• Revenue: $1.8 billion for fiscal 2024, up almost 15% year-over-year.
• Trailing 12-Month Revenue: Approximately $1.95 billion, including pre-acquisition revenues.
• Adjusted Free Cash Flow: $175 million.
• Fourth Quarter Revenue: $480.5 million, an increase of 18.6% from the previous year.
• Organic Sales Growth: 3.5% over the same quarter a year ago.
• Adjusted EBITDA: $44.9 million or 9.3% of sales for the fourth quarter.
• Operating Income: $20.1 million for the fourth quarter.
• Adjusted Earnings Per Share: $0.42 for the fourth quarter.
• Cash Flow from Operations: Approximately $46 million for the fourth quarter.
• Debt Leverage: 3.5 times at the end of Q4.
• Net Capital Expenditures: $3.4 million for the fourth quarter.
• Return on Invested Capital (ROIC): Approximately 11% inclusive of acquisitions.

• Warning! GuruFocus has detected 6 Warning Signs with DSGR.

Release Date: March 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Distribution Solutions Group Inc (NASDAQ:DSGR) reported a significant revenue increase of almost 15% for fiscal 2024, reaching $1.8 billion, primarily driven by strategic acquisitions.
• The company successfully expanded its revenue both organically and through five strategic acquisitions, enhancing its scale, geographic footprint, and customer base.
• DSGR's adjusted free cash flow grew to $175 million, indicating strong financial health and operational efficiency.
• The company has made substantial investments in its sales force and digital tools, which are expected to enhance customer engagement and drive long-term growth.
• DSGR's Jexpro Services segment reported a notable EBITDA margin expansion of 160 basis points for the full year, driven by strong performance in aerospace, defense, technology, and renewables markets.

Negative Points

• The company faced persistent macroeconomic headwinds throughout 2024, impacting its business units and overall performance.
• Lawson Products, a key segment of DSGR, experienced a significant decline in military sales, down over 50% for the full year, due to changes in the military ordering process.
• The integration of Source Atlantic into the Canada Branch Division has compressed DSGR's overall margins, with a 50 basis point impact on consolidated margins in Q4.
• DSGR's Test Equity Group faced challenges in the electronics assembly market, causing softness in the electronic production supplies segment.
• The company is still in the early stages of integrating recent acquisitions, which may continue to create near-term earnings volatility and margin compression.

Q & A Highlights

Q: Can you provide insights on quarter-to-date sales levels across DSG compared to the end of Q4? A: Ronald Knutson, CFO, noted that Lawson has started the first quarter strongly, excluding acquisitions from 2024. Sales are up compared to January and February of the previous year. Overall, on a consolidated basis, sales are relatively flat compared to Q4 trends into the first months of 2025.

Q: How have consolidated margins trended in Q1 versus Q4, and are there any noteworthy factors in March that may change that? A: Ronald Knutson stated that there are no significant changes expected in March. January's margins were consistent with Q4, and as 2025 progresses, especially with synergies from 2024 acquisitions, the margin profile is expected to improve, particularly in the second half of the year.

Q: Was the 3.5% organic revenue growth in Q4 a positive surprise, given previous expectations of a flattish outlook? A: John King, CEO, acknowledged that the Q4 results were firmer than expected, reflecting positive momentum in the first quarter. The services vertical sustained its momentum, and more in-market cooperation contributed to the better-than-anticipated results.

Q: What is the outlook for Lawson's margins in 2025, considering sales force initiatives and military sales? A: John King explained that while Lawson has faced challenges, including sales force turnover and military sales decline, investments in sales resources and tools are expected to improve margins. The goal is to return to and exceed previous profitability levels, although this will take time and depend on market conditions.

Q: What is the timeline for ramping Source Atlantic's margins to double digits? A: John King mentioned that achieving double-digit margins for Source Atlantic involves fixing cost structures, particularly in Western Canada. Facility consolidations are expected to release funds, and while progress is anticipated by the end of Q2, achieving the target will take time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.