Financial Performance - Total revenue for the three months ended March 31, 2023, was $348,270,000, a 126.5% increase from $154,085,000 in the same period of 2022 [181]. - Adjusted EBITDA for the first quarter of 2023 was $39,353,000, representing a 191.5% increase from $13,502,000 in Q1 2022 [173]. - Lawson's revenue for Q1 2023 was $125,280,000, with a gross profit of $70,910,000 and an operating income of $8,245,000 [184]. - TestEquity's revenue increased to $107,359,000 in Q1 2023 from $72,402,000 in Q1 2022, reflecting a 48.3% growth [181]. - Gexpro Services reported revenue of $101,016,000 in Q1 2023, up from $81,683,000 in Q1 2022, marking a 23.7% increase [181]. - Net income for the three months ended March 31, 2023, was $5,907,000, compared to a net loss of $2,537,000 in the same period of 2022 [181]. - Adjusted EBITDA for Lawson in Q1 2023 was $18,450,000, a significant increase of 129.4% from $8,042,000 in Q1 2022 [186]. - Adjusted EBITDA for Q1 2023 was $18.5 million, an increase of $10.4 million, or 129.4%, from the same period last year [191]. Cost and Expenses - Total cost of goods sold for Q1 2023 was $215,399,000, which is 61.8% of total revenue, compared to 73.5% in Q1 2022 [181]. - Selling, general and administrative expenses for Q1 2023 totaled $116,150,000, representing 33.4% of total revenue, up from 24.6% in Q1 2022 [181]. - Selling, general and administrative expenses for Lawson increased to $62.7 million in Q1 2023, up from $44.4 million in the prior year quarter [190]. - Interest expense increased by $0.8 million in Q1 2023 due to higher outstanding borrowings from debt refinancing [206]. Inventory and Reserves - As of March 31, 2023, DSG's inventory reserve was $12.9 million, representing approximately 4.5% of gross inventory, with a hypothetical 100 basis point change affecting cost of goods sold by $2.7 million [163]. Market Conditions - Distribution Solutions Group, Inc. (DSG) reported a Purchasing Managers Index (PMI) average of 47.1 for the three months ended March 31, 2023, down from 57.8 in the same period of 2022, indicating a contraction in the manufacturing sector [149]. - The average monthly PMI indicates that a measure above 50 generally signifies expansion, while below 50 indicates contraction, reflecting the economic environment's impact on DSG's operations [149]. Strategic Initiatives - DSG plans to close the acquisition of HIS Company, Inc. in the second quarter of 2023, enhancing its distribution capabilities in industrial technology applications [148]. - The company aims to grow organically by expanding digital capabilities and collaborative selling across its customer bases [146]. - Gexpro Services focuses on increasing wallet share with existing customers and expanding geographic reach in six key vertical markets [156]. - DSG has implemented price increases in response to rising supplier costs, inflation, and increased transportation and labor costs [157]. Cash Flow and Capital Expenditures - Cash and cash equivalents were $31.1 million as of March 31, 2023, compared to $24.6 million at the end of 2022 [210]. - Net cash provided by operating activities was $13.9 million in Q1 2023, a significant improvement from a net cash used of $13.5 million in Q1 2022 [214]. - Total capital expenditures for the three months ended March 31, 2023, were $6.9 million, with an expected range of $14 million to $16 million for the remainder of 2023 [224]. Debt and Financing - The company had $415.9 million in outstanding borrowings and $69.8 million of borrowing availability remaining under its credit facility as of March 31, 2023 [220]. - The company had $7.6 million of remaining availability for stock repurchases under the authorized program as of March 31, 2023 [226]. - The company agreed to purchase Hisco for $269.1 million, with a potential additional earn-out payment of up to $12.6 million based on performance targets [227]. - The completion of the Hisco transaction is subject to regulatory and customary closing conditions [227]. - The Rights Offering is expected to raise approximately $100 million and will be conducted under an effective registration statement [229]. - Luther King Capital Management and its affiliates own approximately 77% of the outstanding stock and intend to fully subscribe for their pro rata portion in the Rights Offering [229].
DSG(DSGR) - 2023 Q1 - Quarterly Report