DXP 엔터프라이즈(DXPE) 2026 회계연도 3분기 실적 발표 콘퍼런스콜: 매출 14.3% 증가

핵심 요약

• DXP 엔터프라이즈는 2026 회계연도 3분기 매출이 전년 동기 대비 14.3% 증가한 5억 8,720만 달러로 사상 최고치를 기록했다고 발표했다. 자체(오가닉) 매출은 8.7% 증가했으며, 인수를 통한 매출 기여액은 4,880만 달러였다.
• 조정 EBITDA는 19.0% 증가한 6,730만 달러를 기록했으며, 마진율은 11.0%에서 11.5%로 확대됐다. 영업이익은 20.1% 증가한 5,250만 달러를 기록했다.
• 희석 주당순이익(EPS)은 25.2% 증가한 1.64달러를 기록했고, 순이익은 24.2% 늘어난 2,690만 달러였다.
• 혁신 펌핑 솔루션(IPS) 부문 매출이 43.3% 증가한 1억 4,410만 달러를 기록하며 사업부별 성장을 견인했다. DXP 워터는 16개 분기 연속 전분기 대비 매출 성장을 기록했다.
• 매출총이익률은 제품 믹스 영향으로 전년 동기 대비 70bp 하락한 30.7%를 기록했다. 판관비율이 매출액 대비 22.9%에서 21.8%로 낮아지며 판관비 레버리지 효과가 이러한 하락 압력을 일부 상쇄했다.
• DXP는 분기 잉여현금흐름 1,440만 달러를 창출했으며, 9월 말 기준 2억 1,880만 달러의 현금을 보유했다. 2억 2,500만 달러 규모의 자산기반대출(ABL) 한도는 전액 미인출 상태를 유지했다.

주요 재무 데이터

2026 회계연도 첫 9개월간 매출은 9.3%의 자체(오가닉) 성장을 포함해 전년 동기 대비 13.2% 증가한 16억 9,000만 달러를 기록했다. 조정 EBITDA는 17.5% 증가한 1억 9,540만 달러로 마진율 11.6%를 기록했다. 잉여현금흐름은 전년 동기의 1,950만 달러에서 3배 이상 증가한 7,050만 달러에 달했다.

사업 및 운영 실적

혁신 펌핑 솔루션(IPS) 매출은 전년 동기 대비 43.3% 증가한 1억 4,410만 달러를 기록했다. 최근 인수한 사업이 4,080만 달러를 기여한 반면, 자체 IPS 매출은 1.6% 증가했다. 사업부 영업이익은 27.4% 증가한 2,340만 달러로 16.3%의 마진율을 나타냈다.

DXP 워터와 생산 계약 및 인수가 성장을 뒷받침했다. 워터 부문 매출은 3분기에 전년 동기 대비 71% 증가했고, 첫 9개월 동안에는 80% 늘어났다. 경영진은 상하수도 사업을 장기 전략적 성장 플랫폼으로 설명했다.

IPS의 에너지 관련 평균 수주잔고는 전분기 대비 5.8% 증가했다. 4분기 말까지 출하가 완료될 예정인 대형 엔지니어링 솔루션 프로젝트를 제외할 경우, 수주잔고는 전분기 대비 7.8%, 1분기 대비 18.5% 증가했다.

서비스 센터 부문은 전년 동기 대비 7.6%, 전분기 대비 2.4% 증가한 3억 7,660만 달러의 매출을 기록했다. 남동부, 캘리포니아, 텍사스 걸프만 연안, 사우스 로키 지역에서의 성장과 금속가공 제품의 호조가 성장을 견인했다. 사업부 영업이익은 5,560만 달러로 14.8%의 마진율을 기록했다.

공급망 서비스 부문 매출은 5.5% 증가한 6,640만 달러를 기록했다. 신규 고객 및 설비 확보가 일부 기존 고객의 활동 둔화를 상쇄했다. 사업부 영업이익은 530만 달러에서 600만 달러로 증가해 9.0%의 마진율을 나타냈다.

