Quarterly Revenue Up 16.3%, Sequential
Margin Growth and Strong Cash Flow
Distribution Solutions Group, Inc. (NASDAQ:DSGR) ("DSG" or
the "Company"), a premier specialty distribution company, today
announced consolidated results for the second quarter ended June
30, 2024. This press release is supplemented by an earnings
presentation at
https://investor.distributionsolutionsgroup.com/news/events.
The following represents a summary of certain operating results
(unaudited). See the reconciliations of GAAP to non-GAAP measures
in Tables 2, 3 and 4.
Three Months Ended
June 30,
March 31,
(Dollars in thousands)
2024
2023
% Change
2024
% Change
Revenue
$
439,536
$
377,984
16.3
%
$
416,086
5.6
%
Operating income (loss)
$
14,158
$
13,776
2.8
%
$
2,783
N/A
Non-GAAP adjusted operating income
$
38,852
$
34,922
11.3
%
$
29,761
30.5
%
Non-GAAP adjusted EBITDA
$
45,181
$
40,100
12.7
%
$
36,067
25.3
%
Operating income (loss) as a percent of
revenue
3.2
%
3.6
%
-38bps
0.7
%
255bps
Adjusted EBITDA as a percent of
revenue
10.3
%
10.6
%
-30bps
8.7
%
160bps
Bryan King, CEO and Chairman of the Board, said, "Our strategic
initiatives are on track, and I am pleased with DSG's quarterly
results, marked by 16.3% revenue growth compared to last year and
double-digit EBITDA margins of 10.3%. In addition, revenue and
EBITDA in the second quarter improved sequentially due to
acquisitions and improving performance in our existing businesses.
As expected, organic revenues were down in the quarter from a year
ago, but improved sequentially by nearly 4% from the first quarter.
Our teams executed well this quarter and sustainably moved us in
the right direction on all critical initiatives resulting in margin
expansion within all three of our verticals. The Lawson MRO
vertical had strong performance while continuing to make
investments in its sales organization, the Gexpro Services OEM
vertical realized continued margin expansion as expected and the
TestEquity industrial technology vertical saw margins improve on
some end market recovery and the continued integration of Hisco.
For the quarter we generated $45.2 million of adjusted EBITDA,
sequentially a 25% improvement over the previous quarter.
"We are very excited about our recent announcement to acquire
Source Atlantic, which is expected to close in the third quarter.
This CAD $250 million business will meaningfully drive DSG's growth
by expanding our scale, customer base, and geographic reach and by
enhancing our enterprise-wide product offerings. Combining Source
Atlantic’s eastern Canadian-focused operations with The Bolt Supply
House’s concentration in western Canada positions us as leading MRO
player across Canada. In addition to Source Atlantic, our Emergent
Safety Supply and S&S Automotive acquisitions completed earlier
this year further strengthens DSG’s North American value-added
capabilities.
"We remain focused on actively working our pipeline of
acquisition targets, incremental margin enhancement initiatives,
and cost savings. These efforts, along with some end market
recovery, drove DSG’s strong second quarter results. Through our
asset-light business model our focus on growing operating cash
flows and accelerating returns on invested capital, positions us
well to maximize long-term shareholder value," concluded Mr.
King.
2024 Second Quarter Summary(1)
- Revenue increased $61.6 million, or 16.3%, to $439.5 million
including $81.4 million of incremental revenue from 2023 and 2024
acquisitions. While organic sales declined 5.7% on comparable days,
organic sales grew 3.8% over the first quarter of 2024. The
sequential sales increase was driven by improving sales in many of
DSG's end markets, including Test & Measurement, Renewables,
Technology and project-related business.
- Operating income was $14.2 million, net of $12.2 million of
non-cash acquired intangible amortization and $12.5 million of
non-recurring severance and acquisition-related retention costs,
stock-based compensation, acquisition-related costs and other
non-recurring items. This compares to operating income of $13.8
million in the prior year quarter. Adjusted operating income,
excluding these non-cash and non-recurring items, was $38.9 million
in the current quarter compared to $34.9 million in the year-ago
quarter and $29.8 million in the first quarter of 2024.
