Distribution Solutions Group Announces 2024 First Quarter Results

First Quarter Revenue Up 19.5% to $416 Million, with Sequential Margin Expansion

Announced Acquisition of S&S Automotive in Collision Repair Industry

Distribution Solutions Group, Inc. (NASDAQ:DSGR) ("DSG" or the "Company"), a premier specialty distribution company, today announced consolidated results for the first quarter ended March 31, 2024. This press release is supplemented by an earnings presentation at https://investor.distributionsolutionsgroup.com/news/events.

Bryan King, CEO and Chairman of the Board said, "Our first quarter results were in line with near-term expectations. The Lawson MRO vertical had strong performance while continuing to make investments in its sales organization, the Gexpro Services OEM vertical returned to double-digit margins as expected this quarter, and the TestEquity industrial technology vertical margins stabilized despite continuing headwinds in the Test & Measurement end market on continued high interest rates and inventory balancing that impacted the market. Sales grew 19.5% to $416 million over the year-ago quarter driven by our acquisition strategy and also increased 2.7% sequentially over the fourth quarter of 2023. As anticipated, organic sales remained soft in the quarter, however, our two-year stacked organic revenues increased by 4.7% given tough sales comparisons in the Technology and Renewables (OEM market) and Test & Measurement (Industrial Technology market) verticals. Sequentially, the business improved in many end markets including Technology and continued strength in our Aerospace & Defense and Industrial Power (OEM market) verticals. For the quarter, consolidated adjusted EBITDA margin improved to 8.7% compared to 8.4% in the fourth quarter of 2023.

"As demonstrated in the first quarter, our acquisition strategy contributes to DSG's inorganic growth by expanding our scale, customer base and geographic reach by enhancing our enterprise-wide product offerings. During the first quarter Lawson completed the acquisition of Emergent Safety Supply to help accelerate our expansion into the safety category. We are also excited about Lawson's acquisition of S&S Automotive, with annual revenues of approximately $40 million, which was announced yesterday. S&S significantly extends our product base and expands Lawson's market reach with automotive dealers in addition to its already established strong position with collision repair shops.

"We are actively working our pipeline of acquisition targets, incremental margin enhancement initiatives, and cost savings -- and expect sequential margin improvements as 2024 develops. Our asset-light business model, combined with 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.

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

 

March 31,

 

December 31,

(Dollars in thousands)

2024

 

2023

 

% Change

 

2023

 

% Change

Revenue

$

416,086

 

 

$

348,270

 

 

19.5

%

 

$

405,239

 

 

2.7

%

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

$

2,783

 

 

$

16,721

 

 

(83.4

)%

 

$

(289

)

 

N/A

 

Non-GAAP adjusted operating income

$

29,761

 

 

$

32,783

 

 

(9.2

)%

 

$

28,006

 

 

6.3

%

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted EBITDA

$

36,067

 

 

$

39,353

 

 

(8.4

)%

 

$

33,880

 

 

6.5

%

 

 

 

 

 

 

 

 

 

 

Operating income (loss) as a percent of revenue

 

0.7

%

 

 

4.8

%

 

 

 

 

(0.1

)%

 

74bps

Adjusted EBITDA as a percent of revenue

 

8.7

%

 

 

11.3

%

 

 

 

 

8.4

%

 

30bps

2024 First Quarter Summary(1)

  • Revenue increased $67.8 million, or 19.5%, to $416.1 million including $99.2 million of incremental revenue from 2023 and 2024 acquisitions. Two-year stacked organic revenue grew by 4.7% despite organic revenue softness in the current quarter being down 8.6% on comparable days. The revenue headwinds were isolated to the technology and renewables end markets and our industrial Test & Measurement business, which are more sensitive to higher interest rates connected to capital spending. Organic revenue grew by 2.1% from the fourth quarter of 2023.
  • Operating income was $2.8 million, which included $10.7 million of non-cash acquired intangible amortization and $16.2 million of non-recurring severance and acquisition-related retention costs, stock-based compensation, acquisition-related costs and other non-recurring items as compared to operating income of $16.7 million in the prior year quarter. Adjusted operating income, excluding these non-cash and non-recurring items, was $29.8 million compared to $32.8 million in the year-ago quarter and $28.0 million in the fourth quarter of 2023.
  • Diluted loss per share was $0.11 for the quarter compared to diluted income per share of $0.14 in the year-ago quarter based on higher depreciation and amortization expenses and non-recurring severance and acquisition-related retention costs. Non-GAAP adjusted diluted earnings per share was $0.25 compared to $0.42 for the same period a year ago and $0.22 from the fourth quarter of 2023.
  • Adjusted EBITDA was $36.1 million or 8.7% compared to $39.4 million in the prior year quarter. Sequentially, adjusted EBITDA grew $2.2 million or 6.5% from the fourth quarter of 2023; and increased as a percent of sales by 30bps from 8.4%.
  • The Company ended the first quarter with total liquidity of $283.9 million, consisting of $85.6 million of cash (restricted and unrestricted) and $198.3 million of availability under its credit facility with net debt leverage of 3.0x. Uses of cash in the first quarter included net capital expenditures of $2.9 million.
  • Completed the acquisition of Emergent Safety Supply in January 2024 to expand and accelerate our safety product category. Subsequent to quarter end, announced the accretive acquisition of S&S Automotive with annual revenues of approximately $40 million to expand our product offering and automotive market reach.

