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Distribution Solutions Group Announces Third Quarter 2022 Results

Strong Operating Results: Sales of $347 Million; Organic Sales Growth of 15%

Board Increases Share Repurchase Plan to $12.5 Million

Distribution Solutions Group, Inc. (NASDAQ:DSGR) ("DSG" or the "Company"), a leading specialty distributor providing high touch, value-added distribution solutions to the maintenance, repair & operations (MRO), original equipment manufacturer (OEM) and industrial technologies markets today announced consolidated results for the third quarter ended September 30, 2022. Presentations are supplemented by a series of slides appearing on the Company’s investor relations home page at www.distributionsolutionsgroup.com.

Note Regarding Reverse Merger Accounting

As a result of the April 1, 2022 merger of Lawson Products, Gexpro Services and TestEquity, our 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 and nine months ended September 30, 2021 include the combined results of Gexpro Services and TestEquity. GAAP results for the three months ended September 30, 2022 include the results of Lawson Products, Gexpro Services and TestEquity and GAAP results for the nine months ended September 30, 2022 include the results of Lawson Products for the six months after the April 1, 2022 merger closing date as well as the results of Gexpro Services and TestEquity for the full nine months.

The following represents a summary of certain operating results (unaudited). See reconciliation of GAAP to non-GAAP measures in table 2.

 

Three Months Ended

 

 

 

September 30,

 

 

(Dollars in thousands)

2022

 

2021

 

% Change

GAAP Net Sales

$

347,151

 

 

$

132,090

 

 

162.8

%

Pre-Merger Sales(1)

 

 

 

 

105,570

 

 

N/M

 

Adjusted Net Sales

 

347,151

 

 

 

237,660

 

 

46.1

%

 

 

 

 

 

 

GAAP Operating Income

 

22,027

 

 

 

5,491

 

 

301.1

%

Pre-Merger Operating Income(1)

 

 

 

 

4,620

 

 

N/M

 

Adjusted Operating Income

 

22,027

 

 

 

10,111

 

 

117.9

%

 

 

 

 

 

 

Adjusted EBITDA

$

34,700

 

 

$

21,221

 

 

63.5

%

 

 

 

 

 

 

Operating income as a percent of GAAP Net Sales

 

6.3

%

 

 

4.2

%

 

 

Adjusted EBITDA as a percent of Adjusted Net Sales

 

10.0

%

 

 

8.9

%

 

 

(1)

Represents Lawson Products pre-merger sales and operating income

Bryan King, CEO and Chairman of the Board, said, “We are excited to report strong third quarter results for DSG. These results support our confidence in the strategic combination of Lawson Products, Gexpro Services and TestEquity earlier this year. Each of the operating companies had strong performance during the quarter on significant sales growth over the year ago quarter with solid sequential sales increases over the second quarter of 2022. The leadership teams of all three companies are demonstrating outstanding focus on sales growth, leveraging best practices and driving incremental cost synergies. We are excited about the future of these best-in-class specialty distributors and believe we can drive significant value creation for all shareholders.

“Third quarter net sales grew to $347.2 million including sales from acquisitions and organic growth of 15.4% through price and volume increases. This, in turn, grew our adjusted EBITDA by $13.5 million from a year ago, to $34.7 million or 10.0% of adjusted net sales. While Q3 is our seasonally strongest quarter, it was negatively impacted by higher compensation and healthcare costs. We continue to focus on improving operating margins across the three operating companies.

"While the global market outlook remains cautious, we are investing in growth and in high ROIC projects to improve our return profile and strengthen our competitive positioning. Although demand is strong today, we are managing our business to rapidly adapt to changing market conditions. We continue to build our leadership positions in the specialty distribution industry, and believe that our disciplined execution of planned strategies will position us well to capture market share in this environment. We plan to prudently manage the business for growth, returns and cash flow as we maximize long-term value for shareholders,” concluded Mr. King.

