Distribution Solutions Group (DSGR) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $440 million, up 16.3% year-over-year, driven by acquisitions despite a 5.7% organic sales decline; organic sales grew 3.8% sequentially from Q1 2024.

• Adjusted EBITDA was $45.2 million (10.3% margin), up 12.7% year-over-year and 25.3% sequentially, with margin expansion across all business verticals.

• Net income for Q2 2024 was $1.9 million, with diluted EPS of $0.04, impacted by higher depreciation, amortization, and non-recurring costs.

• Announced acquisition of Source Atlantic, a leading Canadian distributor, expected to close in Q3, expanding addressable market and geographic reach.

• Completed S&S Automotive and Emergent Safety Supply acquisitions in H1 2024, strengthening North American capabilities.

Financial highlights

• Q2 consolidated revenue was $439.5 million, up $61.6 million or 16.3% year-over-year, mainly from 2023 and 2024 acquisitions.

• Adjusted EBITDA margin expanded to 10.3% from 8.7% in Q1 2024; adjusted operating income was $38.9 million, up 11.3% year-over-year.

• Adjusted diluted EPS was $0.40, compared to $0.42 last year and $0.25 in Q1 2024.

• Net income margin for the quarter was 0.4%; operating income margin was 3.2%.

• Cash from operations was $21.4 million; total liquidity at quarter-end was $209.9 million, including $56.9 million in cash.

Outlook and guidance

• Expect organic sales growth to be flat to slightly positive in the second half of 2024 as comps ease and end markets recover.

• Source Atlantic acquisition expected to be accretive to EBITDA margins and returns on invested capital by end of 2025, targeting double-digit EBITDA margin run-rate.

• Management remains focused on acquisition pipeline, margin enhancement, and cost savings initiatives.

• Pipeline for additional bolt-on acquisitions remains strong, supporting continued M&A-driven growth.

• Focus on deleveraging through earnings growth and free cash flow generation.