DXP ENTERPRISES INC

NOTE 15 -SUPPLEMENTAL CASH FLOW INFORMATION

(1) FY 2024 includes $9.3 million of interest associated with 2023 paid in 2024.

NOTE 16 -BUSINESS ACQUISITIONS

The Company continually evaluates potential acquisitions that either strategically fit with the Company’s existing portfolio or expand the Company’s portfolio into new and attractive markets. The Company has completed a number of acquisitions and the purchases of the acquired businesses have resulted in the recognition of goodwill and other intangible assets in the Company’s Consolidated Financial Statements.

The Company makes an initial allocation of the purchase price at the date of acquisition based upon its estimate of the fair value of the acquired assets and assumed liabilities. The Company obtains the information used for the purchase price allocation during due diligence and through other sources. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized. Final determination of the fair values may result in further adjustments.

The fair values of acquired intangibles are determined based on estimates and assumptions that are deemed reasonable by the Company. The Company from time-to-time engages third-party valuation specialists who review the Company’s critical assumptions and calculations of the fair value of acquired intangible assets in connection with significant acquisitions. Only facts and circumstances that existed as of the acquisition date are considered for subsequent adjustment. The Company is continuing to evaluate certain pre-acquisition contingencies associated with certain of its 2025 acquisitions. The Company will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.

Each acquisition has been accounted for as a business combination under ASC 805, “Business Combinations”.

2025 Acquisitions

During the first quarter of 2025, the Company acquiredone business for a total of $13.0 million. We acquired this business to expand our platforms and to maintain our leading position as the largest distributor of rotating equipment in North America.

During the second quarter of 2025, the Company acquiredone business for a total of $1.0 million. We acquired this business to expand our geographic coverage and to maintain our leading position as the largest distributor of rotating equipment in North America.

During the third quarter of 2025, the Company acquiredone business for a total of $11.6 million. We acquired this business to expand our end markets and enhance a geographic region in order to maintain our leading position as the largest distributor of rotating equipment in North America.

During the fourth quarter of 2025, the Company acquired three businesses for a total of $53.6 million. We acquired these three businesses to expand our water & wastewater end-market and our product categories.

The results for thesix businesses acquired during the year have been included in our Consolidated Financial Statements beginning on the respective dates of acquisition.

Purchase Price Allocation and Consideration

In aggregate, the acquisition-date fair value of the consideration transferred for thesix businesses acquired in 2025 totaled $79.2 million. Thesix acquisitions contributed $42.7 million in Sales and $4.4 million in Net income attributable to common shareholders for the year ended December 31, 2025. The following table summarizes the total consideration, the estimated fair values of the assets acquired and liabilities assumed at the acquisition date for the 2025 acquisitions:

The total cash and cash equivalents acquired for thesesix acquisitions was $12.7 million. Transaction-related costs included within selling, general, and administrative expenses in the consolidated statements of operations was $1.8 million for the twelve months ended December 31, 2025.

The goodwill total of approximately $39.8 million is attributable primarily to expected synergies and the assembled workforce of each entity of which $33.1 million is deductible for tax purposes and $6.7 million is not deductible for tax purposes. Goodwill assigned to our SC and IPS segments as a result of these transactions was $12.2 million and $27.6 million, respectively.

Of the $17.3 million of acquired intangible assets, $0.9 million was provisionally assigned to non-compete agreements that are subject to amortization over 5 years and $16.4 million was assigned to customer relationships and will be amortized over a period of 8 years.

