performance with 2025 gross margins up 67 basis points year-over-year, consistent operating leverage leading to sustained adjusted EBITDA margins, more notably, our first fiscal year of 11% plus adjusted EBITDA margins, continued execution of our acquisition strategy, completing 6 acquisitions contributing $96 million in sales in 2025, the successful refinancing and repricing of our Term Loan B, including raising an incremental $205 million in capital and reducing interest costs by 50 basis points and continued capital return to shareholders through our share repurchase program, a great year.

Total sales for the fourth quarter increased 11.9% year-over-year to a record $527.4 million. This reflects an improvement in average sales per business day increasing from $8.03 million per day in Q3 with 64 business days to $8.51 million sales per business day in Q4 with 62 business days. Acquisitions that have been with DXP for less than a year contributed $21.9 million in sales during the fourth quarter. Total sales for DXP for fiscal 2025 were $2.0 billion, increasing 11.9% compared to fiscal 2024.

For the full year, acquisitions contributed $96 million in sales. Average daily sales for fiscal 2025 were $8 million per day versus $7.13 million per day in fiscal 2024, a 12.3% increase. Adjusting for acquisitions, average daily organic sales were $7.6 million per day for fiscal 2025 compared to $6.7 million per day in fiscal 2024. That said, the average daily sales trends during fiscal 2025 improved from $7.6 million per day in Q1 to $8.5 million per day in Q4 or an increase of 12.5%.

In terms of our business segments, Innovative Pumping Solutions sales grew 26.4% in fiscal year 2025 versus 2024, followed by Service Center sales growing 11% year-over-year and Supply Chain Services sales declining 1.4% year-over-year.

In terms of Innovative Pumping Solutions, we continue to experience strong backlogs in both our energy and water and wastewater business. On a comparative year-over-year basis, our average energy-related backlog finished the year up 36.9% compared to 2024. That said, our Q4 energy-related average backlog declined another 9.3% from Q3. This is the second quarter of decline in the energy-related backlog, but the backlog continues to be ahead of all our averages. Additionally, January grew 5.3% over December. As David mentioned and as we have been discussing on previous earnings calls, we have booked a few large projects in both energy and water that we have recognized some revenue in 2025 and will continue into 2026.

Now we will be looking to see what happens to our Q1 2026 average energy backlog. The conclusion continues to remain that we are trending meaningfully above all notable sales levels based upon where our backlog stands today. We also see strength in our IPS Water backlog as it continues to grow due to a combination of organic and acquisition additions.

In terms of our Service Centers, our Service Center performance reflects our internal growth initiatives, along with our diversified and evolving end market dynamics. On a comparative basis, fiscal year 2025 is now our strongest year with $1.4 billion in sales and sets a new sales high watermark. Regions within our Service Center business segment, which experienced year-over-year sales growth include the Ohio River Valley, Southeast, Texas Gulf Coast and California. From a product perspective, we also experienced strength in our air compressors, metalworking and U.S. Safety Services divisions.

Supply Chain Services sales performance reflects a 1.4% decrease year-over-year. Supply Chain Services sales performance reflects pullback in activity at oil and gas and our diversified chemical customer sites. Overall, we experienced reduced spend from existing customers while continuing to drive efficiencies and streamline purchasing that we bring to our customers. As expected, Q4 was impacted by seasonality with there being fewer billing days as SCS customers have facility closures and holiday hours. However, interest in demand for SCS services is increasing because of the proven technology and efficiencies they perform for all their industrial customers, and we expect a stronger 2026 as we onboard new customers.

Turning to our gross margins. DXP's total gross margins were 31.54%, a 67 basis point improvement over fiscal 2024. This improvement is attributed to strength in gross profit margins across all 3 business segments with Innovative Pumping Solutions showing 166 basis point improvement from last year and Supply Chain Services improving 121 basis points. Additionally, the contribution from accretive acquisitions at higher overall relative gross margin versus our base DXP business helped drive consistent gross margins within consolidated DXP. Acquisitions continue to be accretive to both gross and operating margins.

That said, from a segment mix sales contribution, Service Centers contributed 68%, Innovative Pumping Solutions, 19% and Supply Chain Services was 13%. This sales mix positively impacts our gross margins as we see an uptick in contribution from IPS compared to fiscal 2024.

In terms of operating income, all 3 business segments combined increased 40 basis points in year-over-year business segment operating income margins or $38 million versus fiscal 2024. Service Centers, IPS and Supply Chain Services each had 14.54%, 18% and 8.7% operating income margins, respectively. The consistency in Innovative Pumping Solutions reflects the impact of our water and wastewater acquisitions at a higher relative operating income margin and a growing percentage of revenue or sales mix.

DXP Water has gone from 22% of sales of IPS in 2023 to over 55% of IPS at the end of 2025. Total DXP operating income was $176.9 million or 8.8% of sales for fiscal 2025 versus $145 million and 8.1% of sales in fiscal 2024. Our SG&A for fiscal 2025 increased $48.2 million to $459.1 million. The increase reflects the growth in the business, the addition of acquisitions as well as incentive compensation and DXP investing in its people through merit and pay raises. Additionally, this also reflects an increase in our insurance premiums, continued investment in technology and our facilities as well as acquisition costs and growth initiatives. SG&A as a percentage of sales decreased slightly or 3 basis points year-over-year to 22.8% of sales. We still anticipate that DXP will benefit from the leverage inherent in the business despite increased operating dollars supporting our growth and the impact of acquisitions.

Turning to EBITDA. Fiscal 2025 adjusted EBITDA was $225.3 million. Adjusted EBITDA margins were 11.2%. This is our third fiscal year with adjusted EBITDA margins in excess of 10% and our first year with adjusted EBITDA margins in excess of 11% for all 4 quarters. We will look to continue to expand margins in 2026 as recent acquisitions should enhance our margins and internal initiatives focused on efficiency extract operating leverage. In fiscal 2025, this translated into 1.5x operating leverage.

In terms of our EPS, our net income for fiscal 2025 was $88.68 million. Our earnings per diluted share for fiscal 2025 was $5.37 per share versus $4.22 per share last year. Adjusting for onetime items, adjusted earnings per diluted share for fiscal 2025 was $5.42 per share.

Turning to the balance sheet and cash flow. In terms of working capital, our working capital increased $70.7 million for December -- from December, excuse me, of 2024 and decreased $2.9 million from September of this year to $361.7 million. As a percentage of fiscal year 2025 sales, this amounted to 17.9%. This is an uptick from fiscal year-end 2024 and reflects the impact of acquisitions, business mix and an increase in DXP's capital project work. As we move into fiscal 2026, we will continue to grow into the working capital as a percentage of sales, specifically the impact from recent acquisitions. That said, we do anticipate further acquisitions, which could cause a move upwards, albeit we are focused on managing working capital as efficiently as possible as we scale and grow.

