Cuộc họp công bố kết quả kinh doanh quý 3 năm tài chính 2026 của DXP Enterprises (DXPE): Doanh thu tăng 14.3%

Điểm nhấn chính

• DXP Enterprises ghi nhận doanh thu kỷ lục trong quý 3 năm tài chính 2026 đạt 587,2 triệu USD, tăng 14,3% so với cùng kỳ năm trước. Doanh thu hữu cơ tăng 8,7%, trong khi các thương vụ mua lại đóng góp 48,8 triệu USD.
• EBITDA điều chỉnh tăng 19,0% lên 67,3 triệu USD, với biên lợi nhuận mở rộng từ 11,0% lên 11,5%. Lợi nhuận hoạt động tăng 20,1% lên 52,5 triệu USD.
• EPS pha loãng tăng 25,2% lên 1,64 USD, trong khi lợi nhuận ròng tăng 24,2% lên 26,9 triệu USD.
• Phân khúc Innovative Pumping Solutions dẫn đầu đà tăng trưởng với doanh thu tăng 43,3% lên 144,1 triệu USD. DXP Water ghi nhận quý thứ 16 liên tiếp đạt mức tăng trưởng doanh thu so với quý liền trước.
• Biên lợi nhuận gộp giảm 70 điểm cơ bản so với cùng kỳ năm trước xuống còn 30,7% do cơ cấu doanh thu. Hiệu ứng đòn bẩy từ chi phí SG&A đã bù đắp một phần áp lực này, với tỷ lệ chi phí SG&A trên doanh thu giảm từ 22,9% xuống 21,8%.
• DXP tạo ra 14,4 triệu USD dòng tiền tự do trong quý và kết thúc tháng 9 với 218,8 triệu USD tiền mặt. Hạn mức tín dụng ABL trị giá 225 triệu USD của công ty vẫn chưa được sử dụng.

Dữ liệu tài chính quan trọng

Lũy kế 9 tháng đầu năm tài chính 2026, doanh thu tăng 13,2% lên 1,69 tỷ USD, trong đó tăng trưởng hữu cơ đạt 9,3%. EBITDA điều chỉnh tăng 17,5% lên 195,4 triệu USD, với biên lợi nhuận đạt 11,6%. Dòng tiền tự do tăng hơn gấp ba lần, từ 19,5 triệu USD của cùng kỳ năm trước lên 70,5 triệu USD.

Kết quả kinh doanh và hoạt động

Doanh thu phân khúc Innovative Pumping Solutions tăng 43,3% so với cùng kỳ năm trước lên 144,1 triệu USD. Các thương vụ mua lại gần đây đóng góp 40,8 triệu USD, trong khi doanh thu hữu cơ của IPS tăng 1,6%. Lợi nhuận hoạt động phân khúc tăng 27,4% lên 23,4 triệu USD, tương ứng biên lợi nhuận 16,3%.

Đà tăng trưởng được hỗ trợ bởi DXP Water, các hợp đồng sản xuất và những thương vụ mua lại. Doanh thu mảng nước tăng 71% so với cùng kỳ năm trước trong quý 3 và tăng 80% trong 9 tháng đầu năm. Ban lãnh đạo mô tả ngành nước và xử lý nước thải là một nền tảng tăng trưởng chiến lược dài hạn.

Lượng đơn đặt hàng tồn đọng (backlog) bình quân liên quan đến năng lượng của IPS đã tăng 5,8% so với quý trước. Nếu loại trừ một dự án giải pháp kỹ thuật lớn dự kiến hoàn tất giao hàng vào cuối quý 4, backlog tăng 7,8% so với quý trước và tăng 18,5% so với quý 1.

Phân khúc Service Centers đạt doanh thu 376,6 triệu USD, tăng 7,6% so với cùng kỳ năm trước và tăng 2,4% so với quý trước. Động lực tăng trưởng đến từ các khu vực Đông Nam, California, Bờ Vịnh Texas và Nam Rockies, cùng với sự khởi sắc ở các sản phẩm gia công kim loại. Lợi nhuận hoạt động phân khúc đạt 55,6 triệu USD, với biên lợi nhuận là 14,8%.

Doanh thu phân khúc Supply Chain Services tăng 5,5% lên 66,4 triệu USD. Việc có thêm khách hàng và cơ sở mới đã bù đắp cho sự sụt giảm hoạt động từ một số khách hàng hiện hữu. Lợi nhuận hoạt động phân khúc tăng từ 5,3 triệu USD lên 6,0 triệu USD, tương ứng biên lợi nhuận đạt 9,0%.