DXP는 2026 회계연도 첫 9개월 동안 5건의 인수를 완료했으며, 분기 종료 후 미시간주 소재 MDS를 인수하기로 합의했다. 경영진은 특히 상하수도, 기술 역량 및 지리적 확장 분야에서 인수합병 파이프라인이 여전히 활발하다고 밝혔다.

경영진 전망

경영진은 콘퍼런스콜에서 언급된 대형 IPS 프로젝트의 출하가 4분기 말까지 전량 완료될 것으로 예상했다. 회사는 현재의 믹스 효과가 완화되면 IPS 마진율이 과거 수준으로 회복될 것으로 전망하고 있다.

DXP는 또한 프로젝트 청구 및 대금 회수를 관리함에 따라 4분기 중 운전자본이 정상화될 것으로 기대하고 있다. 분기 이자비용은 약 1,700만 달러 수준을 유지할 것으로 예상되며, 예정된 원금 상환에 따라 시간이 지나면서 소폭 감소할 전망이다.

10월 일평균 매출은 903만 달러로, 7월(845만 달러), 8월(951만 달러), 9월(960만 달러)과 비교된다. 경영진은 수요가 여전히 견조하다고 밝혔으며, 매출 확보를 위해 구조적으로 가격을 인하하지는 않고 있다고 강조했다.

리스크 및 주요 점검 요인

서비스 센터 및 IPS 부문의 믹스 변화로 인해 매출총이익률은 30.7%로 하락했다. 경영진은 이번 하락이 구조적이지 않다고 밝혔으나, 분기별 믹스가 수익성에 지속적으로 영향을 미칠 수 있음을 인정했다.

운전자본은 6월 대비 2,760만 달러 증가한 4억 2,090만 달러를 기록했다. 매출채권은 3,250만 달러 증가했고 미청구공사비는 950만 달러 늘어났는데, 이는 프로젝트 활동과 DXP 워터의 매출채권 회수 기간 장기화를 일부 반영한 결과다.

경영진은 관세, 인플레이션, 금리 및 지정학적 불확실성을 고객에게 부담을 줄 수 있는 요인으로 꼽았다. IPS는 장기 사이클 엔지니어링 프로젝트를 포함하고 있어 수주잔고의 매출 전환, 프로젝트 실행 및 청구 규율이 중요한 변수가 된다.

DXP는 총부채 8억 3,950만 달러로 이번 분기를 마감했다. 담보부 레버리지 비율은 2.3배였으며, 현금 보유액은 총 2억 1,880만 달러, 신용장(LC) 차감 후 ABL 대출 가능 한도는 1억 9,220만 달러였다.

애널리스트 Q&A 주요 내용

경영진은 3분기 매출총이익률 하락이 가격 압박이나 구조적 변화보다는 통상적인 사업 믹스에 기인한 것이라고 설명했다. 또한 30%를 상회하는 매출총이익률에 만족감을 유지하고 있으며 수익성 있는 매출을 지속적으로 목표로 삼고 있다고 덧붙였다.

IPS 영업이익률의 전분기 대비 하락 역시 믹스와 관련이 있었다. 경영진은 마진율이 낮은 대형 프로젝트가 여러 분기에 걸쳐 인식되어 왔으며, 이것이 이번 변동의 유일한 원인은 아니라고 밝혔다.

일평균 매출은 3분기 내내 강세를 보이다가 10월에 903만 달러로 완만해졌다. 경영진에 따르면 10월까지의 연간 누적 매출은 전년 동기 대비 13.9% 증가했다.

경영진은 4분기 이자비용이 분기당 약 1,700만 달러 수준과 대체로 일치할 것으로 예상된다고 밝혔다.

실적 발표 콘퍼런스콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Hello, everyone. Thank you for joining us, and welcome to the DXP Enterprises Q3 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Kent Yee, CFO. Kent, please go ahead.

Kent Yee

Thank you. This is Kent Yee, and welcome to DXP's Q3 2026 Conference Call to discuss our results for the third quarter ending September 30, 2026. 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 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 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 the third quarter performance and financial results. David?

