DXP Enterprises’ Q2 2026 Earnings Call: Margin Guidance and Sales Figures Clash, Energy Outlook Split

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $576.5 million, up 15.6% year-over-year
• EPS: $1.76 per diluted share, compared with $1.43 in the second quarter of 2025
• Gross Margin: 31.8%, compared to 31.6% in Q2 2025

Business Commentary:

Strong Financial Performance:

• DXP Enterprises reported total sales of $576.5 million for Q2 2026, up 15.6% year-over-year, with organic sales growth of 11.1%.
• The growth was driven by strong performance in the Innovative Pumping Solutions (IPS) segment, increased production contracts, strategic acquisitions, and demand in water and wastewater projects.

Innovative Pumping Solutions (IPS) Growth:

• The IPS segment experienced a 52.6% year-over-year increase in sales, reaching $142.7 million, driven by water and wastewater activity and strategic acquisitions.
• The growth reflects DXP's technical expertise in solving complex customer problems and delivering engineered solutions, particularly in long-cycle projects.

Improved Profitability and Margins:

• DXP's adjusted EBITDA increased to $70.4 million, or 12.2% of sales, marking a new high watermark for the company.
• This improvement was due to sales growth, gross margin strength, and fixed cost leverage as the business scaled.

Service Centers Performance:

• Service centers reported a 8.3% year-over-year increase in sales, totaling $367.9 million, with organic sales growth of $40.9 million.
• Growth was driven by increased business activity across multiple regions, showcasing the strength of DXP's local customer-driven model.

Supply Chain Services and Strategic Acquisitions:

• Supply chain services saw modest growth with sales of $65.8 million, up 0.6% year-over-year.
• The company focused on disciplined acquisitions, completing four acquisitions in the first half of 2026, which expanded its water and wastewater platform and geographic reach.

Sentiment Analysis:

Overall Tone: Positive

• Management stated: 'We had a very strong second quarter' and 'We are pleased with how recent acquisition businesses are contributing.' They highlighted 'strong sales growth, improved profitability, expanded adjusted EBITDA margins, generated strong free cash flow,' and expressed being 'very encouraged by our second quarter results.'

Q&A:

• Question from Zach Marriott (Stevens): Good morning and congrats on the solid quarter. I want to start with daily sales trends by month. Can you please fill in the gap for us in May for Q2 and then share what color you can for Q3 thus far?
  Response: Daily sales were $9 million in May; no color provided for Q3.

• Question from Zach Marriott (Stevens): And on EBITDA margins, you have been in the 11% range pretty consistently and just reported a 12. As you look into Q3, is it more likely you'll stay at 12% or head back closer to 11%?
  Response: Management did not provide direct guidance but believes the business can reach 12% sustainably longer term.

• Question from Zach Marriott (Stevens): And last one, if I could, on CapEx, I heard you that this year is a more normalized level compared to last year. Could you please just touch on what those elevated investments from last year entailed?
  Response: Elevated investments last year were in software, facilities, equipment, and private label pump patterns to support growth and rotating equipment capabilities.

Contradiction Point 1

EBITDA Margin Sustainability

Contradiction on the ability to sustain a 12% EBITDA margin.

Zach Marriott (Stevens) - Zach Marriott (Stevens)

2026Q2: While the company believes the business can sustain a 12% margin long-term, it did not provide specific guidance for Q3. - Kent Yee(CFO)

Given historically consistent EBITDA margins around 11% but a recent 12% report, will Q3 likely maintain 12% or revert to 11%? - Zach Marriott (Stephens)

2026Q2: Management believes the business can achieve a sustainable 12% EBITDA margin long-term. - Kent Yee(CFO)

Contradiction Point 2

Daily Sales Trend for April 2026

Inconsistent reporting of daily sales for April 2026.

What were Zach Marriott's key insights from the Stevens earnings call? - Zach Marriott (Stevens)

2026Q2: April: $9.1 million - Kent Yee(CFO)

Can you provide daily sales trends by month, including the data for May in Q2 and available information for Q3 thus far? - Zach Marriott (Stephens)

2026Q1: April = $9.0M/day (up 15% YoY) - Kent Yee(CFO)

Contradiction Point 3

Daily Sales Trends and Quarterly Averages

Contradiction on the trend and level of daily sales for January and the year-to-date average.

What was Zach Marriott's (Stevens) question during the earnings call? - Zach Marriott (Stevens)

2026Q2: Provided the daily sales per business day for Q1 and Q2 2026: ... January: $7.2 million ... Year-to-date average: $8.7 million per day - Kent Yee(CFO)

Can you provide daily sales trends by month, including May's Q2 data and current Q3 updates? - Zachary Marriott (Stephens)

20260226-2025 Q4: For January 2026: $6.9 million/day, which is up 2% year-over-year and is typically the slowest month of the year. February is shaping up positively. - Kent Yee(CFO)

Contradiction Point 4

Energy Sales Outlook and Timing

Contradiction on the expected timing of energy sales strength in 2026.

Zach Marriott (Stevens) - Zach Marriott (Stevens)

2026Q2: The expectation is for 2026 energy sales to be more back-end weighted. - Kent Yee(CFO)

What factors are driving the positive dynamics in energy in the second half of this year, specifically conversion backlog or other factors? - Zachary Marriott (Stephens)

20260226-2025 Q4: The delay was attributed to projects being on hold, possibly due to political uncertainty, with an expectation of activity resuming at the beginning of the year, affecting year-end sales. - David Little(CEO)

Contradiction Point 5

Outlook for Q3 2026 EBITDA Margins

Contradiction on providing specific guidance for Q3 margins.

Zach Marriott (Stevens) - Zach Marriott (Stevens)

2026Q2: While the company believes the business can sustain a 12% margin long-term, it did not provide specific guidance for Q3. - Kent Yee(CFO)

Will EBITDA margins stay at 12% or return to 11% in Q3? - Zach Marriott (Stephens)

2026Q1: Q2 Margins: SG&A leverage is expected as sales trends continue positively; margins could be higher than the Q1 11.1% EBITDA margin, especially with accelerating sales (April sales up 15% YoY). - Kent Yee(CFO)