Sales and Profitability Growth with Value-Creating Strategic Initiatives
Distribution Solutions Group, Inc. (NASDAQ:DSGR) ("DSG" or the "Company"), a premier specialty distribution company, today announced consolidated results for the third quarter ended September 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 |
||||||||||||||||
|
September 30, |
|
June 30, |
||||||||||||||
(Dollars in thousands) |
|
2024 |
|
|
|
2023 |
|
|
% Change |
|
|
2024 |
|
|
% Change |
||
Revenue |
$ |
468,019 |
|
|
$ |
438,909 |
|
|
6.6 |
% |
|
$ |
439,536 |
|
|
6.5 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||
Operating income |
$ |
18,947 |
|
|
$ |
12,783 |
|
|
48.2 |
% |
|
$ |
14,158 |
|
|
33.8 |
% |
Non-GAAP adjusted operating income |
$ |
42,458 |
|
|
$ |
38,001 |
|
|
11.7 |
% |
|
$ |
38,852 |
|
|
9.3 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||
Non-GAAP adjusted EBITDA |
$ |
49,110 |
|
|
$ |
43,703 |
|
|
12.4 |
% |
|
$ |
45,181 |
|
|
8.7 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||
Operating income (loss) as a percent of revenue |
|
4.0 |
% |
|
|
2.9 |
% |
|
110bps |
|
|
3.2 |
% |
|
80bps |
||
Adjusted EBITDA as a percent of revenue |
|
10.5 |
% |
|
|
10.0 |
% |
|
50bps |
|
|
10.3 |
% |
|
20bps |
||
Bryan King, CEO and Chairman of the Board, said, "We are pleased with DSG’s third quarter results, which delivered sales and profitability growth over the prior-year quarter. Total sales, including acquisitions, grew 6.6% to $468 million despite organic revenue compression of 2.1% compared to the year-ago quarter. Adjusted EBITDA for the quarter grew by 12.4% to $49.1 million, or 10.5% as a percentage of sales. Acquisitions in 2024 drove the quarterly sales increase, and we reported average daily sales for Lawson up 1.4%, for Gexpro Services up 12.5%, and for TestEquity down 7.4% for the period. Sequentially, compared to the second quarter, total sales grew by 6.5%, organic sales were up slightly at 0.2%, and the Adjusted EBITDA margin of 10.5% expanded by 20 basis points.
"DSG’s Source Atlantic acquisition, under our Lawson Products operating company, closed this quarter, and combined with Lawson’s The Bolt Supply House, we added a reportable segment focused on the Canadian MRO market. This CAD $250 million revenue Canadian business will drive DSG's growth by expanding our scale, customer base, and geographic reach while enhancing our enterprise-wide product offerings. We also announced the acquisition of ConRes Test Equipment under the TestEquity operating company from Continental Resources as a carve-out. This leading test and measurement equipment provider with $12 million in annual revenues further strengthens our customer intimacy with their leasing and calibration service offerings. Finally, as part of Gexpro Services’ growth platform, we announced the strategic acquisition of Tech-Component Resources (TCR), a distributor of fasteners, mechanical components, and other industrial products in Southeast Asia to support existing large OEM customers’ expansion plans while providing us with a strategic foothold in this growing region.
"We remain focused on deploying our capital for the highest returns in acquisitions and organic investments. Our asset-light business model drives strong cash flow conversion, and our focus on capital returns positions us well to maximize long-term value for our shareholders," concluded Mr. King.
2024 Third Quarter Summary(1)
- Revenue increased $29.1 million, or 6.6%, to $468.0 million including $38.1 million of incremental revenue from three acquisitions closed in 2024. While organic sales declined 2.1% over a year ago, organic sales grew 0.2% sequentially over the second quarter of 2024.
- Operating income was $18.9 million, net of $12.0 million of non-cash acquired intangible amortization and $11.5 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 $12.8 million in the prior year quarter, net of similar items as 2024. Adjusted operating income, excluding these non-cash and non-recurring items, was $42.5 million in the current quarter compared to $38.0 million in the year-ago quarter and $38.9 million in the second quarter of 2024.
- Diluted income per share was $0.46 for the quarter inclusive of a $0.40 tax benefit based on the anticipated effective tax rate for the full year compared to diluted loss per share of $0.03 in the year-ago quarter. Non-GAAP adjusted diluted earnings per share was $0.37 compared to $0.35 for the same period a year ago and $0.40 for the second quarter of 2024.