- Diluted income per share was $0.04 for the quarter compared to
diluted income per share of $0.07 in the year-ago quarter based on
higher depreciation and amortization expenses and non-recurring
severance and acquisition-related retention costs in the current
quarter. Non-GAAP adjusted diluted earnings per share was $0.40
compared to $0.42 for the same period a year ago and $0.25 for the
first quarter of 2024.
- Adjusted EBITDA was $45.2 million, a 10.3% margin compared to
$40.1 million, a 10.6% margin in the prior year quarter.
Sequentially, adjusted EBITDA grew $9.1 million or 25.3% from the
first quarter of 2024; and increased as a percent of sales by
160bps.
- The Company ended the second quarter with total liquidity of
$209.9 million, consisting of $56.9 million of cash (restricted and
unrestricted) and $153.0 million of availability under its credit
facility with net debt leverage of 3.2x. Cash generated from
operations was $21.4 million for the quarter. Uses of cash in the
second quarter included net capital expenditures of $4.0 million
and share repurchases of $1.7 million.
- Lawson completed the acquisition of S&S Automotive in May
2024.
(1) See reconciliation of GAAP to non-GAAP
measures in tables 2, 3 and 4.
Share and per share data for all periods
presented reflect two-for-one stock split.
Conference Call
Distribution Solutions Group, Inc. will conduct a conference
call with investors to discuss 2024 second quarter results at 9:00
a.m. Eastern Time on August 1, 2024. The conference call is
available by direct dial at 1-888-506-0062 in the U.S. or
1-973-528-0011 from outside of the U.S. The participant access code
is 258432. A replay of the conference call will be available by
telephone approximately two hours after completion of the call
through August 15, 2024. Callers can access the replay by dialing
1-877-481-4010 in the U.S. or 1-919-882-2331 outside the U.S. The
passcode for the replay is 50812. A streaming audio of the call and
an archived replay will also be available on the investor relations
page of Distribution Solutions Group's website. Presentations may
be supplemented by a series of slides appearing on the company's
investor relations home page at
https://investor.distributionsolutionsgroup.com/news/events.
About Distribution Solutions Group,
Inc.
Distribution Solutions Group ("DSG") is a premier multi-platform
specialty distribution company providing high touch, value-added
distribution solutions to the maintenance, repair & operations
(MRO), the original equipment manufacturer (OEM) and the industrial
technologies markets. DSG was formed through the strategic
combination of Lawson Products, a leader in MRO distribution of
C-parts, Gexpro Services, a leading global supply chain services
provider to manufacturing customers, and TestEquity, a leader in
electronic test & measurement solutions.
Through its collective businesses, DSG is dedicated to helping
customers lower their total cost of operation by increasing
productivity and efficiency with the right products, expert
technical support and fast, reliable delivery to be a one-stop
solution provider. DSG serves approximately 180,000 customers in
several diverse end markets supported by approximately 3,700
dedicated employees and strong vendor partnerships. DSG ships from
strategically located distribution and service centers to customers
in North America, Europe, Asia, South America and the Middle
East.
For more information on Distribution Solutions Group please
visit www.distributionsolutionsgroup.com.
