Distribution Solutions Group (DSGR) 16th Annual Midwest Ideas Conference summary

Strategic Overview and Growth

• Combined three specialty distributors into a $2B revenue business, doubling size in 3.5 years through organic growth and up to 11 acquisitions, serving over 200,000 customers in 50+ countries.

• Focuses on high-touch, value-added services such as VMI, technical support, kitting, and supply chain solutions, driving high customer retention and structural margins.

• End-market diversification with no significant customer or supplier concentration, providing resilience across cycles and industries like aerospace, automotive, technology, and renewables.

• Positioned to benefit from labor shortages, onshoring, digitalization, and increasing technology integration (IoT).

• Maintains strong free cash flow with CapEx at 1% of revenue and robust balance sheet, supporting ongoing M&A and platform monetization.

Business Verticals and Operational Highlights

• Lawson Products: 930 sales reps manage VMI for 70,000 customers, focusing on consumable Class C parts with high gross margins (~70%).

• Gexpro Services: Supplies custom-specified Class C parts to 1,800–2,000 large manufacturing customers across six end markets, leveraging JIT and VMI.

• TestEquity Group: $800M revenue, doubled by HISCO acquisition, provides test/measurement equipment and electronic production supplies, with 20% revenue from test equipment.

• High customer retention rates: 92% overall, up to 98% in some segments.

• Each vertical operates with its own management, preserving commercial strategies and integration as appropriate.

Financial Performance and Capital Allocation

• Q2 2025 revenue was $502M, up 14.3% year-over-year, with organic sales growth of 3.3% and sequential growth of 2.4%.

• Q2 adjusted EBITDA reached $48.6M (9.7% margin), with margin compression from recent acquisitions but sequential improvement over Q1.

• Diluted EPS for Q2 was $0.11, with non-GAAP adjusted EPS at $0.35; TTM free cash flow conversion was approximately 93%.

• Maintained disciplined capital allocation, including $20M in share repurchases YTD 2025, a $37.5M repurchase program, and total liquidity of ~$314M as of June 30, 2025.

• Focused on deleveraging, with leverage reduced from 3.6x at merger close to 3.5x, and TTM ROIC of ~11%.