Distribution Solutions Group Announces Fiscal 2023 First Quarter Results

Achieves Record Revenue and Profit Growth, Strong Organic Revenue

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 first quarter ended March 31, 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.

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 period following the April 1, 2022 merger closing date. GAAP results for the three months ended March 31, 2022 include the combined results of Gexpro Services and TestEquity, while GAAP results for the three months ended March 31, 2023 include the results of Lawson Products, Gexpro Services and TestEquity.

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

 

 

 

March 31,

 

 

(Dollars in thousands)

2023

 

2022

 

% Change

GAAP Revenue

$

348,270

 

 

$

154,085

 

 

126.0

%

Pre-Merger Revenue(1)

 

 

 

 

117,877

 

 

N/M

 

Adjusted Revenue

 

348,270

 

 

 

271,962

 

 

28.1

%

 

 

 

 

 

 

GAAP Operating Income

 

16,721

 

 

 

2,988

 

 

N/M

 

Pre-Merger Operating Income(1)

 

 

 

 

12,076

 

 

N/M

 

Adjusted Operating Income

 

16,721

 

 

 

15,064

 

 

11.0

%

GAAP Operating income as a percent of GAAP Revenue

 

4.8

%

 

 

1.9

%

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

39,353

 

 

$

22,672

 

 

73.6

%

Adjusted EBITDA as a percent of Adjusted Revenue

 

11.3

%

 

 

8.3

%

 

 

(1)

Represents Lawson Products pre-merger revenue and operating income

Bryan King, CEO and Chairman of the Board, said, “I am excited to report the continued strong financial performance of DSG. During the first quarter, revenue and EBITDA margin improvement continued, with adjusted revenue growth of 28%, fueled by organic growth of 13.7%, and adjusted EBITDA expansion to $39.4 million, or 11.3% of revenue. This margin profile represents a 300 basis point improvement compared to one year ago as our execution has tracked our vision for why we formed the DSG platform a year ago. We remain confident in our prospects and continue to focus on generating shareholder value by driving sales growth, improving profitability and creating incremental cash flow through solid performance.

"We continue to watch the demand environment, and although certain end markets have moderated somewhat, we anticipate continued year-over-year revenue and profitability expansion as 2023 progresses with a focus on organic growth, strategic acquisitions and improved operational efficiencies. We believe that our asset light business model, combined with our focus on growing operating cash flows, positions us well to enhance shareholder value in 2023 and beyond.

"We were also thrilled to recently announce our agreement to acquire Hisco, a leading distributor of specialty products serving industrial technology applications, which is expected to close by the end of the second quarter. We believe that combining with Hisco will strategically accelerate our growth trajectory for all of our operating companies, with expansion in both customers and product offerings, coupled with better scale and incremental cost synergies," concluded Mr. King.

First Quarter Highlights (1)

  • GAAP revenue was $348.3 million, an increase of $194.2 million or 126.0%, which included $38.9 million of additional revenue from companies acquired in 2022 other than Lawson Products.
  • Non-GAAP adjusted revenue, which in the first quarter of 2022 includes the pre-merger revenue of Lawson Products for comparison, increased 28.1% or approximately $76.3 million. This improvement was driven by strong organic growth of 13.7% plus revenue from companies acquired in 2022 (other than Lawson Products).
  • Reported operating income increased by $13.7 million from the prior year period to $16.7 million or 4.8% of GAAP revenue. Non-GAAP adjusted EBITDA increased by 73.6% from the prior year period to $39.4 million or 11.3% of revenue.
  • Diluted income per share was $0.28 for the quarter compared to a diluted loss per share of $0.25 in the year-ago quarter. Non-GAAP diluted earnings per share was $0.52 in the first quarter 2023 compared to $0.00 for the same period a year ago.
  • On March 30, 2023, the Company entered into a Stock Purchase Agreement for the acquisition of HIS Company, Inc., a Texas corporation (“Hisco”), for $269.1 million in cash payable at closing, with a potential additional earn-out payment of up to $12.6 million and $37.5 million, payable in cash or DSG common stock, in potential employee retention payments. DSG anticipates funding the transaction using a combination of an expanded committed credit facility and approximately $100 million of equity to be raised in a rights offering to existing stockholders. The transaction is expected to close in the second quarter of 2023, subject to regulatory and customary closing conditions.