In terms of cash, we had $303.8 million in cash on the balance sheet as of December 31. This is an increase of $155.5 million compared to Q4 of 2024 and $180 million since September. This reflects the refinancing of our existing Term Loan B in the fourth quarter and the strong cash flow generation we experienced during the fourth quarter, which we will touch upon later in my comments. As it pertains to our Term Loan B, similar to last year, during the fourth quarter, we announced that we refinanced and repriced our Term Loan B, maintaining our maturity of October 2030. We successfully repriced the Term Loan B, reducing our borrowing cost by 50 basis points to SOFR plus 325 versus SOFR plus 375 while also raising an incremental $205 million in capital to support our acquisition and investments program over the next 9 to 12 months.

Over the last 2 years, we have successfully reduced our borrowing cost by over 150 basis points while raising an incremental $310 million in capital, and we have deployed $218.3 million for acquisitions through 2025. We look forward to an exciting acquisition year and the continued scaling of DXP.

In terms of CapEx, CapEx for fiscal 2025 was $40.3 million versus $25.1 million in fiscal 2024. This increase reflects investing in some of our facilities and equipment, software and related investments to drive improvement and efficiencies on behalf of our employees. That said, a majority of our CapEx is growth-oriented and controllable, and we have the ability to pivot if and when necessary. As we move forward, we will continue to invest in the business as we focus on growth. As mentioned during the second quarter, over the short to medium term or the next 1 to 2 quarters, we should see CapEx lessen, and we will look for it to be less overall in 2026.

Turning to free cash flow. We generated solid operating cash flow during the fourth quarter as we did during the second and third quarter. During Q4 and for fiscal 2025, we had cash flow from operations of $42.6 million and $94.3 million, respectively. For fiscal 2025, this translated into $54 million in free cash flow. This does reflect the improvements in profitability along with elevated CapEx, which is primarily growth oriented, and we expect to taper again in fiscal 2026. Additionally, we continue to focus on tightly managing our capital projects, which we see as an opportunity to further generate and optimize cash flow. We have highlighted this in the past as recurring investments in inventory, product and costs in excess of billings. That said, we continue to focus on tightly managing this aspect of our business from a cash flow perspective and look to align billings with the investments and we look to make further strides here in 2026.

Return on invested capital, or ROIC for fiscal 2025 was 39.2% and continues to be measurably above our cost of capital and reflects the improvements in EBITDA and operating leverage inherent within the business. Additionally, it also points to our recent acquisitions performance and their positive contribution and accretive impact to both gross profit and EBITDA. As of December 31, our fixed charge coverage ratio was 2.1:1 and our secured leverage ratio was 2.3:1 with a covenant EBITDA for the last 12 months of $241.1 million. Total debt outstanding on December 31 was $846.8 million.

In terms of liquidity, as of December 31, we were undrawn on our ABL with $31.5 million in letters of credit with $153.5 million of availability and liquidity of $457.3 million, including $303.8 million in cash, which a portion of has been used to purchase Mid-Atlantic, PREMIERflow and Ambiente, which we've closed subsequent to fiscal year-end. We are excited to have all 3 recent acquisitions as a part of DXP, and they will start reporting with us for the first quarter of 2026.

All of you, welcome to DXP. DXP's acquisition pipeline continues to grow and the market continues to present compelling opportunities. Looking forward, we expect this to continue through fiscal 2026, and we look forward to closing a minimum of 1 to 3 additional acquisitions by the middle of the year. We remain comfortable with our -- with our ability to execute on our pipeline and valuations continue to remain reasonable. In terms of capital allocation, we repurchased or returned $17 million to shareholders via our share repurchase program in fiscal 2025 or a total of 182,000 shares of DXP stock.

In summary, we continue to remain excited about the future of building the next chapter and evolution of DXP. We will keep our eyes focused on those things we can control and what is ahead of us.

With that, I will now turn the call over for questions.

[Operator Instructions] Your first question comes from Zach Marriott of Stephens.

Is there any color you can share on the daily sales trends by month for both Q4 and Q1 thus far, please?

Zach, great to hear from you. Absolutely. We'll walk through Q4. And then given the fact that we filed earlier this year and being a large accelerated filer, we just really have January, but we'll give some color there. Starting in October, $7.5 million per day; November, $8.2 million per day; December, $9.8 million per day for a quarterly average of $8.5 million per day. January was $6.9 million per day. To give you context, that's up year-over-year 2%, if you will. January also typically is, if not the lowest month in the year, typically is always typically our slowest month in the year.

So that's what we have at this point in time and feel good with how February is shaping up.

Understood. And then is there anything that should drive a meaningful margin difference, whether up or down when comparing 4Q with 1Q?

You mean on a go-forward basis. We don't necessarily specifically provide any guidance, Zach. But once again, to the comments we made during our script, water continues to be accretive to both gross and operating income margins. And in Q4, obviously, this year, a little bit different than last year, we closed 3 acquisitions: APSCO, Triangle and Pump Solutions. So if they perform what we saw from a due diligence standpoint, that should be accretive to our margins here in Q1.

There are no further questions at this time. This concludes today's call. Thank you so much for attending.

Wait a minute. I'd give Zach more time if he needs it.

Absolutely. One moment please.

Sure. I got one more. Just looking for some color on the positive dynamics that you guys called out developing in energy in the second half of this year. Would this be conversion backlog or something else?

I'll let David comment on the overall tone, but just in terms of from a backlog perspective, Zach, what our comments were is in transparency, we did see another decline in Q4. That said, the tone in our business planning was everybody was quoting jobs and there was a fair amount of quote activity. And so the early expectation, the way I put it is for 2026 from an energy perspective potentially to be more back-end weighted.

But I'll let David comment and see if he has anything.

Yes. From our operating perspective, we're just seeing a lot of quoting activity. So we go back to the third quarter and fourth quarter, and so our bookings seem to be light. So we followed up with what our quoting activity and what about the projects in the future and et cetera. And so I think in general, people felt like that people had things on hold a bit and maybe that was political, maybe it wasn't. I'm not sure. But they just felt like that things would start being turned loose sort of at the beginning of the year. And then, of course, that affects sales towards the end of the year.

Anything else, Zach?

No, sir.

