[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and detailed accounting notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----- | :-------------------------------- | :------------------------------- | | Total Assets | $1,232,715 | $493,294 | | Total Liabilities | $685,968 | $327,525 | | Total Stockholders' Equity | $546,747 | $165,769 | | Goodwill | $351,147 | $106,145 | | Intangible assets, net | $236,869 | $96,608 | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenue | $347,151 | $132,090 | $822,572 | $391,069 | | Gross Profit | $119,167 | $34,838 | $274,606 | $98,826 | | Operating Income (Loss) | $22,027 | $5,491 | $29,128 | $13,212 | | Net Income (Loss) | $16,541 | $1,225 | $9,289 | $(204) | | Basic EPS | $0.85 | $0.12 | $0.54 | $(0.02) | | Diluted EPS | $0.84 | $0.12 | $0.53 | $(0.02) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity increased from **$165,769 thousand** at December 31, 2021, to **$546,747 thousand** at September 30, 2022, primarily due to deemed consideration for reverse acquisition and net income, partially offset by foreign currency translation adjustments and treasury stock repurchases[23](index=23&type=chunk)[26](index=26&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summary of Cash Flows (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :----------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by (used in) operating activities | $(19,280) | $17,137 | | Net cash provided by (used in) investing activities | $(120,550) | $(26,975) | | Net cash provided by (used in) financing activities | $151,820 | $11,212 | | Cash, cash equivalents and restricted cash at end of period | $25,352 | $11,961 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies, business combinations, revenue recognition, and other financial details - Distribution Solutions Group, Inc. (DSG), formerly Lawson Products, Inc., changed its name on May 5, 2022, and operates as a global specialty distribution company through three principal operating companies: Lawson, TestEquity, and Gexpro Services[37](index=37&type=chunk) - The Mergers of TestEquity and Gexpro Services into DSG were consummated on April 1, 2022, with TestEquity and Gexpro Services treated as accounting acquirers and Lawson's results included post-Merger Date[41](index=41&type=chunk)[45](index=45&type=chunk)[48](index=48&type=chunk)[53](index=53&type=chunk) Key Acquisition Details (Nine Months Ended September 30, 2022) (in thousands) | Item | Value (in thousands) | | :--- | :--- | | Fair value of shares exchanged for reverse acquisition | $351,491 | | Goodwill from Mergers (after adjustments) | $187,780 | | Total purchase consideration for other 2022 acquisitions | $119,415 | | Total purchase consideration for other 2021 acquisitions | $50,639 | | Gain on bargain purchase (NEF acquisition) | $1,363 | - The earnout derivative liability, initially **$43.9 million** for 1,162,000 shares, saw 700,000 shares reclassified to equity on April 29, 2022, with the remaining liability at **$12.7 million** at September 30, 2022, and a **$9.6 million** benefit recorded in Q3 2022 due to fair value changes[155](index=155&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) Debt Overview (in thousands) | Metric | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----- | :-------------------------------- | :------------------------------- | | Total Debt | $418,796 | $229,044 | | Senior secured revolving credit facility | $123,925 | $0 | | Senior secured term loan | $243,750 | $0 | | Senior secured delayed draw term loan | $50,000 | $0 | | Borrowing availability (revolving credit) | $75,100 | N/A | | Weighted average interest rate (Apr 1 - Sep 30, 2022) | 4.3% | N/A | - The company repurchased **54,089 shares** of common stock for **$1.9 million** in Q3 2022, and the Board increased the stock repurchase program from **$7.5 million** to **$12.5 million** on November 2, 2022, leaving **$7.6 million** available[193](index=193&type=chunk)[366](index=366&type=chunk)[457](index=457&type=chunk)[458](index=458&type=chunk) - A shareholder derivative action was filed on October 3, 2022, alleging breach of fiduciary duty related to the Mergers, which the company intends to vigorously defend against without estimating potential loss[201](index=201&type=chunk)[202](index=202&type=chunk) - Related party management agreements with LKCM were novated on April 1, 2022, with a **$5.3 million** prior obligation settled as a deemed equity contribution, and LKCM affiliates owned approximately **75%** of DSG common stock post-Mergers[207](index=207&type=chunk)[212](index=212&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operational results, merger impacts, segment performance, critical accounting policies, liquidity, and non-GAAP measures [Overview](index=37&type=section&id=Overview) - Distribution Solutions Group, Inc. (DSG), formerly Lawson Products, Inc., changed its name on May 5, 2022, and is structured with three principal operating companies: Lawson, TestEquity, and Gexpro Services[224](index=224&type=chunk)[225](index=225&type=chunk) - Lawson distributes MRO products with VMI, TestEquity