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Distribution Solutions Group Announces 2022 Fourth Quarter and Full Year Results

Reported Full Year Revenue of $1.2 Billion

Strong Q4 Results: Organic Sales Growth of 17%

Distribution Solutions Group, Inc. (NASDAQ:DSGR) ("DSG" or the "Company"), a premier, multi-platform distribution company 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 fourth quarter and full year ended December 31, 2022. This press release is supplemented by an earnings slide deck 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 strategic combination 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 twelve months ended December 31, 2021 include the combined results of Gexpro Services and TestEquity, GAAP results for the three months ended December 31, 2022 include the results of Lawson Products, Gexpro Services and TestEquity and GAAP results for the year ended December 31, 2022 include the results of Lawson Products for the nine months after the April 1, 2022 merger closing date as well as the results of Gexpro Services and TestEquity for the full twelve months.

The following represents a summary of certain operating results (unaudited). See reconciliation of GAAP to non-GAAP measures in tables 2 and 3.

 

Three Months Ended

 

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

 

December 31,

 

 

(Dollars in thousands)

 

2022

 

 

 

2021

 

 

% Change

 

 

2022

 

 

 

2021

 

 

% Change

GAAP Revenue

$

328,850

 

 

$

129,221

 

 

154.5

%

 

$

1,151,422

 

 

$

520,290

 

 

121.3

%

Pre-Merger Revenue(1)

 

 

 

 

102,067

 

 

N/M

 

 

 

117,877

 

 

 

417,733

 

 

N/M

 

Adjusted Revenue

 

328,850

 

 

 

231,288

 

 

42.2

%

 

 

1,269,299

 

 

 

938,023

 

 

35.3

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating Income

 

12,658

 

 

 

(1,791

)

 

N/M

 

 

 

41,786

 

 

 

11,421

 

 

265.9

%

Pre-Merger Operating Income(1)

 

 

 

 

(825

)

 

N/M

 

 

 

12,076

 

 

 

11,987

 

 

0.7

%

Adjusted Operating Income

 

12,658

 

 

 

(2,616

)

 

N/M

 

 

 

53,862

 

 

 

23,408

 

 

130.1

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

34,003

 

 

$

17,657

 

 

92.6

%

 

$

123,028

 

 

$

75,219

 

 

63.6

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating income as a percent of GAAP Revenue

 

3.8

%

 

 

(1.4

)%

 

 

 

 

3.6

%

 

 

2.2

%

 

 

Adjusted EBITDA as a percent of Adjusted Revenue

 

10.3

%

 

 

7.6

%

 

 

 

 

9.7

%

 

 

8.0

%

 

 

(1)

Represents Lawson Products pre-merger revenue and operating income

Bryan King, CEO and Chairman of the Board, said, “We are pleased with fourth quarter results that exceeded expectations. Our continued topline growth and sequential improvement in margins further supports our strategic decision to combine Lawson Products, Gexpro Services and TestEquity. While macroeconomic uncertainties remain, we are laser-focused on driving greater returns on cash flow through a combination of organic growth, strategic acquisitions and operational efficiencies. We believe that our disciplined approach to capital allocation through our asset light model coupled with our strengthening balance sheet positions us to further generate meaningful returns and cash flow in 2023.

“Fourth quarter revenue grew to nearly $329 million, consisting of organic growth of 16.7% as well as revenue from acquisitions. Fourth quarter Adjusted EBITDA grew $16.3 million over a year ago to $34.0 million or 10.3% of adjusted revenue, with an expansion in margins over the third quarter on fewer selling days. On a full year basis, we realized strong comparable adjusted revenue growth of over 35% and adjusted margin expansion in terms of dollars and percentage. I want to congratulate our leadership teams for successfully completing five acquisitions in 2022, as well as realizing sequential margin expansion as the year developed," concluded Mr. King.

