Distribution Solutions reports 14.3% revenue increase
Distribution Solutions Group, Inc. reported its second quarter revenue increased $62.9 million, or 14.3%, to $502.4 million, driven by $48.8 million of incremental revenue from five acquisitions closed in 2024.
Organic sales grew 3.3% over a year ago and 5.1% sequentially over the first quarter of 2025. Operating income was $26.8 million, net of $11.7 million of non-cash acquired intangible amortization and $1.4 million of non-recurring severance and acquisition-related retention costs, stock-based compensation, acquisition-related costs and other non-recurring items. This compares to an operating income of $14.2 million in the prior year quarter, net of similar items as 2024.
The company ended the quarter with total liquidity of $314.4 million, consisting of $61.8 million of cash (restricted and unrestricted) and $252.7 million available under its credit facility with net debt leverage of 3.5x.
Bryan King, CEO and chairman, said, "We are pleased to deliver strong top and bottom-line results and cash flows for the quarter. Sales increased 14.3% to $502.4 million for the quarter, driven by acquisitions and a 3.3% average daily organic sales growth versus last year. Sequentially, seasonal daily sales grew by 2.4% over the first quarter. Adjusted EBITDA rose to $48.6 million, or 9.7% of sales, and grew year-over-year and sequentially by 7.5% and 13.5%, respectively. Compared to the same quarter last year, Adjusted EBITDA margins declined slightly pressured by approximately 60bps from our Source Atlantic acquisition. However, we saw a lift in margin sequentially as we vigorously work on improving margins in Canada.
"In the second quarter, each of our operational teams delivered sequential expansion of adjusted margins driven partially by an expected seasonality benefit, but also evidencing progress on the execution of initiatives across our DSG platform. Sequentially, Lawson’s net margins in the quarter expanded from 11.9% to 12.6%, Gexpro Services expanded from 12.6% to 13.4%, TestEquity expanded from 6.8% to 6.9% and Canada Branch Division expanded from 5.2% to 6.5%. Initiatives to improve margins in each of our five 2024 acquisitions are still in the early stages, and we remain confident in our plan to enhance margins further and achieve higher returns. During the quarter, the teams also improved working capital management, enabling us to generate $33.3 million from cash flows from operations while ending the quarter with no outstanding revolver debt. We are well positioned with liquidity and flexibility as we evaluate our acquisition pipeline.
"DSG’s core strengths include strong vendor relationships and robust source capabilities, which have become increasingly important amid ongoing trade policy changes. These shifts have driven greater customer engagement as DSG teams help guide customers through sourcing options and product alternatives to add value. We remain cautiously optimistic about the remainder of 2025 given this uncertainty. In the first half of 2025, our stock buyback program was active, and we repurchased $20.0 million of DSGR stock, with $8.8 million of the repurchases occurring in the second quarter. I am confident that we will continue to build strong businesses through a combination of organic growth and the acquisition of strategic bolt-on businesses. We are fully aligned with shareholders and expect that by generating significant free cash flow and building structurally higher margin businesses, that our shareholders will be rewarded with an expanded valuation," concluded King.
INDUSTRIAL SUPPLY MAGAZINE
The July/August issue of Industrial Supply magazine features an in-depth cover story about 3BG Supply. Plus, we're featuring articles by contributing writers Dr. Bharani Nagarathnam and Frank Hurtte, as well as interviews with numerous product and distribution industry experts.
