FORT WORTH, TEXAS, August 1, 2024 - Distribution Solutions Group, Inc. (NASDAQ:DSGR) ("DSG" or the "Company"), a premier specialty distribution company, today announced consolidated results for the second quarter ended June 30, 2024. This press release is supplemented by an earnings presentation at https://investor.distributionsolutionsgroup.com/news/events.

The following represents a summary of certain operating results (unaudited). See the reconciliations of GAAP to non-GAAP measures in Tables 2, 3 and 4.

Bryan King, CEO and Chairman of the Board, said, "Our strategic initiatives are on track, and I am pleased with DSG's quarterly results, marked by 16.3% revenue growth compared to last year and double-digit EBITDA margins of 10.3%. In addition, revenue and EBITDA in the second quarter improved sequentially due to acquisitions and improving performance in our existing businesses. As expected, organic revenues were down in the quarter from a year ago, but improved sequentially by nearly 4% from the first quarter. Our teams executed well this quarter and sustainably moved us in the right direction on all critical initiatives resulting in margin expansion within all three of our verticals. The Lawson MRO vertical had strong performance while continuing to make investments in its sales organization, the Gexpro Services OEM vertical realized continued margin expansion as expected and the TestEquity industrial technology vertical saw margins improve on some end market recovery and the continued integration of Hisco. For the quarter we generated $45.2 million of adjusted EBITDA, sequentially a 25% improvement over the previous quarter.

"We are very excited about our recent announcement to acquire Source Atlantic, which is expected to close in the third quarter. This CAD $250 million business will meaningfully drive DSG's growth by expanding our scale, customer base, and geographic reach and by enhancing our enterprise-wide product offerings. Combining Source Atlantic’s eastern Canadian-focused operations with The Bolt Supply House’s concentration in western Canada positions us as leading MRO player across Canada. In addition to Source Atlantic, our Emergent Safety Supply and S&S Automotive acquisitions completed earlier this year further strengthens DSG’s North American value-added capabilities.

"We remain focused on actively working our pipeline of acquisition targets, incremental margin enhancement initiatives, and cost savings. These efforts, along with some end market recovery, drove DSG’s strong second quarter results. Through our asset-light business model our focus on growing operating cash flows and accelerating returns on invested capital, positions us well to maximize long-term shareholder value," concluded Mr. King.

2024 Second Quarter Summary(1)

•Revenue increased $61.6 million, or 16.3%, to $439.5 million including $81.4 million of incremental revenue from 2023 and 2024 acquisitions. While organic sales declined 5.7% on comparable days, organic sales grew 3.8% over the first quarter of 2024. The sequential sales increase was driven by improving sales in many of DSG's end markets, including Test & Measurement, Renewables, Technology and project-related business.

•Operating income was $14.2 million, net of $12.2 million of non-cash acquired intangible amortization and $12.5 million of non-recurring severance and acquisition-related retention costs, stock-based compensation, acquisition-related costs and other non-recurring items. This compares to operating income of $13.8 million in the prior year quarter. Adjusted operating income, excluding these non-cash and non-recurring items, was $38.9 million in the current quarter compared to $34.9 million in the year-ago quarter and $29.8 million in the first quarter of 2024.

•Diluted income per share was $0.04 for the quarter compared to diluted income per share of $0.07 in the year-ago quarter based on higher depreciation and amortization expenses and non-recurring severance and acquisition-related retention costs in the current quarter. Non-GAAP adjusted diluted earnings per share was $0.40 compared to $0.42 for the same period a year ago and $0.25 for the first quarter of 2024.

•Adjusted EBITDA was $45.2 million, a 10.3% margin compared to $40.1 million, a 10.6% margin in the prior year quarter. Sequentially, adjusted EBITDA grew $9.1 million or 25.3% from the first quarter of 2024; and increased as a percent of sales by 160bps.