Contingent Consideration

The acquisitions included contingent consideration arrangements that requires additional consideration to be paid based on the achievement of annual EBITDA targets over aone-to-three year period. The range of undiscounted amounts the Company may be required to pay under the contingent consideration agreement is between zero and $5.6 million. The combined fair value of the contingent consideration recognized on each acquisition date of $4.8 million was estimated by using a weighted probability of possible payments. That measure is based on significant Level 3 inputs not observable in the market. The significant assumption includes a discount rate of 8.3%. Changes in the fair value measurement each period reflect the passage of time as well as the impact of adjustments, if any, to the likelihood of achieving the specified targets. The changes in the fair value of the contingent consideration are measured during each reporting period and reflected in our results of operations. The fair value measurement includes earnings forecasts, which are a Level 3 measurement as discussed in Note 5 - Fair Value of Financial Assets and Liabilities. The fair value of the contingent consideration is reviewed quarterly over the earn-out period to compare actual earnings before interest, taxes, depreciation and amortization (“EBITDA”) achieved to the estimated EBITDA used in our forecasts.

Pro Forma Results of Operations (unaudited)

The following unaudited supplemental pro forma results of operations for the Company which incorporate the acquisitions completed in 2025, 2024 and 2023, have been provided for illustrative purposes only and may not be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the future (in thousands).

The pro forma combined results of operations for the years ended December 31, 2025, 2024, and 2023 were prepared by adjusting the historical results of the Company to include the historical results of the businesses acquired in each year as if the business combinations that occurred during each year had occurred as of the beginning of the comparable prior annual reporting period.

2024 Acquisitions

During the first quarter of 2024, the Company acquired three businesses for a total of $46.8 million. We acquired these three businesses to expand our water & wastewater end-market, enhance our aftermarket and service capabilities, as well as expand into new geographic territories.

During the second quarter of 2024, the Company acquired a pump and rotating equipment distribution company for $81.5 million. We acquired this business as part of our growth strategy and to maintain our leading position as the largest distributor of rotating equipment in North America.

During the third quarter of 2024, the Company acquired a rotating equipment distribution company for $36.8 million. We acquired this business to expand our water & wastewater end market.

During the fourth quarter of 2024, the Company acquiredtwo businesses for a total of $9.8 million. We acquired these two businesses to expand our water & wastewater end-market and our product categories.

In aggregate, the acquisition-date fair value of the consideration transferred for theseven businesses acquired in 2024 totaled $174.9 million. Theseven acquisitions contributed $91.3 million in Sales and $19.1 million in Net income attributable to common shareholders for the year ended December 31, 2024. The following table summarizes the total consideration, the estimated fair values of the assets acquired and liabilities assumed at the acquisition date for the 2024 acquisitions:

2023 Acquisitions

During the second quarter of 2023, the Company acquiredtwo businesses for a total of $11.7 million. We acquired thesetwo businesses to expand our water & wastewater end-market by expanding into new geographic territories, enhance our product capabilities, and attract and retain talent.

During the fourth quarter of 2023, the Company acquired a leading municipal and industrial pump sales, service, and repair business for $1.7 million. We acquired this company to enhance our end-markets as well as expand into additional geographic territories.

In aggregate, the acquisition-date fair value of the consideration transferred for thethree businesses acquired in 2023 totaled $13.4 million. Thethree acquisitions contributed $7.6 million in Sales and $0.8 million in Net income attributable to common shareholders for the year ended December 31, 2023. The following table summarizes the total consideration, the estimated fair values of the assets acquired and liabilities assumed at the acquisition date for the 2023 acquisitions:

NOTE 17 -COMMITMENTS AND CONTINGENCIES

From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. While the Company is unable to predict the outcome or estimate the financial impact of these disputes, it believes that the ultimate resolution will not have, either individually or in the aggregate, a material adverse effect on its consolidated financial position, cash flows, or results of operations.

NOTE 18 -OTHER INCOME AND EXPENSE, NET

The components of other (income) expense, net were as follows:

NOTE 19 -REVENUE

The Company disaggregates revenue based upon our geography and our reportable segments - Service Centers, Innovative Pumping Solutions and Supply Chain Services. Each of our geographic and reportable business segments are impacted and influenced by varying factors, including the macroeconomic environment, maintenance and capital spending and commodity prices and exploration and production activity. As such, we believe this information is important in depicting the nature, timing and uncertainty of our contracts with customers. The following Geographical Information and Note 20 - Segment Reporting present our revenue disaggregated by source.

