Good morning, ladies and gentlemen. Thank you for standing by. My name is Erica, and I will be the conference operator today. At this time, I would like to welcome everyone to the DXP Enterprises, Inc. 2023 Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] I now turn the call over to Kent Yee, CFO. .

Thank you, Erica, and thank you to everyone for joining us today. This is Kent Yee and welcome to DXP's Q2 2023 conference call to discuss our results for the second quarter ending June 30, 2023. 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 -- 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. However, DXP assumes no obligation to update that information as a result 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 our second quarter performance and financial results..

Good morning and thank you Kent. Thanks to everyone for joining us today on our fiscal 2023 second quarter conference call. We are pleased to see end market demand and DXP's performance continue through Q2 and remain at record levels through the first half of 2023.

This allows us to achieve another quarter of both solid sales growth and 10% EBITDA margins. Overall, we had a great second quarter and strong first half of 2023. We are establishing new highs for DXP and look forward to the second half of 2023.

The first half of 2023 highlight solid execution and continued positive demand trends supported by our ability to grow organically and navigate the dynamic supply chain and pricing environment.

We continue to execute our acquisition strategy to continue to grow our DXP water and wastewater platform adding Florida valve and Riordan Materials during the quarter.

We continue to execute on our goals to diversify DXP's business while maintaining our commitment to foundational end markets like energy that have been and will always be a part of DXP. This is DXP's second quarter of adjusted EBITDA margins in excess of 10%, which is great to see, and we look forward to maintaining this profitability momentum.

This speaks to our relentless drive. We have to center our strategy around our customers, remain customer-driven experts, while creating a win-win for all our stakeholders.

We remain highly focused on providing the expertise our customers have come to expect from DXP by providing more efficient solutions, reduce costs and achieving their ESG objectives. This consistent approach has fueled our financial results.

Second quarter adjusted EBITDA of $45.3 million and diluted earnings per share of $1.06 was supported by year-over-year sales growth of 16.4%. Thanks to our efforts of all our DXP people across the company, we continue to grow and further our positive momentum, driving further operational improvements while performing for our customers.

Our key end markets continue to perform for DXP and potentially have secular trends that we are just beginning to see including energy, power, chemicals, and aerospace.

I personally want to thank all our DXP stakeholders in particular all our DXPeople for their determination and hard work as we continue to grow and improve the business and achieve new sales highs for our business.

As we move into the second half of the year, we remain confident that our well-balanced business, strong balance sheet, exceptional teams improved capabilities and robust acquisition pipeline position us well to navigate the current environment and achieve continued success.

I will begin today, with some perspective on our second quarter and thoughts on the remainder of 2023. Kent will then take you through the key financial results after my remarks. After his prepared comments, we will open for Q&A.

Again, let me thank our DXP stakeholders in particular our DXPeople for their continued efforts, adaptability as we grow and evolve DXP into a more diversified and less cyclical business.

Total DXP sales for Q2 increased 16.4% year-over-year and 1% sequentially or were $428 million or an average of $6.8 million per business day for the second quarter. Thank you, to the 2,757 DXPeople for your hard work and dedication.

In terms of Q2 financial results, service centers led the way, growing sales 18.85% year-over-year followed by Supply Chain Services growing sales 12.29% and then innovative pumping solutions, growing sales 9.78% year-over-year.

In terms of service centers, the diversity of end markets and MRO nature within service centers allowed us to continue to remain resilient, and continue to experience consistent top line growth. Additionally, our Cisco acquisition continues to perform, as we closed out the fiscal year of Cisco being with DXP.

From my regional perspective, a majority of our regions continue to experience year-over-year growth, including the Rocky Mountains, Southeast and Texas Gulf Coast. We continue to expect that our end markets will remain constructive over the foreseeable future.

As it pertains to energy, we believe we could be in the early stages of an up cycle supported by energy transition, which has been consistent with our recent commentary over the last three quarters. Supply Chain Services continues to experience year-over-year due to the addition of a new diversified chemical customer during Q2 and Q3 of last year.

As we move into Q3, we will look for new customer additions as we well as continue to manage procuring products and managing inflation both year-over-year and sequential growth will flatten out until we start ramping new customers.

That said, demand for SCS services is increasing because of the proven technology and efficiencies they perform for all their industrial customers. But the sales cycle can be protracted, and we will look to our SCS leaders to add new customers, as we move into 2024.

