Distribution Solutions Group (DSGR) 17th Annual Southwest IDEAS Conference summary

Company Overview and Growth Strategy

• Formed by merging three specialty distributors in early 2022, focusing on product distribution and value-added services.

• Achieved significant growth, doubling revenue to $2 billion and EBITDA to $190 million in three years through organic expansion and M&A.

• Operates three verticals: Lawson Products (MRO, vendor-managed inventory), Gexpro Services (OEM, Class C parts), and TestEquity (electronic test equipment and supplies).

• Maintains a highly diversified customer base of over 200,000 across multiple end markets, minimizing concentration risk.

• M&A is a core growth driver, with nine acquisitions and $550 million deployed since formation, targeting synergistic deals to expand margins and geographic reach.

Operational Initiatives and Vertical Performance

• Lawson Products focuses on sales rep productivity, route optimization, and AI-driven sales support to drive organic growth.

• Gexpro Services boasts 98% customer retention and is investing in people to build a strong revenue pipeline.

• TestEquity, representing 40% of sales, is under new leadership with a focus on e-commerce, inside sales, and margin improvement.

• Shared M&A team and best practices across verticals drive efficiency and leverage capital structure.

• Each vertical is accountable for its own P&L, sales, and EBITDA targets, fostering internal competition and alignment.

Business Model and Strategic Initiatives

• Operates an asset-light, high-return model with over 200,000 customers and 10,000 suppliers, leveraging a multi-platform approach for cross-selling and operational efficiencies.

• Focuses on value-added services such as vendor managed inventory, kitting, and technical support, creating sticky customer relationships and a strong competitive moat.

• Strategic initiatives include expanding product adjacencies, enhancing digital and e-commerce capabilities, and driving margin improvement in acquired businesses.

• M&A strategy targets synergistic acquisitions that enhance structural margins, expand geographic reach, and add technical capabilities, with a focus on North America, Europe, and SE Asia.

• Capital allocation prioritizes organic growth, accretive M&A, and shareholder returns, with a $37.5M share repurchase program and strong free cash flow conversion (~96%).