Fourth Quarter Highlights (1)

  • GAAP revenue was $328.9 million, an increase of $199.6 million or 154.5%, which included $60.2 million of additional revenue from companies acquired in 2021 and 2022 other than Lawson Products.
  • Non-GAAP adjusted revenue, which in the fourth quarter of 2021 includes the pre-merger revenue of Lawson Products, increased approximately $97.6 million or 42.2% to $328.9 million. This improvement was driven by organic growth of 16.7% and revenue from companies acquired in 2021 and 2022 (other than Lawson Products).
  • Reported operating income increased by $14.4 million from the prior year period to $12.7 million or 3.8% of GAAP revenue.
  • Diluted loss per share was $0.10 for the quarter compared to a diluted loss per share of $0.47 in the year ago quarter. Non-GAAP diluted earnings per share was $0.25 in the fourth quarter 2022 compared to $0.15 for the same period a year ago.
  • Non-GAAP adjusted EBITDA increased by $16.3 million from the prior year period to $34.0 million or 10.3% of non-GAAP adjusted revenue.
  • In November, the Board authorized an increase of the existing share buy-back program from $7.5 million to $12.5 million. During 2022, the Company repurchased approximately 54,000 shares of its common stock for an aggregate price of $1.9 million on top of $3.0 million previously repurchased 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 4.

Full Year Highlights (2)

  • GAAP revenue was $1.15 billion, an increase of $631.1 million or 121.3%. The increase was driven by the inclusion of Lawson Products revenue of $324.8 million following the April 1, 2022 merger closing date and $203.6 million of additional revenue from companies acquired in 2021 and 2022 (other than Lawson Products).
  • Non-GAAP adjusted revenue was $1.27 billion, which in 2022 and 2021 includes the pre-merger revenue of Lawson Products, increased approximately $331.3 million or 35.3%. This improvement was driven by organic growth of 13.8% and revenue from companies acquired in 2021 and 2022 (other than Lawson Products).
  • Reported operating income increased by $30.4 million from the prior year period to $41.8 million or 3.6% of GAAP revenue.
  • Diluted earnings per share was $0.42 for the year compared to a loss per diluted share of $0.49 in the year ago period.
  • Non-GAAP adjusted EBITDA increased by $47.8 million from the prior year period to $123.0 million or 9.7% of non-GAAP adjusted revenue.
  • The Company ended the year with $24.6 million of cash on hand and $77.0 million of availability under its credit facility with net debt leverage of 3.1x. Net capital expenditures were $11.3 million during 2022.

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

Q4 2022

Q4 2021

 

Q4 2022

Q4 2021

 

Q4 2022

Q4 2021

 

Q4 2022

Q4 2021

 

Q4 2022

Q4 2021

GAAP Revenue

$

108,029

 

$

 

 

$

100,103

 

$

66,516

 

 

$

105,374

 

$

62,705

 

 

$

15,344

 

$

 

 

$

328,850

 

$

129,221

 

Pre-Merger Revenue(1)

 

 

 

89,791

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,276

 

 

 

 

 

102,067

 

Adjusted Revenue

$

108,029

 

$

89,791

 

 

$

100,103

 

$

66,516

 

 

$

105,374

 

$

62,705

 

 

$

15,344

 

$

12,276

 

 

$

328,850

 

$

231,288

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating Income

$

3,746

 

$

 

 

$

4,317

 

$

(2,428

)

 

$

3,932

 

$

637

 

 

$

663

 

$

 

 

$

12,658

 

$

(1,791

)

Pre-Merger Operating Income(1)

 

 

 

(1,995

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,170

 

 

 

 

 

(825

)

Adjusted Operating Income

 

3,746

 

 

(1,995

)

 

 

4,317

 

 

(2,428

)

 

 

3,932

 

 

637

 

 

 

663

 

 

1,170

 

 

 

12,658

 

 

(2,616

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

11,509

 

$

6,839

 

 

$

10,795

 

$

4,587

 

 

$

10,476

 

$

4,645

 

 

$

1,223

 

$

1,586

 

 

$

34,003

 

$

17,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating income as a percent of GAAP Revenue

 

3.5

%

 

%

 

 

4.3

%

 

(3.7

)%

 

 

3.7

%

 

1.0

%

 

 

4.3

%

 

%

 