Third Quarter Highlights (1)

  • GAAP net sales were $347.2 million, an increase of $215.1 million or 162.8%. Non-GAAP adjusted net sales increased approximately $109.5 million or 46.1% driven by organic growth of 15.4% and $68.4 million of additional sales from companies acquired in 2021 and 2022 other than Lawson Products.
  • Reported operating income was $22.0 million or 6.3% of net sales including merger related costs, an inventory net realizable value adjustment and amortization expense as a result of the reverse merger acquisition accounting. This represents an improvement of $16.5 million over the prior year. Non-GAAP adjusted EBITDA increased by $13.5 million from the prior year period to $34.7 million or 10.0% of adjusted net sales.
  • Earnings per diluted share was $0.84 for the quarter compared to $0.12 in the year ago quarter. Non-GAAP diluted earnings per share was $0.64 in the third quarter 2022 compared to $0.25 for the same period a year ago 2021.
  • The Company ended the quarter with $25.2 million of cash on hand and $75.1 million of availability under its credit facility.
  • In November, the Board authorized an increase of the existing share buy-back program from $7.5 million to $12.5 million. During the quarter, the Company repurchased approximately 54,000 shares of its common stock for an aggregate price of $1.9 million which leaves $7.6 million available under its expanded authorized share repurchase plan.



    (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 (unaudited). See reconciliation of GAAP to non-GAAP measures in table 2.

 

Lawson Products

 

Gexpro Services

 

TestEquity

 

Other

 

Consolidated DSG

(Dollars in thousands)

Q3 2022

Q3 2021

 

Q3 2022

Q3 2021

 

Q3 2022

Q3 2021

 

Q3 2022

Q3 2021

 

Q3 2022

Q3 2021

GAAP Net Sales

$

109,418

 

$

 

 

$

103,749

 

$

64,264

 

 

$

116,709

 

$

67,826

 

 

$

17,275

 

$

 

 

$

347,151

 

$

132,090

 

Pre-Merger Sales(1)

 

 

 

93,686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,884

 

 

 

 

 

105,570

 

Adjusted Net Sales

$

109,418

 

$

93,686

 

 

$

103,749

 

$

64,264

 

 

$

116,709

 

$

67,826

 

 

$

17,275

 

$

11,884

 

 

$

347,151

 

$

237,660

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating Income

$

5,352

 

$

 

 

$

7,992

 

$

4,437

 

 

$

7,576

 

$

1,054

 

 

$

1,107

 

$

 

 

$

22,027

 

$

5,491

 

Pre-Merger Operating Income(1)

 

 

 

3,488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,132

 

 

 

 

 

4,620

 

Adjusted Operating Income

 

5,352

 

 

3,488

 

 

 

7,992

 

 

4,437

 

 

 

7,576

 

 

1,054

 

 

 

1,107

 

 

1,132

 

 

 

22,027

 

 

10,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

9,670

 

$

7,560

 

 

$

12,485

 

$

6,308

 

 

$

10,122

 

$

5,524

 

 

$

2,423

 

$

1,829

 

 

$

34,700

 

$

21,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income as a percent of GAAP Net Sales

 

4.9

%

 

%

 

 

7.7

%

 

6.9

%

 

 

6.5

%

 

1.6

%

 

 

6.4

%

 

%

 

 

6.3

%

 

4.2

%

Adjusted EBITDA as a percent of Adjusted Net Sales

 

8.8

%

 

8.1

%

 

 

12.0

%

 

9.8

%

 

 

8.7

%

 

8.1

%

 

 

14.0

%

 

15.4

%

 

 

10.0

%

 

8.9

%

(1)

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

Conference Call

Distribution Solutions Group, Inc. will conduct a conference call with investors to discuss third quarter 2022 results at 9:00 a.m. Eastern Time on November 3, 2022. 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 648011. A replay of the conference call will be available by telephone approximately two hours after completion of the call through November 17, 2022. 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 46486#. 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 www.distributionsolutionsgroup.com.

About Distribution Solutions Group, Inc.

