Distribution Solutions Group (DSGR) Q2 2026 earnings summary

Executive summary

• Q2 2026 revenue reached $557.7 million, up 11.0% year-over-year, driven by 10.2% organic sales growth and $4.1 million from the Eastern Valve acquisition.

• Adjusted EBITDA was $53.9 million (9.7% margin), up from $48.6 million in the prior year quarter and $37.8 million sequentially.

• Net income increased to $8.5 million from $5.0 million in the prior year quarter; adjusted diluted EPS was $0.47, up from $0.35.

• A definitive merger agreement was signed post-quarter for acquisition by LKCM Headwater at $35.00 per share in cash, pending shareholder and regulatory approval.

Financial highlights

• Gross margin for Q2 was 32.3% (down from 33.9%), impacted by sales mix and higher tariffs.

• Operating income was $27.9 million (5.0% margin), net of $11.1 million in intangible amortization and $6.2 million in non-recurring costs.

• Cash flow from operations was $22.0 million in Q2; total liquidity stood at $420.2 million and net working capital at $522.3 million.

• Adjusted operating income (excluding non-cash and non-recurring items) was $45.2 million, up from $39.9 million year-over-year.

• Interest expense decreased $1.2 million in Q2 due to lower average rates.

Outlook and guidance

• The merger is expected to close pending regulatory and shareholder approvals, after which the company will be privately held.

• Management expects continued organic growth, leveraging cross-segment collaboration and digital expansion.

• Acquisition strategy is on hold due to merger-related restrictions.

• PMI index averaged 53.0 in H1 2026, indicating manufacturing sector expansion.

• Tariff uncertainties persist, but are being managed with suppliers and customers.