DXP Enterprises, Inc.

Hello, everyone. Thank you for joining us and welcome to the DXP Enterprises Q2 2026 earnings conference call. 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 to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Kent Yee, CFO. Kent, please go ahead.

Thank you. This is Kent Yee, and welcome to DXP's Q2 2026 conference call to discuss our results for the second quarter ending June 30, 2026. Joining me today is our Chief Operating Officer, Nick Little. Our Chairman and CEO, David Little, is traveling, and so we will be kind of going forward from that fashion today. 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 r.dxpe.com. I will now turn the call over to Nick Little, our Chief Operating Officer, to provide his thoughts in a summary of our second quarter financial results. Nick?

Good morning, and thank you, Kent. Like Kent said, I'm filling in for David Little, who is having technical difficulties while traveling. I also want to thank everyone for joining us today on DXP's fiscal 2026 second quarter call. We had a very strong second quarter, and I'm proud of how our DXP people performed. We delivered strong year-over-year and sequential sales growth expanded profitability and generated quarterly adjusted dividend. More importantly, we did it by staying close to our customers, solving real problems in the field, and continuing to build momentum across the business. Let me start by saying that Q2 was a strong example of what happens when our DX people stay close to customers, execute locally, and bring technical expertise to our customers. We grew sales, improved productivity, generated significant free cash flow and continue to advance our strategy of being customer-driven experts, technical, reliable, fast, and convenient for our customers. We are pleased to see DXP's performance continue throughout Q2 and remain at record levels through the first half of 2026. This allowed us to achieve strong sales growth and 12% EBITDA margins. Thank you to our 3,510 DX people for your hard work and dedication. We welcome our new acquisitions as well as all the new DX people DXP continues to invest in and hire for growth. Total DXP sales for the second quarter were $576.5 million, up 15.6% year over year. Organic sales increased 11.1% year over year. continuing to show the underlying strength of the business. Our acquisitions are contributing, but our existing teams and branches are also winning with customers. Profitability also improved. Gross profit margin was 31.8%. Income from operations increased to 55.5 million. Adjusted EBITDA was 70.4 million or 12.2% of sales. Net income increased to 28.7 million and Diluted EPS was 1.76 compared with 1.43 in the second quarter of 2025. Those are strong results and I want to be clear that they start with our DX people taking care of customers. A special thanks goes to our sales professionals, operations teams, branch leaders, service technicians, engineers, supply chain teams and corporate support teams. DXP works because of DX people you can trust. Our customers rely on us to solve problems quickly and provide technical solutions, keeping their operations running, and making doing business with DXP fast and convenient. That's what being customer driven experts means. From a growth standpoint, we continue to like where DXP is positioned. Customers in water and wastewater, energy infrastructure, general industry, Air Compression, Data Centers, and other technical markets need reliability, responsiveness, and expertise. Those are DXV's strengths, and they create opportunities for us to earn more of the customer's business and drive revenue and margin share. Across DXV, growth is coming from several consistent themes, expanding our technical and engineering 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 efficiently. Our strategy has not changed, and that's a good thing. We want to grow DXP organically and through acquisitions, diversify the company, expand our capabilities, and service customers with solutions that are fast, convenient, reliable and supported by DX people. We are not chasing growth just to get bigger. We are focused on profitable growth, strong cash generation and customer relationships that last. The broader economy continues to have volatility from tariffs, inflation, interest rates and geopolitical uncertainty. But the work our customers do is mission critical and the products and services DXP provides are essential to keeping plants, facilities, municipalities and industrial operations moving. That gives our business resilience and it gives our DX people a chance to show why DXP is different. During the first half of 2026, our service centers and innovative pumping solutions businesses generated $967.3 million in sales up 14.3% from prior year. That growth reflects both organic execution and recent acquisitions, especially within IPS and our water and wastewater platform. Innovative pumping solutions again led the way in the second quarter. IPS sales increased 52.6% year over year and 20.3% sequentially. to 142.7 million. This growth was driven by water and wastewater activity, increased production contracts, and strategic acquisitions. Our IPS teams continue to show what technical expertise looks like in the field, solving complex customer problems, delivering engineered solutions, and helping customers move important projects forward. IPS