DXP Enterprises, Inc.

Thank you for standing by. My name is Novi, and I will be your conference operator today. At this time, I would like to welcome everyone to the DXP Enterprises, Inc. Third Quarter 2024 Earnings Release and Conference Call. All lines have been placed on you to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Kent Yee, Chief Financial Officer. Please go ahead.

Thank you, Novi, and thank you, everyone. This is Kent Yee, and welcome to DXP's Q3 2024 conference call to discuss our results for the third quarter ending September 30, 2024. 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.dxve.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 2024 third quarter conference call. Kent will take you through the key financial details after my remarks, and 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 2,989 DX people. Congratulations to all our stakeholders and a special thank to you and our DX people you can trust. We are pleased to see in-market demand and DXPs performance continue through Q3. We remain at record levels as we move into the last quarter of 2024. This allows us to achieve another quarter of both solid sales growth and 10% plus 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 physical 2024. We remain focused on serving our customers and providing products and services that help them save money, consolidate their MRO spend, manage inventory, and provide solutions to solve their revolving 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 physical 2023 and 2024 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 physical 2024 and going into physical 2025. We continue to be excited about the future and delivering a differentiated customer experience, creating an engaging winning culture for DXP. and investing in our business to strengthen our core capabilities and drive long-term growth. Here today through September 30th, total sales were up 4.7% and adjusted EBITDA is up 6.5%. Last 12-month sales and adjusted EBITDA were $1.74 billion and $183 million, respectively, with adjusted EBITDA margins of 10.5%. Moving to our third quarter, total DXP revenue of $47.9 million for the third quarter of 2024 was a 12.8% increase year over year, with adjusted EBITDA of $52.4 million for the third quarter. In terms of Q3 financial results, innovative pumping solution led the way, growing sales 52.3%, year-over-year to 89.8 million. Following by service centers growing sales 7.6% year-over-year to 316.8 million. And supply chain services flat or growing 0.7% year-over-year to 66.2 million. In terms of IPS, our innovative pumping solutions, We have two broad markets tied to capital budgets and or project work. DXP's heritage energy related project work and DXP water. Year to date, DXP's water is 45% of IPS sales versus last year at this time, it was 31%. As we have grown our DXP water platform, we have increased both gross margins and operating income margins for the segment and for DXP. Our energy-related bookings and backlog continues to show resilience and perform above our long-term averages, albeit not at all-time highs. Additionally, our year-to-date average remains above our long-term average energy IPS backlog going back to 2015, which we mentioned first occurred in Q1 of this year. What this indicates is that we are continuing to get bookings and we feel good at this point in the cycle on the energy and water and wastewater related project work. We look forward to seeing how this impacts our results and project revenue in both energy and water and wastewater as we move through 2024 and into 2025. We have booked a few large projects in both energy and water that should start recognizing revenue starting in Q1 or Q2 of next year. That said, as we maintain growth, DXP's focus within IPS will be to continue to manage the demand levels we have, 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, and our MRO nature within service centers allows us to continue to remain resilient and continue to experience consistent top-line year-over-year growth. From a regional perspective, regions that experience year-over-year growth included north central north texas south rockies southwest and our canadian rotating equipment business we continue to expect our in markets will remain constructive over the near future we have all seen strength and excuse me we have also seen strength in our u.s safety services division and metal working products division which is great to see supply chain service Services sales have continued to align with performance trends observed in the second half of 2023. Historically, the later half of the year is impacted by holiday season and there being fewer billing days. However, Supply Chain Services is anticipating an increase in new accounts implemented in Q4 of 2024 and Q1 of 2025. SES has also invested in a customer care model, allowing customers to utilize DXP's remote technology without the need of full-time on-site presence. This model enables DXP to extend supply chain services technology to accounts with smaller sites and expand the business relationship. SES remains committed to expanding our industrial customer base through enhanced marketing and lead generation tools. As we go into physical 2025, we will focus on extending DXP's service and repair offering for rotating equipment and safety services to our existing customers, leveraging the broader DXP capability. We anticipate this could happen in early 2025. Demand for supply chain services services is increasing because of proven technology and efficiency they perform for all of their industrial customers. VXP's overall gross profit margins for the third quarter were 30.9%, a 94 basis point improvement over 2023. Overall, I'm pleased with our gross margins and our steady improvement over the last seven quarters. SG&A for the third quarter increased $16.8 million versus Q3 of 2023. SG&A as a percent of sales increased going from 21.4% in Q3 of 2023 to 22.5% in Q3 of 2024. SG&A continues to reflect our investment in our people, and our growth strategies, along with improvements in technology and processes to gain future efficiencies. As always, it is my privilege to share DXP's financial results on behalf of our DX people. DXP's overall operating income margin was 8.4%, or $39.6 million, which includes corporate expense and amortization. This reflects an 18 basis point decline in margin versus Q3 of 2023. We still feel there is opportunity in our operations to be more efficient, and we have chosen to invest in the business via people and our operations as we have been focused on growth. Service centers operating income margins were 14.6%. IPS's operating income margins were 20.3%. Supply chain services operating income margins were 8.4%. Overall, DXP produced adjusted EBITDA of $52.4 million in the third quarter of 2024 versus $44 million in the same period of 2023. This turned into a year-over-year increase of $8.4 million or 19.1%. Adjusted EBITDA as a percent of sales was 11.1%, up 59 basis points versus Q3 of 23, and up 27 basis points versus Q2 of 2024. I am pleased by our performance in the third quarter. DXP continues to make great efforts and adapt as we grow and evolve DXP in a more diversified and less cyclical business. The next chapter. We still have substantial work to do to achieve our 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 commitment to our customers is strong. We are driving growth and improvements at DXT We look forward to navigating and working through the remainder of Physical 2024 and launch into Physical 2025, further developing the next chapter. We continue to build our capabilities to provide a technical set of products and services in all our markets. We make DXP very unique in our industry and gives us more ways to help our customers win. Finally, I would like to thank our DX people for continuing to main 10% plus EBITDA margins and hitting a new quarter sales high in Q3. Let's do it again in Q4. Q3 was another great quarter as we continue to have success in 2024 and prepare to launch ourselves into 2025. We remain excited for what is next. With that, I will now turn it back to Kent to review our financials in more detail.