Distribution Solutions Group (“DSG”) is a best-in-class 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 120,000+ long-standing customers in several diverse end markets supported by more than 3,000 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 (formerly Lawson Products, Inc.) Annual Report on Form 10-K for the fiscal year ended December 31, 2021, 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) whether or not the terms of the earnout provisions in either of the merger agreements will be satisfied such that DSG would be required to issue additional shares of common stock in connection with the mergers; (ii) unanticipated difficulties or expenditures relating to the mergers; (iii) the risk that stockholder litigation in connection with the mergers results in significant costs of defense, indemnification and liability; and (iv) 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 to any forward-looking statements whether as a result of new information, future events or otherwise.

-TABLES FOLLOW-

Distribution Solutions Group, Inc.

Condensed Consolidated Balance Sheets

(Dollars in thousands, except share data)

(Unaudited)

 

 

September 30,

2022

 

December 31,

2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

25,171

 

 

$

14,671

 

Restricted cash

 

181

 

 

 

 

Accounts receivable, less allowance for doubtful accounts

 

173,083

 

 

 

80,574

 

Inventories, net

 

260,840

 

 

 

132,717

 

Prepaid expenses and other current assets

 

26,769

 

 

 

8,098

 

Total current assets

 

486,044

 

 

 

236,060

 

Property, plant and equipment, net

 

64,765

 

 

 

9,079

 

Rental equipment, net

 

25,489

 

 

 

24,727

 

Goodwill

 

351,147

 

 

 

106,145

 

Deferred tax asset

 

201

 

 

 

266

 

Intangible assets, net

 

236,869

 

 

 

96,608

 

Cash value of life insurance

 

17,198

 

 

 

 

Right of use assets

 

44,682

 

 

 

19,662

 

Other assets

 

6,320

 

 

 

747

 

Total assets

$

1,232,715

 

 

$

493,294

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

96,886

 

 

$

47,958

 

Current portion of long-term debt

 

16,121

 

 

 

134,405

 

Current portion of lease obligation

 

9,994

 

 

 

4,641

 

Earnout derivative liability

 

12,700

 

 

 

 

Related party payables

 

 

 

 

4,813

 

Accrued expenses and other current liabilities

 

58,663

 

 

 

23,126

 

Total current liabilities

 

194,364

 

 

 

214,943

 

Long-term debt, less current portion, net

 

397,461

 

 

 

93,134

 

Security bonus plan

 

9,958

 

 

 

 

Deferred compensation

 

10,248

 

 

 

 

Lease obligation

 

38,169

 

 

 

16,132

 

Deferred tax liability

 

32,258

 

 

 

2,742

 

Other liabilities

 

3,510

 

 

 

574

 

Total liabilities

 

685,968

 

 

 

327,525

 

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 - 19,712,137 and 10,542,333 shares, respectively

Outstanding - 19,400,005 and 10,294,824 shares, respectively

 

19,424

 

 

 

10,318

 

Capital in excess of par value

 

574,176

 

 

 

197,057

 

Retained deficit

 

(23,853

)

 

 

(33,142

)

Treasury stock – 312,132 and 247,509 shares, respectively

 

(12,475

)

 

 

(10,033

)

Accumulated other comprehensive (loss) income

 

(10,525

)

 

 

1,569

 

Total stockholders’ equity

 

546,747

 

 

 

165,769

 

Total liabilities and stockholders’ equity

$

1,232,715

 

 

$

493,294

 

Distribution Solutions Group, Inc.

Condensed Consolidated Statements of Income

(Dollars in thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

Revenue

$

347,151

 

 

$

132,090

 

 

$

822,572

 

 

$

391,069

 

Cost of goods sold

 

227,984

 

 

 

97,252

 

 

 

547,966

 

 

 

292,243

 

Gross profit

 

119,167

 

 

 

34,838

 

 

 

274,606

 

 

 

98,826

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

97,140

 

 

 

29,347

 

 

 

245,478

 

 

 

85,614

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

22,027

 

 

 

5,491

 

 

 

29,128

 

 

 

13,212

 

 

 

 

 

 

 

 

 

Interest expense

 

(6,097

)

 

 

(3,976

)

 

 

(16,704

)

 

 

(12,482

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

(3,395

)

 

 

 

Change in fair value of earnout liabilities

 

9,641

 

 

 

 

 

 

3,948

 

 

 