In terms of IPS or Innovative Pumping Solutions, our Q2 average IPS backlog continues to stay ahead of the fiscal 2022 average. Additionally, our year-to-date average for the first time started to exceed our long-term average our IPS backlog going back to 2015.

What this indicates is, that we are continuing to give bookings as we mentioned earlier, and we are likely in the front end of a good cycle on the energy-related project work and we look forward to as we move through 20223.

And we maintain growth, our main focus within IPS will be managing the demand levels we have finding opportunities in all markets such as energy, biofuels, food and beverage and water and wastewater and pricing appropriately given the supply chain dynamics and ebbs and flows of inflation.

DXP's overall gross profit margins for the quarter were 30.8% and sequentially a 133 basis point improvement over Q1 and 245 basis point improvement over Q2 of last year. A special thanks to our DXPeople who have stayed on top of supplier product increases, labor costs and overall efficiencies.

Overall DXP produced adjusted EBITDA of $45.3 million and adjusted EBITDA as a percent of sales of 10.6%, which reflects the operating leverage we expect to get with significant sales growth. This also marks our second sequential quarter of 10% plus EBITDA margins and we will look for this to continue as we move through the second half of 2023.

Regarding capital allocations, we continue to make investments to fuel growth and diversify DXP through acquisitions, while opportunistically repurchasing shares. By balancing these two approaches are pursuing both, we are driving long-term value for our customers – excuse me, shareholders.

We are continuing to return value to our shareholders through our 85 million share repurchase program. And during the quarter we purchased 749,000 shares amounting to $23.957 million. Let me conclude my remarks by saying that I am encouraged by our continued sequential improvement in sales and profitabilities.

We continue to make progress on growth strategies and our commitment to customers is stronger than ever. We are driving growth and improvements at DXP and we look forward to navigating and working through the remainder of fiscal 2023.

Finally, I would like to thank our DXPeople for achieving our goal of 10, 10 and 10 again, and we aim to keep the streak alive. Q2 was another great quarter, as we continue to have a successful year in 2023. With that, I will now turn this back over to Kent, and he will review the financials in more detail..

strong organic sales growth and contribution from acquisitions, continued impacts from inflation or price increases compared to a year ago albeit at a slower pace, continued record service center performance marked by gross margin, strength and stability, notable year-over-year and sequential growth in IPS with a positive outlook in terms of our backlog and energy activity, strong sales increases within SES, driven by the addition of a large diversified chemical customer compared to a year ago, although plateauing during Q2, consistent operating leverage leading to sustained adjusted EBITDA margins and significant capital return to shareholders through our share repurchase program.

Total sales for the second quarter increased 16.4% year-over-year and 0.9% sequentially to a record $428 million. Acquisitions that have been with DXP for less than a year contributed $7.3 million in sales during the quarter.

Average daily sales for the second quarter were $6.8 million per day versus $6.6 million per day in Q1 2023 and $5.8 million per day in Q2 2022. Adjusting for acquisitions, average daily sales were $6.7 million per day for the second quarter.

That said, the average daily sales trends during the quarter went from $6.65 million per day in April to $6.9 million per day in June reflecting a typical quarter end push as we closed out the second quarter. In terms of our business segments; Service Centers grew 18.9% year-over-year.

This was followed by Supply Chain Services growing 12.3% year-over-year and Innovative Pumping Solutions growing sales 9.8% year-over-year. Excluding acquisitions Service Centers grew 18.85%, our sales increased $47.3 million, while Innovative Pumping Solutions sales increased 9.78% or sales increased $5.65 million.

In terms of our Service Centers, regions within the Service Center business segment, which experienced notable sales growth year-over-year include the Lyo River Valley, North Rockies, Texas Gulf Coast and the Southeast.

Key products and end markets driving the sales performance include air compressors, rotating equipment and general industrial, chemical, food and beverage, transportation and energy.

Supply Chain Services performance continues to reflect the impact of the addition of a large diversified chemical customer that we added in Q2 of last year and has fully ramped as of Q2 this year. This customer contributed $15.9 million in sales during the quarter.

Other notable gains from an end market perspective within SES include growth within our energy and food and beverage customers compared to a year ago. In terms of Innovative Pumping Solutions, we continue to experience increases in the energy-related backlog.

Our Q2 energy-related average backlog grew 6.5% over our Q1 average backlog which is a notable uptick compared to Q1 of this year and continues to be ahead of our 2016 and 2017 average backlog and now is only down 1.5% when comparing to the 2015 average backlog.