 

3.8

%

 

(1.4

)%

Adjusted EBITDA as a percent of Adjusted Revenue

 

10.7

%

 

7.6

%

 

 

10.8

%

 

6.9

%

 

 

9.9

%

 

7.4

%

 

 

8.0

%

 

12.9

%

 

 

10.3

%

 

7.6

%

(1)

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

Conference Call

Distribution Solutions Group, Inc. will conduct a conference call with investors to discuss fourth quarter 2022 results at 9:00 a.m. Eastern Time on March 9, 2023. 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 228752. A replay of the conference call will be available by telephone approximately two hours after completion of the call through March 23, 2023. 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 47406. 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 leading, 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 110,000 customers in several diverse end markets supported by approximately 3,100 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 Annual Report on Form 10-K, 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.

-TABLES FOLLOW-

Distribution Solutions Group, Inc.

Consolidated Balance Sheets

(Dollars in thousands, except share data)

(Unaudited)

 

 

December 31,

2022

 

December 31,

2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

24,554

 

 

$

14,671

 

Restricted cash

 

186

 

 

 

 

Accounts receivable, less allowance for doubtful accounts

 

166,301

 

 

 

80,574

 

Inventories, net

 

264,374

 

 

 

132,717

 

Prepaid expenses and other current assets

 

22,773

 

 

 

8,098

 

Total current assets

 

478,188

 

 

 

236,060

 

Property, plant and equipment, net

 

64,395

 

 

 

9,079

 

Rental equipment, net

 

27,139

 

 

 

24,727

 

Goodwill

 

348,048

 

 

 

104,211

 

Deferred tax asset

 

189

 

 

 

266

 

Intangible assets, net

 

227,994

 

 

 

96,608

 

Cash value of life insurance

 

17,166

 

 

 

 

Right of use assets

 

46,755

 

 

 

19,662

 

Other assets

 

5,736

 

 

 

747

 

Total assets

$

1,215,610

 

 

$

491,360

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

80,486

 

 

$

47,958

 

Current portion of long-term debt

 

16,352

 

 

 

134,405

 

Current portion of lease obligation

 

9,964

 

 

 

4,641

 

Earnout derivative liability

 

 

 

 

 

Related party payables

 

 

 

 

4,813

 

Accrued expenses and other current liabilities

 

62,677

 

 

 

23,126

 

Total current liabilities

 

169,479

 

 

 

214,943

 

Long-term debt, less current portion, net

 

395,825

 

 

 

93,134

 

Security bonus plan

 

9,651

 

 

 

 

Deferred compensation

 

9,962

 

 

 

 

Lease obligation

 

39,828

 

 

 

16,132

 

Deferred tax liability

 

23,834

 

 

 

808

 

Other liabilities

 

4,036

 

 

 

574

 

Total liabilities

 

652,615

 

 

 

325,591

 

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 - 19,730,362 and 10,542,333 shares, respectively

Outstanding - 19,416,784 and 10,294,824 shares, respectively

 

19,417

 

 

 

10,318

 

Capital in excess of par value

 

591,796

 

 

 

197,057

 

Retained deficit

 

(25,736

)

 

 

(33,142

)

Treasury stock – 313,578 and 247,509 shares, respectively

 

(12,526

)

 

 

(10,033

)

Accumulated other comprehensive (loss) income

 

(9,956

)

 

 

1,569

 

Total stockholders’ equity

 

562,995

 

 

 

165,769

 

Total liabilities and stockholders’ equity

$

1,215,610

 

 

$

491,360

 

Distribution Solutions Group, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Dollars in thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

Twelve Months Ended

 

December 31,

 

December 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

Revenue

$

328,850

 

 

$

129,221

 

 

$

1,151,422

 

 

$

520,290

 

Cost of goods sold

 

212,558

 

 

 

97,769

 

 

 

760,524

 

 

 

390,012

 

Gross profit

 

116,292

 

 

 

31,452

 

 

 

390,898

 

 

 

130,278

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

103,634

 

 

 

33,243

 

 

 

349,112

 

 

 