 

Other income (expense), net

 

(550

)

 

 

(74

)

 

 

224

 

 

 

(328

)

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

25,021

 

 

 

1,441

 

 

 

13,201

 

 

 

402

 

Income tax expense (benefit)

 

8,480

 

 

 

216

 

 

 

3,912

 

 

 

606

 

 

 

 

 

 

 

 

 

Net income (loss)

$

16,541

 

 

$

1,225

 

 

$

9,289

 

 

$

(204

)

 

 

 

 

 

 

 

 

Basic income (loss) per share of common stock

$

0.85

 

 

$

0.12

 

 

$

0.54

 

 

$

(0.02

)

 

 

 

 

 

 

 

 

Diluted income (loss) per share of common stock

$

0.84

 

 

$

0.12

 

 

$

0.53

 

 

$

(0.02

)

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 

 

 

 

 

 

Net income (loss)

$

16,541

 

 

$

1,225

 

 

$

9,289

 

 

$

(204

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

(9,774

)

 

 

175

 

 

 

(12,094

)

 

 

172

 

Comprehensive income (loss)

$

6,767

 

 

$

1,400

 

 

$

(2,805

)

 

$

(32

)

Distribution Solutions Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

 

Nine Months Ended September 30,

 

2022

 

2021

 

 

 

 

Operating activities

 

 

 

Net income (loss)

$

9,289

 

 

$

(204

)

Adjustments to reconcile to net cash used in operating activities:

 

 

 

Depreciation and amortization

 

31,314

 

 

 

13,649

 

Amortization of debt issue costs

 

1,419

 

 

 

899

 

Extinguishment of debt

 

3,395

 

 

 

 

Stock-based compensation

 

445

 

 

 

 

Change in fair value of earnout liability

 

(3,948

)

 

 

 

Gain on sale of rental equipment

 

(2,463

)

 

 

(1,918

)

Charge for step-up of acquired inventory

 

2,703

 

 

 

 

Net realizable value and reserve adjustment for obsolete and excess inventory

 

5,551

 

 

 

(585

)

Bad debt expense

 

564

 

 

 

1,136

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

Accounts receivable

 

(30,795

)

 

 

5,740

 

Inventories, net

 

(43,857

)

 

 

2,770

 

Prepaid expenses and other current assets

 

(2,224

)

 

 

(953

)

Accounts payable

 

1,687

 

 

 

(6,857

)

Accrued expenses and other current liabilities

 

1,316

 

 

 

982

 

Other changes in operating assets and liabilities

 

6,324

 

 

 

2,478

 

Net cash provided by (used in) operating activities

 

(19,280

)

 

 

17,137

 

Investing activities

 

 

 

Purchases of property, plant and equipment

 

(4,954

)

 

 

(2,907

)

Business acquisitions, net of cash acquired

 

(113,681

)

 

 

(19,721

)

Purchases of rental equipment

 

(7,913

)

 

 

(8,246

)

Proceeds from sale of rental equipment

 

5,998

 

 

 

3,899

 

Net cash provided by (used in) investing activities

 

(120,550

)

 

 

(26,975

)

Financing activities

 

 

 

Proceeds from revolving lines of credit

 

302,044

 

 

 

20,500

 

Payments on revolving lines of credit

 

(237,370

)

 

 

(11,200

)

Proceeds from term loans

 

445,630

 

 

 

 

Payments on term loans

 

(343,662

)

 

 

(7,321

)

Deferred financing costs

 

(11,956

)

 

 

 

Capital contribution

 

 

 

 

9,233

 

Repurchase of common stock

 

(1,940

)

 

 

 

Shares repurchased held in treasury

 

(469

)

 

 

 

Payment of financing lease principal

 

(457

)

 

 

 

Net cash provided by (used in) financing activities

 

151,820

 

 

 

11,212

 

Effect of exchange rate changes on cash and cash equivalents

 

(1,309

)

 

 

188

 

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

 

10,681

 

 

 

1,562

 

Cash, cash equivalents and restricted cash at beginning of period

 

14,671

 

 

 

10,399

 

Cash, cash equivalents and restricted cash at end of period

$

25,352

 

 

$

11,961

 

Cash and cash equivalents

$

25,171

 

 

$

11,961

 

Restricted cash

 

181

 

 

 

 

Total cash, cash equivalents and restricted cash

$

25,352

 

 

$

11,961

 

Distribution Solutions Group, Inc.