This release contains certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that involve risks and uncertainties. Terms such as "aim,"
"anticipate," "believe," "contemplates," "continues," "could,"
"ensure," "estimate," "expect," "forecasts," "if," "intend,"
"likely," "may," "might," "objective," "outlook," "plan,"
"positioned," "potential," "predict," "probable," "project,"
"shall," "should," "strategy," "will," "would," and variations of
them and other words and terms of similar meaning and expression
(and the negatives of such words and terms) are intended to
identify forward-looking statements. Forward-looking statements can
also be identified by the fact that they do not relate strictly to
historical or current facts. Such forward-looking statements are
based on current expectations and involve inherent risks,
uncertainties and assumptions, including factors that could delay,
divert or change any of them, and could cause actual outcomes to
differ materially from current expectations. DSG can give no
assurance that any goal or plan set forth in forward-looking
statements can be achieved and DSG cautions readers not to place
undue reliance on such statements, which speak only as of the date
made. DSG undertakes no obligation to release publicly any
revisions to forward-looking statements as a result of new
information, future events or otherwise. Actual results may differ
materially from those projected as a result of certain risks and
uncertainties. Certain risks associated with DSG's business are
also discussed from time to time in the reports DSG files with the
SEC, including DSG's Annual Report on Form 10-K, DSG's Quarterly
Reports on Form 10-Q and DSG's Current Reports on Form 8-K, which
should be reviewed carefully. In addition, the following factors,
among others, could cause actual outcomes and results to differ
materially from those discussed in the forward-looking statements:
(i) unanticipated difficulties, expenditures or any problems
arising in connection with or after the combination of the
businesses of Lawson Products, TestEquity and Gexpro Services (the
"merger"), which may result in DSG not operating as effectively and
efficiently as expected; (ii) the risk that stockholder litigation
in connection with the merger or any other acquisition or business
combination completed by DSG or any of its subsidiaries results in
significant costs of defense, indemnification and liability; and
(iii) the risks that DSG may encounter difficulties integrating the
business of DSG with the business of other companies that DSG has
acquired or may acquire or has otherwise combined with or may
otherwise combine with, that DSG may not achieve the anticipated
synergies contemplated with respect to any such business or
transactions and that certain assumptions with respect to such
business or transactions could prove to be inaccurate.
Distribution Solutions Group,
Inc.
Condensed Consolidated Balance
Sheets
(Dollars in thousands, except
share data)
(Unaudited)
June 30, 2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
46,786
$
83,931
Restricted cash
10,125
15,695
Accounts receivable, less allowances
235,802
213,448
Inventories
320,748
315,984
Prepaid expenses and other current
assets
43,306
28,272
Assets held for sale
3,589
—
Total current assets
660,356
657,330
Property, plant and equipment, net
108,709
113,811
Rental equipment, net
23,062
24,575
Goodwill
428,308
399,925
Deferred tax asset, net
84
95
Intangible assets, net
276,896
253,834
Cash value of life insurance
19,312
18,493
Right of use operating lease assets
84,878
76,340
Other assets
5,947
5,928
Total assets
$
1,607,552
$
1,550,331
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
108,184
$
98,674
Current portion of long-term debt
31,367
32,551
Current portion of lease liabilities
16,877
13,549
Accrued expenses and other current
liabilities
108,116
97,241
Total current liabilities
264,544
242,015
Long-term debt, less current portion,
net
573,654
535,881
Lease liabilities
73,480
67,065
Deferred tax liability, net
16,774
18,326
Other liabilities
25,796
25,443
Total liabilities
954,248
888,730
Stockholders' equity:
Preferred stock, $1 par value:
Authorized - 500,000 shares, issued and
outstanding — None
—
—
Common stock, $1 par value:
Authorized - 70,000,000 shares
Issued - 47,636,856 and 47,535,618 shares,
respectively
Outstanding - 46,787,160 and 46,758,359
shares, respectively
46,786
46,758
Capital in excess of par value
674,074
671,154
Retained deficit
(38,035
)
(34,707
)
Treasury stock – 849,696 and 777,259
shares, respectively
(18,655
)
(16,434
)
Accumulated other comprehensive income
(loss)
(10,866
)
(5,170
)
Total stockholders' equity
653,304
661,601
Total liabilities and stockholders'
equity
$
1,607,552
$
1,550,331
Distribution Solutions Group,
Inc.
