Why DXP leans more on digital services and tech-driven supply chain

DXP Enterprises Inc., a Houston-based industrial distributor, is intensifying its focus on digital enablement and technology-driven supply chain services as customers seek cost-saving strategies amid rising tariffs and persistent inflation.

During its Q1 2025 earnings call, DXP executives emphasized the growing demand for its digitally enabled Supply Chain Services segment. Supply Chain Services provides procurement optimization, integrated technology solutions, and customer-specific inventory management. While the company does not break out ecommerce revenue, Supply Chain Services revenue rose 2.1% year over year and 1.3% sequentially. That’s an encouraging result given the typically slower start to the year and longer sales cycles in this segment.

“Demand for Supply Chain Services is increasing as customers look for efficiency,” said Kent Yee, chief financial officer. “We anticipate some nice wins starting to show in 2025, especially as customers seek to streamline procurement processes in response to inflation and tariffs.”

David Little, chief executive officer, said DXP’s value proposition extends beyond industrial product expertise.

“We’re not just supplying parts,” Little said. “We’re helping customers digitize their supply chain, reduce touchpoints, and take cost out of their procurement process — particularly critical when macro pressures like tariffs start to hit.”

DXP Enterprises operates as a diversified industrial distributor serving customers in maintenance, repair, operating, and production (MRO) markets. The company’s portfolio includes rotating equipment, bearings, power transmission products, metalworking tools, safety equipment, and custom-engineered pump systems. Its business segments — Service Centers, Supply Chain Services, and Innovative Pumping Solutions — serve customers across the United States, Canada, Mexico, and the Middle East, with additional capabilities in renewable energy solutions and global sourcing support.

How digital services contribute to DXP revenue

Digital and technology-led services now underpin DXP’s broader revenue growth strategy. The company continues to invest in facility automation, software, and customer-facing digital tools.

Capital expenditures in Q1 totaled $19.9 million, more than double the $9.4 million it spent in Q4 2024. A sizable portion of that increase is tied to software and system upgrades. Executives said most capital spending remains “growth-oriented and controllable,” aimed at increasing productivity and improving digital integration across its business segments.

Supply Chain Services now accounts for 13.3% of total revenue. Meanwhile, Service Centers — which also include digital ordering and fulfillment tools — make up 68.6 %. The remaining 18.1% comes from Innovative Pumping Solutions, which designs and manufactures custom pump systems.

The Service Centers segment is where many customers interact through DXP’s digital procurement platforms. It posted a 13.4% year-over-year revenue gain. It also reached a record $327 million for the quarter.

Total DXP revenue in Q1

Little noted that DXP’s hybrid model — combining technical sales support, digital procurement capabilities, and deep product knowledge — positions the company well to help customers adjust to global sourcing shifts.

“We understand where our suppliers manufacture and how tariffs apply, which allows us to help customers make smart substitutions or shift sourcing without disrupting operations,” he said.

Total DXP revenue for the quarter was $476.6 million, up 15.5 % from a year earlier. That includes 11.1% organic growth and $31.1 million from acquisitions. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) reached $52.5 million, or 11% of sales.

Executives said they expect digital and supply chain service speed to accelerate throughout the year, with new customer wins expected in the second and third quarters as more industrial buyers reevaluate sourcing and procurement strategies.

“As inflation and tariffs persist, the pressure is on our customers to find smarter ways to buy,” Little said. “That’s where our technology-led service model gives us an edge.”

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