David Little

Good morning, and thank you, and thank you to everyone joining us today on DXP's fiscal 2026 Third Quarter Conference Call. It is my pleasure to share DXP's third quarter results with you on behalf of 3,494 DXPeople. Congratulations to all our stakeholders and a special thank you to our DXPeople you can trust.

We carried our momentum from the first half of the year into a strong third quarter. I am proud of what our DXPeople accomplished in Q3. Sales grew year-over-year and sequentially, adjusted EBITDA increased 19% and from the prior year and DXP continued to generate positive cash flow.

What excites me is all 3 of our business segments grew sales sequentially and year-over-year. Our DXPeople are executing both locally and collectively as DXP advances our strategy of being customer-driven experts by providing technical engineered solutions that are reliable, fast and convenient.

Through the first 9 months of 2026, DXP generated $1.7 billion in sales, up 13.2%, and $195.4 million in adjusted EBITDA, up 17.5%. Our year-to-year adjusted EBITDA margin was $11.6 million. We are building a strong business and we intend to keep that customer first as we finish the year and as we continue to provide engineered solutions.

Total DXP sales for the third quarter were $587.2 million, up 14.3% year-over-year. Importantly, organic sales increased 8.7% year-over-year. Our acquisitions are contributing and our existing business are also growing. That combination is important. We are expanding our capabilities while continuing to capture more of our customers' wallet or spend.

Profitability remained strong compared to the prior year. Income from operations increased 20.1% to $52.5 million. Adjusted EBITDA increased 19% to $67.3 million and our 11.5% of sales. Net income increased 24.2% to $26.9 million. Diluted earnings per share increased to 1.64 compared to 1.31 in the third quarter of 2025. Gross profit margins were lower primarily due to sales mix.

We had a strong growth, but a portion of that growth came from lower margin business. There is nothing structurally different about the business. We did achieve operating leverage on our expenses as a percent of sales, which partially offset the lower gross margin percentage. As we move forward, improved gross margins and continue to leverage our expense base remain important opportunities for DXP.

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 reliable responsiveness and expertise. These are DXP's strengths. They create opportunity for us to earn more of the customers' business and drive revenue and market share gains.

Our strategy has not changed. We want to grow organically and through acquisitions, diversify the company expand our technical capabilities and serve customers with solutions that are fast, convenient, reliable and supported by DXPeople. We are focused on profitable growth, strong cash generation and customer relationships that last.

Tariffs, inflation, interest rates, geopolitical uncertainty can certainly challenge our customers. Our focus is on what we can control, staying close to those customers, responding quickly, delivering the technical solutions they need, the work we support is critical. Keeping plants, facilities, municipalities, industrial operations moving. This is where our DXPeople make a difference.

During the first 9 months of 2026, our service centers and Innovative Pumping Solutions business generated approximately $1.5 billion in sales, up 14.7% and over the prior year. These businesses bring together the strength of our local customer relationship and our engineered solutions capability. That is a powerful combination for DXP.

Innovative Pumping Solutions again led our year-to-year growth in the third quarter. IPS sales increased 43.3% year-over-year and 1% sequentially to $144.1 million. The growth in IPS reflects increased water and wastewater activity, production contracts and strategic acquisitions. Our IPS team bring technical expertise to the complex customer applications, delivering engineered solutions and helping customers move important solutions forward. We like the momentum we are building in this business.

DXP continues to be an important long-term strategy. Sales were up 71% year-over-year and 1.8% sequentially. For the first 9 months of 2026, DXP water sales were up 80% year-over-year. Water is deliberately a growth platform for DXP and we are expanding it with technical capabilities, geographic reach and customer relationships to compound for many years.

We also saw increases in our energy and water and wastewater bookings and backlog. Our average energy-related backlog increased 8.7% sequentially in Q3. These are markets where our customers value experience, reliability and know-how. Many IPS engineered solutions are long cycle in nature, making disciplined execution and a steady pipeline of orders important.

As we move forward, our IPS focus is on disciplined execution, staying close to our customers and converting technical capabilities into the profitable growth of both DXP and its clients. We want to keep earning the next project by keeping today's project right. That means understanding the application, delivering reliable solutions and following through with the customer.

