DXP Enterprises, Inc.

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. All lines have been placed on mute 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, hit the press star followed by the number one on your telephone keypad. And to withdraw your question, press star one again. Thank you. 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 30th, 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, Ken, 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 DX people. Congratulations to all our stakeholders and a special thank you to our DX people you can trust. We are pleased to see in 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 Physical 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 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 physical 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 physical year 2025 and go into the physical year 2026. We continue to be excited about the future, delivering a differentiated customer experience, creating an engaging, winning culture for DX people, and investing in our business to strengthen our core capabilities and drive long-term growth. Year-to-date through September 30th, 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 and 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 two 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's sales versus last year at this time, it was 47%. As we 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 earning 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're 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 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 US 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 electronic, so flow to approve processes and price increases and inflation and tariffs take longer to implement. That said, SES is adding several new customers and 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 SES and also being subject to the customer's facility closures and holiday hours. Thus, we expect mild Q4 and stronger outlook as we close out Q1 of 2026. Demand for SES 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 two years. SG&A for the third quarter increased $11 million versus Q3 of 2024. SG&A has a percent of sales increase 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 DX people. 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 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. DX people 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're 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 physical 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 DX people 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.