Condensed Consolidated
Statements of Operations
(Dollars in thousands, except per
share data)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2024
2023
2024
2023
Revenue
$
439,536
$
377,984
$
855,622
$
726,254
Cost of goods sold
288,009
241,961
560,686
457,360
Gross profit
151,527
136,023
294,936
268,894
Selling, general and administrative
expenses
137,369
122,247
277,995
238,397
Operating income (loss)
14,158
13,776
16,941
30,497
Interest expense
(12,793
)
(9,492
)
(24,620
)
(17,162
)
Change in fair value of earnout
liabilities
(8
)
36
(3
)
(21
)
Other income (expense), net
359
(761
)
97
(1,736
)
Income (loss) before income
taxes
1,716
3,559
(7,585
)
11,578
Income tax expense (benefit)
(180
)
535
(4,257
)
2,647
Net income (loss)
$
1,896
$
3,024
$
(3,328
)
$
8,931
Basic income (loss) per share of common
stock
$
0.04
$
0.07
$
(0.07
)
$
0.21
Diluted income (loss) per share of
common stock
$
0.04
$
0.07
$
(0.07
)
$
0.21
Basic weighted average shares
outstanding
46,818,932
43,621,236
46,798,055
42,935,198
Diluted weighted average shares
outstanding
47,623,712
43,995,014
46,798,055
43,305,218
Distribution Solutions Group,
Inc.
Condensed Consolidated
Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Six Months Ended June
30,
2024
2023
Operating activities
Net income (loss)
$
(3,328
)
$
8,931
Adjustments to reconcile to net cash used
in operating activities:
Depreciation and amortization
35,587
30,306
Amortization of debt issuance costs
1,320
1,002
Stock-based compensation
1,891
4,392
Deferred income taxes
(1,541
)
86
Change in fair value of earnout
liabilities
3
21
(Gain) loss on sale of rental
equipment
(900
)
(1,377
)
(Gain) loss on sale of property, plant and
equipment
(5
)
215
Charge for step-up of acquired
inventory
634
716
Net realizable value adjustment and
write-offs for obsolete and excess inventory
3,110
3,538
Bad debt expense
106
933
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable
(18,331
)
(4,799
)
Inventories
(1,636
)
(2,576
)
Prepaid expenses and other current
assets
(15,345
)
(6,405
)
Accounts payable
9,771
(8,936
)
Accrued expenses and other current
liabilities
15,636
(624
)
Other changes in operating assets and
liabilities
1,037
2,041
Net cash provided by (used in) operating
activities
28,009
27,464
Investing activities
Purchases of property, plant and
equipment
(5,829
)
(7,796
)
Business acquisitions, net of cash
acquired
(95,437
)
(252,007
)
Purchases of rental equipment
(3,214
)
(5,990
)
Proceeds from sale of rental equipment
2,110
2,969
Net cash provided by (used in) investing
activities
(102,370
)
(262,824
)
Financing activities
Proceeds from revolving lines of
credit
84,139
161,684
Payments on revolving lines of credit
(40,285
)
(274,134
)
Proceeds from term loans
—
305,000
Payments on term loans
(8,188
)
(11,250
)
Deferred financing costs
—
(3,419
)
Proceeds from rights offering, net of
offering costs of $1,531
—
98,469
Repurchase of common stock
(1,683
)
—
Shares repurchased held in treasury
(538
)
(171
)
Payment of financing lease principal
(237
)
(249
)
Payment of earnout
—
(1,000
)
Net cash provided by (used in) financing
activities
33,208
274,930
Effect of exchange rate changes on cash
and cash equivalents
(1,562
)
541
Increase (decrease) in cash, cash
equivalents and restricted cash
(42,715
)
40,111
Cash, cash equivalents and restricted cash
at beginning of period
99,626
24,740
Cash, cash equivalents and restricted
cash at end of period
$
56,911
$
64,851
Cash and cash equivalents
$
46,786
$
44,244
Restricted cash
10,125
20,607
Total cash, cash equivalents and
restricted cash
$
56,911
$
64,851
Distribution Solutions Group,
Inc.
Table 1 - Selected Segment
Financial Data
(Dollars in thousands)
(Unaudited)
Three Months Ended
June 30,
2024
2023
Revenue:
Lawson Products
$
121,118
$
119,147
Gexpro Services
107,134
108,274
TestEquity
197,481
136,067
Other
14,471
14,496
Intersegment revenue elimination
(668
)
—
Total
$
439,536
$
377,984
Operating income (loss):
Lawson Products
$
6,129
$
8,470
Gexpro Services
8,091
8,778
TestEquity
703
(3,182
)
Other
(765
)
(290
)
Total
$
14,158
$
13,776
DISTRIBUTION SOLUTIONS GROUP,
INC.