(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)

Q1 2023

Q1 2022

 

Q1 2023

Q1 2022

 

Q1 2023

Q1 2022

 

Q1 2023

Q1 2022

 

Q1 2023

Q1 2022

GAAP Revenue

$

125,280

 

$

 

 

$

101,016

 

$

81,683

 

 

$

107,359

 

$

72,402

 

 

$

14,615

 

$

 

 

$

348,270

 

$

154,085

 

Pre-Merger Revenue(1)

 

 

 

104,902

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,975

 

 

 

 

 

117,877

 

Adjusted Revenue

$

125,280

 

$

104,902

 

 

$

101,016

 

$

81,683

 

 

$

107,359

 

$

72,402

 

 

$

14,615

 

$

12,975

 

 

$

348,270

 

$

271,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating Income

$

8,245

 

$

 

 

$

7,374

 

$

3,592

 

 

$

26

 

$

(604

)

 

$

1,076

 

$

 

 

$

16,721

 

$

2,988

 

Pre-Merger Operating Income(1)

 

 

 

11,096

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

980

 

 

 

 

 

12,076

 

Adjusted Operating Income

 

8,245

 

 

11,096

 

 

 

7,374

 

 

3,592

 

 

 

26

 

 

(604

)

 

 

1,076

 

 

980

 

 

 

16,721

 

 

15,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

18,450

 

$

8,042

 

 

$

11,674

 

$

8,011

 

 

$

7,659

 

$

5,491

 

 

$

1,570

 

$

1,128

 

 

$

39,353

 

$

22,672

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA as a percent of Adjusted Revenue

 

14.7

%

 

7.7

%

 

 

11.6

%

 

9.8

%

 

 

7.1

%

 

7.6

%

 

 

10.7

%

 

8.7

%

 

 

11.3

%

 

8.3

%

(1)

Represents Lawson Products and The Bolt Supply House pre-merger revenue and operating income

Conference Call

Distribution Solutions Group, Inc. will conduct a conference call with investors to discuss first quarter 2023 results at 9:00 a.m. Eastern Time on May 4, 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 484346. A replay of the conference call will be available by telephone approximately two hours after completion of the call through May 18, 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 PIN access number for the replay is 48132. 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 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 110,000 customers in several diverse end markets supported by approximately 3,100 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) risks and uncertainties relating to the pending acquisition of Hisco by DSG and the related financing thereof, including the risks that the transaction may not be completed on the timeline expected, that DSG may encounter difficulties integrating the business of DSG and Hisco, that DSG may not achieve the 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)

 

 

March 31,

2023

 

December 31,

2022

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

31,144

 

 

$

24,554

 

Restricted cash

 

188

 

 

 

186

 

Accounts receivable, less allowances

 

172,688

 

 

 

166,301

 

Inventories, net

 

269,981

 

 

 

264,374

 

Prepaid expenses and other current assets

 

25,726

 

 

 

22,773

 

Total current assets

 

499,727

 

 

 

478,188

 

Property, plant and equipment, net

 

64,433

 

 

 

64,395

 

Rental equipment, net

 

27,168

 

 

 

27,139

 

Goodwill

 

348,212

 

 

 

348,048

 

Deferred tax asset

 

179

 

 

 

189

 

Intangible assets, net

 

219,213

 

 

 

227,994

 

Cash value of life insurance

 

17,500

 

 

 

17,166

 

Right of use operating lease assets

 

46,403

 

 

 

46,755

 

Other assets

 

5,520

 

 

 

5,736

 

Total assets

$

1,228,355

 

 

$

1,215,610

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

90,871

 

 

$

80,486

 

Current portion of long-term debt

 

16,094

 

 

 

16,352

 

Current portion of lease liabilities

 

10,744

 

 

 

9,964

 

Accrued expenses and other current liabilities

 

55,426

 

 

 

62,677

 

Total current liabilities

 

173,135

 

 

 

169,479

 

Long-term debt, less current portion, net

 

395,215

 

 

 

395,825

 

