DXP Enterprises (DXPE) Q2 2025: IPS Sales Jump 27.5%, Backlog Signals Multi-Quarter Growth Runway
DXP Enterprises delivered a record Q2 with standout 27.5% year-over-year growth in Innovative Pumping Solutions (IPS), driven by energy and water project momentum and robust acquisition execution. Backlog and bookings remain at all-time highs, underpinning visibility for continued sales and margin expansion through 2025. Management’s acquisition pipeline and disciplined cost leverage position DXPE to further diversify and compound profitability, even as supply chain and macro uncertainty linger in the background.
Summary
- IPS Outpaces Core Growth: Innovative Pumping Solutions leads with multi-year highs in sales and backlog.
- Margin Expansion Through Mix and M&A: Acquisitions and segment mix drive EBITDA margins to new records.
- Backlog and Pipeline Strengthen Outlook: Bookings and project visibility support sustained growth into 2026.
Performance Analysis
DXP Enterprises posted a record quarter, with total sales reaching $498.7 million, reflecting both organic momentum and acquisition contributions. Innovative Pumping Solutions (IPS), the engineered equipment and project division, surged 27.5% year-over-year, led by energy and water projects. Service Centers, the core distribution and service arm, also delivered steady growth, while Supply Chain Services remained flat, with sequential improvement as a large new contract ramped above breakeven in July.
Gross margin advanced to 31.65%, up 72 basis points YoY, as higher-margin IPS and acquired businesses improved the company’s profitability profile. Adjusted EBITDA margin climbed to 11.5%, a new high, reflecting fixed cost leverage and disciplined SG&A management. Average daily sales trended upward through the quarter, peaking in June, although July saw a seasonal dip.
- IPS Energy Backlog at All-Time High: Energy project backlog grew 12.9% sequentially, supporting multi-quarter revenue visibility.
- Service Centers Show Regional Strength: Growth was broad-based across North and South Rockies, Ohio River Valley, and South Atlantic regions.
- Supply Chain Contract Ramp: New SES contract loss in Q2 reversed to profitability in July, with $20M+ annualized run-rate expected.
Acquisitions contributed $24.6 million in Q2 sales, with integration of higher-margin businesses accelerating margin gains. Cash flow improved YoY despite working capital investment and elevated CapEx, which management expects to moderate in H2. Leverage and liquidity remain well within covenant limits, enabling continued M&A activity.
Executive Commentary
"We are establishing new highs for DXP. Look forward to the second half of 2025. The first half of 2025 highlights solid execution and our ability to grow organically through and through acquisitions. We continue to execute our acquisition strategy, adding two rotating equipment acquisitions during the first half and one after the quarter end. We continue to execute our goals to diversify the business with new products, new industries served and geographical expansions."
David Little, Chairman and CEO
"Q2 financial performance reflects DXP's ability to continue to successfully navigate through the market and execute and create value for all our stakeholders. Our second quarter results also reflect a new record high sales watermark, along with a new all-time high in adjusted EBITDA margins."
Kent Yee, CFO
Strategic Positioning
1. IPS Growth Engine and Backlog Visibility
IPS, DXP’s engineered project solutions arm, is now the company’s fastest-growing segment, benefiting from both energy and water infrastructure demand. Backlog is at a record high, with energy bookings and billings exceeding one-to-one, and the division’s water platform achieving its 11th consecutive quarter of sequential sales growth. This backlog strength provides a clear runway for continued elevated revenue and margin contribution into 2026.
2. Acquisition-Driven Diversification and Margin Accretion
Acquisitions remain central to DXP’s strategy, with three deals closed YTD and a robust pipeline for H2. Recent targets have delivered above-average gross and EBITDA margins, particularly in water, wastewater, and rotating equipment. These higher-margin businesses are lifting consolidated profitability, and management expects further accretive deals as the pipeline remains active and valuations reasonable.