During Q3, service centers also delivered solid growth. Sales increased 7.6% year-over-year, 2.4% sequentially to $376.6 million. Organic growth remained a key contributor with increased activity across Southeast, California, Texas Gulf Coast and the South Rocky regions as well as strength in our middle working product category. This is the heart of DXP's local customer-driven bottles.

Our service center teams know their customers understand the application, respond quickly when the customer needs us. That local presence allows DXP to be fast, convenient by bringing real technical services to the customer.

Supply Chain Services increased $66.4 million, up 5.6% year-over-year and 0.9% sequentially. Growth reflected new customers in facilities, partially offset by lower activity within certain existing customers. We are pleased to see [ SES ] contribute to growth across DXP. This business is a great example of being customer-driven experts because we not just sell 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 DXP's growth strategy, and we remain disciplined. We look for businesses that fit our culture, strength through technical capabilities and help us serve customers faster and more conveniently. Our focus is on the building broader platform, expanding our reach, making sure growth creates lasting value for customers and shareholders.

For the first 9 months of 2026, acquisition sales were $139.4 million compared with $74.1 million in the prior year period. Acquisition sales contributed $48.8 million in Q3. We are pleased with our acquisition program, and our focus remains on operational and [indiscernible], cross-selling retaining great people, making each acquired business part of DXP's culture of DXPeople you can trust.

[ Equip ] contributed to our third quarter results. We are excited to welcome them aboard to DXP. We look forward to supporting their customers with broad capabilities of our company and continuing to build XP water in Canada. We continue to generate positive free cash flow. In the third quarter, free cash flow was $14.4 million compared to $29.8 million in Q2 growth, acquisitions, project activity required additional working capital in this quarter, which tempered cash generation.

For the first 9 months of '26 free cash flow was $70.5 million compared with $19.5 million in the same period of 2025. The year-to-date improvement matters. We remain focused on working capital discipline, aligning project billing with our investments and converting earnings into cash. We ended September with $218.8 million in cash and no borrowings outstanding on our ABL.

That is a strong financial position and gives us considerable flexibility, and we continue to invest in organic growth, pursue disciplined acquisitions, allocate capital where we believe can generate attractive long-term returns for our shareholders. Overall, I am encouraged by our third quarter and the momentum we have built through the first 9 months of 2026. We grew sales across all 3 segments, increased adjusted EBITDA earnings year-over-year, [indiscernible] generated free cash flow.

The real story remains our people, DXPeople, showing up every day for our customers and for each other. I want to personally thank all our DXPeople for their hard work, customer focus and execution. We're building the next chapter of DXP by being technical experts, providing customer-driven engineered solutions and continuing to be fast and convenient.

This is how we win. This is how we earn trust. This is why customers continue to rely on DXP. As we move into the fourth quarter, our promised priorities remain unchanged: drive organic growth, expand margins, grow our water and wastewater platform execute disciplined acquisitions, generate strong free cash flow and increase long-term shareholder value.

We have strong momentum, a strong balance sheet and significant opportunities ahead for us. We are focused on executing, expanding margins, generating cash and continue to build DXP into a large and more valuable company. We importantly. Most importantly, I want to thank our DXPeople. Their technical expertise, customer focus and hard work are what makes these results possible. Let's finish 2026 strong. With that, I will now turn it over to Kent to review our financials in more detail.

Kent Yee

Thank you, David, and thank you to everyone for joining us for our review of our third quarter 2026 financial results. Q3 financial performance reflects continued execution across DXP with another record sales quarter, double-digit year-over-year growth in operating income and adjusted EBITDA and improved operating leverage across the business.

Our results also reflect the continued contribution of our acquisition strategy alongside strong organic growth in our service centers. At the same time, gross margins were impacted by mix this quarter, and we made a meaningful investment in working capital to support growth, which tempered free cash flow.

As it pertains specifically to our third quarter, DXP's financial results reflect record sales of $587.2 million, growing 14.3% year-over-year, including $48.8 million of acquisition sales. Organic sales growth of 8.7% year-over-year led by 11.3% organic growth in service centers, continued strategic acquisition activity, closing 5 deals through Q3 and 1 subsequent to quarter end. Operating income growth of $8.8 million or 20.1% to $52.5 million, with operating margins expanding to 8.9%.