•The Company ended the second quarter with total liquidity of $209.9 million, consisting of $56.9 million of cash (restricted and unrestricted) and $153.0 million of availability under its credit facility with net debt leverage of 3.2x. Cash generated from operations was $21.4 million for the quarter. Uses of cash in the second quarter included net capital expenditures of $4.0 million and share repurchases of $1.7 million.

•Lawson completed the acquisition of S&S Automotive in May 2024.

(1) See reconciliation of GAAP to non-GAAP measures in tables 2, 3 and 4.

Share and per share data for all periods presented reflect two-for-one stock split.

Conference Call

Distribution Solutions Group, Inc. will conduct a conference call with investors to discuss 2024 second quarter results at 9:00 a.m. Eastern Time on August 1, 2024. The conference call is available by direct dial at 1-888-506-0062 in the U.S. or 1-973-528-0011 from outside of the U.S. The participant access code is 258432. A replay of the conference call will be available by telephone approximately two hours after completion of the call through August 15, 2024. Callers can access the replay by dialing 1-877-481-4010 in the U.S. or 1-919-882-2331 outside the U.S. The passcode for the replay is 50812. A streaming audio of the call and an archived replay will also be available on the investor relations page of Distribution Solutions Group's website. Presentations may be supplemented by a series of slides appearing on the company's investor relations home page at https://investor.distributionsolutionsgroup.com/news/events.

About Distribution Solutions Group, Inc.

Distribution Solutions Group ("DSG") is a premier multi-platform specialty distribution company providing high touch, value-added distribution solutions to the maintenance, repair & operations (MRO), the original equipment manufacturer (OEM) and the industrial technologies markets. DSG was formed through the strategic combination of Lawson Products, a leader in MRO distribution of C-parts, Gexpro Services, a leading global supply chain services provider to manufacturing customers, and TestEquity, a leader in electronic test & measurement solutions.

Through its collective businesses, DSG is dedicated to helping customers lower their total cost of operation by increasing productivity and efficiency with the right products, expert technical support and fast, reliable delivery to be a one-stop solution provider. DSG serves approximately 180,000 customers in several diverse end markets supported by approximately 3,700 dedicated employees and strong vendor partnerships. DSG ships from strategically located distribution and service centers to customers in North America, Europe, Asia, South America and the Middle East.

For more information on Distribution Solutions Group please visit www.distributionsolutionsgroup.com.

This release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Terms such as "aim," "anticipate," "believe," "contemplates," "continues," "could," "ensure," "estimate," "expect," "forecasts," "if," "intend," "likely," "may," "might," "objective," "outlook," "plan," "positioned," "potential," "predict," "probable," "project," "shall," "should," "strategy," "will," "would," and variations of them and other words and terms of similar meaning and expression (and the negatives of such words and terms) are intended to identify forward-looking statements. Forward-looking statements can also be identified by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements are based on current expectations and involve inherent risks, uncertainties and assumptions, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. DSG can give no assurance that any goal or plan set forth in forward-looking statements can be achieved and DSG cautions readers not to place undue reliance on such statements, which speak only as of the date made. DSG undertakes no obligation to release publicly any revisions to forward-looking statements as a result of new information, future events or otherwise. Actual results may differ materially from those projected as a result of certain risks and uncertainties. Certain risks associated with DSG's business are also discussed from time to time in the reports DSG files with the SEC, including DSG's Annual Report on Form 10-K, DSG's Quarterly Reports on Form 10-Q and DSG's Current Reports on Form 8-K, which should be reviewed carefully. In addition, the following factors, among others, could cause actual outcomes and results to differ materially from those discussed in the forward-looking statements: (i) unanticipated difficulties, expenditures or any problems arising in connection with or after the combination of the businesses of Lawson Products, TestEquity and Gexpro Services (the "merger"), which may result in DSG not operating as effectively and efficiently as expected; (ii) the risk that stockholder litigation in connection with the merger or any other acquisition or business combination completed by DSG or any of its subsidiaries results in significant costs of defense, indemnification and liability; and (iii) the risks that DSG may encounter difficulties integrating the business of DSG with the business of other companies that DSG has acquired or may acquire or has otherwise combined with or may otherwise combine with, that DSG may not achieve the anticipated synergies contemplated with respect to any such business or transactions and that certain assumptions with respect to such business or transactions could prove to be inaccurate.