Lease liabilities

 

39,061

 

 

 

39,828

 

Deferred tax liability

 

24,123

 

 

 

23,834

 

Other liabilities

 

24,412

 

 

 

23,649

 

Total liabilities

 

655,946

 

 

 

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 - 21,441,506 and 19,730,362 shares, respectively

Outstanding - 21,125,289 and 19,416,784 shares, respectively

 

21,125

 

 

 

19,417

 

Capital in excess of par value

 

591,292

 

 

 

591,796

 

Retained deficit

 

(19,833

)

 

 

(25,736

)

Treasury stock – 316,217 and 313,578 shares, respectively

 

(12,643

)

 

 

(12,526

)

Accumulated other comprehensive (loss) income

 

(7,532

)

 

 

(9,956

)

Total stockholders’ equity

 

572,409

 

 

 

562,995

 

Total liabilities and stockholders’ equity

$

1,228,355

 

 

$

1,215,610

 

Distribution Solutions Group, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Dollars in thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

March 31,

 

2023

 

2022

 

 

 

 

Revenue

$

348,270

 

 

$

154,085

 

Cost of goods sold

 

215,399

 

 

 

113,201

 

Gross profit

 

132,871

 

 

 

40,884

 

 

 

 

 

Selling, general and administrative expenses

 

116,150

 

 

 

37,896

 

 

 

 

 

Operating income (loss)

 

16,721

 

 

 

2,988

 

 

 

 

 

Interest expense

 

(7,670

)

 

 

(6,856

)

Loss on extinguishment of debt

 

 

 

 

(581

)

Change in fair value of earnout liabilities

 

(57

)

 

 

 

Other income (expense), net

 

(975

)

 

 

956

 

 

 

 

 

Income (loss) before income taxes

 

8,019

 

 

 

(3,493

)

Income tax expense (benefit)

 

2,112

 

 

 

(956

)

 

 

 

 

Net income (loss)

$

5,907

 

 

$

(2,537

)

 

 

 

 

Basic income (loss) per share of common stock

$

0.28

 

 

$

(0.25

)

 

 

 

 

Diluted income (loss) per share of common stock

$

0.28

 

 

$

(0.25

)

Distribution Solutions Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

2023

 

2022

Operating activities

 

 

 

Net income (loss)

$

5,907

 

 

$

(2,537

)

Adjustments to reconcile to net cash used in operating activities:

 

 

 

Depreciation and amortization

 

15,722

 

 

 

7,589

 

Amortization of debt issue costs

 

469

 

 

 

655

 

Extinguishment of debt

 

 

 

 

581

 

Stock-based compensation

 

2,204

 

 

 

 

Deferred income taxes

 

612

 

 

 

 

Change in fair value of earnout liability

 

57

 

 

 

 

Gain on sale of rental equipment

 

(889

)

 

 

(736

)

Loss on sale of property, plant and equipment

 

151

 

 

 

 

Bargain purchase option

 

 

 

 

 

Charge for step-up of acquired inventory

 

 

 

 

 

Net realizable value and reserve adjustment for obsolete and excess inventory

 

2,158

 

 

 

636

 

Bad debt expense

 

253

 

 

 

50

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

Accounts receivable

 

(6,015

)

 

 

(12,534

)

Inventories

 

(7,243

)

 

 

(12,126

)

Prepaid expenses and other current assets

 

(2,941

)

 

 

(110

)

Accounts payable

 

11,183

 

 

 

7,097

 

Accrued expenses and other current liabilities

 

(8,698

)

 

 

(2,252

)

Other changes in operating assets and liabilities

 

928

 

 

 

155

 

Net cash provided by (used in) operating activities

 

13,858

 

 

 

(13,532

)

Investing activities

 

 

 

Purchases of property, plant and equipment

 

(4,490

)

 

 

(410

)

Business acquisitions, net of cash acquired

 

 

 

 

(56,429

)

Purchases of rental equipment

 

(2,420

)

 

 

(2,657

)

Proceeds from sale of rental equipment

 

1,816

 

 

 

1,923

 

Net cash provided by (used in) investing activities

 

(5,094

)

 

 

(57,573

)

Financing activities

 

 

 