3. Service Centers and Regional Expansion
Service Centers provide stability and recurring revenue, with growth supported by technical product additions, new pump brands, and expansion into new geographies such as Florida. E-commerce initiatives and national accounts are increasing recurring revenue, while regional growth remains broad-based across multiple U.S. markets.
4. Supply Chain Services: Inflecting After Contract Ramp
Supply Chain Services (SES), which manages MRO procurement and logistics, was flat YoY due to a large contract ramp that initially lost money but turned profitable in July. With $20M+ in annualized new contract revenue and additional wins in the pipeline, SES is positioned for a stronger H2, though pricing adjustments for inflation and tariffs remain a lagging headwind.
5. Capital Allocation and Financial Flexibility
DXP’s balance sheet and cash flow support ongoing M&A and organic investment, with leverage ratios well within covenants and $219 million in liquidity. CapEx is expected to moderate in H2, freeing up additional free cash flow for strategic initiatives.
Key Considerations
DXP’s Q2 results underscore a business model that blends engineered project solutions, industrial distribution, and supply chain management, each with distinct growth and margin levers. Investors should weigh the following:
Key Considerations:
- IPS Outperformance Drives Margin Profile: Continued backlog growth and project wins in energy and water position IPS as a multi-year growth and profit engine.
- Acquisition Integration and Pipeline: Margin-accretive deals are compounding profitability, with management signaling at least 3-4 additional closings in H2.
- Supply Chain Services Turnaround: SES contract ramp is a near-term drag but is now inflecting, with new wins likely to restore growth and margin contribution.
- SG&A Leverage and Cost Discipline: Operating leverage is delivering margin gains, but continued headcount and wage investments will need to be offset by topline growth.
Risks
Macro uncertainty, including industrial demand swings and tariff-driven pricing delays, could pressure segment growth and margin stability. Integration risk from ongoing acquisitions and the need to absorb working capital from new deals could temporarily constrain cash flow. Supply chain and inflationary pressures remain a watchpoint, especially for SES, where pricing adjustments lag cost increases.
Forward Outlook
For Q3 2025, DXP Enterprises expects:
- Continued sales momentum, underpinned by record IPS backlog and new SES contract ramp.
- EBITDA margin to remain at or above 11%, supported by mix and acquisition accretion.
For full-year 2025, management maintained a positive outlook:
- Multiple acquisitions targeted for H2, with incremental sales and margin upside.
Management highlighted several factors that support guidance:
- Backlog and bookings remain at all-time highs, providing multi-quarter visibility.
- Acquisition pipeline is robust, with margin-accretive targets prioritized.
Takeaways
DXP’s Q2 results reinforce its transition toward a higher-margin, less cyclical industrial solutions platform, with IPS and targeted M&A driving both growth and profitability.
- IPS and Acquisitions Compound Profitability: Backlog strength and margin-accretive deals are structurally lifting the business above legacy cyclicality.
- SES and Service Centers Provide Stability: Recurring revenue and contract wins in these segments help cushion volatility and broaden the growth base.
- Investors Should Watch H2 Acquisition Execution: The pace and integration of new deals will be a key determinant of whether margin gains are sustained into 2026.
Conclusion
DXP Enterprises is executing on its strategic playbook, with IPS backlog, acquisition synergies, and disciplined cost leverage driving record results and a positive multi-quarter outlook. The business is well-positioned to deliver compounding value, provided integration and macro volatility are managed effectively.
Industry Read-Through
DXP’s results provide a clear read-through for the industrial distribution and engineered solutions sector: Project-driven businesses with backlog visibility are best positioned to weather macro uncertainty and inflationary headwinds. Margin-accretive M&A is increasingly critical for platform players, especially as legacy distribution faces price and cost pressure. Water infrastructure and energy project demand are durable tailwinds, while supply chain services remain exposed to lagging price adjustments and contract ramp risk. Peers should prioritize backlog growth, accretive bolt-ons, and cost leverage to replicate DXP’s margin expansion trajectory.