Adjusted EBITDA of $67.3 million, up 19% year-over-year with adjusted EBITDA margins of 11.5% and diluted earnings per share of $1.64, up 25.2% from $1.31 in Q3 of last year. In terms of our detailed financial results, total sales for the third quarter increased 14.3% year-over-year to $587.2 million. Acquisitions that have been with DXP for less than a year contributed $48.8 million in sales during the quarter.

Excluding the impact of acquisitions, organic sales were $538.3 million representing 8.7% organic growth compared to the third quarter of 2025. Average daily sales for the third quarter were 9.18 million per day versus 8.03 million per day in Q3 of last year. Adjusting for acquisitions, organic average daily sales were 8.41 million per day versus 7.74 million per day in Q3 of 2025.

As is typical, sales accelerated throughout the quarter with average daily sales increasing from $8.45 million per day in July to $9.6 million per day in September, reflecting a normal quarter end push, but highlighting strong acceleration coming into quarter end.

In terms of our business segments, Innovative Pumping Solutions grew 43.3% year-over-year, followed by service centers growing 7.6% and Supply Chain Services growing 5.5% year-over-year. Innovative Pumping Solutions sales increased $43.6 million or 43.3% year-over-year to $144.1 million. This growth reflects increased activity in DXP water, increased production contracts and strategic acquisitions within IPS.

Recent acquisitions contributed $40.8 million sales during the quarter compared to $6.7 million in Q3 of last year. Excluding acquisitions, IPS organic sales were $2.5 million or 1.6%. Segment operating income for IPS was $23.4 million, up from $18.4 million or 27.4% compared to Q3 of last year.

In terms of Innovative Pumping Solutions backlog we experienced increases in the energy and water and wastewater bookings and backlog. Our Q3 energy-related average backlog grew 5.8% sequentially, which is consistent with what we saw in Q2 and further stems to the declines we saw in Q3 and Q4 of last year. That said, as we have mentioned, we continue to have some large engineered solutions, and we have continued to recognize revenue again in Q3 and should be completely shipped by the end of Q4.

Excluding this project, our backlog is up 7.8% sequentially and 18.5% from Q1. The conclusion continues to remain that we are trending meaningfully above all notable sales levels and our backlog has mitigated some decline we saw in the second half of 2025 and positions us to do well going into 2027. Our DXP Water platform experienced our 16th consecutive quarter of sequential sales growth and we will look for this to continue as we close out fiscal year 2026.

In terms of our service centers, service center sales increased $26.5 million or 7.6% year-over-year to $376.6 million. This growth was driven by increased business activity across multiple regions, including Southeast, California, Texas Gulf Coast and South Rockies. Additionally, we saw strength in our metalworking product category.

From a segment operating income perspective, Service Centers generated $55.6 million of operating income in the quarter, reflecting continued strength and consistency in the core MRO business. We are building a larger, more diversified platform with attractive end market demand, project opportunities and recurring service potential. Supply Chain Services sales increased $3.4 million or 5.5% year-over-year $66.4 million.

Performance reflects the onboarding of new customers and related facilities, partially offset by decreased activity with certain existing customers. Segment operating income was $6 million compared to $5.3 million in the prior year period, reflecting improved profitability along with a pickup in sales growth.

Turning to gross margins. DXP's total gross margins were 30.7% for the third quarter compared to 31.4% in Q3 of 2025. Gross margin was negatively impacted by approximately 65 basis points, primarily due to mix shifts within both Service Centers and IPS during the quarter. That said, on a year-to-date basis, gross margins were 31.6% compared to 31.5% in the first 9 months of 2025, reflecting the continued reflecting -- excuse me, the continued contribution from recent acquisitions and our continuing margin expansion efforts.

Our SG&A for the quarter increased $10.5 million from Q3 of last year to $128 million and was essentially flat or $500,000 sequentially from Q2. The year-over-year increase reflects increased payroll-related costs, depreciation and amortization, including the addition of acquired businesses. However, SG&A as a percentage of sales improved approximately 108 basis points to 21.8% from 22.9% in Q3 of last year, reflecting operating leverage as sales increased.

