DXP Enterprises (DXPE) risk factors, FY2025 10-K

Other

1. 01Credit and Access to Debt Capital

Risk Related to the Company's Business and Operations

1. 02Demand for our products could decrease if the manufacturers of those products sell them directly to end users
2. 03Changes in our customer and product mix, or adverse changes to the cost of goods we sell, could cause our gross margin percentage to fluctuate or decrease, and we may not be able to maintain historical margins
3. 04Material changes in the costs of our products from manufacturers without the ability to pass price increases onto our customers could cause our gross and operating margins to declineNew
4. 05Our manufacturers may cancel our oral or written distribution authorizations upon little or no notice, which could adversely impact our revenues and profits from distributing certain manufacturers’ products
5. 06A variety of issues could affect the timing or profitability of our projects, which may result in additional costs to us, reductions or delays in revenues, the payment of liquidated damages or project termination
6. 07Changes in estimates related to revenues and costs associated with our contracts with customers could result in a reduction or elimination of revenues, a reduction of profits or the recognition of losses
7. 08We may experience unexpected supply shortages, which could adversely affect our product and service offerings and our business
8. 09Price reductions by our manufacturers of products that we sell could cause the value of our inventory to decline. Also, these price reductions could cause our customers to demand lower sales prices for these products, possibly decreasing our margins and profitability on sales
9. 10We rely upon third-party transportation providers for our merchandise shipments and are subject to increased shipping costs as well as the potential inability of our third-party transportation providers to deliver products on a timely basis
10. 11Our business has substantial competition that could adversely affect our results
11. 12The loss of or the failure to attract and retain key personnel could adversely impact our results of operations
12. 13The loss of any key supplier could adversely affect the Company’s sales and profitability
13. 14Our future results will be impacted by our ability to implement our internal growth strategy
14. 15Risks associated with executing our acquisition strategy
15. 16Goodwill and intangible assets recorded as a result of our acquisitions could become impaired
16. 17Interruptions in the proper functioning of our information systems could disrupt operations and cause increases in costs and/or decreases in revenues
17. 18Cybersecurity breaches and other disruptions or misuse of our network and information systems could affect our ability to conduct our business effectively
18. 19Our backlog is subject to unexpected adjustments and potential cancellations
19. 20Our actual results could differ from the assumptions and estimates used to prepare our financial statements
20. 21The Company's uncertain tax position and effective tax rate may vary from period to period. Currently, these uncertainties primarily relate to an ongoing Internal Revenue Service (“IRS”) examination regarding the realization of federal research and development tax creditsNew

Risks Related to the Market and Economy

1. 22A general slowdown in the economy could negatively impact the Company's sales growth and profitability
2. 23We could be adversely impacted by low oil prices, volatility in oil prices and downturns in the energy industry, including decreased capital expenditures, impacting our customers’ demand for our products and services
3. 24Adverse weather events or natural disasters could negatively disrupt our operations

Risks Related to Credit or Access to Debt Capital

1. 25We may not be able to refinance on favorable terms or may not refinance, extend or repay our debt, which could adversely affect our results of operations or may result in default of our debt
2. 26Our failure to comply with financial covenants of our credit facilities may adversely affect our results of operations and our financial conditions
3. 27We may not be able to access acquisition financing, including debt capital
4. 28A deterioration in the oil and gas sector or other circumstances may negatively impact our business and results of operations and thus hinder our ability to comply with financial covenants under our credit facilities, including the Secured Leverage Ratio and Fixed Charge Coverage Ratio financial covenants
5. 29Changes in our credit profile may affect our relationship with our suppliers, which could have a material adverse effect on our liquidity

Risks Related to Legal and Regulatory Matters

1. 30Risks associated with substantial or material claims or lawsuits that are not covered by insurance
2. 31The nature of our manufactured products carries the possibility of significant product liability and warranty claims, which could harm our business and future results
3. 32We are subject to potential shareholder litigation associated with the potential volatile trading price of our common stock
4. 33We are subject to personal injury, product liability and environmental claims involving allegedly defective products
5. 34We are subject to risks associated with conducting business in foreign countries20% rewritten
6. 35We are subject to environmental, health and safety laws and regulations that may lead to significant liabilities and negatively impact our business
7. 36We are subject to various government regulations, the cost of compliance of such regulations could increase our cost of conducting business and any violations of such regulations could materially adversely affect our financial condition or results of operations