The following is a summary of the Distribution Solutions Group, Inc. (DSGR) Q4 2023 Earnings Call Transcript:
Financial Performance:
DSG's annual revenue grew by 23.7% to $1.57 billion, due to the acquisition of four companies impacting $267.5 million.
Adjusted EBITDA increased to $157 million in 2023 from $123 million in 2022.
GAAP diluted loss per share of $0.20 for the full year and adjusted diluted EPS was $1.42.
The company ended the year with nearly $300 million of liquidity, including $99.6 million of cash.
Each of DSG's three segments, Lawson, Gexpro Services, and the TestEquity Group, contributed 30%, 23%, and 47% of revenue, respectively.
The TestEquity group saw the highest increase in sales due to recent acquisitions, especially the Hisco acquisition in 2023.
Business Progress:
Lawson's sales grew by 9.1%, driven by a significant improvement in its strategic business and increased sales rep productivity.
Gexpro Services' sales growth was hindered in Q4 due to delays in project-related businesses, particularly in renewables and technology.
DSG made strides in strengthening its balance sheet, ending 2023 at a leverage rate of 2.9 times.
Management remains focused on robust working capital investment and careful inventory management.
DSG intends to execute disciplined inorganic growth via an acquisition model and reduce capital intensity where possible.
The company repurchased 139,000 shares at an average cost of $26.09 per share during Q4 2023.
DSG foresees ongoing progress with cross-selling initiatives, increasing sales through long-term customer relationships, and making strategic, accretive acquisitions.
DSG expects approximately $17 million in savings due to cost-cutting measures and anticipates an overall operating leverage expansion, provided certain market conditions are met.
The company emphasized profitability expansion in Lawson and explored earnings opportunities in their outside sales team, resulting in improved long-term profitability despite an initial impact on organic revenue growth.
DSG also focused on collaboration and cross-selling across all three business verticals and plans to enhance business liquidity, considering share buybacks if the stock price significantly discounts their estimated terminal business value.
More details: Distribution Solutions Group IR
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