The conclusion continues to remain that we are trending meaningfully above 2016 and 2017 sales levels and we are moving towards 2015 levels based upon where our backlog stands today. We have been experiencing strong organic sales growth within IPS as we mentioned in Q1 we expect that to continue throughout 2023.

Additionally, we are also continuing to find opportunities in other markets as David mentioned including biofuels hydrogen carbon capture and sequestration versus our traditional oil and gas but we expect energy to contribute meaningfully going forward. Turning to our gross margins.

DXP's total gross margins were 30.8%, 245 basis point improvement over Q2 2022. This improvement was across all of our business segments with IPS showing the greatest improvement with margins improving 481 basis points on a year-over-year comparative basis.

That said from a segment mix sales contribution Service Centers contributed 69.7%, Supply Chain Services 15.5% and innovative pumping solutions was 14.8% compared to last year SCS sales mix contribution was higher at 16% which impacted DXP's margins in Q2 of 2022.

In terms of operating income combined all three business segments increased 143 basis points or $13.7 million a year-over-year business segment operating income versus Q2 2022. This was primarily driven by improvements in operating income margins within Service Centers and IPS.

Service Center operating income margins improved 190 basis points and IPS operating income margins improved 94% on a Q2 comparative basis year-over-year. The improvement in service centers reflects the impact of acquisitions at a higher relative operating income margin.

Total DXP operating income increased 17 basis points versus Q2 2022 to $37.5 million. Our SG&A for the quarter increased $16 million from Q2 2022 to $94.4 million. The increase reflects the growth in the business and associated incentive compensation as well as DXP investing in its people through merit and pay raises as well as increased headcount.

SG&A as a percentage of sales increased 75 basis points year-over-year to 22.1% of sales. The increase primarily reflects the impact of acquisitions plus a 70 basis point uptick from Q1 on total SG&A.

We still anticipate that DXP will benefit from the leverage inherent in the business despite increasing operating dollars supporting our growth, cost inflation and the impact of acquisitions. Turning to EBITDA. Q2 2023 adjusted EBITDA was a record $45.3 million. Adjusted EBITDA margins were 10.6%.

This is our second quarter of sequential adjusted EBITDA margins in excess of 10% and we would look for this to continue. Year-over-year adjusted EBITDA margins increased 264 basis points or $12.7 million. This reflects the fixed cost SG&A leverage we experienced as we grow sales. This translated into 2.5x operating leverage.

In terms of our EPS, our net income for Q2 was $19 million. Our earnings per diluted share for Q2 2023 was $1.06 per share versus $0.74 per share last year. Of note we returned $25.1 million to shareholders through the share repurchase during Q2. Turning to the balance sheet and cash flow.

In terms of working capital, our working capital increased $22.4 million from December and $15.8 million from March to $299.4 million. As a percent of last 12 month sales, this amounted to 18.2%. We are still at a point where we are in line with our historical average of ranges in terms of investing in working capital.

But as discussed in Q3 of last year, this has begun to move off our Q3 2022 high of 19.9% of last 12-month sales as we have on-boarded some of our recent acquisitions for a full 12 months. We do anticipate further acquisitions. So as we move into the second half of 2023, this could move upwards.

In terms of cash, we had $15.5 million in cash on the balance sheet as of June 30. This is a decrease of $30.6 million compared to the end of Q4 and $42.7 million since March. This reflects the purchases of two acquisitions Florida Valve and Riordan Materials and share repurchases which we will touch in a little more detail later on in my comments.

In terms of CapEx, CapEx in the second quarter was $1.8 million or a decrease of $2 million compared to Q1 2023. We are still ahead of our fiscal year 2022 levels as we reinvest in some of our facilities and equipment on behalf of our employees. As we move forward we will continue to invest in the business as we focus on growth.

Turning to free cash flow. Free cash flow through Q2 or year-to-date was a positive $18.4 million which reflects a minus $4.2 million during the second quarter. This reflects significant investments in project work along with a reduction in payable days.

That said, while we continue to make improvements in our free cash flow when we are growing DHP makes significant investments in inventory and project work throughout the year and we have experienced significant step-up since Q4 of last year.

Return on invested capital ROIC at the end of the second quarter was 32% and continues to be above our cost of capital and is reflecting our improved profitability levels. As of June 30, our fixed charge coverage ratio was 2.73:1 and our secured leverage ratio was 2.53:1 with a covenant EBITDA for the last 12 months of $161.9 million.

