DXP Enterprises Q3 2026 Sales Rise 14.3% as EBITDA Margin Expands

DXP Enterprises Inc. (NASDAQ: DXPE) reported double-digit revenue and earnings growth for its fiscal third quarter, supported by organic expansion and acquired businesses, while adjusted EBITDA grew faster than sales and its margin widened from a year earlier. Cash generation weakened, however, as higher working-capital requirements reduced operating and free cash flow.

For the quarter ended September 30, 2026, sales rose 14.3% to $587.2 million from $513.7 million a year earlier. Organic sales increased 8.7%, while acquisitions owned for less than 12 months contributed $48.8 million. Sales per business day advanced to $9.2 million from $8.0 million, with both periods containing 64 business days.

Net income increased 24.2% to $26.9 million, or $1.64 per diluted share, from $21.6 million, or $1.31 per share, in the third quarter of fiscal 2025. The diluted share count was 16.4 million, compared with 16.5 million a year earlier.

Adjusted EBITDA, a non-GAAP measure, rose 19.0% to $67.3 million from $56.5 million. Adjusted EBITDA margin expanded to 11.5% from 11.0%, indicating improved operating profitability despite a lower gross margin. Gross profit increased to $180.5 million from $161.3 million, but gross margin narrowed to 30.7% from 31.4%.

GAAP operating income climbed to $52.5 million from $43.7 million, lifting operating margin to 8.9% from 8.5%. Reportable segments generated $85.1 million of operating profit before $32.6 million of corporate expenses and intangible-asset amortization.

Pumping business leads segment growth

Service Centers remained DXP’s largest segment, generating $376.6 million of sales, or 64% of the company total. The segment recorded $55.6 million of operating profit and a 14.8% operating margin. Its revenue increased from $350.2 million in the prior-year quarter.

Innovative Pumping Solutions delivered the strongest revenue growth among the three businesses. Sales rose to $144.1 million from $100.6 million, accounting for 25% of consolidated revenue. The segment produced $23.4 million of operating profit and a 16.2% margin, the highest of DXP’s reportable segments in the quarter.

Supply Chain Services sales increased to $66.4 million from $63.0 million. The business contributed $6.0 million of operating profit at a 9.0% margin and represented 11% of total sales.

For the first nine months of fiscal 2026, DXP generated $1.69 billion in sales, up from $1.49 billion in the comparable period. Organic sales totaled $1.55 billion and acquisition sales were $139.4 million. Nine-month net income increased to $75.6 million from $65.8 million, while adjusted EBITDA rose to $195.4 million from $166.3 million.

Working capital weighs on cash flow

Third-quarter operating cash flow fell to $18.7 million from $34.9 million a year earlier. Free cash flow, defined as operating cash flow less capital expenditures, declined to $14.4 million from $28.1 million. Free cash flow represented 21.5% of adjusted EBITDA.

The reduction largely reflected a $23.5 million use of cash from changes in net working capital, compared with a $13.6 million use a year earlier. Net working capital reached $421 million, equivalent to 19.0% of last-12-month sales, up from $365 million and 18.6% in the prior-year quarter.

DXP ended the period with $218.8 million of cash and restricted cash, down $7.8 million during the quarter. Net debt was $620.7 million, compared with $615.9 million at the end of the preceding quarter. The company paid $13.3 million for business acquisitions during the period and closed one acquisition in the quarter, followed by another after quarter-end.

Capital allocation remains flexible

Management said its capital-allocation priorities include disciplined acquisitions aimed at end-market diversification, portfolio enhancement and geographic expansion. DXP also maintains a flexible share-repurchase program and a net leverage target of no more than 3.5 times.

The company said return on invested capital should continue to improve as it focuses on margins, operating leverage and run-rate EBITDA. ROIC was 34.7% in the third quarter, unchanged from the preceding quarter but above 33.5% a year earlier.

DXP cautioned that forward-looking expectations may not be achieved and are subject to the risks described in its regulatory filings. The quarter’s heavier working-capital use, lower gross margin and higher net debt also remain relevant constraints as the company continues deploying capital toward acquisitions and other business requirements.