- Adjusted EBITDA was $49.1 million, reflecting a 10.5% margin, compared to $43.7 million, at a 10.0% margin in the prior year quarter. Sequentially, adjusted EBITDA grew by $3.9 million from the second quarter of 2024 and increased as a percentage of sales by 20bps.
- Expanded the credit facility by $255 million with an additional term loan of $200 million and an increase in the revolver of $55 million from $200 million to $255 million. The Company ended the third quarter with total liquidity of $328.0 million, consisting of $75.8 million of cash (restricted and unrestricted) and $252.2 million of availability under its credit facility with net debt leverage of 3.7x. Cash generated from operations was $17.3 million for the quarter. Uses of cash in the third quarter included net capital expenditures of $4.1 million and share repurchases of $0.9 million.
- Completed the acquisition of Source Atlantic in August 2024. Signed agreements to purchase ConRes Test Equipment, a leading test and measurement equipment provider and Tech-Component Resources Pte Ltd ("TCR"), a distributor of fasteners, mechanical components, and other industrial products in Southeast Asia serving OEM customers and related applications. TCR closed in October 2024. ConRes Test Equipment is expected to close in the fourth quarter of 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 third quarter results at 9:00 a.m. Eastern Time on October 31, 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 962760. A replay of the conference call will be available by telephone approximately two hours after completion of the call through November 14, 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 51271. 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 190,000 customers in several diverse end markets supported by approximately 4,300 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, Section 21E of the Securities Exchange Act of 1934, as amended, and the “safe-harbor” provisions under the Private Securities Litigation Reform Act of 1995, 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 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. DSG undertakes no obligation to release publicly any revisions to forward-looking statements as a result of new information, future events or otherwise. Each forward-looking statement speaks only as of the date on which such statement is made, and DSG undertakes no obligation to update any such statement to reflect events or circumstances arising after such date. Actual results may differ materially from those projected as a result of certain risks and uncertainties. Factors that could cause or contribute to such differences or that might otherwise impact DSG’s business, financial condition and results of operations include the risks that DSG may encounter difficulties integrating the business of DSG with the business of other companies that DSG has combined with or may otherwise combine with and that certain assumptions with respect to such business or transactions could prove to be inaccurate. Certain risks associated with DSG’s business are also discussed from time to time in the reports DSG files with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K or other reports the Company may file from time to time with the Securities and Exchange Commission, which should be reviewed carefully.
-TABLES FOLLOW-
|
|||||||
Distribution Solutions Group, Inc. Condensed Consolidated Balance Sheets (Dollars in thousands, except share data) (Unaudited) |
|||||||
|
|||||||
|
September 30,
|
|
December 31,
|
||||
ASSETS |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
61,344 |
|
|
$ |
83,931 |
|
Restricted cash |
|
14,423 |
|
|
|
15,694 |
|
Accounts receivable, less allowances |
|
281,142 |
|
|
|
213,449 |
|
Inventories |
|
347,018 |
|
|
|
315,984 |
|
Prepaid expenses and other current assets |
|
63,427 |
|
|
|
28,272 |
|
Assets held for sale |
|
3,358 |
|
|
|
— |
|
Total current assets |