Total debt outstanding on June 30 was $425.9 million. In terms of liquidity as of the quarter we were undrawn on our ABL with $2.7 million in letters of credit outstanding with $132.3 million of availability and liquidity of $147.8 million including DXP’s $15.5 million in cash on the balance sheet.

In terms of acquisitions, we closed on two acquisitions during the quarter Riordan Materials and Florida Valve. We are excited to have them reporting with us for the second quarter of 2023. Welcome to DXP Florida valve and Riordan. Both provide leading platforms within the municipal and industrial water and wastewater industries.

DXP's acquisition pipeline continues to grow and the market continues to present compelling opportunities. Our acquisition strategy has created significant value for DXP enhancing our end markets margins and DXP's cash flow profile.

Looking forward, we expect this to continue through 2023 and we look forward to closing a minimum of two to four acquisitions during the second half of 2023. Updating our thoughts on capital allocation our primary goal still remains to invest in our business, including the execution of our acquisition strategy.

We are also committed to maintaining a conservative balance sheet as demonstrated by our target leverage ratio of 3.5 times or less. To the extent, we have access capital after achieve these objects, the share repurchase program will provide us the mechanism to return capital to our shareholders.

During the quarter as previously mentioned, we repurchased $25.1 million and year-to-date $34.2 million in DXP stock or a total of 749,000 shares in Q2 and 1.1 million shares year-to-date.

As we move into the second half of the year, we remain confident that our well-balanced business, strong balance sheet, exceptional DXP people, growing capabilities, and strong acquisition pipeline position us well to navigate the current environment and achieve continued success.

Balance end market mix and geographic coverage offer us multiple avenues to grow and create value for our customers and suppliers, while providing important resiliency in unpredictable markets. In summary, we are pleased with our progress at the halfway mark and we look forward to finishing 2023 strong as we approach Q3 and Q4.

I will now turn the call over for questions..

[Operator Instructions] Our first question comes from the line of Tommy Moll from Stephens Inc. Tommy, go ahead..

Good morning, and thank you for taking my questions..

Good morning Tommy..

I wanted to start on some of the average daily sales insight. You provided first I just want to make sure I heard correctly. So, it's $6.8 million reported that would be $6.7 million excluding the M&A impact.

Did I hear that correctly?.

Yes, that's correct Tommy..

Okay. And then Kent you provided some of the monthly insight.

Can you just run through the months again? And were those on an as-reported basis, or were those excluding the M&A as well?.

That includes acquisitions. But what I'll do is I'll walk you through the trend in the quarter and give you a flash a draft flash for July. So, April was 6.65%, May 6.5%, June 6.91%, and then July 6.57%. .

Thank you. That's helpful..

Yes. And so our year-to-date average -- I'd just add a little further insight there Tommy. Our year-to-date average is averaging about 6.6%. And so hopefully that gives you a little bit of insight to kind of the trends in DXP. .

Yes. And then the $428 million you reported for the quarter I think it was the 11th consecutive of sequential sales increase.

Based on that July trend and everything today would your best guess be that Q3 could be up again sequentially from that 428 million, or is there another factor you'd point us to were flat or even a down sequential might be more realistic at this point?.

I'll take that one Tommy. The yes we want to keep our streak alive. And we're working hard. We have a lot of growth strategies to do so even though I think there's no question that the Fed is using interest rates to slow the economy down and we see that in certain markets. And then we see growth in certain markets.

So, it kind of depends on the mix of all that but aerospace and energy and certainly water and wastewater and food and beverage those are markets that are growing for us. And so we're working really, really hard to I guess overcome some of the other markets that are slowing down a little bit.

And so -- but I think when you put it all together our goal and optimism is that we'll keep the streak alive even though I don't consider a small percentage of growth to be a negative.

I consider if we do -- as an example I think if we do 1% growth in the third quarter, well then that will be 12% growth year-over-year, so we'll certainly be happy with that. .

Fair enough..

And Tom the only thing I would add to it is and you asked it at the front end of just the sales per business day is our pipeline -- acquisition pipeline still remains in place.

And so if we get one or two done in the quarter just dependent upon the timing, we could -- that would fit with David's comments and those are always additive, but if that gives you some more insight..

Yes, that's helpful. Thank you. On margins second quarter in a row above 10% for EBITDA. Peeling back the layers, you got a pretty big tailwind on the gross margin side just under 31% for the quarter which is the highest in a long time. So, I wondered if we could talk to the gross margin performance.