SEC REGULATION G GAAP
RECONCILIATIONS
The Company reports its financial results
in accordance with U.S. generally accepted accounting principles
(GAAP). However, the Company's management believes that certain
non-GAAP financial measures may provide users of this financial
information with additional meaningful comparisons between current
results and results in prior operating periods. Management believes
that these non-GAAP financial measures can provide additional
meaningful reflections of underlying trends of the business because
they provide a comparison of historical information that excludes
certain non-operational or non-cash items that impact the overall
comparability. See Tables below for supplemental financial data and
corresponding reconciliations to GAAP financial measures for the
three months ended June 30, 2024 and 2023 and the three months
ended March 31, 2024. Non-GAAP financial measures should be viewed
in addition to, and not as an alternative for, the Company's
reported results prepared in accordance with GAAP.
Distribution Solutions Group,
Inc.
Table 2 - Reconciliation of
GAAP Net Income (Loss) and GAAP Operating Income (Loss) to
Non-GAAP Adjusted
EBITDA
(Dollars in thousands)
(Unaudited)
Three Months Ended
June 30, 2024
June 30, 2023
March 31, 2024
Net income (loss)
$
1,896
$
3,024
$
(5,224
)
Income tax expense (benefit)
(180
)
535
(4,077
)
Other income (expense), net
(359
)
761
262
Change in fair value of earnout
liabilities
8
(36
)
(5
)
Interest expense
12,793
9,492
11,827
Operating income (loss)
14,158
13,776
2,783
Depreciation and amortization
18,535
14,584
17,052
Stock-based compensation(1)
(307
)
2,188
2,198
Severance and acquisition related
retention expenses(2)
8,313
2,437
10,716
Acquisition related costs(3)
3,598
5,058
1,954
Inventory step-up(4)
634
716
—
Other non-recurring(5)
250
1,341
1,364
Non-GAAP adjusted EBITDA
$
45,181
$
40,100
$
36,067
Operating income (loss) as a percent of
revenue
3.2
%
3.6
%
0.7
%
Adjusted EBITDA as a percent of
revenue
10.3
%
10.6
%
8.7
%
(1)
Expense (benefit) primarily for
stock-based compensation, of which a portion varies with the
Company's stock price
(2)
Includes severance expense for actions
taken in 2024 and 2023 not related to a formal restructuring plan
and acquisition related retention expenses for the Hisco and
S&S Automotive acquisitions
(3)
Transaction and integration costs related
to acquisitions
(4)
Inventory fair value step-up adjustment
for acquisition accounting related to acquisitions completed by
Lawson Products and TestEquity
(5)
Other non-recurring costs consist of
certain non-recurring strategic projects and other non-recurring
items
Distribution Solutions Group,
Inc.