|
770,712 |
|
|
|
657,330 |
|
Property, plant and equipment, net |
|
128,927 |
|
|
|
113,811 |
|
Rental equipment, net |
|
22,601 |
|
|
|
24,575 |
|
Goodwill |
|
467,320 |
|
|
|
399,925 |
|
Deferred tax asset, net |
|
— |
|
|
|
95 |
|
Intangible assets, net |
|
279,772 |
|
|
|
253,834 |
|
Cash value of life insurance |
|
19,905 |
|
|
|
18,493 |
|
Right of use operating lease assets |
|
89,806 |
|
|
|
76,340 |
|
Other assets |
|
5,899 |
|
|
|
5,928 |
|
Total assets |
$ |
1,784,942 |
|
|
$ |
1,550,331 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable |
$ |
130,659 |
|
|
$ |
98,674 |
|
Current portion of long-term debt |
|
42,078 |
|
|
|
32,551 |
|
Current portion of lease liabilities |
|
19,287 |
|
|
|
13,549 |
|
Accrued expenses and other current liabilities |
|
82,083 |
|
|
|
97,241 |
|
Total current liabilities |
|
274,107 |
|
|
|
242,015 |
|
Long-term debt, less current portion, net |
|
704,135 |
|
|
|
535,881 |
|
Lease liabilities |
|
75,898 |
|
|
|
67,065 |
|
Deferred tax liability, net |
|
26,203 |
|
|
|
18,326 |
|
Other liabilities |
|
23,837 |
|
|
|
25,443 |
|
Total liabilities |
|
1,104,180 |
|
|
|
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 - 47,717,376 and 47,535,618 shares, respectively Outstanding - 46,837,880 and 46,758,359 shares, respectively |
|
46,837 |
|
|
|
46,758 |
|
Capital in excess of par value |
|
676,203 |
|
|
|
671,154 |
|
Retained deficit |
|
(16,114 |
) |
|
|
(34,707 |
) |
Treasury stock – 879,496 and 777,259 shares, respectively |
|
(19,552 |
) |
|
|
(16,434 |
) |
Accumulated other comprehensive income (loss) |
|
(6,612 |
) |
|
|
(5,170 |
) |
Total stockholders' equity |
|
680,762 |
|
|
|
661,601 |
|
Total liabilities and stockholders' equity |
$ |
1,784,942 |
|
|
$ |
1,550,331 |
|
Distribution Solutions Group, Inc. Condensed Consolidated Statements of Operations (Dollars in thousands, except per share data) (Unaudited) |
|||||||||||||||
|
|||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
September 30, |
|
September 30, |
||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
||||||||
Revenue |
$ |
468,019 |
|
|
$ |
438,909 |
|
|
$ |
1,323,641 |
|
|
$ |
1,165,163 |
|
Cost of goods sold |
|
309,171 |
|
|
|
293,612 |
|
|
|
869,857 |
|
|
|
750,972 |
|
Gross profit |
|
158,848 |
|
|
|
145,297 |
|
|
|
453,784 |
|
|
|
414,191 |
|
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative expenses |
|
139,901 |
|
|
|
132,514 |
|
|
|
417,896 |
|
|
|
370,911 |
|
|
|
|
|
|
|
|
|
||||||||
Operating income (loss) |
|
18,947 |
|
|
|
12,783 |
|
|
|
35,888 |
|
|
|
43,280 |
|
|
|
|
|
|
|
|
|
||||||||
Interest expense |
|
(15,160 |
) |
|
|
(12,895 |
) |
|
|
(39,780 |
) |
|
|
(30,057 |
) |
Change in fair value of earnout liabilities |
|
(858 |
) |
|
|
667 |
|
|
|
(861 |
) |
|
|
646 |
|
Other income (expense), net |
|
(15 |
) |
|
|
(1,133 |
) |
|
|
82 |
|
|
|
(2,869 |
) |
|
|
|
|
|
|
|
|
||||||||
Income (loss) before income taxes |
|
2,914 |
|
|
|
(578 |
) |
|
|
(4,671 |
) |
|
|
11,000 |
|
Income tax expense (benefit) |
|
(19,007 |
) |
|
|
990 |
|
|
|
(23,264 |
) |
|
|
3,637 |
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) |
$ |
21,921 |
|
|
$ |
(1,568 |
) |
|
$ |
18,593 |
|
|
$ |
7,363 |
|
|
|
|
|
|
|
|
|
||||||||
Basic income (loss) per share of common stock |
$ |
0.47 |
|
|
$ |
(0.03 |
) |
|
$ |
0.40 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted income (loss) per share of common stock |
$ |
0.46 |
|
|
$ |
(0.03 |
) |
|
$ |
0.39 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
||||||||
Basic weighted average shares outstanding |
|
46,799,672 |
|
|
|
46,737,443 |
|
|
|
46,798,598 |
|
|
|
44,216,541 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted weighted average shares outstanding |
|
47,560,478 |
|
|
|
46,737,443 |
|
|
|
47,603,808 |
|
|
|
44,597,419 |
|
Distribution Solutions Group, Inc. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) |
|||||||
|
|||||||
|
Nine Months Ended September 30, |
||||||
|
|
2024 |
|
|
|
2023 |