distributes test equipment and electronic supplies, and Gexpro Services provides global supply chain solutions with VMI and kitting[227](index=227&type=chunk)[228](index=228&type=chunk)[233](index=233&type=chunk)[243](index=243&type=chunk) [Key Factors Affecting our Results of Operations and Financial Condition](index=39&type=section&id=Key%20Factors%20Affecting%20our%20Results%20of%20Operations%20and%20Financial%20Condition) - The company is affected by rising supplier, transportation, and labor costs, leading to supply chain disruptions, inventory acquisition challenges, and negative impacts on gross margins[248](index=248&type=chunk) - A cyber incident in February 2022 led to potential unlawful access, prompting DSG to engage a cybersecurity firm, notify affected parties, and record a **$0.4 million** receivable from its cyber insurance provider[250](index=250&type=chunk)[251](index=251&type=chunk) [Critical Accounting Policies and Use of Estimates](index=

Financial Data and Key Metrics Changes - The company reported consolidated sales of $321 million, representing a 139% increase on a GAAP basis due to the inclusion of Lawson Products [37] - Organic sales growth was nearly 12%, with a like-for-like increase of approximately 34% or $80.6 million over the second quarter of 2021 [38] - Adjusted EBITDA improved by $11.7 million to $31.7 million, translating to 9.9% of sales [40] Business Line Data and Key Metrics Changes - Lawson Products generated sales of $107.3 million, with organic sales growth of 13.1% compared to the second quarter of 2021 [43] - Gexpro Services reported total sales of $99.8 million, with organic sales growth of 6% [48] - TestEquity's sales grew by over 44%, with organic sales increasing by 10.6% in both the Test & Measurement and Electronic Production Supplies businesses [52] Market Data and Key Metrics Changes - The company experienced strong demand across all operating segments, with increasing customer backlog in TestEquity indicating robust market conditions [36][64] - Gexpro Services maintained gross margin percentage despite inflationary pressures, indicating effective management of supply chain costs [50] Company Strategy and Development Direction - The company continues to focus on an acquisition strategy, having closed four acquisitions in 2022 that are expected to generate annual revenues of over $180 million [15][16] - Management emphasized the importance of cross-selling opportunities among the operating companies to enhance service offerings and customer value [60][61] Management's Comments on Operating Environment and Future Outlook - Management noted no significant slowdown in unit volume shipped, indicating strong customer demand despite economic uncertainties [63][64] - The company remains confident in achieving adjusted EBITDA margins above 10% by the end of 2022, driven by revenue synergies and cost management [70][71] Other Important Information - The company ended the quarter with $17.9 million in cash and $406 million in outstanding debt, maintaining a net debt leverage ratio of 3.6 times [41] - Management highlighted the successful integration of acquisitions and the ongoing evaluation of new acquisition opportunities [17][18] Q&A Session Summary Question: What progress has been made on cross-selling among operating companies? - Management indicated that customers are receptive to expanded service capabilities, leading to quick conversions and enhanced value propositions [60][61] Question: Is there any indication of economic slowdown impacting the business? - Management reported no signs of slowdown in unit volume shipped and noted strong customer demand reflected in increasing backlogs [63][64] Question: How are price increases being managed across segments? - All three companies have successfully passed along price increases to offset supplier cost increases, with approximately 7% of the 12% organic growth attributed to price [65][66] Question: What factors are driving adjusted EBITDA margin expansion? - Management cited strong demand, effective cost management, and revenue synergies as key drivers of margin expansion [67][70] Question: What is the status of the acquisition pipeline? - The acquisition pipeline remains robust, with ongoing activity across all three platforms and targeted multiples of 7 to 8 times [73][75] Question: What are the order trends and seasonality expectations? - Management expects the second and third quarters to be stronger due to more selling days, with consistent trends observed early in the third quarter [85][86] Question: How is cash flow generation expected to normalize? - Management anticipates cash flow generation to return to normalized levels in the latter half of the year, following initial merger-related costs [95][96]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) ☒ Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For quarterly period ended June 30, 2022 or ☐ Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file Number: 0-10546 DISTRIBUTION SOLUTIONS GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 36-2229304 (State or other jurisdiction ...