What can you tell us about the price cost dynamic and the inflationary cycle? And then at the same time, is there any M&A or mix impact worth calling out as well on that gross margin performance?.

Yes sure. There's certainly -- our goal is to do 30%, so to exceed that slightly is a real plus for us and we're certainly happy to get that. And then when we look at what makes that happen, we do go to mix and our certain of our businesses are higher gross profit-oriented than others.

As an example Supply Chain Services has a very low growth, I mean it's like 20% but their SG&A is 10%. So they still make a 10% or greater, well slightly below that operating income margin, but an EBITDA margin of 10.

So they contribute and then of course, their investment on working capital is, they don't have a lot of inventory and stuff like that the customer keeps all that. So we're happy with the returns we get with supply chain services. I don't want to mislead anybody about that because we're certainly very happy about it.

But it does if that's a bigger portion of what we're doing going forward within gross margins will come down because they operate on very low gross margins but very low expenses also. Then other water and wastewater has high gross profit margins because they have. this is a long explanation but I'm going to give it to you I think it would be helpful.

They have a lot of jobs that they do on commissions. And so actually in that sense their gross profit margin on those types of jobs is 100%. So that is helpful. Now they do an awful lot of resale too, and those margins are healthy also. Innovative Funding Solutions is kind of a three bids and a buy.

You're doing a big project $1 million projects and so they get into competitive situations. So they're not -- their margins aren't as low as supply chain services, but they're lower than the service center margins. And so again, if the more that grows as a percentage of our MRO center service will then -- then that can pull back on margins also.

But that's what I'm talking about is there is a blend of margins. And of course, the blend works out to 30-plus or gold's 30% overall. That seems to be achievable and we don't see anything. There's no onetime anything out there or anything of any significance that would drive that down besides mix and some products sometimes.

So I'm very, very pleased with our people's ability to pass on inflation and supplier cost and labor costs and et cetera. So we're pleased with those results and we tend to think that that they're going to hang around there, whether it's 29.5% or 30.5% makes no difference to me really. I mean it makes a difference in the sense it's better.

But I'd be happy with either one of those numbers..

Yeah. I want to talk about M&A in depth before we hit that topic. Let's address the oil and gas end market dynamics. I mean you're looking at crude back into the mid-80s that are.

So what observations would you have for us about the underlying trends there?.

So I'll study that pretty hard. And so here's what I know. And of course, there's a lot I don't know. But here's what I know. I know that the drilling we do nowadays is with lateral lines going from 1 mile to 2 miles, that the efficiencies of each well drilled is much greater. So we can have less rigs and still be producing more oil or gas.

So this is on the drilling side. And of course, we're not tied to drilling. We are tied to production. So that is, is kind of one factor. The other factor is that we started off with 9,000 DUCs drilled uncompleted wells, and that's down to 4,000 and something. I'm not giving you exact numbers so don't hold me to that.

But in that range and so that's also not needing new drilling to produce more production. So that's helpful, too. That said, in the last part of the equation is that oil and gas is a completing resource. So they have to produce more to just keep even and so we are kind of at the rate we're at right now today we're kind of staying even.

It's been 11.9% to 12.3%. So it's kind of been in that range probably 12.2 million barrels a day, as we speak. So -- that's kind of how that works. It's good for us kind of midstream the equipment that's on the well-site the gathering system and et cetera. So, we see activity in that -- where we play as being very strong.

And then, when we mentioned energy, we have to talk about other sources of energy. And so we're playing in those markets likewise. And so we're doing hydrogen projects. We're doing corn ethanol. We're playing in a lot of the other markets that are designed around energy, even the service and repair wind mills and things like that.

But we're not in solar panels. And we certainly don't manufacture wind turbines, but we do work on them. So I think when we think of energy, we think of this balance between that we're going to renewable fuels and we're playing in that, and then, we'll never quite get it right. So there may not be enough oil and gas that renewable can take over.

So when that happens then oil and gas prices are going to go up and then everybody will get dynamic around that. So it's a moving ball. So what I'm not here thinking, I know everything. If I did really make a lot of money, but I don't have a perfect answer, but those are some of the factors that we're looking at.

And they are all pointing to the fact that we think that that renewables and oil and gas are both needed to do more to serve the world with energy. And so we think that the coming year or years' is going to be a strong market..