Geographical Information

Revenues are presented in geographic area based on location of the facility shipping products or providing services.

The Company’s revenues by geographical location are as follows (in millions):

Recent Acquisitions

We define and calculate organic sales to include locations and acquisitions under our ownership for at least twelve months. "Acquisition Sales" are sales from acquisitions that have been under our ownership for less than twelve months and are excluded in our calculation of Organic Sales.

The following tables sets forth the disaggregation of revenue from sales associated with recent acquisitions for the twelve months ended December 31, 2025 and 2024(in thousands):

The following tables sets forth the disaggregation of revenue from sales associated with recent acquisitions for the twelve months ended December 31, 2024 and 2023(in thousands):

NOTE 20 –SEGMENT REPORTING

We have three reportable and operating segments: Service Centers, Innovative Pumping Solutions and Supply Chain Services.

The Service Centers segment is engaged in providing MRO products and equipment, including logistics capabilities, to industrial customers. The Service Centers segment provides a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, fastener, industrial supply, safety products and safety services categories.

The Innovative Pumping Solutions segment fabricates and assembles custom-made pump packages, re-manufactures pumps, manufactures branded private label pumps, and provides products and services for the water and wastewater treatment industries.

The Supply Chain Services segment provides a wide range of MRO products and manages all or part of a customer's supply chain, including warehouse and inventory management.

No customer accounts for 10% or more of our revenues. Sales are shown net of intersegment eliminations.

Corporate primarily includes unallocated overhead costs that are not directly associated with our reportable segments.

Segment information is prepared on the same basis that our Chief Executive Officer, who is our chief operating decision maker (“CODM”), manages the segments, evaluates financial results, and makes key operating decisions.

These segments were determined primarily by the distribution channels of the products and services offered and the nature of the customer markets and the primary driver of the customers’ spending. The Company's CODM directs the allocation of resources to these segments based upon historical and current revenue, direct operating expenses, operating income, and capital expenditures of each respective segment. The allocation of resources across these segments is dependent upon, among other factors, the segments' historical or future expected operating margins; the segments' historical or future expected returns on capital; outlook within a specific market; opportunities to grow profitability; new products, services or new customer accounts; confidence in management; and competitive landscape and intensity.

As a part of the Company's annual business planning, the CODM reviews our reportable segment composition and financial performance. As a result of this review, on January 1st, 2025, we moved certain branch locations previously reported under our IPS segment to our SC segment. Historical financial information by segment has been retroactively recast to reflect the results of this review.

The following table sets out financial information related to the Company’s segments (in thousands):

NOTE 21 –RELATED PARTIES DISCLOSURES

The Board uses policies and procedures, to be applied by the Audit Committee of the Board, for review, approval or ratification of any transactions with related persons. Those policies and procedures will apply to any proposed transactions in which the Company is a participant, the amount involved exceeds $120,000 and any director, executive officer or significant shareholder or any immediate family member of such a person has a direct or material indirect interest. Any related party transaction will be reviewed by the Audit Committee of the Board of Directors to determine, among other things, the benefits of any transaction to the Company, the availability of other sources of comparable products or services and whether the terms of the proposed transaction are comparable to those provided to unrelated third parties.

The Company incurred approximately $2.3 million, $1.9 million, and $1.8 million in lease expenses to entities controlled by the Company’s Chief Executive Officer and family for the years ended December 31, 2025, 2024 and 2023, respectively.

NOTE 22 -SUBSEQUENT EVENTS

On January 1, 2026, the Company completed the acquisition of PREMIERflow, LLC. The acquisition was funded with cash on the balance sheet.

On January 1, 2026, the Company completed the acquisition of Mid Atlantic Storage Systems Inc. The acquisition was funded with cash on the balance sheet.

On February 1, 2026, the Company completed the acquisition of Ambiente H2O Inc. The acquisition was funded with cash on the balance sheet.