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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Distribution Solutions Group Inc | NASDAQ:DSGR | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.67 | 2.28% | 30.10 | 29.75 | 30.50 | 30.19 | 29.50 | 29.50 | 58,224 | 00:08:55 |
Record Second Quarter Revenue Up 17.6%
Distribution Solutions Group, Inc. (NASDAQ:DSGR) ("DSG" or the "Company"), a 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, today announced consolidated results for the second quarter ended June 30, 2023. This press release is supplemented by an earnings slide deck appearing on the Company’s investor relations page at https://investor.distributionsolutionsgroup.com/news/events.
The following represents a summary of certain operating results (unaudited). See reconciliation of GAAP to non-GAAP measures in tables 2 and 3.
Three Months Ended
June 30,
(Dollars in thousands)
2023
2022
% Change
GAAP Revenue
$
377,984
$
321,336
17.6
%
GAAP Operating Income
$
13,776
$
4,113
234.9
%
GAAP Operating income as a percent of GAAP Revenue
3.6
%
1.3
%
Adjusted EBITDA
$
40,100
$
31,653
26.7
%
Adjusted EBITDA as a percent of GAAP Revenue
10.6
%
9.9
%
Bryan King, CEO and Chairman of the Board, said, “Our business delivered outstanding results during the second quarter as total revenue grew by 17.6%. GAAP operating income more than tripled and adjusted EBITDA increased by $8.4 million or nearly 27%, representing 10.6% of revenue. We continued to expand our margin profile with strong execution and performance during the first half of 2023 driven by broad-based contributions across our market leading businesses. We continue to strategically focus on generating shareholder value by driving sales growth, improving profitability and generating incremental cash flow.
"Our second quarter included just over three weeks of Hisco results, which we acquired in June, and we are well underway integrating Hisco's business into DSG. Combining Hisco into our TestEquity business expands our customer base, geographic reach and product offerings while driving additional scale and cost synergies to the entire DSG platform.
"We are closely monitoring the demand environment in light of continued tightening of monetary policy to emphasize on growth segments to drive revenues. While certain end markets moderated somewhat during the second quarter, we continue to invest in those initiatives we believe will fuel profitable growth across the DSG companies. Our asset light business model, combined with our focus on growing operating cash flows and accelerating returns on invested capital, positions us well to enhance long-term shareholder value," concluded Mr. King.
Second Quarter Highlights (1)
(1) See reconciliation of GAAP to non-GAAP measures in tables 2 and 3.
The following represents a summary of certain operating results for each reportable segment and our All Other category (unaudited). See reconciliation of GAAP to non-GAAP measures in tables 2 and 3.
Lawson Products
Gexpro Services
TestEquity
All Other
Consolidated DSG
(Dollars in thousands)
Q2 2023
Q2 2022
Q2 2023
Q2 2022
Q2 2023
Q2 2022
Q2 2023
Q2 2022
Q2 2023
Q2 2022
GAAP Revenue
$
119,147
$
107,334
$
108,274
$
99,792
$
136,067
$
97,874
$
14,496
$
16,336
$
377,984
$
321,336
GAAP Operating Income
$
8,470
$
(2,562
)
$
8,778
$
5,390
$
(3,182
)
$
471
$
(290
)
$
814
$
13,776
$
4,113
Adjusted EBITDA
$
16,070
$
9,405
$
13,142
$
11,915
$
9,493
$
8,647
$
1,395
$
1,686
$
40,100
$
31,653
GAAP Operating income as a percent of GAAP Revenue
7.1
%
(2.4
)%
8.1
%
5.4
%
(2.3
)%
0.5
%
(2.0
)%
5.0
%
3.6
%
1.3
%
Adjusted EBITDA as a percent of GAAP Revenue
13.5
%
8.8
%
12.1
%
11.9
%
7.0
%
8.8
%
9.6
%
10.3
%
10.6
%
9.9
%
Note Regarding Reverse Merger Accounting
As a result of the April 1, 2022 strategic combination of Lawson Products, Gexpro Services and TestEquity, the Company's financial results are reported under reverse merger accounting treatment as required by generally accepted accounting principles ("GAAP"). Accordingly, Lawson Products results are included only for the periods following the April 1, 2022 merger closing date. GAAP results for the three and six months ended June 30, 2022 include the combined results of Gexpro Services and TestEquity, and the results of Lawson Products only subsequent to April 1, 2022. GAAP results for the three and six months ended June 30, 2023 include the results of Lawson Products, Gexpro Services and TestEquity.