118,857

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

12,658

 

 

 

(1,791

)

 

 

41,786

 

 

 

11,421

 

 

 

 

 

 

 

 

 

Interest expense

 

(7,597

)

 

 

(4,255

)

 

 

(24,301

)

 

 

(16,737

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

(3,395

)

 

 

 

Change in fair value of earnout liabilities

 

(4,431

)

 

 

 

 

 

(483

)

 

 

 

Other income (expense), net

 

(894

)

 

 

905

 

 

 

(670

)

 

 

577

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

(264

)

 

 

(5,141

)

 

 

12,937

 

 

 

(4,739

)

Income tax expense (benefit)

 

1,619

 

 

 

(293

)

 

 

5,531

 

 

 

313

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(1,883

)

 

$

(4,848

)

 

$

7,406

 

 

$

(5,052

)

 

 

 

 

 

 

 

 

Basic income (loss) per share of common stock

$

(0.10

)

 

$

(0.47

)

 

$

0.43

 

 

$

(0.49

)

 

 

 

 

 

 

 

 

Diluted income (loss) per share of common stock

$

(0.10

)

 

$

(0.47

)

 

$

0.42

 

 

$

(0.49

)

Distribution Solutions Group, Inc.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

 

Twelve Months Ended December 31,

 

 

2022

 

 

 

2021

 

 

 

 

 

Operating activities

 

 

 

Net income (loss)

$

7,406

 

 

$

(5,052

)

Adjustments to reconcile to net cash used in operating activities:

 

 

 

Depreciation and amortization

 

45,186

 

 

 

18,683

 

Amortization of debt issue costs

 

1,888

 

 

 

1,297

 

Extinguishment of debt

 

3,395

 

 

 

 

Stock-based compensation

 

2,448

 

 

 

 

Deferred income taxes

 

(2,406

)

 

 

(3,999

)

Change in fair value of earnout liability

 

483

 

 

 

 

Gain on sale of rental equipment

 

(3,632

)

 

 

(2,055

)

Bargain purchase option

 

 

 

 

(1,363

)

Charge for step-up of acquired inventory

 

2,866

 

 

 

 

Net realizable value and reserve adjustment for obsolete and excess inventory

 

4,608

 

 

 

1,104

 

Bad debt expense

 

795

 

 

 

939

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

Accounts receivable

 

(21,771

)

 

 

6,936

 

Inventories

 

(42,404

)

 

 

(5,059

)

Prepaid expenses and other current assets

 

(1,874

)

 

 

1,732

 

Accounts payable

 

(8,839

)

 

 

(2,241

)

Accrued expenses and other current liabilities

 

4,492

 

 

 

2,894

 

Other changes in operating assets and liabilities

 

(3,670

)

 

 

(3,496

)

Net cash provided by (used in) operating activities

 

(11,029

)

 

 

10,320

 

Investing activities

 

 

 

Purchases of property, plant and equipment

 

(8,307

)

 

 

(3,026

)

Business acquisitions, net of cash acquired

 

(115,343

)

 

 

(33,936

)

Purchases of rental equipment

 

(11,794

)

 

 

(10,755

)

Proceeds from sale of rental equipment

 

8,756

 

 

 

6,341

 

Net cash provided by (used in) investing activities

 

(126,688

)

 

 

(41,376

)

Financing activities

 

 

 

Proceeds from revolving lines of credit

 

383,489

 

 

 

38,121

 

Payments on revolving lines of credit

 

(320,751

)

 

 

(11,200

)

Proceeds from term loans

 

445,630

 

 

 

6,000

 

Payments on term loans

 

(335,305

)

 

 

(7,486

)

Deferred financing costs

 

(11,956

)

 

 

 

Capital contribution

 

 

 

 

9,233

 

Repurchase of common stock

 

(1,940

)

 

 

 

Shares repurchased held in treasury

 

(520

)

 

 

 

Payment of financing lease principal

 

(429

)

 

 

 

Payment on seller's note

 

(9,757

)

 

 

 

Net cash provided by (used in) financing activities

 

148,461

 

 

 

34,668

 

Effect of exchange rate changes on cash and cash equivalents

 

(675

)

 

 

660

 

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

 

10,069

 

 

 

4,272

 

Cash, cash equivalents and restricted cash at beginning of period

 

14,671

 

 

 

10,399

 

Cash, cash equivalents and restricted cash at end of period

$

24,740

 

 

$

14,671

 

Cash and cash equivalents

$

24,554

 

 

$

14,671

 

Restricted cash

 

186

 

 

 

 

Total cash, cash equivalents and restricted cash

$

24,740

 

 

$

14,671

 

Distribution Solutions Group, Inc.