(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 first quarter results at 9:00 a.m. Eastern Time on May 2, 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 143899. A replay of the conference call will be available by telephone approximately two hours after completion of the call through May 16, 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 50335. 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.

-TABLES FOLLOW-

Distribution Solutions Group, Inc.

Condensed Consolidated Balance Sheets

(Dollars in thousands, except share data)

(Unaudited)

 

 

March 31,

2024

 

December 31,

2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

73,097

 

 

$

83,931

 

Restricted cash

 

12,505

 

 

 

15,695

 

Accounts receivable, less allowances

 

221,253

 

 

 

213,448

 

Inventories

 

313,820

 

 

 

315,984

 

Prepaid expenses and other current assets

 

34,382

 

 

 

28,272

 

Total current assets

 

655,057

 

 

 

657,330

 

Property, plant and equipment, net

 

111,371

 

 

 

113,811

 

Rental equipment, net

 

23,709

 

 

 

24,575

 

Goodwill

 

402,009

 

 

 

399,925

 

Deferred tax asset, net

 

78

 

 

 

95

 

Intangible assets, net

 

246,761

 

 

 

253,834

 

Cash value of life insurance

 

19,150

 

 

 

18,493

 

Right of use operating lease assets

 

79,024

 

 

 

76,340

 

Other assets

 

5,964

 

 

 

5,928

 

Total assets

$

1,543,123

 

 

$

1,550,331

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

101,719

 

 

$

98,674

 

Current portion of long-term debt

 

30,250

 

 

 

32,551

 

Current portion of lease liabilities

 

14,638

 

 

 

13,549

 

Accrued expenses and other current liabilities

 

93,883

 

 

 

97,241

 

Total current liabilities

 

240,490

 

 

 

242,015

 

Long-term debt, less current portion, net

 

535,736

 

 

 

535,881

 

Lease liabilities

 

69,323

 

 

 

67,065

 

Deferred tax liability, net

 

17,150

 

 

 

18,326

 

Other liabilities

 

25,766

 

 

 

25,443

 

Total liabilities

 

888,465

 

 

 

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 - 47,597,864 and 47,535,618 shares, respectively

Outstanding - 46,806,573 and 46,758,359 shares, respectively

 

46,806

 

 

 

46,758

 

Capital in excess of par value

 

672,974

 

 

 

671,154

 

Retained deficit

 

(39,931

)

 

 

(34,707

)

Treasury stock – 791,291 and 777,259 shares, respectively

 

(16,883

)

 

 

(16,434

)

Accumulated other comprehensive income (loss)

 

(8,308

)

 

 

(5,170

)

Total stockholders' equity

 

654,658

 

 

 

661,601

 

Total liabilities and stockholders' equity

$

1,543,123

 

 

$

1,550,331

 

Distribution Solutions Group, Inc.

Condensed Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(Unaudited)

 

Three Months Ended

 

March 31,

 

2024

 

2023

 

 

 

 

Revenue

$

416,086

 

 

$

348,270

 

Cost of goods sold

 

272,677

 

 

 

215,399

 

Gross profit

 

143,409

 

 

 

132,871

 

 

 

 

 

Selling, general and administrative expenses

 

140,626

 

 

 

116,150

 

 

 

 

 

Operating income (loss)

 

2,783

 

 

 

16,721

 

 

 

 

 

Interest expense

 

(11,827

)

 

 

(7,670

)

Change in fair value of earnout liabilities

 

5

 

 

 

(57

)

Other income (expense), net

 

(262

)

 

 

(975

)

 

 

 

 

Income (loss) before income taxes

 

(9,301

)

 

 

8,019

 

Income tax expense (benefit)

 

(4,077

)

 

 

2,112

 

 

 

 

 

Net income (loss)

$

(5,224

)

 

$

5,907

 

 

 

 

 

Basic income (loss) per share of common stock

$

(0.11

)

 

$

0.14

 

 

 

 

 

Diluted income (loss) per share of common stock

$

(0.11

)

 

$

0.14

 

 

 

 

 