Okay. At this time, there are no further questions. I will now turn the call back to David Little for closing remarks.

Yes. My remarks basically to all the stakeholders and DXPeople. Just -- we had an awesome year. We feel like that between organic and inorganic growth that we're going to have another good year. And so thanks for that. Thanks for all the hard work on trying to drive whether that's new computer systems or new sales processes, et cetera. I know we work to improve continuously. And even though our SG&A only modestly improved, it did improve. So I'm happy about that. And -- but anyway, thanks for a great year, and we look forward to next year.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, and thank you for standing by. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to the DXP Enterprises, Inc. Third Quarter 2025 Earnings Release. [Operator Instructions]

Now I would like to turn the call over to our CFO, Kent Yee. Please go ahead.

Thank you, Mark, and thank you, everyone, for joining us today. This is Kent Yee, and welcome to DXP's Q3 2025 Conference Call to discuss our results for the third quarter ending September 30, 2025.

Joining me today is our Chairman and CEO, David Little.

Before we get started, I want to remind you that today's call is being webcast and recorded and includes forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis are contained in our SEC filings. DXP assumes no obligation to update that information as a result of new information or future events.

During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our earnings press release. The press release and an accompanying investor presentation are now available on our website at ir.dxpe.com.

I will now turn the call over to David Little, our Chairman and CEO, to provide his thoughts and a summary of our third quarter performance and financial results. David?

Thanks, Kent, and thanks to everyone on our 2025 third quarter conference call. Kent will take you through the key financial details after my remarks. After our prepared comments, we will open for Q&A.

It is my privilege to share DXP's third quarter results with you on behalf of over 3,234 DXPeople. Congratulations to all our stakeholders and a special thank you to our DXPeople you can trust.

We are pleased to see end market demand and DXP's performance continue through Q3 and remain at record levels as we move into the last quarter of 2025. This allows us to achieve another quarter of both solid sales growth and 11% adjusted EBITDA margins. We are pleased to announce strong third quarter results with sales, operating income and earnings per share all up over the prior year. This is a great way to start the second half of fiscal 2025.

We remain focused on serving our customers, providing products and services that help them save money, consolidate their MRO spend, manage inventory and provide solutions to solve their ever evolving needs. Being customer-driven and growing sales profitably is our goal.

We continue to focus on driving organic and acquisition growth, increasing gross profit margins and increasing productivity. Our execution has resulted in fiscal 2024 and 2025 top line and bottom line growth, both organically and through acquisitions. That said, our growth strategies are working, and our acquisition pipeline should add to our results as we close out the fiscal year 2025 and go into the fiscal year 2026.

We continue to be excited about the future, delivering a differentiated customer experience, creating an engaging winning culture for DXPeople, and investing in our business to strengthen our core capabilities and drive long-term growth.

Year-to-date through September 30, total sales are up 11.8% and adjusted EBITDA is up 17.6%. Last 12 month sales and adjusted EBITDA were $1.6 billion and $217.1 million, respectively, with adjusted EBITDA margins of 11.1%.

Moving to our third quarter results. Total DXP revenue was $513.7 million, an 8.6% increase year-over-year with adjusted EBITDA of $56.5 million.

In terms of Q3 financial results from segment perspective, Innovative Pumping Solutions led the way, growing sales 11.9% year-over-year to $100.6 million, followed by our Service Centers growing sales 10.5% year-over-year to $350.2 million. Supply Chain Services declined 5% year-over-year to $63 million.

In terms of IPS, our Innovative Pumping solution, it bears repeating that we have 2 broad businesses tied to capital budgets or project work, DXP's heritage energy-related project work and DXP Water. Year-to-date, DXP Water is 54% of IPS' sales versus last year at this time, it was 47%. As we grow -- have grown our DXP Water platform, we have increased both gross margins and operating income margins for the IPS segment and for DXP.

Our energy-related bookings and backlog continues to show resilience and perform above our long-term averages, albeit not an all-time high. Additionally, our year-to-date average remains above our long-term average energy IPS backlog going back to 2015. What this indicates is that we continue to feel good at this point in the cycle on energy and water and wastewater-related project work.

As we have been discussing on previous earnings calls, we have booked a few large projects in both energy and water that have been recognized some of the revenues in 2025 and will continue in 2026. We are quoting a lot of opportunities and working hard to convert quotes to bookings. That said, DXP's focus within IPS will be to continue to manage the demand levels we have plus finding opportunities in all markets such as energy, biofuels, food and beverage and water and wastewater and manage pricing and delivery while improving and maintaining margins.

In terms of Service Centers, the diversity of end markets, multiple product division approach, service and repair and our MRO nature within Service Centers allows us to continue to remain resilient and to continue to experience consistent top line year-over-year growth. A few growth initiatives that are helping DXP grow percentages at over the last several years is technical products like automation, vacuum pumps, new pump brands for water and industrial markets, process equipment and filtration. New markets like water, air compression and data centers need pumps. They need water, power, cooling and filtration.

We have added an e-commerce channel for the generation that wants to buy pumps and parts electronically. The service nature within Service Centers allows us to continue to remain resilient and continue to experience consistent sales performance and continue to find ways to add value for our customers.

From a regional perspective, regions that continue to experience year-over-year growth includes South Central, California, Southeast, South Rockies, Texas Gulf Coast and Northern Rockies.

We have also seen strength in our air compressor, metalworking and U.S. Safety Services division, which is also great to see.

Supply Chain Services sales decreased 3.7% sequentially and year-over-year declined to $63 million. In the Supply Chain Services, all pricing is electronics, so flow to improve processes and price increases and inflation and tariffs take longer to implement. That said, SCS is adding several new customers and are currently -- they are being implemented.

Historically, the latter half of the year is impacted by the holiday season and there being fewer billing days with SCS and also being subject to the customers' facility closures and holiday hours, thus, we expect mild Q4 and stronger outlook as we close out Q1 of 2026. Demand for SCS services is increasing because of the proven technology, efficiency they perform for all of their industrial customers, and we expect a strong year in 2026.

DXP's overall gross profit margins for the third quarter were 31.4%, a 50 basis point improvement over 2024. Overall, I am pleased with our gross margins and our steady improvement over the last 2 years.

SG&A for the third quarter increased $11 million versus Q3 of 2024. SG&A as a percent of sales increased going from 22.5% in Q3 of 2024 to 22.9% in Q3 of 2025. SG&A continues to reflect our investment in our people, increasing insurance renewals, technology investments, acquisition support and other growth strategies. As always, it is our privilege to share DXP's financial results on behalf of all our DXPeople.