|
Operating activities |
|
|
|
||||
Net income (loss) |
$ |
18,593 |
|
|
$ |
7,363 |
|
Adjustments to reconcile to net cash used in operating activities: |
|
|
|
||||
Depreciation and amortization |
|
54,211 |
|
|
|
47,316 |
|
Amortization of debt issuance costs |
|
2,093 |
|
|
|
1,662 |
|
Stock-based compensation |
|
4,323 |
|
|
|
5,441 |
|
Compensation expense related to employee share purchases |
|
— |
|
|
|
427 |
|
Deferred income taxes |
|
(2,814 |
) |
|
|
— |
|
Change in fair value of earnout liabilities |
|
861 |
|
|
|
(646 |
) |
(Gain) loss on sale of rental equipment |
|
(1,586 |
) |
|
|
(1,929 |
) |
(Gain) loss on sale of property, plant and equipment |
|
190 |
|
|
|
(86 |
) |
Charge for step-up of acquired inventory |
|
1,760 |
|
|
|
2,866 |
|
Net realizable value adjustment and write-offs for obsolete and excess inventory |
|
4,311 |
|
|
|
8,073 |
|
Bad debt expense |
|
537 |
|
|
|
1,045 |
|
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
||||
Accounts receivable |
|
(30,423 |
) |
|
|
(8,329 |
) |
Inventories |
|
(981 |
) |
|
|
1,566 |
|
Prepaid expenses and other current assets |
|
(33,335 |
) |
|
|
(7,288 |
) |
Accounts payable |
|
14,091 |
|
|
|
10,552 |
|
Accrued expenses and other current liabilities |
|
(20,183 |
) |
|
|
5,587 |
|
Other changes in operating assets and liabilities |
|
(912 |
) |
|
|
433 |
|
Net cash provided by (used in) operating activities |
|
10,736 |
|
|
|
74,053 |
|
Investing activities |
|
|
|
||||
Purchases of property, plant and equipment |
|
(9,091 |
) |
|
|
(11,180 |
) |
Business acquisitions, net of cash acquired |
|
(194,393 |
) |
|
|
(252,007 |
) |
Purchases of rental equipment |
|
(5,703 |
) |
|
|
(7,735 |
) |
Proceeds from sale of rental equipment |
|
3,795 |
|
|
|
4,202 |
|
Net cash provided by (used in) investing activities |
|
(205,392 |
) |
|
|
(266,720 |
) |
Financing activities |
|
|
|
||||
Proceeds from revolving lines of credit |
|
166,777 |
|
|
|
174,587 |
|
Payments on revolving lines of credit |
|
(166,496 |
) |
|
|
(295,816 |
) |
Proceeds from term loans |
|
200,000 |
|
|
|
305,000 |
|
Payments on term loans |
|
(22,688 |
) |
|
|
(11,250 |
) |
Deferred financing costs |
|
(2,064 |
) |
|
|
(3,419 |
) |
Proceeds from rights offering, net of offering costs of $1,531 |
|
— |
|
|
|
98,469 |
|
Repurchase of common stock |
|
(2,580 |
) |
|
|
— |
|
Shares repurchased held in treasury |
|
(538 |
) |
|
|
(171 |
) |
Proceeds from employees for share purchases |
|
— |
|
|
|
3,253 |
|
Payment of financing lease principal |
|
(462 |
) |
|
|
(358 |
) |
Payment of earnout |
|
— |
|
|
|
(1,000 |
) |
Net cash provided by (used in) financing activities |
|
171,949 |
|
|
|
269,295 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
(1,151 |
) |
|
|
(209 |
) |
Increase (decrease) in cash, cash equivalents and restricted cash |
|
(23,858 |
) |
|
|
76,419 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
99,625 |
|
|
|
24,740 |
|
Cash, cash equivalents and restricted cash at end of period |
$ |
75,767 |
|
|
$ |
101,159 |
|
Cash and cash equivalents |
$ |
61,344 |
|
|
$ |
80,456 |
|
Restricted cash |
|
14,423 |
|
|
|
20,703 |
|
Total cash, cash equivalents and restricted cash |
$ |
75,767 |
|
|
$ |
101,159 |
|
Distribution Solutions Group, Inc.
Segment Reporting
Change in Reportable Segments: As a result of the Source Atlantic Limited ("Source Atlantic") acquisition, we realigned our reportable segments by adding a new segment with a focus on the Canadian MRO market. The new Canada Branch Division segment includes the results of Source Atlantic and Bolt Supply House ("Bolt"). The results of Bolt had previously been included in our All Other non-reportable segment prior to Q3 2024. The results of the Lawson, TestEquity and Gexpro Services reportable segments did not change. The segment realignment had no impact on our financial condition or results of operations. Prior period segment results have been recast to reflect our new reportable segments.