Basic weighted average shares outstanding

 

46,777,178

 

 

 

42,241,540

 

 

 

 

 

Diluted weighted average shares outstanding

 

46,777,178

 

 

 

42,608,408

 

Distribution Solutions Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

 

Three Months Ended March 31,

 

2024

 

2023

Operating activities

 

 

 

Net income (loss)

$

(5,224

)

 

$

5,907

 

Adjustments to reconcile to net cash used in operating activities:

 

 

 

Depreciation and amortization

 

17,052

 

 

 

15,722

 

Amortization of debt issuance costs

 

660

 

 

 

469

 

Stock-based compensation

 

2,198

 

 

 

2,204

 

Deferred income taxes

 

1,159

 

 

 

612

 

Change in fair value of earnout liabilities

 

(5

)

 

 

57

 

Gain on sale of rental equipment

 

(432

)

 

 

(889

)

Loss on sale of property, plant and equipment

 

(5

)

 

 

151

 

Net realizable value adjustment and write-offs for obsolete and excess inventory

 

1,605

 

 

 

2,158

 

Bad debt expense

 

(333

)

 

 

253

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

Accounts receivable

 

(6,560

)

 

 

(6,015

)

Inventories

 

1,048

 

 

 

(7,243

)

Prepaid expenses and other current assets

 

(6,813

)

 

 

(2,941

)

Accounts payable

 

3,454

 

 

 

11,183

 

Accrued expenses and other current liabilities

 

(1,488

)

 

 

(8,698

)

Other changes in operating assets and liabilities

 

299

 

 

 

928

 

Net cash provided by (used in) operating activities

 

6,615

 

 

 

13,858

 

Investing activities

 

 

 

Purchases of property, plant and equipment

 

(2,454

)

 

 

(4,490

)

Business acquisitions, net of cash acquired

 

(13,145

)

 

 

 

Purchases of rental equipment

 

(1,221

)

 

 

(2,420

)

Proceeds from sale of rental equipment

 

812

 

 

 

1,816

 

Net cash provided by (used in) investing activities

 

(16,008

)

 

 

(5,094

)

Financing activities

 

 

 

Proceeds from revolving lines of credit

 

8,858

 

 

 

93,953

 

Payments on revolving lines of credit

 

(11,611

)

 

 

(87,607

)

Payments on term loans

 

(625

)

 

 

(7,500

)

Shares repurchased held in treasury

 

(449

)

 

 

(117

)

Payment of financing lease principal

 

(124

)

 

 

(123

)

Payment of earnout

 

 

 

 

(1,000

)

Net cash provided by (used in) financing activities

 

(3,951

)

 

 

(2,394

)

Effect of exchange rate changes on cash and cash equivalents

 

(680

)

 

 

222

 

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

 

(14,024

)

 

 

6,592

 

Cash, cash equivalents and restricted cash at beginning of period

 

99,626

 

 

 

24,740

 

Cash, cash equivalents and restricted cash at end of period

$

85,602

 

 

$

31,332

 

Cash and cash equivalents

$

73,097

 

 

$

31,144

 

Restricted cash

 

12,505

 

 

 

188

 

Total cash, cash equivalents and restricted cash

$

85,602

 

 

$

31,332

 

Distribution Solutions Group, Inc.

Table 1 - Selected Segment Financial Data

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

Three Months Ended

 

March 31,

 

2024

 

2023

Revenue:

 

 

 

Lawson Products

$

118,186

 

 

$

125,280

Gexpro Services

 

98,651

 

 

 

101,016

TestEquity

 

187,149

 

 

 

107,359

Other

 

12,495

 

 

 

14,615

Intersegment revenue elimination

 

(395

)

 

 

Total

$

416,086

 

 

$

348,270

 

 

 

 

Operating income (loss):

 

 

 

Lawson Products

$

4,107

 

 

$

8,245

Gexpro Services

 

5,462

 

 

 

7,374

TestEquity

 

(6,094

)

 

 

26

Other

 

(692

)

 

 

1,076

Total

$

2,783

 

 

$

16,721

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 March 31, 2024 and 2023 and the three months ended December 31, 2023. 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

Q1 2024, Q1 2023 and Q4 2023

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended

 

March 31, 2024

 

March 31, 2023

 

December 31, 2023

Net income (loss)

$

(5,224

)

 

$

5,907

 

$

(16,330

)

Income tax expense (benefit)

 

(4,077

)

 

 

2,112

 

 

3,323

 

Other income (expense), net

 

262

 

 

 

975

 

 

113

 

Change in fair value of earnout liabilities

 

(5

)

 

 

57

 

 

(112

)

Interest expense

 

11,827

 

 

 

7,670

 

 

12,717

 

Operating income (loss)