DXP's overall operating income margin was 8.5% or $43.7 million, which includes corporate expenses and amortization. This reflects a 14 basis point increase in margins versus Q3 of '24. We still feel there is opportunity in our operations to be more efficient, but we have chosen to invest in the business via people and our operations, and we have been focused on growth.

Overall, DXP produced adjusted EBITDA of $65.5 million in the third quarter of 2025 versus $52.6 million in the same period of 2024. Adjusted EBITDA as a percent of sales was 11% for the third quarter.

I am pleased with our performance in the third quarter. DXPeople continue to make great efforts and adapt as we grow and evolve DXP into a more diversified and less cyclical business. We call that the next chapter. We still have substantial work to do to achieve our efficiency goals, but I am confident that the team will continue to execute and drive sales and profitability.

We are growing sales more than the market and expect that into the near future. We continue to make progress on our growth strategies and our commitments to our customers is strong. We are driving growth and improvements at DXP, and we look forward to navigating and working through the remainder of fiscal 2025. To continue to build our capabilities to provide a technical set of products and services in all of our markets, which makes DXP very unique in our industry and gives us more ways to help our customers win.

Finally, I would like to thank our DXPeople for continuing to maintain 11% plus EBITDA margins, hitting a new quarter sales high in Q3. Q3 was another great quarter as we continue to have a successful year in 2025. We remain excited about the next chapter.

And with that, I'm going to turn it over to Ken.

Thank you, David, and thank you to everyone for joining us for our review of our third quarter 2025 financial results. Q3 financial performance reflects DXP's ability to continue to successfully navigate through the market and execute and create value for all our stakeholders. Our third quarter results also reflect another new record sales watermark.

As it pertains specifically to our third quarter, DXP's third quarter financial results reflect solid sales growth within IPS along with an accelerating contribution from DXP Water, record Service Center performance marked by gross margin strength and stability and a pickup in sales performance from Q2 to Q3 2025, consistent consolidated gross margin performance with year-to-date margins up 89 basis points versus last year, continued contribution from acquisitions with sales year-to-date of $74.1 million and consistent operating leverage leading to sustained 11% plus adjusted EBITDA margins.

Total sales for the third quarter increased 8.6% year-over-year to a record $513.7 million and 3% compared to Q2. Acquisitions that have been with DXP for less than a year contributed $18.4 million in sales during the quarter. Average daily sales for the third quarter were $8 million per day versus $7.92 million per day in Q2 and $7.39 million per day in Q3 of 2024.

Adjusting for acquisitions, average daily organic sales were $7.74 million per day for the third quarter of 2025 versus $6.95 million per day during the third quarter of 2024. That said, the average daily sales trends during the quarter went from $7.26 million per day in July to $8.9 million per day in September, reflecting a normal push in the last month of the quarter.

In terms of our business segments, Innovative Pumping Solutions sales grew 11.9% year-over-year and 7.5% sequentially. This was followed by Service Center sales growing 10.5% year-over-year and 3.1% sequentially. Supply Chain Services sales declined 3.7% sequentially and 5% year-over-year.

In terms of Innovative Pumping Solutions, we continue to experience strong backlogs in both our energy and water and wastewater businesses. Our Q3 energy-related average backlog declined 3.3%. This is our first decline in the backlog in 10 quarters, but continues to be ahead of all our averages.

As David mentioned, and as we have been discussing on previous earnings calls, we have booked a few large projects in both energy and water that we have recognized some revenue in 2025 and will continue into 2026. We will be looking to see what happens to our Q4 2025 and Q1 2026 average backlog.

The conclusion continues to remain that we are trending meaningfully above all notable sales levels based upon where our backlog stands today. To provide a broader perspective, on a 9-month comparative basis, our native energy IPS backlog is up 56.2% year-over-year. We expect this to continue throughout 2025. We also see strength in our IPS water backlog as it continues to grow due to a combination of organic and acquisition additions. DXP Water's average backlog is up 7% compared to Q2.

In terms of our Service Centers, our Service Center performance reflects our internal growth initiatives along with our diversified and evolving end market dynamics.

On a comparative basis, our third quarter of 2025 is now our strongest quarter within Service Centers over the last 10 quarters and sets a new sales high watermark.

Regions within our Service Center business segment, which experienced year-over-year sales growth in South Central, California, Southeast, North and South Rockies and the Texas Gulf Coast.

From a product perspective, we also experienced strength in our air compressors and U.S. Safety Services divisions.

Supply Chain Services sales performance reflects a 3.7% decrease sequentially and 5% decline year-over-year. Supply Chain Services third quarter sales performance reflects pullback in activity at oil and gas and our diversified chemical customer sites.

Overall, we experienced reduced spending from existing customers by continuing to drive efficiencies and streamline purchasing that we bring to our new customers.

Going into Q4, we expect the next quarter to be impacted by seasonality with there being fewer billing days as SCS customers have facility closures and holiday hours. Thus, we expect a mild Q4 and stronger outlook as we close out Q1 of 2026. However, interest and demand for SCS services is increasing because of the proven technology and efficiencies they perform for all their industrial customers, and we expect a stronger 2026.

Turning to our gross margins. DXP's total gross margins were 31.39%, a 50 basis point improvement over Q3 of 2024. This improvement is attributed to strength in gross profit margins within Service Centers with a 117 basis point improvement from Q3 of last year.

Additionally, the accretive contribution from acquisitions at a higher overall relative gross margin versus our base DXP business helped drive consistent gross margins within consolidated DXPE.

Acquisitions continue to be accretive to both our gross and operating margins. That said, from a segment mix sales contribution, Service Centers contributed 68.16%; Innovative Pumping Solutions, 19.57%; and Supply Chain Services was 12.26%. This sales mix positively impacts our gross margins as we see an uptick in contribution from IPS.

In terms of operating income, Service Centers, IPS and Supply Chain Services each had 14.6%, 18.3% and 8.4% operating income margins, respectively. The consistency in Innovative Pumping Solutions reflects the impact of our water and wastewater acquisitions at a higher relative operating income margin and a growing percentage of revenue in our sales mix.

DXP Water has gone from 28% of year-to-date sales in Q1 of 2023 to over 54% of year-to-date sales of IPS at the end of the third quarter of 2025. Total DXP operating income was $43.7 million in the third quarter or 8.5% of sales versus $39.6 million or 8.37% of sales in the third quarter of 2024.

Our SG&A for the quarter increased $11 million from Q3 2024 and $5.7 million from Q2 of this year to $117.6 million. The increase reflects the growth in the business and associated incentive compensation and DXP investing in its people through merit and pay raises.