Distribution Solutions Group, Inc. |
|||||||
Table 1 - Selected Segment Financial Data |
|||||||
(Dollars in thousands) |
|||||||
(Unaudited) |
|||||||
|
|
|
|
||||
|
Three Months Ended |
||||||
|
September 30, |
||||||
|
|
2024 |
|
|
|
2023 |
|
Revenue: |
|
|
|
||||
Lawson Products |
$ |
117,957 |
|
|
$ |
114,477 |
|
Canada Branch Division |
|
39,092 |
|
|
|
13,543 |
|
Gexpro Services |
|
116,141 |
|
|
|
103,232 |
|
TestEquity |
|
195,244 |
|
|
|
207,657 |
|
Intersegment revenue elimination |
|
(415 |
) |
|
|
— |
|
Total |
$ |
468,019 |
|
|
$ |
438,909 |
|
|
|
|
|
||||
Operating income (loss): |
|
|
|
||||
Lawson Products |
$ |
726 |
|
|
$ |
10,643 |
|
Canada Branch Division |
|
2,523 |
|
|
|
1,468 |
|
Gexpro Services |
|
11,543 |
|
|
|
7,332 |
|
TestEquity |
|
4,329 |
|
|
|
(5,027 |
) |
All Other |
|
(174 |
) |
|
|
(1,633 |
) |
Total |
$ |
18,947 |
|
|
$ |
12,783 |
|
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 September 30, 2024 and 2023 and the three months ended June 30, 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 |
||||||||||
|
September 30, 2024 |
|
September 30, 2023 |
|
June 30, 2024 |
||||||
Net income (loss) |
$ |
21,921 |
|
|
$ |
(1,568 |
) |
|
$ |
1,896 |
|
Income tax expense (benefit) |
|
(19,007 |
) |
|
|
990 |
|
|
|
(180 |
) |
Other income (expense), net |
|
15 |
|
|
|
1,133 |
|
|
|
(359 |
) |
Change in fair value of earnout liabilities |
|
858 |
|
|
|
(667 |
) |
|
|
8 |
|
Interest expense |
|
15,160 |
|
|
|
12,895 |
|
|
|
12,793 |
|
Operating income (loss) |
|
18,947 |
|
|
|
12,783 |
|
|
|
14,158 |
|
Depreciation and amortization |
|
18,624 |
|
|
|
17,010 |
|
|
|
18,535 |
|
Stock-based compensation(1) |
|
2,432 |
|
|
|
1,049 |
|
|
|
(307 |
) |
Severance and acquisition related retention expenses(2) |
|
3,568 |
|
|
|
10,478 |
|
|
|
8,313 |
|
Acquisition related costs(3) |
|
2,901 |
|
|
|
(94 |
) |
|
|
3,598 |
|
Inventory step-up(4) |
|
1,126 |
|
|
|
2,150 |
|
|
|
634 |
|
Other non-recurring(5) |
|
1,512 |
|
|
|
327 |
|
|
|
250 |
|
Non-GAAP adjusted EBITDA |
$ |
49,110 |
|
|
$ |
43,703 |
|
|
$ |
45,181 |
|
|
|
|
|
|
|
||||||
Operating income (loss) as a percent of revenue |
|
4.0 |
% |
|
|
2.9 |
% |
|
|
3.2 |
% |
|
|
|
|
|
|
||||||
Adjusted EBITDA as a percent of revenue |
|
10.5 |
% |
|
|
10.0 |
% |
|
|
10.3 |
% |
(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 |
||||||||||||||||||||||
|
September 30, 2024 |
|
September 30, 2023(3)(4) |
|
June 30, 2024 |
||||||||||||||||||
|
Amount |
|
Diluted EPS(2) |
|
Amount |
|
Diluted EPS(2) |
|
Amount |
|
Diluted EPS(2) |
||||||||||||
Net income (loss) |
$ |
21,921 |
|
|
$ |
0.46 |
|
|
$ |
(1,568 |
) |
|
$ |
(0.03 |
) |
|
$ |
1,896 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pretax adjustments: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Stock-based compensation |
|
2,432 |
|
|
|
0.05 |
|
|
|
1,049 |
|
|
|
0.02 |
|
|
|
(307 |
) |
|
|
(0.01 |
) |
Acquisition related costs |
|
2,901 |
|
|
|
0.06 |
|
|
|
(94 |
) |