Table 1 - Selected Segment Financial Data

(Dollars in thousands)

 (Unaudited)

 

 

 

 

 

 

Three Months Ended

 

December 31,

 

 

2022

 

 

2021

 

Revenue:

 

 

 

Lawson

$

108,029

 

$

 

Gexpro Services

 

100,103

 

 

66,516

 

TestEquity

 

105,374

 

 

62,705

 

Other

 

15,344

 

 

 

Total

$

328,850

 

$

129,221

 

 

 

 

 

Operating Income:

 

 

 

Lawson

$

3,746

 

$

 

Gexpro Services

 

4,317

 

 

(2,428

)

TestEquity

 

3,932

 

 

637

 

Other

 

663

 

 

 

Total

$

12,658

 

$

(1,791

)

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 December 31, 2021 and the years ended December 31, 2022 and 2021 certain results of pre-merger Lawson Products and excludes for all periods 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 December 31, 2022 and 2021 and the years ended December 31, 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 Revenue to Non-GAAP Adjusted Revenue and

GAAP Operating Income to Non-GAAP Adjusted EBITDA

Q4 2022 and Q4 2021

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lawson Products

 

Gexpro Services

 

TestEquity

 

Other

 

Consolidated DSG

Quarter Ended

Q4 2022

Q4 2021

 

Q4 2022

Q4 2021

 

Q4 2022

Q4 2021

 

Q4 2022

Q4 2021

 

Q4 2022

Q4 2021

GAAP Revenue

$

108,029

 

$

 

 

$

100,103

 

$

66,516

 

 

$

105,374

 

$

62,705

 

 

$

15,344

 

$

 

 

$

328,850

 

$

129,221

 

Pre-Merger Revenue(1)

 

 

 

89,791

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,276

 

 

 

 

 

102,067

 

Adjusted Revenue

$

108,029

 

$

89,791

 

 

$

100,103

 

$

66,516

 

 

$

105,374

 

$

62,705

 

 

$

15,344

 

$

12,276

 

 

$

328,850

 

$

231,288

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating Income

$

3,746

 

$

 

 

$

4,317

 

$

(2,428

)

 

$

3,932

 

$

637

 

 

$

663

 

$

 

 

$

12,658

 

$

(1,791

)

Pre-Merger Operating Income(1)

 

 

 

(1,995

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,170

 

 

 

 

 

(825

)

Adjusted Operating Income

 

3,746

 

 

(1,995

)

 

 

4,317

 

 

(2,428

)

 

 

3,932

 

 

637

 

 

 

663

 

 

1,170

 

 

 

12,658

 

 

(2,616

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

4,063

 

 

1,942

 

 

 

4,196

 

 

1,486

 

 

 

5,055

 

 

3,548

 

 

 

558

 

 

409

 

 

 

13,872

 

 

7,385

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger/integration costs(2)

 

1,324

 

 

3,741

 

 

 

1,274

 

 

1,264

 

 

 

465

 

 

13

 

 

 

 

 

 

 

 

3,063

 

 

5,018

 

Stock-based compensation(3)

 

2,003

 

 

3,435

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,003

 

 

3,435

 

Severance costs(4)

 

217

 

 

98

 

 

 

221

 

 

 

 

 

3

 

 

16

 

 

 

2

 

 

7

 

 

 

443

 

 

121

 

Acquisition related costs(5)

 

 

 

(382

)

 

 

549

 

 

4,145

 

 

 

1,021

 

 

431

 

