Distribution Solutions Group on Thursday reported a double-digit increase in quarterly sales but a decline in its margins as it prepares to become a privately held company.
The parent of Lawson Products, TestEquity and Gexpro Services — the no. 16 distributor on ID’s latest Big 50 list — posted $557.7 million in second-quarter revenues, an increase of 11% compared to the same quarter last year. Company officials said that organic sales rose by 10.2%, while its acquisition of Eastern Valve earlier in the year added about $4.1 million to its revenue total. DSG’s Lawson division saw sales edge up from $124.3 million to $125.5 million.
The company reported $180.1 million in gross profit and $27.9 million in operating income — up from $170.1 million and $26.8 million, respectively — but its gross margin fell from 33.9% to 32.3% and its operating margin slipped from 5.3% to 5% over that span. Officials attributed the dip in gross margin to “customer and vertical sales mix shifts” and “higher tariff rates on inbound shipments.”
DSG’s net income climbed from $5 million last year to $8.5 million in the latest quarter; its adjusted EBITDA margin was flat at 9.7%.
The company’s results came three weeks after it announced an agreement with majority shareholder LKCM Headwater Investments under which the private equity firm would acquire all outstanding shares of DSG and take the business private. That transaction remains pending.
