CHICAGO — Distribution Solutions Group Inc., a multi-platform specialty distribution company to the MRO, OEM and industrial technologies markets, on Thursday announced consolidated results for the second quarter ended June 30.
Chairman and CEO Bryan King said, “Our business delivered outstanding results during the second quarter as total revenue grew by 17.6%. GAAP operating income more than tripled and adjusted EBITDA increased by $8.4 million or nearly 27%, representing 10.6% of revenue.
"We continued to expand our margin profile with strong execution and performance during the first half of 2023 driven by broad-based contributions across our market leading businesses. We continue to strategically focus on generating shareholder value by driving sales growth, improving profitability and generating incremental cash flow.
"Our second quarter included just over three weeks of Hisco results, which we acquired in June, and we are well underway integrating Hisco's business into DSG. Combining Hisco into our TestEquity business expands our customer base, geographic reach and product offerings while driving additional scale and cost synergies to the entire DSG platform.
"We are closely monitoring the demand environment in light of continued tightening of monetary policy to emphasize on growth segments to drive revenues. While certain end markets moderated somewhat during the second quarter, we continue to invest in those initiatives we believe will fuel profitable growth across the DSG companies. Our asset light business model, combined with our focus on growing operating cash flows and accelerating returns on invested capital, positions us well to enhance long-term shareholder value."
Second quarter highlights:
- GAAP revenue was $378.0 million, an increase of $56.6 million or 17.6%, which included $43.4 million of additional revenue from companies acquired in 2022 and 2023 other than Lawson Products.
- GAAP operating income increased by $9.7 million from the prior year period to $13.8 million representing 3.6% of GAAP revenue. Adjusted EBITDA increased 26.7% from the prior year period to $40.1 million or 10.6% of revenue.
- Diluted income per share was $0.14 for the quarter compared to a diluted loss per share of $0.23 in the year-ago quarter. Non-GAAP adjusted diluted earnings per share was $0.52 in the second quarter 2023 compared to $0.36 for the same period a year ago.
- On June 8, 2023, DSG completed the acquisition of HIS Company, Inc., a Texas corporation (Hisco), for total purchase consideration of $270.4 million, net of acquired cash, with a potential additional cash earn-out payment and potential employee retention payments of $37.5 million, payable in cash or DSG common stock. DSG funded the transaction through a combination of our expanded credit facility and approximately $100 million of equity raised in a common stock rights offering to existing stockholders. Hisco sales following the completion of the acquisition in the quarter were approximately $28.0 million and is included in the TestEquity reportable segment.
The company ended the quarter with $189.6 million of availability under its committed credit facility and $44.2 million of unrestricted cash on hand.
As a result of the April 1, 2022, strategic combination of Lawson Products, Gexpro Services and TestEquity, the company's financial results are reported under reverse merger accounting treatment as required by generally accepted accounting principles. Accordingly, Lawson Products results are included only for the periods following the April 1, 2022 merger closing date. GAAP results for the three and six months ended June 30, 2022 include the combined results of Gexpro Services and TestEquity, and the results of Lawson Products only subsequent to April 1, 2022. GAAP results for the three and six months ended June 30, 2023 include the results of Lawson Products, Gexpro Services and TestEquity.