Distribution Solutions Group Announces 2024 Second Quarter Results

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

 

Contacts

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

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