Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 5, 2026 · Beat 5 of last 7 quarters
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DXP's strong quarter, driven by water and wastewater and engineered pumping solutions, underscores the durability of infrastructure-related demand that supports the AI buildout—particularly through data center cooling and power systems. The company's record margins and robust free cash flow provide dry powder for further acquisitions, potentially expanding its capabilities in technical MRO and engineered solutions that serve AI infrastructure.
DXP delivered a strong Q2 with total sales up 15.6% to $576.5M, including $49.8M from acquisitions and 11.1% organic growth. Adjusted EBITDA rose to $70.4M (12.2% margin), and diluted EPS came in at $1.76, up from $1.43 a year ago. IPS led growth with sales up 52.6% to $142.7M, driven by water and wastewater and acquisitions, while Service Centers grew 8.3% and Supply Chain Services grew 0.6%. Free cash flow improved to $29.8M in the quarter and $56M for the first half, and the company closed four acquisitions in H1 plus Mequipco in Canada after quarter end.
Management struck a confident tone, citing strong momentum in water and wastewater, a growing IPS backlog, and a record 12.2% adjusted EBITDA margin as evidence the business can sustain higher profitability. They did not provide formal guidance but noted the 12% margin is a new high watermark and believe it is achievable on a sustainable basis longer term, supported by mix shift toward higher-margin water and wastewater. The acquisition pipeline remains active—four deals closed in H1 2026, plus Mequipco in Canada closed August 1—and the balance sheet was strengthened with an expanded ABL facility and an S&P upgrade to B+. Management reiterated priorities of organic growth, margin expansion, disciplined M&A, and free cash flow generation, and expressed confidence in continued growth and market outperformance for the remainder of 2026.
“We are not chasing growth just to get bigger. We are focused on profitable growth, strong cash generation and customer relationships that last.”
on Growth strategy
“The conclusion continues to remain that we are trending meaningfully above all notable sales levels, and our backlog has mitigated some declines we saw in the second half of 2025.”
on IPS backlog
“This is our first quarter at 12%. So I don't want to promise anything. And as you know, we don't give direct guidance, but we do believe longer term, the business easily can get to that 12% on a sustainable basis.”
on EBITDA margin outlook
Can you please fill in the gap for us in May for Q2 and then share what color you can for Q3 thus far?
Kent provided monthly sales per business day: January $7.2M, February $8.4M, March $9.2M, April $9.1M, May $9.0M, June $9.4M. He did not provide Q3 color.
On EBITDA margins, you have been in the 11% range pretty consistently and just reported at 12%. As you look into Q3, is it more likely you'll stay at 12% or head back closer to 11%?
Kent noted mix is a factor, with water and wastewater approaching 70% of IPS sales and carrying higher operating income margins. He said 12% is a new high watermark and while not promising, he believes the business can sustain 12% longer term.
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?
Kent explained last year's elevated CapEx included investments in software, facilities, equipment, and patterns for private-label pumps, which support DXP's position as a leading rotating equipment provider.