Total DXP operating income was $52.5 million in the third quarter or 8.9% of sales versus $43.7 million or 8.5% of sales in the third quarter of 2025. In terms of segment operating margins, service centers, IPS and Supply chain services at 14.8%, 16.3% and 9% operating income margins, respectively.

Turning to EBITDA. 2026 adjusted EBITDA was $67.3 million compared to $56.5 million in Q3 of 2025. Adjusted EBITDA margins were 11.5%, up from 11% last year, the improvement reflects sales growth and the fixed cost SG&A leverage we continue to see as we scale the business, partially offset in this quarter by lower gross margins. For the quarter, this translated into 1.3x operating leverage. Year-to-date, adjusted EBITDA was $195.4 million with adjusted EBITDA margins of 11.6% versus 11.2% in the first 9 months of 2025.

In terms of our -- our net income was -- for Q3 was $26.9 million, up 24.2% from $21.6 million in Q3 of last year. Earnings per diluted share for Q3 2026 was $1.64 per share versus $1.31 per share last year. Our effective tax rate for the quarter was 26.3% compared to 26.6% in Q3 of last year. Year-to-date, earnings per diluted share were $4.62 versus $3.98 for the first months of 2025.

Turning to the balance sheet and cash flow. In terms of working capital, working capital as of September 30, 2026, was $420.9 million, an increase of $27.6 million from June and $59.2 million from December of 2025. As a percentage of the last 12 months sales, this amounted to 19%. The increase was primarily due to sustained sales growth, acquisitions and increased project activity.

During the quarter, accounts receivable increased $32.5 million and costs in excess of billings increased $9.5 million with receivable days increasing within DXP water. We continue to focus on tightly managing our project work and aligning billings with the investments, and we expect working capital to normalize as we move into the fourth quarter.

In terms of cash, we had $218.8 million in cash on the balance sheet as of September 30. We also had $192.2 million of availability under our ABL after $32.8 million in letters of credit. We remain undrawn on our ABL, which provides DXP with ample dry powder to pursue acquisitions and broadly invest in DXP.

CapEx in the third quarter was $4.2 million compared to $6.7 million in Q3 of last year. For the first 9 months of 2026, capital expenditures were $10.2 million compared to $37 million in the first 9 months of 2025. This reflects a more normalized level of capital spending following the elevated investments we made last year.

Turning to free cash flow. Cash flow from operations was $18.7 million in the third quarter, and free cash flow was $14.4 million versus million in Q3 of 2025. The year-over-year decline reflects the investment in working capital previously mentioned. For the first 9 months of 2026, free cash flow was $70.5 million compared to $19.5 million in the prior year period, more than tripling year-over-year.

Over the last 4 quarters, DXP has produced $105 million in free cash flow or an average of approximately $26 million per quarter while continuing to grow the business. As of September 30, our fixed charge coverage ratio was 2.98: 1, and our secured leverage ratio was 2.3:1, with a covenant EBITDA for the last 12 months of $270 million.

Total debt outstanding on September 30 was $839.5 million. In terms of acquisitions, we have acquired 5 businesses through the first 9 months of 2026, including the acquisition of [ Mico ] Limited in the third quarter, which was funded with cash on the balance sheet and DXP stocking gives DXP Water a beachhead to expand in Canada.

These acquisitions are directly aligned with our strategy to expand our water and wastewater platform, extend our geographic reach and maintain our position as the largest distributor of rotating equipment in North America. Subsequent to quarter end on November 1, we entered an agreement to acquire MDS at Michigan, which was also funded with cash on the balance sheet.

DXP's acquisition pipeline continues to remain active and we continue to see acquisitions as a disciplined and repeatable growth lever for DXP, particularly where we can add strong teams, technical expertise and market access in attractive end markets. As a reminder, during the third quarter, we further strengthened our financial position. On July 2, we entered into a new loan agreement, increasing our ABL to $225 million and extending the maturity to July 2031.