Lawson Products, Inc. (LAWS) Q1 2022 Results Conference Call April 28, 2022 9:00 AM ET Company Participants Steven Hooser - IR Bryan King - Chairman Ron Knutson - EVP and CFO Operator Good morning, everyone. Welcome to the Lawson Products First Quarter 2022 Earnings Call. As a reminder, this conference call is being recorded. Now I will turn the call over to Steven Hooser, Investor Relations, to provide introductions and read the safe harbor statement. Please go ahead. Steven Hooser Good morning, and welcom ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol Name of each exchange on which registered Common stock, $1.00 par value LAWS NASDAQ Global Select Market FORM 10-Q (Mark One) ☒ Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For quarterly period ended March 31, 2022 or ☐ Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For ...

Financial Data and Key Metrics Changes - Lawson Products reported consolidated sales of $102.1 million for Q4 2021, an increase of $4 million compared to the previous year, despite having one less selling day [21] - Average daily sales grew by 5.7% year-over-year for Q4 and 19.7% for the full year 2021 compared to 2020 [6][21] - Adjusted EBITDA margin for Q4 was 8.3%, and for the full year, it was 8.6% [6][38] - Consolidated gross margin percentage was 52.9% for Q4, slightly down from 53.1% in the previous year [22][26] Business Line Data and Key Metrics Changes - MRO sales rep productivity improved by 8.6% year-over-year [22] - Historical loss in MRO business saw average daily sales increase by 9.6% over Q4 2020, while Bolt Supply increased nearly 27% [26] - Partsmaster sales were impacted by a slowdown in military procurement, but military activity is expected to rebound in early 2022 [11] Market Data and Key Metrics Changes - Strategic accounts growth was down 2.4% sequentially for Q4 but up 9.7% compared to Q4 2020 [13] - Non-oil and gas customers represent 93% of the total strategic account customer base, with significant growth in industrial customers [13] - Government civilian segment sales were down due to lower PPE sales compared to 2020, but growth is anticipated from new contracts [16] Company Strategy and Development Direction - The company is focusing on organic growth initiatives, including investments in people and processes, particularly in the SLED markets [8] - The integration of Partsmaster is complete, and both Partsmaster and Bolt Supply have performed well, reinforcing confidence in future acquisitions [12] - The company is adapting to supply chain challenges and inflation by implementing price increases and managing costs effectively [9][40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory in 2022, citing improvements in customer backorders and operational efficiency [18][63] - The company is confident in its ability to manage through supply chain disruptions and inflation, with a focus on maintaining customer relationships [24][66] - Early signs of customer demand in 2022 are positive, with mid-to-high single-digit increases in average daily sales compared to the previous year [71] Other Important Information - The company plans to invest $10 million to $12 million in capital expenditures in 2022, focusing on expanding distribution capabilities [34] - The company ended Q4 with $91.3 million in liquidity, positioning it well for future investments and acquisitions [36] Q&A Session Summary Question: Insights on labor shortages impacting organic growth - Management noted an increase in new customer inquiries due to labor shortages, with revenue retention slightly improving to just under 91% [44][46] Question: Size of investments in growth initiatives - Investments in growth initiatives for Q4 were approximately $300,000 to $400,000, with expectations for continued investment in early 2022 [53][56] Question: Outlook for standalone business growth - Management refrained from providing formal guidance but indicated positive trends in early 2022 sales [76][79] Question: Inventory build outlook - Management is comfortable with current inventory levels and does not anticipate significant increases in 2022 [81][83] Question: Activity in oil and gas accounts - Management acknowledged some volatility in oil and gas accounts but emphasized strong relationships with loyal customers [90][92] Question: Gross margin outlook for 2022 - Management expects stable gross margins, with ongoing cost increases being offset by price increases [94][96]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-10546 (Exact Name of Registrant as Specified in Charter) LAWSON PRODUCTS, INC. Delaware 36-2229304 (State or other jurisdiction of (I. ...

