HOUSTON - DXP Enterprises , Inc. (NASDAQ: NASDAQ:DXPE), a prominent distributor of products and services, has successfully closed on refinancing its Senior Secured Term Loan B borrowings, raising an additional $105 million. This transaction brings DXP's total Senior Secured Term Loan B borrowings to $649.5 million. The company disclosed that the refinanced debt, which matures on October 13, 2030, is priced at Term SOFR plus a margin of 3.75 percent.
The proceeds from the borrowing are earmarked for repaying existing debts under the same loan category, with surplus funds allocated for general corporate purposes, potential acquisitions, and associated transaction fees and expenses. The refinancing is part of DXP's broader strategy to maintain financial flexibility and support its growth objectives, both organically and through acquisitions.
DXP's Chairman and CEO, David R. Little, expressed satisfaction with the refinancing outcome, viewing it as a positive step towards ending the year strongly and driving growth into 2025. The company's capital allocation strategy is a blend of funding growth, debt service, reinvestment in the business, and market support.
Chief Financial Officer Kent Yee highlighted the refinancing's success, which he stated would save an estimated six million dollars in annual interest expenses and enhance liquidity. Yee pointed to DXP's growth, noting sales increased from $1.0 billion in 2020 to $1.7 billion in the twelve months ending June 30, 2024, and adjusted EBITDA grew from $64.9 million in 2020 to over $187.6 million in the same period.
The financial maneuver is expected to provide DXP with the necessary leverage to accelerate its acquisition strategy and strategic reinvestment in the business. Following the transaction, DXP's pro forma net debt to EBITDA ratio stands at 2.75:1, positioning the company for disciplined growth.
DXP Enterprises serves a variety of sectors, providing products and services that include pumping solutions, supply chain services, and maintenance, repair, operating, and production (MROP) services across North America and Dubai. The company aims to leverage its product knowledge and technical expertise to offer competitive advantages to its customers.
Additional details about the refinanced borrowings will be disclosed in DXP's Current Report on Form 8-K, which will be filed with the Securities and Exchange Commission by today's date, as per the company's announcement. This news is based on a press release statement.
In other recent news, DXP Enterprises has made significant strides with the acquisition of Hartwell Environmental Corporation, a move that bolsters its presence in the Texas and Oklahoma markets. The acquisition, part of DXP's Water strategy, was funded through cash reserves, underscoring Hartwell's solid performance with sales of approximately $18.4 million and adjusted EBITDA of $4.1 million in the previous year.
DXP Enterprises has also launched a new stock repurchase initiative of up to $85 million over the next 24 months. This decision follows the successful completion of the previous repurchase program, reflecting the company's confidence in its shares' value.
In terms of financial performance, DXP Enterprises reported a 4.1% year-over-year and 8% sequential growth in sales for Q2 2024. The company's adjusted EBITDA margins exceeded 10% for the fifth consecutive quarter, demonstrating operational efficiency despite a slight decline in service center sales.
Additionally, DXP Enterprises continues to expand its portfolio, with plans to finalize at least two more acquisitions by the end of 2024. The company's backlog in energy-related sectors is growing, and operating income has increased across all business segments. These recent developments suggest a continued positive outlook for DXP Enterprises.
InvestingPro Insights
DXP Enterprises' recent refinancing move aligns well with its strong financial performance and growth trajectory. According to InvestingPro data, the company's market capitalization stands at $829.85 million, reflecting its significant presence in the distribution sector. The company's revenue for the last twelve months as of Q2 2024 reached $1684.48 million, with a modest growth of 2.34% over the same period.
An InvestingPro Tip highlights that DXP's management has been aggressively buying back shares, which could be seen as a vote of confidence in the company's future prospects and aligns with the company's strategy of supporting market value. This aggressive share repurchase program complements the company's efforts to optimize its capital structure through the recent refinancing.
Another relevant InvestingPro Tip indicates that DXP is trading at a low P/E ratio relative to its near-term earnings growth. With a P/E ratio of 14.13 and an adjusted P/E ratio of 13.47 for the last twelve months as of Q2 2024, the company appears to be attractively valued considering its growth potential and recent financial maneuvers.
These insights from InvestingPro provide additional context to DXP's refinancing strategy and overall financial health. Investors interested in a deeper analysis can access 6 more InvestingPro Tips for DXP Enterprises, offering a comprehensive view of the company's financial position and market performance.
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