Proceeds from revolving lines of credit

 

93,953

 

 

 

34,277

 

Payments on revolving lines of credit

 

(87,607

)

 

 

(46,064

)

Proceeds from term loans

 

 

 

 

145,630

 

Payments on term loans

 

(7,500

)

 

 

(57,036

)

Deferred financing costs

 

 

 

 

(7,939

)

Shares repurchased held in treasury

 

(117

)

 

 

 

Payment of financing lease principal

 

(123

)

 

 

(73

)

Payment of earnout

 

(1,000

)

 

 

 

Net cash provided by (used in) financing activities

 

(2,394

)

 

 

68,795

 

Effect of exchange rate changes on cash and cash equivalents

 

222

 

 

 

(7

)

Increase (decrease) in cash, cash equivalents and restricted cash

 

6,592

 

 

 

(2,317

)

Cash, cash equivalents and restricted cash at beginning of period

 

24,740

 

 

 

14,671

 

Cash, cash equivalents and restricted cash at end of period

$

31,332

 

 

$

12,354

 

Cash and cash equivalents

$

31,144

 

 

$

12,354

 

Restricted cash

 

188

 

 

 

 

Total cash, cash equivalents and restricted cash

$

31,332

 

 

$

12,354

 

Distribution Solutions Group, Inc.

Table 1 - Selected Segment Financial Data

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

Three Months Ended

 

March 31,

 

2023

 

2022

Revenue:

 

 

 

Lawson Products

$

125,280

 

$

 

Gexpro Services

 

101,016

 

 

81,683

 

TestEquity

 

107,359

 

 

72,402

 

Other

 

14,615

 

 

 

Total

$

348,270

 

$

154,085

 

 

 

 

 

Operating Income:

 

 

 

Lawson Products

$

8,245

 

$

 

Gexpro Services

 

7,374

 

 

3,592

 

TestEquity

 

26

 

 

(604

)

Other

 

1,076

 

 

 

Total

$

16,721

 

$

2,988

 

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 includes certain results of pre-merger Lawson Products for the three months ended March 31, 2022 and 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 March 31, 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 Revenue to Non-GAAP Adjusted Revenue and

GAAP Operating Income to Non-GAAP Adjusted EBITDA

Q1 2023 and Q1 2022

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lawson Products

 

Gexpro Services

 

TestEquity

 

All Other

 

Consolidated DSG

Quarter Ended

Q1 2023

Q1 2022

 

Q1 2023

Q1 2022

 

Q1 2023

Q1 2022

 

Q1 2023

Q1 2022

 

Q1 2023

Q1 2022

GAAP Revenue

$

125,280

 

$

 

 

$

101,016

 

$

81,683

 

 

$

107,359

 

$

72,402

 

 

$

14,615

 

$

 

 

$

348,270

 

$

154,085

 

Pre-Merger Revenue(1)

 

 

 

104,902

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,975

 

 

 

 

 

117,877

 

Adjusted Revenue

$

125,280

 

$

104,902

 

 

$

101,016

 

$

81,683

 

 

$

107,359

 

$

72,402

 

 

$

14,615

 

$

12,975

 

 

$

348,270

 

$

271,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating Income

$

8,245

 

$

 

 

$

7,374

 

$

3,592

 

 

$

26

 

$

(604

)

 

$

1,076

 

$

 

 

$

16,721

 

$

2,988

 

Pre-Merger Operating Income(1)

 

 

 

11,096

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

980

 

 

 

 

 

12,076

 

Adjusted Operating Income

 

8,245

 

 

11,096

 

 

 

7,374

 

 

3,592

 

 

 

26

 

 

(604

)

 

 

1,076

 

 

980

 

 

 

16,721

 

 

15,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

6,558

 

 

1,946

 

 

 

3,865

 

 

2,821

 

 

 

4,805

 

 

4,768

 

 

 

494

 

 

143

 

 

 

15,722

 

 

9,678

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger/integration costs(2)

 

1,009

 

 

2,974

 

 

 

214

 

 

842

 

 

 

 

 

600

 

 

 

 

 

 

 

 

1,223

 

 

4,416

 

Stock-based compensation(3)

 