Lawson Products, Inc. (LAWS) Q3 2021 Earnings Conference Call October 28, 2021 9:00 AM ET Company Participants Michael DeCata - President and Chief Executive Officer Ron Knutson - Chief Financial Officer Conference Call Participants Kevin Steinke - Barrington Research Associates Operator Good morning, ladies and gentlemen, and welcome to the Lawson Products Third Quarter 2021 Earnings Call. This call will be hosted by Michael DeCata, Lawson Products' President and Chief Executive Officer; and Ron Knutson, L ...

Financial Performance - Total sales increased by 16.9% to $105.6 million in Q3 2021 compared to $90.3 million in Q3 2020, driven by improved business conditions and Partsmaster sales [117]. - Revenue for the nine months ended September 30, 2021, increased by 24.5% to $315.7 million from $253.5 million in the same period in 2020 [127]. - Partsmaster contributed $44.6 million in sales in the first nine months of 2021, compared to $5.4 million in the same period in 2020 [127]. - Operating income for Q3 2021 was $4.6 million, compared to $2.0 million in Q3 2020, reflecting improved operational performance [110]. - Net income for the nine months ended September 30, 2021, was $10.2 million, down from $14.9 million in the same period in 2020 [126]. Cost and Expenses - Adjusted non-GAAP operating income was $7.3 million in Q3 2021, down from $7.7 million in Q3 2020, primarily due to increased supplier costs [110]. - Selling expenses increased to $72.9 million for the first nine months of 2021, up from $55.4 million in the same period a year ago, representing a 31.6% increase [130]. - General and administrative expenses rose to $79.5 million in the first nine months of 2021 from $57.8 million in the prior year, a 37.5% increase [131]. Profitability Metrics - Gross profit margin improved to 53.1% in Q3 2021 from 52.3% in Q3 2020 [115]. - Gross profit increased by $8.8 million to $56.0 million in Q3 2021, compared to $47.2 million in Q3 2020, primarily due to increased sales [118]. - Consolidated gross profit as a percentage of sales was 53.1% in Q3 2021, up from 52.3% in Q3 2020 [118]. Cash Flow and Liquidity - Available cash and cash equivalents decreased to $7.5 million on September 30, 2021, from $28.4 million on December 31, 2020, primarily due to the payment of the acquisition liability related to Partsmaster [136]. - The company believes cash from operations and available funds under the Credit Agreement are sufficient for operating requirements and strategic initiatives [143]. Acquisition Impact - The acquisition of Partsmaster for $35.3 million contributed $13.6 million in revenue and an operating loss of $0.8 million in Q3 2021 [97]. - The company deferred $3.5 million in employer-side social security payments under the CARES Act, with $1.7 million expected to be paid in 2021 [101]. Operational Metrics - Average monthly PMI was 60.2 in Q3 2021, indicating expansion compared to 55.2 in Q3 2020 [106]. - Average sales per representative per day increased by 8.2% to $1.352 in Q3 2021 compared to $1.249 in Q3 2020 [107]. - Bolt Supply sales improved by 13.5% compared to the prior year quarter, contributing to overall sales growth [117]. Financial Position and Compliance - As of September 30, 2021, the company had $10.9 million in outstanding borrowings and $87.4 million of borrowing availability under its Revolving Credit Facility [140]. - The company can borrow up to 3.25 times its EBITDA and maintains a minimum fixed charge ratio of 1.15, remaining compliant with all financial covenants as of September 30, 2021 [141]. - Non-compliance with financial covenants in future quarters could lead to higher financing costs and restrictions on borrowing, adversely affecting the company's financial condition [142]. Challenges - Supply chain disruptions and inflation continue to pose challenges, impacting inventory acquisition and customer order fulfillment [108]. - Capital expenditures were $5.7 million for the nine months ended September 30, 2021, compared to $1.3 million in the same period in 2020 [137]. - The company has a stock repurchase program authorized for up to $7.5 million, but did not repurchase any shares in the first nine months of 2021 [139].