Additionally, this also reflects an increase in our insurance premiums, which we changed our renewal from a calendar year to midyear renewal, continued investments in technology and our facilities as well as acquisition costs and growth initiatives. SG&A as a percentage of sales increased 36 basis points year-over-year to 22.88% of sales and was up slightly or 46 basis points sequentially from Q2 of this year.

Turning to EBITDA. Q3 2025 adjusted EBITDA was $56.5 million. Adjusted EBITDA margins were 11%. We continue to benefit from the fixed cost SG&A leverage we experienced as we grow sales. This translated into 1.5x operating leverage.

In terms of EPS, our net income for Q3 was $21.6 million. Our earnings per diluted share for Q3 2025 was $1.31 per share versus $1.27 per share last year. Adjusting for onetime items, adjusted earnings per diluted share for Q3 2025 was $1.34 per share.

Turning to the balance sheet and cash flow. In terms of working capital, our working capital increased $15.6 million from June and $73.6 million from December to $364.5 million. As a percentage of last 12 months sales, this amounted to 18.6%. This is an uptick from where we have been and reflects the impact of acquisitions and an increase in DXP's capital project work. As we move into fiscal 2026, we will continue to grow into the working capital as a percentage of sales, and particularly the impact from recent acquisitions.

In terms of cash, we had $123.8 million in cash on the balance sheet as of September 30. This is an increase of $9.5 million compared to the end of Q1 and reflects our ability to produce free cash flow while managing growth capital expenditures and remaining acquisitive.

In terms of CapEx, CapEx in the third quarter was $6.8 million or a decrease of $3.6 million compared to Q2 and a $2.8 million increase versus Q3 of last year. We are continuing to make investments in our business, software, our facilities and operations for our employees. As we move forward, we will continue to invest in the business as we focus on growth.

That said, as mentioned during the second quarter, over the short to medium term over the next 1 to 2 quarters, we should see CapEx lessen and we look for it to be less in 2026.

Turning to free cash flow. Free cash flow for the third quarter was $28.2 million versus $24.4 million in Q3 of 2024. This does reflect improvements in profitability along with elevated CapEx, which is primarily growth-oriented and highly controllable.

Additionally, we continue to focus on tightly managing our capital projects, which we see as an opportunity to further generate and optimize cash flow. We have highlighted this in the past as requiring investments in inventory, product and costs in excess of billings. That said, we continue to focus on tightly managing this aspect of our business from a cash flow perspective and look to align billings with the investments.

Return on invested capital, or ROIC at the end of the third quarter was 33% and continues to be measurably above our cost of capital and reflects the improvements in EBITDA and the operating leverage inherent within the business. Additionally, also, it points to our recent acquisitions performance and their positive contribution and accretive impact to both gross profit and EBITDA.

As of September 30, our fixed charge coverage ratio was 2.2:1, and our secured leverage ratio was 2.3:1 with a covenant EBITDA for the last 12 months of $225.1 million. Total debt outstanding on September 30 was $644 million.

In terms of liquidity, as of the third quarter, we were undrawn on our ABL with $31.6 million in letters of credit with $153.4 million of availability and liquidity of $277.3 million, including $123.8 million in cash.

In terms of acquisitions, we have closed 5 acquisitions year-to-date, including 2 subsequent to the quarter end, and we will look to close a minimum another 3 before the end of the first quarter. DXP's acquisition pipeline continues to remain active and robust, and the market continues to present compelling opportunities. That said, we remain comfortable with our ability to execute on our pipeline and valuations continue to remain reasonable.

In summary, we are excited about the future and building the next chapter. We will keep our eyes focused on those things we can control and what is ahead of us. We are excited because there is still substantial value embedded in DXP. Now I will turn the call over for questions.

And your first question comes from the line of Zach Marriott with Stephens.

So sorry, I missed the daily sales number for June. If you could just quickly walk through Q3 again? And then any color you could share on Q4 thus far?

Yes. No, absolutely. I'll just walk through each month in Q3 and then kind of give you our flash look at October for Q4. July was $7.26 million per day, August, $7.95 million per day, September $8.9 million per day and October was $7.59 million per day.

Much appreciated. Looking at EBITDA margins, the last 2 years, there was a little compression in the margin percentage from 3Q to 4Q. Is it fair to expect something similar this year in 4Q '25?

Yes. Zach, actually, I think last year, which may have been the first time, we started going above 10% EBITDA margins really, really in Q2, Q3 and in Q4 of last year. So point being is I think, big picture, we've said it on the last couple of earnings calls, but that we feel plenty comfortable with 11%. Yes, there may be quarters where it's 11.2%, 11.4%. But really, we're trending now, I'll call it, at a sustainable 11% plus for now.

As we move into 2026 and we continue to get more acquisitions and particularly in the water space, we may adjust that. But right now, the 11% is sustainable. So hopefully, that answers your question around Q4.

Q4 is a lighter, though, I think that's your point, is lighter from the number of days in the quarter due to holidays, Thanksgiving and Christmas here in the U.S. and Boxing Day, if you will, in Canada. But we still expect from a profitability perspective to be our mix to kind of get us to that 11%.

Understood. That's responsive. And then corporate expenses aren't something we talk about too much, but there has been some variability just worth asking about today. The Q3 number you just reported was just under $26 million. Is that a fair proxy for what we should assume going forward? And what might bias that number higher or lower as you move through the coming quarters?

Yes. So there was a couple of unique things in there that I think David and I both called out in our scripts. One, we just -- and this is the first year, we flipped our insurance renewal from a calendar year to a midyear. And so that created July as when you're paying all the premiums, a little bit of an elevated level.

On top of that, from an insurance perspective, no different than any other company, our insurance overall premiums have gone up slightly. So that's what you're seeing from July going forward, if you will. And so in Q4, I think you will see from a percentage basis, very similar.

The other thing we experienced was just higher -- we're self-insured and we play on a claims basis from a health insurance perspective, and we had some unique claims come through, if you will, in Q3. That I can't forecast right now whether that will happen in Q4 or not, but that created an elevated level of cost, if you will, that's flowing through that corporate SG&A number.

And then once again, we're acquisitive, as everyone knows. And so just more so timing than anything else, but we've been busy here, if you will, in Q3 from an acquisition standpoint. So our professional fees, if you will, and costs kind of were elevated here in Q3. That will continue. We have a very robust pipeline, but that will continue in Q4 and into Q1 for sure, just given our pipeline from an acquisition standpoint. So hopefully, that gives you additional color there on that SG&A line.