Conference Call
Distribution Solutions Group, Inc. will conduct a conference call with investors to discuss second quarter 2023 results at 9:00 a.m. Eastern Time on August 3, 2023. 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 360415. A replay of the conference call will be available by telephone approximately two hours after completion of the call through August 17, 2023. 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 48695. 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 170,000 customers in several diverse end markets supported by approximately 3,800 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 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. The terms “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 other words and terms of similar meaning and expression 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. 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 or expenditures relating to the mergers; (ii) the risk that stockholder litigation in connection with the mergers results in significant costs of defense, indemnification and liability; (iii) any problems arising in combining the businesses of Lawson Products, TestEquity and Gexpro Services, which may result in the combined company not operating as effectively and efficiently as expected; and (iv) the risks that DSG may encounter difficulties integrating the business of DSG and Hisco, that DSG may not achieve the anticipated synergies contemplated with respect to the transaction and that certain assumptions with respect to Hisco's business or the transaction could prove to be inaccurate.
-TABLES FOLLOW-
Distribution Solutions Group, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
June 30, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
44,244
$
24,554
Restricted cash
20,607
186
Accounts receivable, less allowances
238,705
166,301
Inventories, net
326,236
264,374
Prepaid expenses and other current assets
32,999
22,773
Total current assets
662,791
478,188
Property, plant and equipment, net
113,329
64,395
Rental equipment, net
27,106
27,139
Goodwill
398,663
348,048
Deferred tax asset
7
189
Intangible assets, net
277,537
227,994
Cash value of life insurance
17,628
17,166
Right of use operating lease assets
65,772
46,755
Other assets
7,246
5,736
Total assets
$
1,570,079
$
1,215,610
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
88,977
$
80,486
Current portion of long-term debt
32,386
16,352
Current portion of lease liabilities
12,836
9,964
Accrued expenses and other current liabilities
92,999
62,677
Total current liabilities
227,198
169,479
Long-term debt, less current portion, net
558,845
395,825
Lease liabilities
57,735
39,828
Deferred tax liability
25,905
23,834
Other liabilities
24,403
23,649
Total liabilities
894,086
652,615
Stockholders’ equity:
Preferred stock, $1 par value:
Authorized - 500,000 shares, issued and outstanding — None
—
—
Common stock, $1 par value:
Authorized - 35,000,000 shares
Issued - 23,667,064 and 19,730,362 shares, respectively
Outstanding - 23,349,735 and 19,416,784 shares, respectively
23,350
19,417
Capital in excess of par value
688,983
591,796
Retained deficit
(16,809
)
(25,736
)
Treasury stock – 317,329 and 313,578 shares, respectively
(12,697
)
(12,526
)
Accumulated other comprehensive (loss) income
(6,834
)
(9,956
)
Total stockholders’ equity
675,993
562,995
Total liabilities and stockholders’ equity
$
1,570,079
$
1,215,610
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,
