INCOME TAXES

9 Months Ended

Sep. 30, 2025

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The following table presents provision for income taxes (in thousands, except for effective tax rate):  

	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Income before provision for income taxes	$	29,452		$	23,732		$	88,221		$	62,291
Provision for income taxes	7,821			2,631			22,389			13,165
Effective tax rate	26.6		%	11.1		%	25.4		%	21.1		%

We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgment is required in determining our provision for income taxes and evaluating our uncertain tax positions. The effective tax rate increased primarily due to a lower tax benefit from research and development tax credits, lower tax benefit from stock compensation vested during the period, partially offset by a higher benefit for state income taxes.

While we believe that we have adequately provided for all uncertain tax positions, or tax positions where we believe it is not more-likely-than-not that the position will be sustained upon review, amounts asserted by tax authorities could be greater or less than our accrued position. Accordingly, our provisions on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or the underlying matters are settled or otherwise resolved with the respective tax authorities.

On July 4, 2025, the United States Congress passed the budget reconciliation bill H.R. 1, known as the One Big Beautiful Bill Act (“OBBBA”). Key provisions include the repeal of Section 174 R&D capitalization requirements, the extension of 100% bonus depreciation, restoration of the Section 163(j) interest limitation to an EBITDA basis, and the introduction of a 1% charitable contribution deduction floor. As of September 30, 2025, the immediate expensing of R&D costs under Section 174, the continuation of 100% bonus depreciation, and the restoration of the EBITDA-based Section 163(j) limitation are expected to decrease cash taxes in the short term and generate a federal net operating loss. These changes are not expected to have a material impact on the Company’s effective tax rate.

The Organization of Economic Cooperation and Development (“OECD”) continues to release additional guidance, including administrative guidance on how Pillar Two rules should be interpreted and applied by jurisdictions as they adopt Pillar Two. A number of countries have utilized the administrative guidance as a starting point for legislation that went into effect January 1, 2024. As of September 30, 2025, DXP anticipates the impact of Pillar Two to be immaterial to the Company based on current legislation that has been enacted to date.