Last one for me. Can you please touch on any data center exposure or opportunities you guys may have?

Sure. I'll take that. We're looking at a lot of different avenues based on the products that we represent. So we represent pumps, we represent water, represent filtration. And so all these data centers are -- and we also represent power and equipment that handles gas and other things. So we have an opportunity there. We're trying to do best we can to figure out how to tap into that market.

We are getting a little bit here and there, but it's not been a big market for us. We feel like it can be from -- and so we're attacking it pretty hard. It's pretty diversified across the country. So trying to get on top of all the projects and trying to get some credibility, I guess, with the fact that we can do a lot of things is what we're doing. But really, at this point, I'm going to tell you that it's not been a big win for us. And yet, I think it's a great opportunity.

There is no further questions at this time. I will now turn the call back over to David Little for closing remarks. David?

Yes. First, let me thank all our DXPeople for certainly setting record sales. I think that's awesome. I think as we manage the company, the hardest thing we do is satisfy customers and get bookings and sales. So expenses, they were a little surprising, but they were really for all the right reasons and for the things that are necessary for us to be a growth-oriented company. So I'm not concerned about that. There's nothing really broken about DXP where we add acquisitions, expenses and the dollars are certainly going up, but it was a little concerning that the expense percentage went up. So -- so we're not crazy about that, but it's certainly a lot easier to fix than sales.

I also want to thank our suppliers. It seems like they're doing a much better job with deliveries, and they're trying to manage their costs the best they can and keep us competitive in the marketplace. And we pass on those increases, but -- and that seems to be working all right. I'm pretty proud of the fact that we've got our gross profit margins up slightly and maybe a better statement is they're certainly holding. So I feel good about that.

Of course, thanks to our shareholders and thanks for everybody supporting DXP. In summary, I think you can just say, well, we just had record sales. Gross profit margins are good and holding. Expenses were a little higher than expected, but they were for all the right reasons. Free cash flow improved at $28.2 million, which is great. We continue to hit adjusted EBITDA margins of 11%. We're excited about that.

If we have any negatives, it would be a little bit in the booking side and that we trace that back to kind of our smaller piece of oil and gas that we have today. That market is still struggling as far as growth is concerned. And -- but they tell me even there that quoting activity is up and doing well, and we just got to get from the quote to the bookings.

But anyway, so we're not concerned about any particular markets. We're not concerned about tariffs. We're not concerned about our government as it affects DXP. And so we feel good about our future. And so thank you for joining our call today, and we look forward to talking to you next quarter. Thanks.

That concludes today's call. You may now disconnect.

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to DXP Enterprises, Inc. Second Quarter 2025 Earnings Release. [Operator Instructions]

I would now like to turn the call over to Kent Yee, CFO. Please go ahead.

Thank you, Kate, and thank you, everyone, for joining us today. This is Kent Yee, and welcome to DXP's Q2 2025 Conference Call to discuss our results for the second quarter ending June 30, 2025. Joining me today is our Chairman and CEO, David Little. .

Before we get started, I want to remind you that today's call is being webcast and recorded and includes forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis are contained in our SEC filings. However, DXP assumes no obligation to update that information as a result of new information or future events.

During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our earnings press release. The press release and an accompanying investor presentation are now available on our website at ir.dxpe.com.

I will now turn the call over to David Little, our Chairman and CEO, to provide his thoughts and a summary of our second quarter performance and financial results. David?

Good morning, and thank you, Ken. Thanks to everyone for joining us today on our fiscal 20,252nd quarter conference call. DXP delivered another quarter of strong results with sequential growth 4.7% year-over-year growth of 11.9%.

I want to thank our DX people for their passion and dedication to support our customers in delivering these impressive results. We are pleased to see DXP's performance continue throughout Q2 and remain at record levels throughout the first half of 2025. This allows us to achieve customers and remain customer-driven experts while creating a win-win for all stakeholders.

Thanks to our growth strategies and operational improvements, we continue to build on positive financial results in the second quarter. While performing for our customers, we remain highly focused on providing the expertise and service our customers have come to expect from DXP. DXPeople you can trust. We strive to be credible, reliable and customer-driven every day.

I personally want to thank all our DXP stakeholders, in particular, all our DXPeople for their determination and hard work as we continue to grow and improve the business and achieve new sales highs and profits for the business. We are building the next chapter to DXP, which will define us as the best-in-class industrial business. by being technical experts, providing customer-driven solutions and being fast and convenient.

As to our financial results, I will begin today with some perspective on our second quarter and thoughts on the remainder of 2025. Kent will then take you through the key financial details after my remarks. And after his prepared comments, we will open for Q&A.

In terms of our financial results, the second quarter results resulted in an adjusted EBITDA of $57.3 million or 11.5% of sales and diluted earnings per share of $1.43, a strong quarter that we will look to build from and continue to increase sales, profitability and cash flow. As we move into the second half of the year, we remain confident that our well-balanced business, strong balance sheet, exceptional teams, improved capabilities and robust acquisition pipeline position us well to navigate the current environment and achieve continued success.

Total DXP sales for Q2 increased 11.9% year-over-year and 4.7% sequentially or were $498.7 million or an average of $7.9 million per business day for the second quarter.

On a year-over-year basis, gross profit margins increased 72 basis points and selling, general and administrative expenses decreased 11 basis points as a percent of sales. helping us increase profit margins and our EBITDA margins.

Thank you to the 3,193 DXPeople for your hard work and dedication. We welcome our new acquisitions of Oreo Process Equipment, McBride and Moores Pump, and DXP continues to hire additional DXPeople for growth.

In terms of Q2 segment financial results, Innovative Pumping Solutions led the way, growing sales 27.5% year-over-year followed by service centers growing 10.8% year-over-year and Supply Chain Services essentially flat year-over-year.

In terms of IPS, our Innovative Pumping Solutions both our energy and our DXP Water continued to perform. During Q2, our energy business is up 37.3% year-over-year and anticipated to ramp as we approach Q3 driven by some selected projects.

Our DXP water platform continues to grow sequentially and with Q2 2025 coming in as the 11th consecutive quarter of sequential sales growth. Our Q2 average IPS Energy backlog continues to stay ahead of all averages going back to 2015 and is at an all-time high.

In Q2, we have meaningful bookings in the month of April and May, similar to January and March during the first quarter. This continues to signal that we should have strong energy project revenues over the next 9 to 12 months. We are continuing to get bookings for both our energy and water project work, and we feel comfortable on delivering strong sales performance in 2025.