 

 

 

 

 

 

 

1,570

 

 

4,194

 

Inventory net realizable value adjustment(6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventory step-up(7)

 

 

 

 

 

 

 

 

94

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

94

 

Other non-recurring(8)

 

156

 

 

 

 

 

238

 

 

26

 

 

 

 

 

 

 

 

 

 

 

 

 

394

 

 

26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

11,509

 

$

6,839

 

 

$

10,795

 

$

4,587

 

 

$

10,476

 

$

4,645

 

 

$

1,223

 

$

1,586

 

 

$

34,003

 

$

17,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating income as a percent of GAAP Revenue

 

3.5

%

 

%

 

 

4.3

%

 

(3.7

)%

 

 

3.7

%

 

1.0

%

 

 

4.3

%

 

%

 

 

3.8

%

 

(1.4

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA as a percent of GAAP Revenue

 

10.7

%

 

%

 

 

10.8

%

 

6.9

%

 

 

9.9

%

 

7.4

%

 

 

8.0

%

 

%

 

 

10.3

%

 

13.7

%

Adjusted EBITDA as a percent of Adjusted Revenue

 

10.7

%

 

7.6

%

 

 

10.8

%

 

6.9

%

 

 

9.9

%

 

7.4

%

 

 

8.0

%

 

12.9

%

 

 

10.3

%

 

7.6

%

(1)

Represents Lawson Products pre-merger revenue 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 primarily for stock-based compensation (benefit), of which a portion varies with the Company’s stock price

(4)

Includes severance expense for actions taken in 2022 and 2021, not related to a formal restructuring plan

(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 Revenue to Non-GAAP Adjusted Revenue and

GAAP Operating Income to Non-GAAP Adjusted EBITDA

YTD 2022 and YTD 2021

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lawson Products

 

Gexpro Services

 

TestEquity

 

Other

 

Consolidated DSG

Year Ended

 

2022

 

 

2021

 

 

 

2022

 

 

2021

 

 

 

2022

 

 

2021

 

 

 

2022

 

 

2021

 

 

 

2022

 

 

2021

 

GAAP Revenue

$

324,783

 

$

 

 

$

385,326

 

$

256,129

 

 

$

392,358

 

$

264,161

 

 

$

48,955

 

$

 

 

$

1,151,422

 

$

520,290

 

Pre-Merger Revenue(1)

 

104,902

 

 

371,668

 

 

 

 

 

 

 

 

 

 

 

 

 

12,975

 

 

46,065

 

 

 

117,877

 

 

417,733

 

Adjusted Revenue

$

429,685

 

$

371,668

 

 

$

385,326

 

$

256,129

 

 

$

392,358

 

$

264,161

 

 

$

61,930

 

$

46,065

 

 

$

1,269,299

 

$

938,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating Income

$

6,536

 

$

 

 

$

21,291

 

$

11,092

 

 

$

11,375

 

$

329

 

 

$

2,584

 

$

 

 

$

41,786

 

$

11,421

 

Pre-Merger Operating Income(1)

 

11,096

 

 

8,192

 

 

 

 

 

 

 

 

 

 

 

 

 

980

 

 

3,795

 

 

 

12,076

 

 

11,987

 

Adjusted Operating Income

 

17,632

 

 

8,192

 

 

 

21,291

 

 

11,092

 

 

 

11,375

 

 

329

 

 

 

3,564

 

 

3,795

 

 

 

53,862

 

 

23,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

12,540

 

 

6,736

 

 

 

15,175

 

 

4,899

 

 

 

17,480

 

 

13,784

 

 

 

2,080

 

 

1,605

 

 

 

47,275

 

 

27,024

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger/integration costs(2)

 

7,672

 

 

8,317

 

 

 

4,940

 

 

2,177

 

 

 

3,021

 

 

258

 

 

 

 

 

 

 

 

15,633

 

 

10,752

 

Stock-based compensation(3)

 

(6,147

)

 

4,838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,147

)

 

4,838

 

Severance costs(4)

 

2,050

 

 

939

 

 

 

266

 