 

2,783

 

 

 

16,721

 

 

(289

)

Depreciation and amortization

 

17,052

 

 

 

15,722

 

 

16,272

 

Stock-based compensation(1)

 

2,198

 

 

 

2,204

 

 

2,499

 

Severance and acquisition related retention expenses(2)

 

10,716

 

 

 

351

 

 

11,400

 

Acquisition related costs(3)

 

1,954

 

 

 

4,099

 

 

2,498

 

Inventory step-up(4)

 

 

 

 

 

 

716

 

Other non-recurring(5)

 

1,364

 

 

 

256

 

 

784

 

Non-GAAP adjusted EBITDA

$

36,067

 

 

$

39,353

 

$

33,880

 

(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 acquisition

(3)

Transaction and integration costs related to acquisitions

(4)

Inventory fair value step-up adjustment for acquisition accounting

(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

 

March 31, 2024

 

March 31, 2023(3)(4)

 

December 31, 2023

 

Amount

 

Diluted EPS(2)

 

Amount

 

Diluted EPS(2)

 

Amount

 

Diluted EPS(2)

Net income (loss)

$

(5,224

)

 

$

(0.11

)

 

$

5,907

 

 

$

0.14

 

 

$

(16,330

)

 

$

(0.35

)

 

 

 

 

 

 

 

 

 

 

 

 

Pretax adjustments:

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

2,198

 

 

 

0.05

 

 

 

2,204

 

 

 

0.05

 

 

 

2,499

 

 

 

0.05

 

Acquisition related costs

 

1,954

 

 

 

0.04

 

 

 

4,099

 

 

 

0.10

 

 

 

2,498

 

 

 

0.05

 

Amortization of intangible assets

 

10,746

 

 

 

0.23

 

 

 

9,152

 

 

 

0.21

 

 

 

10,398

 

 

 

0.22

 

Severance and acquisition related retention expenses

 

10,716

 

 

 

0.23

 

 

 

351

 

 

 

0.01

 

 

 

11,400

 

 

 

0.24

 

Change in fair value of earnout liabilities

 

(5

)

 

 

 

 

 

57

 

 

 

 

 

 

(112

)

 

 

 

Inventory step-up

 

 

 

 

 

 

 

 

 

 

 

 

 

716

 

 

 

0.02

 

Other non-recurring

 

1,364

 

 

 

0.03

 

 

 

256

 

 

 

0.01

 

 

 

784

 

 

 

0.02

 

Total pretax adjustments

 

26,973

 

 

 

0.58

 

 

 

16,119

 

 

 

0.38

 

 

 

28,183

 

 

 

0.60

 

Tax effect on adjustments(1)

 

(7,334

)

 

 

(0.16

)

 

 

(4,239

)

 

 

(0.10

)

 

 

(7,412

)

 

 

(0.16

)

Deferred tax asset valuation allowance(5)

 

(2,696

)

 

 

(0.06

)

 

 

 

 

 

 

 

 

6,144

 

 

 

0.13

 

Non-GAAP adjusted net income

$

11,719

 

 

$

0.25

 

 

$

17,787

 

 

$

0.42

 

 

$

10,585

 

 

$

0.22

 

(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 46.777 million, 42.608 million and 46.805 million diluted shares for the first quarter of 2024 and 2023, and the fourth quarter of 2023, 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

 

March 31,

 

December 31,

 

2024

 

2023

 

2023

Operating income (loss)

$

2,783

 

$

16,721

 

$

(289

)

 

 

 

 

 

 

Gross profit adjustments:

 

 

 

 

 

Inventory step-up(1)

 

 

 

 

 

716

 

Total gross profit adjustments

 

 

 

 

 

716

 

 

 

 

 

 

 

Selling, general and administrative expenses adjustments:

 

 

 

 

 

Acquisition related costs(2)

 

1,954

 

 

4,099

 

 

2,498

 

Amortization of intangible assets(3)

 

10,746

 

 

9,152

 

 

10,398

 

Stock-based compensation(4)

 

2,198

 

 

2,204

 

 

2,499

 

Severance and acquisition related retention expenses(5)

 

10,716

 

 

351

 

 

11,400

 

Other non-recurring(6)

 

1,364

 

 

256

 

 

784

 

Total selling, general and administrative adjustments

 

26,978

 

 

16,062

 

 

27,579

 

 

 

 

 

 

 

Total adjustments

 

26,978

 

 

16,062

 

 

28,295

 

Non-GAAP adjusted operating income

$

29,761

 

$

32,783

 

$

28,006

 

(1)

Inventory fair value step-up adjustment for acquisition accounting

(2)

Transaction and integration costs related to acquisitions

(3)

In the first quarter of 2024, 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 acquisition

(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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