Our highly engineered innovative pumping solutions modular fabricated systems and manufacturing new pumps for our PumpWorks brand are forging a path forward with sales growth and elevated brand recognition, albeit without a few bumps as DXP wrote off $2 million and 2 unsuccessful new product developments in Q2.

In terms of service centers, our performance reflects multiple product category approach and our ongoing investment and progress on internal growth initiatives against the mix and evolving end market dynamics.

A few growth initiatives that are helping DXP grow percentage over the last several years are technical products like automation, new pump brands for water and industrial markets process equipment and filtration, new markets like water, air compressors, data centers, data centers need pumps, water power, cooling, filtration products we handle.

We have added an e-commerce channel for the generation that wants to buy pumps and parts electronically, national accounts and preferred pricing agreements increased reoccurring revenues with service and parts agreement. Service nature within service centers allows us to continue to remain resilient and continue to experience consistent sales performance, Adding geography like Florida and training and adding sales professionals has helped grow sales.

From a regional perspective, regions that continue to experience year-over-year growth, including the North and South Rockies, Ohio River Valley, South Atlantic. We've also seen strength in our air compressors and our U.S. Safety Services division is always great to see.

Supply Chain Services sales increased 3.3% sequentially and year-over-year remained flat at $6.4 million. In the Supply Chain business, all pricing is electronic with slow approval processes causes price adjustments for inflation or tariffs to take longer to get implemented. That said, SCS added a large contract that lost money as sales ramped up in Q2 and is now above breakeven in July.

The contract will be $20-plus million as sales ramp up over the next 12 months. Several other small wins are being implemented. So we look forward to SCS having a much better second half of 2025.

A special thanks to our DXPeople who have stayed on top of supplier product increases labor costs and overall efficiencies. Overall, DXP produced adjusted EBITDA of $57.3 million. Adjusted EBITDA margin of 11.5%, which reflects the operating leverage we expect to get with sales growth.

Regarding capital allocation, we continue to make strategic investments to fuel and diversify DXP through acquisitions. During the quarter, we completed 1 acquisition, Laverie machinery. -- and completed another acquisition after the quarter Moore's pump and service.

Again, let me thank all our DXP stakeholders, particularly all our DXPeople for their continued efforts and adaptability as we grow and involve DXP into a more diversified and less cyclical business.

Let me conclude my remarks by saying that I am encouraged with our continued sequential improvement in sales and profitability. We are driving growth and improvements at DXP. We look forward to navigating and working through the remainder of fiscal 2025. We continue to build our capabilities to provide technical set of products and services in all our markets, which makes DXP unique in our industry and gives us ways to help our customers win.

Finally, I'd like to thank our DXPeople for continuing to maintain 11% plus adjusted EBITDA margin and move towards a goal of 12% plus while hitting a new quarter sales high in Q2. Q2 was another great quarter as we continue to have success in 2025.

With that, I will now turn to Ken to review our financials in more detail. Ken?

Thank you, David, and thank you to everyone for joining us for our review of our second quarter 2025 financial results. Q2 financial performance reflects DXP's ability to continue to successfully navigate through the market and execute and create value for all our stakeholders.

Our second quarter results also reflect a new record high sales watermark, along with a new all-time high in adjusted EBITDA margins. As it pertains specifically to our second quarter, DXP's second quarter financial results reflect another record service center sales performance at $339.7 million continued strength in year-over-year sales growth within IPS growing 27.5%, continued gross margin strength with margins improving to 31.65% and consistent operating leverage leading to a record adjusted EBITDA margins at 11.5%.

Total sales for the second quarter increased 4.6% sequentially to $498.7 million. Acquisitions that have been with DXP for less than a year contributed $24.6 million in sales during the quarter. Average daily sales for the second quarter were $7.92 million per day versus $7.57 million per day in Q1 and $6.96 million per day in 2024. Adjusting for acquisitions, average daily sales were $7.53 million per day for the second quarter of 2025 versus $6.6 million per day during the second quarter of 2024.

That said, the average daily sales trends during the quarter went from $7.82 million per day in April to $8.4 million per day in June, reflecting the typical quarter end push as we closed out the second quarter.

In terms of our business segments, Innovative Pumping Solutions grew 8.5% sequentially and 27.5% year-over-year. This was followed by service centers growing 3.9% sequentially and year-over-year. Supply Chain Services grew 3.3% sequentially and declined 0.4% year-over-year or essentially flat.

Innovative Pumping Solutions continue to experience increases in the energy-related bookings and backlog as well as the water and wastewater bookings and backlog. Our Q2 energy-related average backlog grew 4.9% over our Q1 average backlog and continues to be ahead of all our averages. That said, as we mentioned in Q1, we do have a large project in our backlog. Excluding this project, our backlog is up 6.6% from Q1.

The conclusion continues to remain that we are trending meaningfully above all notable sales levels and our backlog continues to grow, even excluding the impacts of unique or large projects.

Our DXP Water platform experienced our 11th consecutive quarter of sequential sales growth growing to $48.7 million, and we look for this to continue as we move through 2025. We also see strength in our IPS Water backlog as it continues to grow due to a combination of organic and acquisition additions.

In terms of our Service Centers, sales grew 3.9% sequentially and 10.8% year-over-year. DXP regions that experienced sequential as well as year-over-year sales growth, including the North and South Rockies, South Central, South Atlantic and Ohio River Valley.

From a product and geographic perspective, our air compressor and U.S. Safety Services also experienced sequential and year-over-year sales growth.

From a segment operating income perspective, we have had 5 consecutive quarters of 14% or greater in segment operating income margins, and we will look for this to continue as we still believe there are regions that can enhance or become more consistent in their operating income margins.

Supply Chain Services performance primarily reflects a 3.3% increase sequentially and slight decline year-over-year, essentially flat. As David mentioned in Q1 and his comments, is in the process of ramping a new customer, and we look for other customer additions as we move through 2025. Demand for SCS services is increasing as customers look for efficiency, and we anticipate current and future wins to start showing in the second half of 2025.

Our SG&A for the quarter increased $11.4 million from Q2 2020 and $2.1 million from Q1 of this year to $111.8 million. The increase reflects the growth in the business and associated incentive compensation and DXP investing in its people through merit and pay raises. However, SG&A as a percentage of sales decreased 12 basis points year-over-year to 22.42% of sales and decreased sequentially 60 basis points from Q1 of this year.