|
|
— |
|
|
|
3,598 |
|
|
|
0.08 |
|
Amortization of intangible assets |
|
11,972 |
|
|
|
0.25 |
|
|
|
11,308 |
|
|
|
0.24 |
|
|
|
12,206 |
|
|
|
0.26 |
|
Severance and acquisition related retention expenses |
|
3,568 |
|
|
|
0.08 |
|
|
|
10,478 |
|
|
|
0.22 |
|
|
|
8,313 |
|
|
|
0.17 |
|
Change in fair value of earnout liabilities |
|
858 |
|
|
|
0.02 |
|
|
|
(667 |
) |
|
|
(0.01 |
) |
|
|
8 |
|
|
|
— |
|
Inventory step-up |
|
1,126 |
|
|
|
0.02 |
|
|
|
2,150 |
|
|
|
0.05 |
|
|
|
634 |
|
|
|
0.01 |
|
Other non-recurring |
|
1,512 |
|
|
|
0.03 |
|
|
|
327 |
|
|
|
0.01 |
|
|
|
250 |
|
|
|
0.01 |
|
Total pretax adjustments |
|
24,369 |
|
|
|
0.51 |
|
|
|
24,551 |
|
|
|
0.53 |
|
|
|
24,702 |
|
|
|
0.52 |
|
Tax effect on adjustments(1)(3) |
|
(11,210 |
) |
|
|
(0.23 |
) |
|
|
(6,457 |
) |
|
|
(0.14 |
) |
|
|
(7,238 |
) |
|
|
(0.15 |
) |
Deferred tax asset valuation allowance(5) |
|
(17,425 |
) |
|
|
(0.37 |
) |
|
|
— |
|
|
|
— |
|
|
|
(410 |
) |
|
|
(0.01 |
) |
Non-GAAP adjusted net income |
$ |
17,655 |
|
|
$ |
0.37 |
|
|
$ |
16,526 |
|
|
$ |
0.35 |
|
|
$ |
18,950 |
|
|
$ |
0.40 |
|
(1) |
|
The adjustment to the income tax expense (benefit) determined by including the non-GAAP adjustments by jurisdiction |
(2) |
|
Pretax adjustments to diluted EPS calculated on 47.560 million, 46.737 million and 47.624 million diluted shares for the third quarter of 2024 and 2023, and the second 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) |
|
The estimated impact to the deferred tax asset valuation allowance from interest expense limitations under Section 163(j) determined by including the non-GAAP adjustments by jurisdiction |
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 |
|||||||||
|
September 30, |
|
June 30, |
|||||||
|
|
2024 |
|
|
2023 |
|
|
|
2024 |
|
Operating income (loss) |
$ |
18,947 |
|
$ |
12,783 |
|
|
$ |
14,158 |
|
|
|
|
|
|
|
|||||
Gross profit adjustments: |
|
|
|
|
|
|||||
Inventory step-up(1) |
|
1,126 |
|
|
2,150 |
|
|
|
634 |
|
Total gross profit adjustments |
|
1,126 |
|
|
2,150 |
|
|
|
634 |
|
|
|
|
|
|
|
|||||
Selling, general and administrative expenses adjustments: |
|
|
|
|
|
|||||
Acquisition related costs(2) |
|
2,901 |
|
|
(94 |
) |
|
|
3,598 |
|
Amortization of intangible assets(3) |
|
11,972 |
|
|
11,308 |
|
|
|
12,206 |
|
Stock-based compensation(4) |
|
2,432 |
|
|
1,049 |
|
|
|
(307 |
) |
Severance and acquisition related retention expenses(5) |
|
3,568 |
|
|
10,478 |
|
|
|
8,313 |
|
Other non-recurring(6) |
|
1,512 |
|
|
327 |
|
|
|
250 |
|
Total selling, general and administrative adjustments |
|
22,385 |
|
|
23,068 |
|
|
|
24,060 |
|
|
|
|
|
|
|
|||||
Total adjustments |
|
23,511 |
|
|
25,218 |
|
|
|
24,694 |
|
Non-GAAP adjusted operating income |
$ |
42,458 |
|
$ |
38,001 |
|
|
$ |
38,852 |
|
(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 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20241030942492/en/
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