Also on July 20, S&P Global Ratings upgraded DXP's issuer credit rating from B+ from B. Together, these give us additional financial flexibility as we continue to invest in the business organically and through acquisitions.

In summary, we are pleased with our third quarter and year-to-date performance. Through the first 9 months of 2026, sales grew 13.2% to $1.69 billion. Organic sales grew 9.3%. Adjusted EBITDA grew 17.5% to $195.4 million and free cash flow more than tripled to $70.5 million. In the third quarter, we delivered record sales, strong organic growth in our service centers expanding operating and adjusted EBITDA margins and continued progress on our acquisition strategy.

We believe DXP remains well positioned to continue creating value through our resilient MRO and supply chain solutions. Our engineered solutions and the growing scale of DXP Water and a disciplined acquisition strategy. We are excited about the future, and we look forward with confidence to closing out 2026 strong. I will now turn the call over to questions.

Operator

[Operator Instructions]. Your first question comes from the line of Zach Marriott with Stephens.

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Zachary Marriott

Is there any color you can share on demand overall then more precisely on the daily sales trends by month for both Q3 and Q4 thus far, please?

Kent Yee

Absolutely. I can walk through the daily sales trend, and I'll just go from July and pull it through October. So our July average daily sales was $8.45 million. August was $9.51 million. September was $9.60 million and then October was $9.03 million per day. Year-to-date -- Zach, if you look at on a year-to-date variance, we're up on a year-to-date basis, 13.9% year-over-year.

Zachary Marriott

Perfect. And then is there anything that should drive a meaningful margin difference whether up or down when comparing 3Q to 4Q? Anything to call out?

David Little

Sorry, if you haven't noticed, I've got a really bad cold. But no, no, no, the margins were just a mix problem. There wasn't anything very specific, nothing jumped out there was -- some people were up. Other people were obviously down. And I think there's we feel good about demand.

And so we're not trying to structurally cut prices to capture more sales. We're still trying to capture profitable sales. So it was it just kind of is what it is. It was still north of 30%, which we spent a long time getting there.

Zachary Marriott

And then sticking on margins in the Innovative Pumping Solutions segment specifically. They dipped quarter-over-quarter. Just what was the driver there? And what is a reasonable expectation for Q4 in that segment?

Kent Yee

Zach, once again, similar to David's comments, I'd echo the mix shift in my comments, I mentioned was in service centers and IPS. So some of that's just once again, a mix shift in IPS, the sequential kind of decline in operating income margins, and so that kind of is what it is.

Specifically, we also have a fairly large project we talked about without getting into too many of the specifics. And so that shift and should be complete by the end of Q4 and -- and so we would expect margins once again to be historically what they've been.

Zachary Marriott

Got it. And then -- sorry.

David Little

No, I was just going to add that not to give the wrong impression of the -- a bigger order we have at a little lower margins. But we've been on a percentage completion basis, dealing with that for several quarters now. So I don't really think that had much effect in my opinion. I think commission work, which is at 100% was -- maybe we can point to that a little bit.

But I don't -- bottom line is we were fine with where the margins landed. We were a little surprised, I guess, that they trended down, but there wasn't any clear answer to it besides just normal everyday business and just how the mix worked down.

Zachary Marriott

Got it. And then last one, if I may, on interest expense holding pretty steady around $17 million a quarter. Is this a fair assumption for Q4 as well?

Kent Yee

Yes. Yes. No. Zach, that's fair. We obviously redid the Term Loan B now almost a year and some change ago. And so we, for a period went up to at-call it, that $17 million. And as the year goes, it should taper slightly. You have some quarterly principal payments. But outside of that, it should stay in the rough same range.

Operator

There are no further questions at this time. I will now turn the call back to David Little for closing remarks.

David Little

Well, thanks, everybody, for participating on the call. I would just like to leave you with, I guess, my thoughts on about the business and the core DXP business is growing. Acquisitions are adding to that growth. Water is becoming a major strategic platform. We have additional margin opportunity.

The balance sheet gives us the capacity to continue to compound the business and creating long shareholder value. Distinct conclusion, thanks to our DXPeople. We feel like things are solid and onward and upward. So thank you very much.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.