(Dollars in thousands, except share data)

(Unaudited)

(Dollars in thousands, except per share data)

(Unaudited)

(Dollars in thousands)

(Unaudited)

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, the Company's management believes that certain non-GAAP financial measures may provide users of this financial information with additional meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflections of underlying trends of the business because they provide a comparison of historical information that excludes certain non-operational or non-cash items that impact the overall comparability. See Tables below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three months ended June 30, 2024 and 2023 and the three months ended March 31, 2024. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.

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

(2)Includes severance expense for actions taken in 2024 and 2023 not related to a formal restructuring plan and acquisition related retention expenses for the Hisco and S&S Automotive acquisitions

(3)Transaction and integration costs related to acquisitions

(4)Inventory fair value step-up adjustment for acquisition accounting related to acquisitions completed by Lawson Products and TestEquity

(5)Other non-recurring costs consist of certain non-recurring strategic projects and other non-recurring items

Distribution Solutions Group, Inc.
Table 3 - Reconciliation of GAAP Net Income (Loss) and GAAP Diluted EPS to Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted EPS
(Dollars in thousands, except per share data)
(Unaudited)
			Three Months Ended
			June 30, 2024												June 30, 2023(3)(4)												March 31, 2024
			Amount						Diluted EPS(2)						Amount						Diluted EPS(2)						Amount						Diluted EPS(2)
Net income (loss)			$	1,896					$	0.04					$	3,024					$	0.07					$	(5,224)					$	(0.11)
Pretax adjustments:
Stock-based compensation			(307)						(0.01)						2,188						0.05						2,198						0.05
Acquisition related costs			3,598						0.08						5,058						0.11						1,954						0.04
Amortization of intangible assets			12,206						0.26						9,406						0.21						10,746						0.23
Severance and acquisition related retention expenses			8,313						0.17						2,437						0.06						10,716						0.23
Change in fair value of earnout liabilities			8						—						(36)						—						(5)						—
Inventory step-up			634						0.01						716						0.02						—						—
Other non-recurring			250						0.01						1,341						0.03						1,364						0.03
Total pretax adjustments			24,702						0.52						21,110						0.48						26,973						0.58
Tax effect on adjustments(1)(3)			(7,238)						(0.15)						(5,552)						(0.13)						(7,334)						(0.16)
Deferred tax asset valuation allowance(5)			(410)						(0.01)						—						—						(2,696)						(0.06)
Non-GAAP adjusted net income			$	18,950					$	0.40					$	18,582					$	0.42					$	11,719					$	0.25

(1)The estimated tax effect on the adjustments is determined by applying the jurisdictional rate of the originating territory of the non-GAAP adjustments

(2)Pretax adjustments to diluted EPS calculated on 47.624 million, 43.995 million and 46.777 million diluted shares for the second quarter of 2024 and 2023,and the first quarter of 2024, respectively

(3)In the fourth quarter of 2023, the Company changed the treatment of amortization of intangible assets and the deferred tax asset valuation allowance to be included in the calculation of Non-GAAP adjusted net income and Non-GAAP adjusted diluted EPS. The calculation of the tax effect on adjustments was revised to consider the jurisdictional rate of the originating territory of the non-GAAP adjustments. Prior periods have been adjusted to conform to current period presentation.

(4)Share and per share data for all periods presented reflect two-for-one stock split

(5)Represents expense related to the deferred tax asset valuation allowance from interest expense limitations under Section 163(j)

(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

Distribution Solutions Group, Inc.

Ronald J. Knutson

Executive Vice President, Chief Financial Officer and Treasurer

1-888-611-9888

Three Part Advisors, LLC

Steven Hooser / Sandy Martin

214-872-2710 / 214-616-2207