Table 3 - Reconciliation of
GAAP Net Income (Loss) and GAAP Diluted EPS to
Non-GAAP Adjusted Net Income
and Non-GAAP Adjusted Diluted EPS
(Dollars in thousands, except per
share data)
(Unaudited)
Three Months Ended
June 30, 2024
June 30, 2023(3)(4)
March 31, 2024
Amount
Diluted EPS(2)
Amount
Diluted EPS(2)
Amount
Diluted EPS(2)
Net income (loss)
$
1,896
$
0.04
$
3,024
$
0.07
$
(5,224
)
$
(0.11
)
Pretax adjustments:
Stock-based compensation
(307
)
(0.01
)
2,188
0.05
2,198
0.05
Acquisition related costs
3,598
0.08
5,058
0.11
1,954
0.04
Amortization of intangible assets
12,206
0.26
9,406
0.21
10,746
0.23
Severance and acquisition related
retention expenses
8,313
0.17
2,437
0.06
10,716
0.23
Change in fair value of earnout
liabilities
8
—
(36
)
—
(5
)
—
Inventory step-up
634
0.01
716
0.02
—
—
Other non-recurring
250
0.01
1,341
0.03
1,364
0.03
Total pretax adjustments
24,702
0.52
21,110
0.48
26,973
0.58
Tax effect on adjustments(1)(3)
(7,238
)
(0.15
)
(5,552
)
(0.13
)
(7,334
)
(0.16
)
Deferred tax asset valuation
allowance(5)
(410
)
(0.01
)
—
—
(2,696
)
(0.06
)
Non-GAAP adjusted net income
$
18,950
$
0.40
$
18,582
$
0.42
$
11,719
$
0.25
(1)
The estimated tax effect on the
adjustments is determined by applying the jurisdictional rate of
the originating territory of the non-GAAP adjustments
(2)
Pretax adjustments to diluted EPS
calculated on 47.624 million, 43.995 million and 46.777 million
diluted shares for the second quarter of 2024 and 2023, and the
first quarter of 2024, respectively
(3)
In the fourth quarter of 2023, the Company
changed the treatment of amortization of intangible assets and the
deferred tax asset valuation allowance to be included in the
calculation of Non-GAAP adjusted net income and Non-GAAP adjusted
diluted EPS. The calculation of the tax effect on adjustments was
revised to consider the jurisdictional rate of the originating
territory of the non-GAAP adjustments. Prior periods have been
adjusted to conform to current period presentation.
(4)
Share and per share data for all periods
presented reflect two-for-one stock split
(5)
Represents expense related to the deferred
tax asset valuation allowance from interest expense limitations
under Section 163(j)
Distribution Solutions Group,
Inc.
Table 4 - Reconciliation of
GAAP Operating Income (Loss) to Non-GAAP Adjusted Operating
Income
(Dollars in thousands)
(Unaudited)
Three Months Ended
June 30,
March 31,
2024
2023
2024
Operating income (loss)
$
14,158
$
13,776
$
2,783
Gross profit adjustments:
Inventory step-up(1)
634
716
—
Total gross profit adjustments
634
716
—
Selling, general and administrative
expenses adjustments:
Acquisition related costs(2)
3,598
5,058
1,954
Amortization of intangible assets(3)
12,206
9,406
10,746
Stock-based compensation(4)
(307
)
2,188
2,198
Severance and acquisition related
retention expenses(5)
8,313
2,437
10,716
Other non-recurring(6)
250
1,341
1,364
Total selling, general and administrative
adjustments
24,060
20,430
26,978
Total adjustments
24,694
21,146
26,978
Non-GAAP adjusted operating income
$
38,852
$
34,922
$
29,761
(1)
Inventory fair value step-up adjustment
for acquisition accounting related to acquisitions completed by
Lawson Products and TestEquity
(2)
Transaction and integration costs related
to acquisitions
(3)
In the fourth quarter of 2023, the Company
changed the treatment of amortization of intangible assets to be
included in the calculation of Non-GAAP adjusted operating income.
Prior periods have been adjusted to conform to current period
presentation.
(4)
Expense (benefit) primarily for
stock-based compensation, of which a portion varies with the
Company's stock price
(5)
Includes severance expense for actions
taken in 2024 and 2023 not related to a formal restructuring plan
and acquisition related retention expenses for the Hisco and
S&S Automotive acquisitions
(6)
Other non-recurring costs consist of
certain non-recurring strategic projects and other non-recurring
items
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240731009470/en/
Company: Distribution Solutions Group, Inc. Ronald J.
Knutson Executive Vice President, Chief Financial Officer and
Treasurer 1-888-611-9888
Investor Relations: Three Part Advisors, LLC Steven
Hooser / Sandy Martin 214-872-2710 / 214-616-2207
Distribution Solutions (NASDAQ:DSGR)
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De Jul 2024 a Ago 2024
Distribution Solutions (NASDAQ:DSGR)
Gráfica de Acción Histórica
De Ago 2023 a Ago 2024
