DXP Enterprises (NASDAQ:DXPE) reported higher second-quarter sales, earnings and cash flow, supported by organic growth, acquisitions and continued expansion in water and wastewater markets.
Total sales for the quarter ended June 30 rose 15.6% year over year to $576.5 million. Acquisitions completed within the past year contributed $49.8 million of revenue, while organic sales increased 11.1% to $526.6 million, according to Chief Financial Officer Kent Yee.
Adjusted EBITDA increased to $70.4 million from $57.3 million a year earlier, with the adjusted EBITDA margin reaching 12.2% of sales, compared with 11.5% in the prior-year period. Yee described the margin level as a new high watermark for the company.
Segment Growth Led by Innovative Pumping Solutions
Innovative Pumping Solutions, or IPS, was DXP’s fastest-growing segment during the quarter. Sales increased 52.6% year over year to $142.7 million, driven by water and wastewater activity, production contracts and acquisitions. Recent acquisitions contributed $47 million of IPS sales in the quarter, compared with $9.1 million in the prior-year period.
Excluding acquisitions, IPS organic sales rose 13.3%, or $11.3 million. Segment operating income increased to $26.7 million from $18.6 million a year earlier.
Chief Operating Officer Nick Little said water and wastewater demand, municipal infrastructure investment and regulatory requirements continue to create long-cycle opportunities for the business. DXP Water generated approximately $97 million in second-quarter sales and $175.5 million for the first half, up 85.6% year over year.
Yee said DXP Water recorded its 15th consecutive quarter of sequential sales growth. Water and wastewater now accounts for nearly 70% of IPS sales, he said during the question-and-answer session.
IPS backlog increased in both energy and water and wastewater markets. Energy-related average backlog rose 7.3% sequentially, while backlog excluding certain large engineered projects increased 10% from the first quarter, Yee said.
Service Centers and Supply Chain Businesses
Service Center sales rose 8.3% year over year and 8.9% sequentially to $367.9 million. The segment’s growth was supported by activity in California, the Gulf Coast, the Southeast, North Texas, South Central and the South Rockies, according to Yee.
Service Centers produced $54.2 million in segment operating income during the quarter. Little characterized the business as central to DXP’s local customer-driven model, with branches providing products, technical expertise and rapid response for industrial customers.
Supply Chain Services sales increased 0.6% to $65.8 million. The company said new customer and facility onboarding partly offset lower activity among certain existing customers. Despite relatively flat revenue, segment operating income improved to $6.5 million from $5.2 million in the prior-year quarter.
- Total gross margin was 31.8%, up from 31.6% a year earlier.
- SG&A expenses rose $15.7 million to $127.6 million, though SG&A as a percentage of sales improved to 22.1% from 22.4%.
- Average daily sales were $9.15 million during the quarter, compared with $7.92 million a year earlier.
- Monthly average daily sales were $9.1 million in April, $9 million in May and $9.4 million in June.
Cash Flow, Liquidity and Acquisitions
DXP generated $29.8 million in free cash flow during the second quarter, compared with $8.3 million in the prior-year quarter. First-half free cash flow totaled $56 million, compared with negative $8.6 million in the first half of 2025.
Over the past four quarters, the company generated $118.7 million of free cash flow, which Yee said represented a new pattern of more consistent cash generation while the business continues to grow.
Capital expenditures were $2.6 million in the second quarter and $5.9 million in the first half, down from $10.3 million and $30.3 million, respectively, in the comparable 2025 periods. Yee said the prior year included investments in software, facilities, equipment and rotating-equipment capabilities, including patterns used for DXP’s private-label pumps.
As of June 30, DXP held $226.6 million in cash and had $147.9 million available under its asset-based lending facility, for total liquidity of $374.5 million. Total debt outstanding was $842.5 million.
The company acquired four businesses during the first half of 2026 for total consideration of $135.6 million. Management said the acquisitions are intended to expand the company’s water and wastewater platform, technical capabilities and geographic reach.
After the quarter ended, DXP acquired Mequipco Ltd., a Western Canadian company that management said provides a foothold for expanding DXP Water in Canada. The transaction was funded with cash and DXP stock.
On July 2, DXP entered into a restated loan and security agreement that increased its asset-based lending facility to $225 million and extended its maturity to July 2031. S&P Global Ratings subsequently upgraded DXP’s issuer credit rating and first-lien term loan ratings to B+ from B, with a stable outlook.
Outlook
Management did not provide formal financial guidance. However, Yee said the company believes it can sustain a 12% adjusted EBITDA margin over the longer term, while noting that the second quarter was its first quarter at that level.
Little said DXP’s priorities remain organic growth, margin expansion, disciplined acquisitions, free-cash-flow generation and further development of the water and wastewater platform. He said the company expects its essential products and services across industrial, municipal and infrastructure markets to provide resilience amid volatility tied to tariffs, inflation, interest rates and geopolitical uncertainty.
About DXP Enterprises (NASDAQ:DXPE)
DXP Enterprises, Inc is a Houston, Texas–based industrial products and services distributor serving customers across North America. The company provides a broad portfolio of maintenance, repair and operations (MRO) supplies, including fluid power components, safety products, mechanical power transmission parts, and instrumentation. DXP’s product offering spans well-recognized private brands as well as equipment and parts from leading global manufacturers, enabling clients in energy, heavy industrial and manufacturing sectors to source critical components from a single supplier.
Through its network of service centers and specialized repair facilities, DXP delivers inventory management programs, turnkey fluid power rebuilds and custom assembly solutions.
