DXP Enterprises, Inc.

Hello, everyone. Thank you for joining us and welcome to the DXP Enterprises fourth quarter 2025 earnings release. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. I will now hand the call over to David Little, CEO. Please go ahead.

Well, thank you, Jay. 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 31st, 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 make both GAAP and non-GAAP financial measures. of gap to non-gap 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 DX People products and operating model, our ability to serve customers across a broad and diverse set of end markets. On behalf of more than 3,286 DX People you can trust, I want to thank our customers, suppliers, and shareholders for their continued trust and support. Physical 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. In 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 in-market exposure while building scale in markets where we have a strong competitive position. At the physical At our physical 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 technicality and help drive more consistent performance over the last several years. We're encouraged by the interplay of these markets as we move into physical 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 operations 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 continue to execute on our capital allocation priorities. We completed six acquisitions, including Arroyo, McBride, Moore's 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, or Innovative Pumping Solution, it bears repeating that we have two 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, Absco, and Pump Solutions. Energy-related bookings and backlog remain at a 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, SES continues to invest in its customer care model and remote technologies, allowing us to expand service offering to customers with smaller sites while improving efficiencies. We believe demand for SES 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 Splane Services with 121 basis point 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 physical 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 Dx people 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.