2023
2022
2023
2022
Revenue
$
377,984
$
321,336
$
726,254
$
475,421
Cost of goods sold
241,961
206,781
457,360
319,982
Gross profit
136,023
114,555
268,894
155,439
Selling, general and administrative expenses
122,247
110,442
238,397
148,338
Operating income (loss)
13,776
4,113
30,497
7,101
Interest expense
(9,492
)
(3,751
)
(17,162
)
(10,607
)
Loss on extinguishment of debt
—
(2,814
)
—
(3,395
)
Change in fair value of earnout liabilities
36
(5,693
)
(21
)
(5,693
)
Other income (expense), net
(761
)
(182
)
(1,736
)
774
Income (loss) before income taxes
3,559
(8,327
)
11,578
(11,820
)
Income tax expense (benefit)
535
(3,612
)
2,647
(4,568
)
Net income (loss)
$
3,024
$
(4,715
)
$
8,931
$
(7,252
)
Basic income (loss) per share of common stock
$
0.14
$
(0.23
)
$
0.42
$
(0.47
)
Diluted income (loss) per share of common stock
$
0.14
$
(0.23
)
$
0.41
$
(0.47
)
Basic weighted average shares outstanding
21,810,618
20,343,028
21,467,599
15,347,943
Diluted weighted average shares outstanding
21,997,507
20,343,028
21,652,609
15,347,943
Distribution Solutions Group, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Six Months Ended June 30,
2023
2022
Operating activities
Net income (loss)
$
8,931
$
(7,252
)
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization
30,306
22,335
Amortization of debt issue costs
1,002
421
Extinguishment of debt
—
3,395
Stock-based compensation
4,392
4,013
Deferred income taxes
86
(420
)
Change in fair value of earnout liabilities
21
5,693
Gain on sale of rental equipment
(1,377
)
(1,821
)
Loss on sale of property, plant and equipment
215
—
Charge for step-up of acquired inventory
716
—
Net realizable value and reserve adjustment for obsolete and excess inventory
—
1,377
Bad debt expense
933
244
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
(4,799
)
(27,639
)
Inventories
962
(28,983
)
Prepaid expenses and other current assets
(6,405
)
(13,777
)
Accounts payable
(8,936
)
(5,254
)
Accrued expenses and other current liabilities
(624
)
9,957
Other changes in operating assets and liabilities
2,041
(1,832
)
Net cash provided by (used in) operating activities
27,464
(39,543
)
Investing activities
Purchases of property, plant and equipment
(7,796
)
(3,410
)
Business acquisitions, net of cash acquired
(252,007
)
(113,781
)
Purchases of rental equipment
(5,990
)
(4,878
)
Proceeds from sale of rental equipment
2,969
6,783
Net cash provided by (used in) investing activities
(262,824
)
(115,286
)
Financing activities
Proceeds from revolving lines of credit
161,684
166,200
Payments on revolving lines of credit
(274,134
)
(67,687
)
Proceeds from term loans
305,000
377,552
Payments on term loans
(11,250
)
(307,490
)
Deferred financing costs
(3,419
)
(11,415
)
Proceeds from rights offering, net of offering costs of $1,531
98,469
—
Shares repurchased held in treasury
(171
)
(78
)
Payment of financing lease principal
(249
)
(39
)
Payment of earnout
(1,000
)
—
Net cash provided by (used in) financing activities
274,930
157,043
Effect of exchange rate changes on cash and cash equivalents
541
1,181
Increase (decrease) in cash, cash equivalents and restricted cash
40,111
3,395
Cash, cash equivalents and restricted cash at beginning of period
24,740
14,671
Cash, cash equivalents and restricted cash at end of period
$
64,851
$
18,066
Cash and cash equivalents
$
44,244
$
17,872
Restricted cash
20,607
194
Total cash, cash equivalents and restricted cash
$
64,851
$
18,066
Distribution Solutions Group, Inc.