Moving on to M&A, I think I heard you guys mention something in the realm of two to four deals you hope to close by the end of the year.

Any insight you can give us on what that pipeline looks like? Are we talking tuck-ins or maybe something larger or whatever insights you can provide though, I recognize it's delicate given these are still in the pipeline, but anything you can provide is helpful..

Yeah. Just some high-level comments there Tommy, one, I'd like to always signal that hey the M&A markets seem to be strong and there's plenty of opportunities there for DXP.

Secondly, and more specifically to our pipeline the two to four, they continue to play on our major themes of water and wastewater, rotating equipment broadly speaking as well just as a product category. And then, more importantly, valuations are in line with our expectations. And so, for us getting the 2% to 4% seems more than reasonable.

If they're in the water and wastewater space, obviously they're accretive to our margins both gross margins as well as EBITDA margins -- and if they're in the rotating equipment space by the way they're typically accretive to our gross margins and our EBITDA margins.

And so we're excited point, being about our pipeline and what we see there spending a lot of time being more selective to be candid, because of the fullness of the pipeline. And so we feel good. Some of them are more tuck-ins in terms of size and then others in aggregate could be closer to around our average acquisition size.

So, our average acquisition size being anywhere between $25 million to $35 million in sales from acquisition standpoint. So we'll see which ones get across the finish line before year end, but we also feel good about going into 2024 to be candid. So....

You mentioned water wastewater a couple of times there can and -- this is the last theme I wanted to make sure we hit on today, but it's clearly been an emphasis in terms of inorganic capital allocation and the deals you've done in the last couple of years. You mentioned that it tends to be margin accretive….

Yes..

Which I presume is one of the reasons you're attracted to it, but maybe even at a higher level refreshes on the strategy for building out that platform what you like about the structure of that market.

And then if you look back at the progress you've made and the platform you have today how would you characterize it in terms of scale and how much more scale do you hope to add going forward? Thank you. .

Yes. And maybe I'll just hit that and then I'll let David chime in on the big picture strategy around water wastewater. But we've always viewed it as a platform that we could scale up between a $350 million to $500 million at least platform. And so just to give you a sense of scale today we are a little bit north of $100 million.

And then what I would also say and then I'll let this be a segue to David is we've always played in the water wastewater platform. It's just something we didn't necessarily historically make the intentful decision as we are in today's market decide to grow via acquisition. And so --and I'll use that just as a segue to David to explain to you why.

But we really like it. And as you picked up on it's accretive to our margins on a variety of fronts.

David?.

So specifically it's not a -- it's not really a cyclical business. It's -- people eat and go the bathroom and do all the stuff that they do. And so we need water. We need clean water. We need to dispose of waste.

We need to do all these things in – and then –and so the market and the infrastructure that's gotten kind of old and there's a lot of repair and replacement activity that's going on. And so that's really driving this particular part of the industry upward. So the other parts to explain it correctly too I can't mention it, but we're a pump company.

We represent pumps that go into industrial and utility type businesses. So being pump people, we understand the technical side of pumps. We understand the repair and service of pumps. So water we've played in that via pumps. And so we're trying to -- so we understand that aspect of the product.

When we look at adding things to that product we look at not only more repair, but we also look at some valves that are specific to that industry. We look at automation and that's specific to that industry.

And so there's kind of -- we're building this platform that takes these five legs to the stool so to speak and that's the pump, the valve, the repair, the automation. And then the last one is a little new for us but it's process equipment. And so it's equipment.

So we're certainly used to that, but it's -- it also has some chemical aspects to it and stuff like that. So all those other three legs valves and process equipment and automation are a little newer to us. And so that's a great growth opportunity to the people that were in municipal, but they were just doing pumps.

And so it's -- this has been a really exciting time and growth strategy that not only are we acquiring people across the United States that are in this business but we are actually bringing things to them to help them grow their business really might not have been a great growth company in the past. So the market is better.

What we bring to them is better. And then the customer finally he likes somebody that can bring more than just one offering to hand. So the fact that you can bring pumps and you can bring the process equipment and then you can service it and you can install it et cetera is very exciting. .

We'll look forward to continuing to follow the progress there and for today's purposes that's all I have. So I'll turn it back. .

Thank you, Tom..

[Operator Instructions].

Erica, I think that's all the questions today. .

I was just giving you a moment. But -- ladies and gentlemen, thank you. That concludes our call today. Thank you for joining us..

Thank you. .

Thank you..