continues to be a strong example of DXP's growth momentum. DXP Water grew to $97.9 million in the quarter, nearly doubling year over year. Municipal infrastructure investments, regulatory requirements, and customer demand for reliable pumping and treating solutions created an attractive long cycle opportunity for DXP Water. DXP Water generated $175.5 million in sales for the first half of 26, up 85.6% year over year. underscoring the momentum we're building in these markets. These markets where our customers value expertise, reliability, and know-how. Many IPS projects are long cycle in nature and when customers choose DXP, they are choosing DX people who understand the application, the urgency, and the importance of getting the solution right. Backlog within IPS also remains an important indicator of the momentum we're seeing in the business. During the second quarter, average IPS backlog remained strong, an increase compared to both prior period and the first quarter. That growth reflects continued demand for engineered pumping solutions, water and wastewater projects, and production-related work with customers who rely on DXP for technical expertise and execution. The average backlog levels we saw throughout Q2 give us confidence in the durability of Customer Activity, and support our positive outlook for the remainder of 2026. Service centers also performed well. Sales increased 8.3% year-over-year and 8.9% sequentially to $367.9 million. Organic sales increased $40.9 million compared to the prior year quarter. This is the heart of DXP's local customer driven model. Our service center teams are close to the customer, they understand the market, and they know how to respond quickly when customers need us. That local presence is what allows DXP to be fast and convenient while still bringing technical expertise to our customers. Supply chain services increased modestly to 65.8 million up 0.6% year over year and 1.2% sequentially. SCS continues to onboard new customers in related facilities, although that growth was partially offset by lower activity with existing customers. This business is a great example of why being customer-driven experts, because we are not just selling products, we are helping customers improve procurement, manage inventory, reduce complexity, and make their supply chain faster, more convenient and more efficient. Acquisitions continue to be an important part of DXV's growth strategy, but we are disciplined about it. We are looking for businesses that fit our culture, strengthen our technical capabilities and help us serve customers better, faster and more conveniently. During the first quarter of 2026, we acquired three businesses and during the second quarter, we acquired one additional business. These acquisitions expand our water and wastewater platform, enhance our capabilities, extend our geographic reach, and reinforce our position as a leading distributor of rotating equipment in North America. For the first six months of 2026, acquisitions were 90.6 million compared to 55.7 million in the prior year period. We are pleased with how recent acquisition businesses are contributing. At the same time, our focus is integration, cross-selling, retaining great people, and making sure each acquired business becomes a part of the DXP culture. We also completed the acquisition of Mequepco on August 1, 2026, funded with cash on the balance sheet and DXP stock. We are excited to welcome these new DX people to DXP and look forward to supporting their customers with the broader capabilities of our company and Growing DXP Water in Canada. Cash generation improved meaningfully in the second quarter. Free cash flow was 29.8 million for the first six months of 2026. Free cash flow was 56 million compared to negative free cash flow of 8.6 million in the first half of 2025. Our balance sheet liquidity position gives us flexibility to continue to invest in organic growth fund acquisitions, support working capital, and manage the business through different economic environments. We want to keep growing, but we want to do it the DXP way, with discipline, customer focus, cash generation, and returns that make sense. Overall, I'm very encouraged by our second quarter results and the progress we're making. We delivered strong sales growth, improved profitability, expanded adjusted EBITDA margins, generated strong free cash flow, and continued to build DXP through strategic acquisitions. But the real story is our people. Our DX people continue to show up every day for customers and for each other. I want to personally thank all of our DX people for their hard work, customer focus, and execution. We continue to build the new chapter of DXP by being technical experts, providing customer driven engineered solutions while continuing to be fast and convenient. This is how we win. This is how we earn trust. And this is why customers continue to rely on DXP. As we look forward, our priorities remain unchanged. Drive organic growth, expand margins, grow our water and wastewater platform, execute disciplined acquisitions, generate strong free cash flow, and increase shareholder value over the long term. I would like to thank all of our employees for their commitment to serving customers and delivering results. Their dedication continues to differentiate DXP in the marketplace. With that, I will turn the call back over to Kent.