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Distribution Solutions Group Announces 2024 First Quarter Results

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Distribution Solutions Group, Inc. (NASDAQ:DSGR) reported a 19.5% increase in first-quarter revenue to $416 million, driven by acquisitions. The company's organic sales were soft, but two-year stacked organic revenues grew by 4.7%. Adjusted EBITDA margin improved to 8.7%, and the company remains focused on inorganic growth through acquisitions.

Positive
  • Revenue increased by 19.5% to $416 million, including $99.2 million from acquisitions.

  • Two-year stacked organic revenue grew by 4.7% despite softness in organic sales.

  • Adjusted EBITDA margin improved to 8.7%.

  • The company continues to focus on inorganic growth through acquisitions.

Negative
  • Operating income decreased by 83.4% due to non-recurring costs.

  • Diluted loss per share was $0.11 compared to $0.14 in the previous year.

  • Adjusted EBITDA decreased by 8.4% to $36.1 million.

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

Announced Acquisition of S&S Automotive in Collision Repair Industry

FORT WORTH, Texas--(BUSINESS WIRE)-- 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

 

 

 

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FAQ

What was Distribution Solutions Group's first-quarter revenue for 2024?

Distribution Solutions Group reported first-quarter revenue of $416 million for 2024.

What was the percentage increase in revenue from the previous year's first quarter?

The revenue increased by 19.5% from the previous year's first quarter.

What was the reason behind the revenue growth in the first quarter?

The revenue growth was driven by acquisitions, with $99.2 million coming from 2023 and 2024 acquisitions.

What was the operating income for Distribution Solutions Group in the first quarter of 2024?

The operating income was $2.8 million in the first quarter of 2024.

What was the adjusted EBITDA margin for Distribution Solutions Group in the first quarter of 2024?

The adjusted EBITDA margin was 8.7% in the first quarter of 2024.

Distribution Solutions Group, Inc.

NASDAQ:DSGR

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