Table 1 - Selected Segment Financial Data

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

Three Months Ended

 

September 30,

 

2022

 

2021

Net Sales:

 

 

 

Lawson

$

109,418

 

$

Gexpro Services

 

103,749

 

 

64,264

TestEquity

 

116,709

 

 

67,826

Other

 

17,275

 

 

Total

$

347,151

 

$

132,090

 

 

 

 

Operating Income:

 

 

 

Lawson

$

5,352

 

$

Gexpro Services

 

7,992

 

 

4,437

TestEquity

 

7,576

 

 

1,054

Other

 

1,107

 

 

Total

$

22,027

 

$

5,491

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 reflection of underlying trends of the business because they provide a comparison of historical information that includes for the three months ended September 30, 2021 certain results of pre-merger Lawson Products and excludes 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 September 30, 2022 and 2021. 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 Sales to Non-GAAP Adjusted Net Sales and

GAAP Operating Income to Non-GAAP Adjusted EBITDA

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lawson Products

 

Gexpro Services

 

TestEquity

 

Other

 

Consolidated DSG

 

Q3 2022

Q3 2021

 

Q3 2022

Q3 2021

 

Q3 2022

Q3 2021

 

Q3 2022

Q3 2021

 

Q3 2022

Q3 2021

GAAP Net Sales

$

109,418

 

$

 

 

$

103,749

 

$

64,264

 

 

$

116,709

 

$

67,826

 

 

$

17,275

 

$

 

 

$

347,151

 

$

132,090

 

Pre-Merger Sales(1)

 

 

 

93,686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,884

 

 

 

 

 

105,570

 

Adjusted Net Sales

$

109,418

 

$

93,686

 

 

$

103,749

 

$

64,264

 

 

$

116,709

 

$

67,826

 

 

$

17,275

 

$

11,884

 

 

$

347,151

 

$

237,660

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating Income

$

5,352

 

$

 

 

$

7,992

 

$

4,437

 

 

$

7,576

 

$

1,054

 

 

$

1,107

 

$

 

 

$

22,027

 

$

5,491

 

Pre-Merger Operating Income(1)

 

 

 

3,488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,132

 

 

 

 

 

4,620

 

Adjusted Operating Income

 

5,352

 

 

3,488

 

 

 

7,992

 

 

4,437

 

 

 

7,576

 

 

1,054

 

 

 

1,107

 

 

1,132

 

 

 

22,027

 

 

10,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

2,009

 

 

1,354

 

 

 

4,065

 

 

1,271

 

 

 

1,896

 

 

3,458

 

 

 

1,009

 

 

697

 

 

 

8,979

 

 

6,780

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger/integration costs(2)

 

1,556

 

 

3,223

 

 

 

664

 

 

385

 

 

 

144

 

 

245

 

 

 

 

 

 

 

 

2,364

 

 

3,853

 

Stock-based compensation(3)

 

(3,568

)

 

(1,171

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,568

)

 

(1,171

)

Severance costs(4)

 

763

 

 

241

 

 

 

 

 

7

 

 

 

178

 

 

8

 

 

 

3

 

 

 

 

 

944

 

 

256

 

Acquisition related costs(5)

 

 

 

425

 

 

 

(290

)

 

3

 

 

 

328

 

 

759

 

 

 

 

 

 

 

 

38

 

 

1,187

 

Inventory net realizable value adjustment(6)

 

1,737

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,737

 

 

 

Inventory step-up(7)

 

778

 

 

 

 

 

 

 

118

 

 

 

 

 

 

 

 

304

 

 

 

 

 

1,082

 

 

118

 

Other non-recurring(8)

 

1,043

 

 

 

 

 

54

 

 

87

 

 

 

 

 

 

 

 

 

 

 

 

 

1,097

 