Table 1 - Selected Segment Financial Data
(Dollars in thousands)
(Unaudited)
Three Months Ended
June 30,
2023
2022
Revenue:
Lawson Products
$
119,147
$
107,334
Gexpro Services
108,274
99,792
TestEquity
136,067
97,874
Other
14,496
16,336
Total
$
377,984
$
321,336
Operating Income:
Lawson Products
$
8,470
$
(2,562
)
Gexpro Services
8,778
5,390
TestEquity
(3,182
)
471
Other
(290
)
814
Total
$
13,776
$
4,113
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 for all periods certain non-operational 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, 2023 and 2022. 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 Operating Income to Non-GAAP Adjusted EBITDA
Q2 2023 and Q2 2022
(Dollars in thousands)
(Unaudited)
Lawson Products
Gexpro Services
TestEquity
All Other
Consolidated DSG
Quarter Ended
Q2 2023
Q2 2022
Q2 2023
Q2 2022
Q2 2023
Q2 2022
Q2 2023
Q2 2022
Q2 2023
Q2 2022
GAAP Revenue
$
119,147
$
107,334
$
108,274
$
99,792
$
136,067
$
97,874
$
14,496
$
16,336
$
377,984
$
321,336
GAAP Operating Income
$
8,470
$
(2,562
)
$
8,778
$
5,390
$
(3,182
)
$
471
$
(290
)
$
814
$
13,776
$
4,113
Depreciation and amortization
4,498
4,522
4,026
4,093
5,560
5,761
500
370
14,584
14,746
Adjustments:
Merger/integration costs(1)
—
1,818
150
2,160
—
1,812
—
—
150
5,790
Stock-based compensation(2)
2,188
4,013
—
—
—
—
—
—
2,188
4,013
Severance and acquisition related retention expenses(3)
119
449
23
45
2,295
458
—
1
2,437
953
Acquisition related costs(4)
651
—
153
189
4,104
145
—
—
4,908
334
Inventory step-up(5)
—
1,165
—
—
716
—
—
457
716
1,622
Other non-recurring(6)
144
—
12
38
—
—
1,185
44
1,341
82
Adjusted EBITDA
$
16,070
$
9,405
$
13,142
$
11,915
$
9,493
$
8,647
$
1,395
$
1,686
$
40,100
$
31,653
GAAP Operating income as a percent of GAAP Revenue
7.1
%
(2.4
)%
8.1
%
5.4
%
(2.3
)%
0.5
%
(2.0
)%
5.0
%
3.6
%
1.3
%
Adjusted EBITDA as a percent of GAAP Revenue
13.5
%
8.8
%
12.1
%
11.9
%
7.0
%
8.8
%
9.6
%
10.3
%
10.6
%
9.9
%
(1)
Merger transaction costs related to the negotiation, review and execution of the merger agreements relating to the business combination of Lawson Products, TestEquity and Gexpro Services and subsequent integration costs
(2)
Expense primarily for stock-based compensation, of which a portion varies with the Company’s stock price
(3)
Includes severance expense for actions taken in 2023 and 2022, not related to a formal restructuring plan and acquisition related retention expenses for the Hisco acquisition
(4)
Expense for acquisition related costs, unrelated to the business combination of Lawson Products, TestEquity and Gexpro Services
(5)
Inventory fair value step-up adjustment for Lawson resulting from the reverse merger acquisition accounting
(6)
Other non-recurring costs consist of non-capitalized deferred financing costs incurred in conjunction with the 2023 credit agreement amendment, 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, 2023
June 30, 2022
Amount
Diluted EPS(2)
Amount
Diluted EPS(2)
Net income (loss) as reported per GAAP
$
3,024
$
0.14
$
(4,715
)
$
(0.23
)
Pretax adjustments:
Acquisition related costs
4,908
0.22
334
0.02
Stock-based compensation
2,188
0.10
4,013
0.20
Merger/integration costs
150
0.01
5,790
0.28
Severance and acquisition related retention expenses
2,437
0.11
953
0.05
Change in fair value of earnout liabilities
(36
)
—
5,693
0.28
Loss on extinguishment of debt
—
—
2,814
0.14
Inventory step-up
716
0.03
1,622
0.08
Other non-recurring
1,341
0.06
82
—
Total pretax adjustments
11,704
0.53
21,301
1.05
Tax effect on adjustments(1)
(3,394
)
(0.15
)
(9,245
)
(0.46
)
Total adjustments, net of tax
8,310
0.38
12,056
0.59
Non-GAAP adjusted net income
$
11,334
$
0.52
$
7,341
$
0.36
(1)
Tax effected at quarterly tax rate of 29.0% and 43.4% for the three months ended June 30, 2023 and 2022, respectively, excluding discrete items.
(2)
Pretax adjustments to diluted EPS calculated on 21.998 million and 20.343 million diluted shares for the second quarter of 2023 and 2022, respectively.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230802254216/en/
Investor Relations: Distribution Solutions Group, Inc. Ronald J. Knutson Executive Vice President, Chief Financial Officer and Treasurer 773-304-5665
Investor Relations Contacts: Three Part Advisors, LLC Steven Hooser / Sandy Martin 214-872-2710 / 214-616-2207
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