 

18

 

 

 

1,095

 

 

32

 

 

 

11

 

 

12

 

 

 

3,422

 

 

1,001

 

Acquisition related costs(5)

 

 

 

 

 

 

1,017

 

 

4,669

 

 

 

1,765

 

 

1,704

 

 

 

 

 

 

 

 

2,782

 

 

6,373

 

Inventory net realizable value adjustment(6)

 

1,737

 

 

1,368

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,737

 

 

1,368

 

Inventory step-up(7)

 

1,943

 

 

 

 

 

163

 

 

212

 

 

 

 

 

 

 

 

761

 

 

 

 

 

2,867

 

 

212

 

Other non-recurring(8)

 

1,199

 

 

 

 

 

354

 

 

243

 

 

 

 

 

 

 

 

44

 

 

 

 

 

1,597

 

 

243

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

38,626

 

$

30,390

 

 

$

43,206

 

$

23,310

 

 

$

34,736

 

$

16,107

 

 

$

6,460

 

$

5,412

 

 

$

123,028

 

$

75,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating income as a percent of GAAP Revenue

 

2.0

%

 

%

 

 

5.5

%

 

4.3

%

 

 

2.9

%

 

0.1

%

 

 

5.3

%

 

%

 

 

3.6

%

 

2.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA as a percent of GAAP Revenue

 

11.9

%

 

%

 

 

11.2

%

 

9.1

%

 

 

8.9

%

 

6.1

%

 

 

13.2

%

 

%

 

 

10.7

%

 

14.5

%

Adjusted EBITDA as a percent of Adjusted Revenue

 

9.0

%

 

8.2

%

 

 

11.2

%

 

9.1

%

 

 

8.9

%

 

6.1

%

 

 

10.4

%

 

11.7

%

 

 

9.7

%

 

8.0

%

(1)

Represents Lawson Products pre-merger revenue 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 primarily for stock-based compensation (benefit), of which a portion varies with the Company’s stock price

(4)

Includes severance expense for actions taken in 2022 and 2021, not related to a formal restructuring plan

(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 4 - 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

 

December 31, 2022

 

December 31, 2021

 

Amount

 

Diluted

EPS(2)

 

Amount

 

Diluted

EPS(2)

Net income (loss) as reported per GAAP

$

(1,883

)

 

$

(0.10

)

 

$

(4,848

)

 

$

(0.47

)

 

 

 

 

 

 

 

 

Pretax adjustments:

 

 

 

 

 

 

 

Change in fair value of earnout liability

 

4,431

 

 

 

0.23

 

 

 

 

 

 

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

Merger/integration costs

 

3,063

 

 

 

0.16

 

 

 

1,277

 

 

 

0.12

 

Stock-based compensation

 

2,003

 

 

 

0.10

 

 

 

 

 

 

 

Severance costs

 

443

 

 

 

0.02

 

 

 

16

 

 

 

 

Acquisition related costs

 

1,570

 

 

 

0.08

 

 

 

4,576

 

 

 

0.45

 

Inventory net realizable value adjustment

 

 

 

 

 

 

 

 

 

 

 

Inventory step-up

 

 

 

 

 

 

 

94

 

 

 

0.01

 

Other non-recurring

 

394

 

 

 

0.02

 

 

 

26

 

 

 

 

Total pretax adjustments

 

11,904

 

 

 

0.61

 

 

 

5,989

 

 

 

0.58

 

Tax effect on adjustments(1)

 

(5,095

)

 

 

(0.26

)

 

 

395

 

 

 

0.04

 

Total adjustments, net of tax

 

6,809

 

 

 

0.35

 

 

 

6,384

 

 

 

0.62

 

Non-GAAP adjusted net income

$

4,926

 

 

$

0.25

 

 

$

1,536

 

 

$

0.15

 

(1)

Tax effected at full year tax rate of 42.8% and (6.6)% for the twelve months ended December 31, 2022 and 2021, respectively.

 
(2)

Pretax adjustments to diluted EPS calculated on 19.408 million and 10.253 million diluted shares for the fourth 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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