 

87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

9,670

 

$

7,560

 

 

$

12,485

 

$

6,308

 

 

$

10,122

 

$

5,524

 

 

$

2,423

 

$

1,829

 

 

$

34,700

 

$

21,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income as a percent of GAAP Net Sales

 

4.9

%

 

%

 

 

7.7

%

 

6.9

%

 

 

6.5

%

 

1.6

%

 

 

6.4

%

 

%

 

 

6.3

%

 

4.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA as a percent of GAAP Net Sales

 

8.8

%

 

%

 

 

12.0

%

 

9.8

%

 

 

8.7

%

 

8.1

%

 

 

14.0

%

 

%

 

 

10.0

%

 

16.1

%

Adjusted EBITDA as a percent of Adjusted Net Sales

 

8.8

%

 

8.1

%

 

 

12.0

%

 

9.8

%

 

 

8.7

%

 

8.1

%

 

 

14.0

%

 

15.4

%

 

 

10.0

%

 

8.9

%

(1)

Represents Lawson Products pre-merger sales 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 2022 and 2021

(5)

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

(6)

Inventory net realizable value adjustment recorded to reduce inventory related to discontinued products where the anticipated net realizable value was lower than the cost reflected in the Company's records

(7)

Inventory fair value step-up adjustments resulting from the reverse merger acquisition accounting for Lawson Products and acquisition accounting for additional acquisitions completed by Gexpro Services

(8)

Other non-recurring costs consists of sales force optimization and other non-recurring items

Distribution Solutions Group, Inc.

Table 3 - Reconciliation of GAAP Net Income (Loss) and Diluted EPS to

Non-GAAP Net Income and Adjusted Diluted EPS

(Dollars in thousands)

(Unaudited)

 

 

 

Three Months Ended

 

September 30, 2022

 

September 30, 2021

 

Amount

 

Diluted EPS(2)

 

Amount

 

Diluted EPS(2)

Net income as reported per GAAP

$

16,541

 

 

$

0.84

 

 

$

1,225

 

 

$

0.12

 

 

 

 

 

 

 

 

 

Pretax adjustments:

 

 

 

 

 

 

 

Change in fair value of earnout liability

 

(9,641

)

 

 

(0.49

)

 

 

 

 

 

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

Merger/integration costs

 

2,364

 

 

 

0.12

 

 

 

630

 

 

 

0.06

 

Stock-based compensation

 

(3,568

)

 

 

(0.18

)

 

 

 

 

 

 

Severance costs

 

944

 

 

 

0.05

 

 

 

15

 

 

 

 

Acquisition related costs

 

38

 

 

 

 

 

 

762

 

 

 

0.07

 

Inventory net realizable value adjustment

 

1,737

 

 

 

0.09

 

 

 

 

 

 

 

Inventory step-up

 

1,082

 

 

 

0.06

 

 

 

118

 

 

 

0.01

 

Other non-recurring

 

1,097

 

 

 

0.06

 

 

 

87

 

 

 

0.01

 

Total pretax adjustments

 

(5,947

)

 

 

(0.30

)

 

 

1,612

 

 

 

0.15

 

Tax effect on adjustments(1)

 

2,016

 

 

 

0.10

 

 

 

(242

)

 

 

(0.02

)

Total adjustments, net of tax

 

(3,931

)

 

 

(0.20

)

 

 

1,370

 

 

 

0.13

 

Non-GAAP adjusted net income

$

12,610

 

 

$

0.64

 

 

$

2,595

 

 

$

0.25

 

(1)

Tax effected at quarterly tax rate of 33.9% and 15.0% for the three months ended September 30, 2022 and 2021, respectively.

(2)

Pretax adjustments to diluted EPS calculated on 19.653 million and 10.568 million diluted shares for the third quarter of 2022 and 2021, respectively.

 

Contacts

Investor Relations:

Distribution Solutions Group, Inc.

Ronald J. Knutson

Executive Vice President and Chief Financial Officer

773-304-5665

Investor Relations Contacts:

Three Part Advisors, LLC

Steven Hooser or Sandy Martin

214-872-2710

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