Distribution Solutions Group (DSGR) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue rose 6.6% year-over-year to $468 million, driven by acquisitions, while organic sales declined 2.1% but grew 0.2% sequentially.

• Adjusted EBITDA increased 12.4% to $49.1 million (10.5% margin), with margin expansion and cost management.

• Net income was $21.9 million, reversing a $1.6 million loss in the prior year, aided by a $19.0 million tax benefit; diluted EPS was $0.46, including a $0.40 tax benefit; adjusted EPS was $0.37, up from $0.35.

• Three major acquisitions completed: Source Atlantic (Canada), ConRes/ConRes Test Equipment (Northeast US), and Tech-Component Resources/TCR (Southeast Asia), expanding geographic and product reach.

• Segment realignment added Canada Branch Division, now four reportable segments.

Financial highlights

• Q3 consolidated revenue: $468 million, up $29.1 million (6.6%) year-over-year; $38.1 million from acquisitions.

• Organic sales declined 2.1% year-over-year; sequential organic sales up 0.2%.

• Adjusted EBITDA: $49.1 million (10.5% margin), up from $43.7 million (10.0%) in Q3 2023.

• Adjusted operating income: $42.5 million, up from $38.0 million a year ago.

• Net income Q3: $21.9 million (vs. $-1.6 million prior year); diluted EPS: $0.46 (includes $0.40 tax benefit); adjusted EPS: $0.37.

Outlook and guidance

• Q4 sales expected to remain consistent with Q3; double-digit EBITDA margin anticipated despite fewer selling days.

• Management expects continued growth from recent acquisitions and organic initiatives, focusing on cost management, integration, and leveraging cross-segment synergies.

• Targeting double-digit EBITDA margin run-rate for Source Atlantic by end of 2025, driven by growth and synergy realization.

• Management remains focused on capital deployment for high-return acquisitions and organic investments, emphasizing long-term value creation.

• No material changes to risk factors or guidance since last annual report.