Turning to EBITDA. Q2 2025 adjusted EBITDA was $57.3 million. Adjusted EBITDA margins were 11.5%. As discussed in Q1, we expect this to pick up and margins have improved as we moved through the first half of 2025. We continue to benefit from fixed cost SG&A leverage we experienced as we grow sales. This translated into 1.6x operating leverage.

In terms of EPS, our net income for Q2 was $23.6 million. Our earnings per diluted share for Q2 was $1.43 per share versus $1 per share last year. This primarily reflects the growth in sales as well as an improvement in gross margins from Q2 2024 to Q2 2025.

Turning to the balance sheet and cash flow. In terms of working capital, our working capital increased $23.8 million from March and $58 million from December to $349 million. As a percentage of the last 12-month sales, this amounted to 18.2%. This is an uptick from where we have been and $6 million of the increase since March is associated with our recent acquisitions. We will continue to grow into the working capital as a percentage of sales as we move into the second half of 2025 with slight offsets as we remain acquisitive and add the associated balance sheets, but not a full year of sales and earnings.

In terms of cash, we had $11.9 million in cash on the balance sheet as of June 30. This is a decrease of $1.4 million compared to the end of Q1 and does not reflect the acquisition of Moores Pump & Services which we closed after the quarter, and we look forward to them reporting with us starting in Q3. CapEx in the second quarter was $10.3 million or a decrease of $9.6 million compared to Q1 and a $1.5 million increase versus quarter of 2024.

We are continuing to make investments in our business, software, our facilities and operations for our employees. As we move forward, we will continue to invest in the business as we focus on growth. That said, over the short to medium term over the next 1 to 2 quarters, we should see CapEx lessen as we finish out of 2025.

Turning to free cash flow. Free cash flow for the second quarter was $8.3 million versus $5.9 million in the second quarter of 2024. This does reflect improvements in profitability along with elevated CapEx, which is primarily growth-oriented and highly controllable.

Additionally, we continue to focus on tightly managing our capital projects, which we see as an to further generate and optimize cash flow. Return on invested capital, or ROIC, at the end of the second quarter was 34.6% and continues to be measurably above our cost of capital and reflects the improvements EBITDA and operating leverage inherent within the business.

As of June 30, our fixed charge coverage ratio was 2.0:1, and our secured leverage ratio was 2.4:1 with a covenant EBITDA for the last 12 months of $221. Total debt outstanding as of June 30 was $645.6 million.

In terms of liquidity, as of the second quarter, we were undrawn on our ABL with $28.7 million in letters of credit with $106 million of availability and liquidity of $219 million, including $112.9 million in cash. Subsequent to the quarter end, we successfully increased our ABL by $50 million. DXP is poised to execute on our acquisition strategy and would anticipate at minimum closing another 3 to 4 acquisitions during the second half of the year.

In terms of acquisitions, we have closed 2 acquisitions during the first half of and one on July 1. DXP's acquisition pipeline continues to remain active and robust, and the market continues to present compelling opportunities. That said, we remain comfortable with our ability to execute on our pipeline and valuations continue to remain reasonable.

In summary, we continue to remain excited about the future. We will continue to keep our eyes focused on those things we can control and what is ahead of us. We are excited because there are still substantial value embedded in DXP. We look forward with great confidence to a feature of sustained growth and market outperformance.

I will now turn the call over for questions.

[Operator Instructions] Your first question comes from the line of Zach Marriott with Stephens Inc.

Is there any color you can share on daily sales trends by month for both Q2 and Q3 thus far?

Sure, Zack. And I'll back up and once again, just walk through Q2 and then we have essentially a sales flash for July, so an estimate for July. But April, as I mentioned in my comments, were $7.81 million. May was $7.5 million June was $8.37 million. And in July, we had at $7.25 million per day. .

Much appreciated. And then is there anything that should drive a meaningful margin difference whether up or down when comparing 2Q and 3Q?

I mean we still -- we continue to benefit from our acquisitions and then being accretive from a margin perspective, meaning obviously, the profitability, specifically within water, wastewater and some of our industrial rotating equipment acquisitions is at a higher gross and thus EBITDA margin. So to the degree and extent we're rolling those ones in as well as rolling new ones in, we've benefited from a margin perspective.

Great. And then I know you touched on the M&A pipeline. So my last one is going to be, are you seeing much hesitation to spend from customers due to macro uncertainty or still tariff uncertainty or anything?

I'm not necessarily sure how that's tied to acquisitions. But I'll let David address kind of the macro environment. I think you probably still have some thoughts as he did in Q1, surrounding tariffs and the impact to our environment and our customers and suppliers. David? .

So maybe I'll tie acquisitions in there typically like to do acquisitions of companies that are well run and they're growing their business. So we're not seeing anything fall off a cliff or anything as far as acquisitions or we wouldn't do them. So -- and then now I really don't think so. When we look at our billings, our backlogs as high as it's ever been, our bookings to billings is in excess of one, it's always billing -- bookings are greater.

So we're not seeing anything. We read a little bit of about things continuing to grow but maybe at a slower pace, but we're really not seeing that.

I will turn the call back over to David Little, CEO, for closing remarks.

Sure. Well, thanks to all our shareholders and all our employees and all our stakeholders, including our suppliers, et cetera. We it's pretty neat to watch our suppliers can start coming to us and people wanting us to handle their products and et cetera, because we are a growth-oriented company, and they want to grow their business also.

So I think that's pretty positive. I think as we look at acquisitions, we're -- we've targeted some acquisitions that do have a lot higher EBITDA margins, et cetera. So that's helping us along with our own internal push to increase our value to our customers. increase the amount we can make by increasing that value. So I'm very pleased with that. Expenses are pretty flat.

But really that's based on the fact that we continue to grow. And so as a percent of sales, we'd like to see that come down a bit. The -- everything we're doing is working. We're not almost kidding about how well that our new products through PumpWorks is working. And so to say that we had a couple of projects that didn't pan out and a couple of million dollar write-off is almost an inside joke because that's pretty minor in the scheme of things.

We didn't include that in any kind of EBITDA adjustment. It was just normal, of course, of doing but nonetheless, I threw that out there. What -- we have -- a lot of our big project is international-oriented -- so we have a lot of activity international in the energy business. And so we're investing pretty heavy into that and look to continue to do so.

The other pieces of our business, whether municipalities or air compressors that's all been wildly successful. Our normal business is having organic growth, and so that's always really, really nice. In fact, DXP has 10% organic growth overall than we're basically going to kick ass. So with that, again,

I'd like to thank all the stakeholders and I'm pleased in the future looks bright. So here we go. Thanks.

Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.