DXP đã hoàn tất năm thương vụ mua lại trong 9 tháng đầu năm 2026 và ký thỏa thuận mua lại MDS tại Michigan sau khi kết thúc quý. Ban lãnh đạo cho biết danh mục các thương vụ tiềm năng vẫn rất tích cực, đặc biệt trong mảng nước và xử lý nước thải, nâng cao năng lực kỹ thuật và mở rộng phạm vi địa lý.

Triển vọng từ ban lãnh đạo

Ban lãnh đạo dự kiến dự án IPS quy mô lớn được thảo luận trong cuộc họp sẽ được bàn giao toàn bộ vào cuối quý 4. Công ty kỳ vọng biên lợi nhuận của IPS sẽ quay trở lại các mức lịch sử sau khi tác động từ cơ cấu doanh thu hiện tại giảm bớt.

DXP cũng dự kiến vốn lưu động sẽ bình thường hóa trong quý 4 khi công ty quản lý việc lập hóa đơn và thu hồi công nợ của dự án. Chi phí lãi vay hàng quý dự kiến sẽ duy trì quanh mức 17 triệu USD và giảm nhẹ theo thời gian nhờ các khoản trả nợ gốc theo lịch trình.

Doanh thu trung bình theo ngày trong tháng 10 đạt 9,03 triệu USD, so với mức 8,45 triệu USD trong tháng 7, 9,51 triệu USD trong tháng 8 và 9,60 triệu USD trong tháng 9. Ban lãnh đạo cho biết nhu cầu vẫn duy trì tích cực và nhấn mạnh rằng công ty không giảm giá mang tính cơ cấu để giành doanh thu.

Rủi ro và các yếu tố cần theo dõi

Biên lợi nhuận gộp giảm xuống 30,7% do sự thay đổi cơ cấu sản phẩm tại Service Centers và IPS. Ban lãnh đạo cho biết sự sụt giảm này không mang tính cơ cấu, nhưng thừa nhận rằng cơ cấu theo quý có thể tiếp tục ảnh hưởng đến khả năng sinh lời.

Vốn lưu động tăng 27,6 triệu USD so với tháng 6 lên 420,9 triệu USD. Các khoản phải thu tăng 32,5 triệu USD, trong khi chi phí vượt giá trị thanh toán theo hóa đơn tăng 9,5 triệu USD, phản ánh một phần hoạt động của các dự án và số ngày thu hồi công nợ kéo dài hơn tại DXP Water.

Ban lãnh đạo cũng chỉ ra các yếu tố thuế quan, lạm phát, lãi suất và sự bất ổn địa chính trị là những thách thức đối với khách hàng. Mảng IPS bao gồm các dự án kỹ thuật có chu kỳ dài, khiến việc chuyển đổi đơn hàng tồn đọng, tiến độ triển khai dự án và kỷ luật lập hóa đơn trở thành những biến số quan trọng.

DXP kết thúc quý với tổng nợ là 839,5 triệu USD. Tỷ lệ đòn bẩy có bảo đảm ở mức 2,3 lần, trong khi tổng lượng tiền mặt đạt 218,8 triệu USD và hạn mức tín dụng ABL còn khả dụng là 192,2 triệu USD sau khi trừ thư tín dụng.

Nội dung nổi bật trong phiên hỏi đáp với chuyên gia phân tích

Ban lãnh đạo cho rằng sự sụt giảm biên lợi nhuận gộp trong quý 3 là do cơ cấu kinh doanh thông thường hơn là áp lực cạnh tranh về giá hay thay đổi mang tính cơ cấu. Họ vẫn tự tin với mức biên lợi nhuận gộp trên 30% và tiếp tục hướng tới mục tiêu tăng trưởng doanh thu có lợi nhuận.

Sự sụt giảm biên lợi nhuận hoạt động của IPS so với quý trước cũng liên quan đến cơ cấu sản phẩm. Ban lãnh đạo cho biết một dự án lớn có biên lợi nhuận thấp hơn đã được ghi nhận trong nhiều quý và không phải là nguyên nhân duy nhất dẫn đến biến động này.

Doanh thu trung bình theo ngày đã tăng mạnh trong suốt quý 3 trước khi hạ nhiệt về mức 9,03 triệu USD trong tháng 10. Theo ban lãnh đạo, doanh thu lũy kế từ đầu năm đến hết tháng 10 tăng 13,9% so với cùng kỳ năm trước.

Ban lãnh đạo chỉ ra rằng chi phí lãi vay trong quý 4 về cơ bản sẽ duy trì ổn định tương đương mức khoảng 17 triệu USD mỗi quý.

Toàn văn biên bản cuộc họp công bố kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

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.