2,204

 

 

(8,595

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,204

 

 

(8,595

)

Severance costs(4)

 

238

 

 

621

 

 

 

 

 

 

 

 

113

 

 

456

 

 

 

 

 

5

 

 

 

351

 

 

1,082

 

Acquisition related costs(5)

 

 

 

 

 

 

161

 

 

569

 

 

 

2,715

 

 

271

 

 

 

 

 

 

 

 

2,876

 

 

840

 

Inventory step-up(6)

 

 

 

 

 

 

 

 

163

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

163

 

Other non-recurring(7)

 

196

 

 

 

 

 

60

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

256

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

18,450

 

$

8,042

 

 

$

11,674

 

$

8,011

 

 

$

7,659

 

$

5,491

 

 

$

1,570

 

$

1,128

 

 

$

39,353

 

$

22,672

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating income as a percent of GAAP Revenue

 

6.6

%

 

%

 

 

7.3

%

 

4.4

%

 

 

%

 

(0.8

)%

 

 

7.4

%

 

%

 

 

4.8

%

 

1.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA as a percent of GAAP Revenue

 

14.7

%

 

%

 

 

11.6

%

 

9.8

%

 

 

7.1

%

 

7.6

%

 

 

10.7

%

 

%

 

 

11.3

%

 

14.7

%

Adjusted EBITDA as a percent of Adjusted Revenue

 

14.7

%

 

7.7

%

 

 

11.6

%

 

9.8

%

 

 

7.1

%

 

7.6

%

 

 

10.7

%

 

8.7

%

 

 

11.3

%

 

8.3

%

(1)

Represents Lawson Products pre-merger revenue and operating income

(2)

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

(3)

Expense (benefit) primarily for stock-based compensation, of which a portion varies with the Company’s stock price

(4)

Includes severance expense for actions taken in 2023 and 2022, not related to a formal restructuring plan

(5)

Expense for acquisition related costs, unrelated to the business combination of Lawson Products, TestEquity and Gexpro Services

(6)

Inventory fair value step-up adjustments resulting from the acquisition accounting for additional acquisitions completed by Gexpro Services

(7)

Other non-recurring costs consist of sales force optimization 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

 

March 31, 2023

 

March 31, 2022

 

Amount

 

Diluted

EPS(2)

 

Amount

 

Diluted

EPS(2)

Net income (loss) as reported per GAAP

$

5,907

 

 

$

0.28

 

 

$

(2,537

)

 

$

(0.25

)

 

 

 

 

 

 

 

 

Pretax adjustments:

 

 

 

 

 

 

 

Acquisition related costs

 

2,876

 

 

 

0.13

 

 

 

840

 

 

 

0.08

 

Stock-based compensation

 

2,204

 

 

 

0.10

 

 

 

 

 

 

 

Merger/integration costs

 

1,223

 

 

 

0.06

 

 

 

1,442

 

 

 

0.14

 

Severance costs

 

351

 

 

 

0.02

 

 

 

456

 

 

 

0.04

 

Change in fair value of earnout liability

 

57

 

 

 

 

 

 

 

 

 

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

581

 

 

 

0.06

 

Inventory step-up

 

 

 

 

 

 

 

163

 

 

 

0.02

 

Other non-recurring

 

256

 

 

 

0.01

 

 

 

24

 

 

 

 

Total pretax adjustments

 

6,967

 

 

 

0.33

 

 

 

3,506

 

 

 

0.34

 

Tax effect on adjustments(1)

 

(1,832

)

 

 

(0.09

)

 

 

(961

)

 

 

(0.09

)

Total adjustments, net of tax

 

5,135

 

 

 

0.24

 

 

 

2,545

 

 

 

0.25

 

Non-GAAP adjusted net income

$

11,042

 

 

$

0.52

 

 

$

8

 

 

$

 

(1)

Tax effected at full year tax rate of 26.3% and 27.4% for the three months ended March 31, 2023 and 2022, respectively.

(2)

Pretax adjustments to diluted EPS calculated on 21.304 million and 10.301 million diluted shares for the first quarter of 2023 and 2022, respectively.

 

Contacts

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 or Sandy Martin

214-872-2710

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