Financial Data and Key Metrics Changes - The company achieved consolidated sales of $106.5 million, reflecting a 47.7% increase compared to Q2 2020 and a 2.9% increase from Q1 2021 [7][20] - Adjusted EBITDA for the quarter was $8.8 million, representing 8.3% of sales [20][25] - The company ended the quarter with a net cash position of $0.9 million after making the final $33 million payment for the Partsmaster acquisition [20][27] Business Line Data and Key Metrics Changes - Partsmaster generated sales of $15.3 million in the quarter, although sales were slightly down from Q1 due to timing on military sales [7][11] - The Bolt Supply business achieved an 11.5% EBITDA for the quarter, with sales growing over 30% year-over-year and 12% over Q1 2021 [11] - Strategic accounts grew by 6.5% compared to Q1 and 50% compared to Q2 2020, while the Kent business grew by 4.7% versus Q1 and 53% year-over-year [12] Market Data and Key Metrics Changes - Sales in the government civilian segment were flat between Q1 and Q2 but up 6.6% compared to Q2 2020, with the SLED segment performing particularly well [13] - The company is focusing on underserved markets and has made progress in developing additional channels to market [14] Company Strategy and Development Direction - The company’s three-part growth strategy remains unchanged, focusing on sales rep productivity and the integration of Partsmaster [15] - Investments are being made in distribution capabilities and expanding the Calgary location to support future growth [11][26] - The company is optimistic about future growth driven by labor challenges faced by customers, which may lead to increased outsourcing of inventory management [39] Management's Comments on Operating Environment and Future Outlook - The management acknowledged challenges from supply chain disruptions and labor shortages but expressed confidence in the company's ability to navigate these issues [6][16] - There is optimism regarding the future, with management highlighting the importance of operational excellence and customer relationships [17][39] Other Important Information - The integration of Partsmaster is progressing as planned, with all sales reps now utilizing Lawson's technology systems [28] - The company is actively managing supply chain challenges and has implemented price increases to offset inflationary pressures [9][31] Q&A Session Summary Question: About the price increases and their impact on margins - Management confirmed that price increases implemented late in Q2 are expected to benefit margins in Q3 and beyond, as customers recognize the necessity of these increases [31] Question: Clarification on the reduced cost structure - The CFO explained that the cost structure has improved due to actions taken in 2020, and the company is managing costs effectively while growing sales [32][33] Question: Monthly trend in average daily sales - Average daily sales showed a sequential increase from March to April, remained flat in May, and slightly decreased in June, with July sales expected to be similar to June [35] Question: Variations among suppliers - Management noted that some suppliers are performing better than others, particularly in the chemical supply sector, and the company is adapting by shifting to functional equivalent products when necessary [36] Question: Long-term growth outlook amid labor challenges - Management indicated that labor challenges faced by customers are creating opportunities for the company to provide more value through outsourcing inventory management [39] Question: Gross margin expectations - Management reiterated that they expect gross margins to return to the 59%-61% range over time, despite current headwinds from supply chain disruptions [41] Question: M&A strategy moving forward - The company remains committed to pursuing larger acquisitions and is confident in its ability to integrate them successfully, without being hindered by the potential Luther King transaction [52][53]