Distribution Solutions Group, Inc. · NASDAQ:DSGR
Distribution Solutions — Stephens Annual Investment Conference 2024
31 slides from Distribution Solutions's conference presentation, Nov 20, 2024
Slide 1: Stephens Annual Investment Conference
NASDAQ: DSGR Stephens Annual Investment Conference November 20, 2024
Slide 2: Disclaimers
Disclaimers Cautionary Note Regarding Forward-Looking Statements This presentation contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the “safe-harbor” provisio
Slide 3: Presenters
Presenters J. Bryan King Ron Knutson DSG Chairman & CEO EVP & CFO for LKCM HW Managing Partner DSG and Lawson Products 3
Slide 4: Leading Specialty Industrial Distribution Platform
Leading Specialty Industrial Distribution Platform MRO Focus OEM Focus Industrial Technologies Focus VMI Focus Canadian Branch Focus Leading vendor managed Leading wholesale distributor of Leading global supply chain services and Leading supplier of electronic and specialty inventory provider of C-p
Slide 5: Attractive Attributes of Specialty Distributors
Attractive Attributes of Specialty Distributors ✓ Business model that extends beyond conventional distribution – repeatedly demonstrating a clear, differentiated value proposition for customers ✓ Fortified competitive moat created by robust technical knowledge, extensive service capabilities, and/or
Slide 6: Value-Added Capabilities Drive Returns
Value-Added Capabilities Drive Returns Specialty Distribution Model Value-Added Offerings…Create High Customer Retention Human capital Technology & Specialty investment (P&L) Systems (B/S) offerings Coupled with working capital investment Drive higher ROIC & higher structural margins Vendor Managed
Slide 7: Cross-Company Collaboration
Cross-Company Collaboration The Power of Three Main Assembly Comprehensive product solutions supported by robust suite of value-added services Fasteners ▪ VMI Management ▪ Manufacturing & Assembly ▪ Labeling & Printing ▪ Slitting & Die Cutting Hydraulics ▪ Packaging & Kitting ▪ Value Engineering Che
Slide 8: DSG Delivers a Unique & Attractive Specialty Distribution Platform
DSG Delivers a Unique & Attractive Specialty Distribution Platform ✓ ✓ ✓ ✓ Significant Customer, Attractive, Accretive Strong, Sticky Role Dual Pronged Supplier & End Market Returns on in the Value Chain Growth Strategy Diversity Incremental Capital Customer-Embedded Serve 10+ Industries 110+ bps Ad
Slide 9: DSG Serves a Broad & Diverse Set of End Markets
DSG Serves a Broad & Diverse Set of End Markets Spotlight: Revenue and End Market Diversification A&D Industry – example of how DSG serves >190,000 customers customers up and down the value chain within various end markets: in a robust set of end markets R&D - TE | OEM - GS/TE/Hisco | MRO - Lawson/H
Slide 10: Value Creation Themes
Value Creation Themes Spotlight: Embedded Growth Opportunities Leverage Platform Across Customer Base Strong Secular Tailwinds Unique total customer value proposition + Onshoring / Infrastructure Monetize distinct capabilities across the platform Nearshoring (CHIPS Act) + Collaborative selling acros
Slide 11: MRO Focus: Overview
MRO Focus: Overview Business Unit Snapshot Products ▪ Fasteners ▪ Hydraulics MRO Focus 38% of Total Revenue ▪ Chemicals ▪ Other broad offerings and C-Parts ▪ Cutting tools ▪ Safety OEM Focus Services ▪ Managed inventory ▪ Product recommendations ▪ Industrial vending Industrial Technologies Focus ▪ A
Slide 12: OEM Focus: Overview
OEM Focus: Overview Business Unit Snapshot Comprehensive Supply Chain Solutions MRO Focus OEM Focus 22% of Total Revenue Vendor Managed Kitting & Aftermarket / Technology Industrial Technologies Focus Inventory (VMI) Assembly Installation Diverse End Markets Renewables Technology Aerospace & Defense
Slide 13: Industrial Technologies Focus: Overview
Industrial Technologies Focus: Overview Business Unit Snapshot Products ▪ Electronic Production ▪ Environmental Test MRO Focus Supplies Chambers ▪ Test & Measurement ▪ Chemicals & Adhesives OEM Focus Instrumentation ▪ Labels and Printing Services ▪ VMI ▪ Asset Management Industrial Technologies Focu
Slide 14: Compounding Effect of Cash Flow Reinvestment
Compounding Effect of Cash Flow Reinvestment Goal of >100% conversion1 Free Cash Flow Reinvesting in the Strategic M&A and bolt- business, balance sheet, on acquisitions and working capital Opportunistic buybacks Debt reduction and potential dividends Disciplined Capital Allocation Framework with a
Slide 15: M&A Strategy: Acquisition Criteria
M&A Strategy Acquisition Criteria Strong organic Synergistic across the A clear integration Prioritizing Unique customer growth and potential platform while thesis to unlock North American value proposition for scale in attractive driving higher targeted value- footprint end markets structural margi
Slide 16: M&A Focus Areas
M&A Focus Areas Fasteners, Fabrication, Electricals, Electronic Production Supplies Safety, Cutting Tools, Automotive, Product Offering Mechanicals, Gaskets/Seals/O- Test & Measurement Fluid Power, Fasteners, Welding Rings, Hose Assemblies Calibration United States North America United States Expand
Slide 17: Q3 2024 Consolidated Financial Highlights
Q3 2024 Consolidated Financial Highlights ✓ Q3 revenue of $468.0M; up $29.1M or 6.6% due to three acquisitions closed in 2024. While organic sales declined 2.1% over a year ago, organic sales grew 0.2% over the second quarter of 2024. ✓ Q3 adjusted EBITDA of $49.1M or 10.5% of sales compared to $43.
Slide 18: Other Financial Highlights
Other Financial Highlights Robust Net Working Capital Investment Focus on Deleveraging via Earnings Total Liquidity Growth and Free Cash Flow Generation $497.4M ~$328 M $281.1 Accounts Receivable 3.6x 3.6x Leverage (1) at April 1, 2022 Merger Close $347.0 Inventory 3.2x 3.7x $(130.7) Accounts Payabl
Slide 19: Highly Aligned Leadership / Governance
Highly Aligned Leadership / Governance J. Bryan King Ron Knutson DSG Chairman & CEO EVP and CFO Dedicated LKCM Headwater team LKCM HW Managing Partner Lawson and DSG investing significant time, resources and well aligned capital LAWSON PRODUCTS GEXPRO SERVICES TESTEQUITY GROUP Cesar Lanuza Bob Conno
Slide 20: LKCM Headwater Introduction
LKCM Headwater Introduction SIGNIFICANT PRIVATE COMPANY DISTRIBUTION EXPERIENCE • LG - Leading distributor of fabricated hose, gaskets and belting for specialized and mission-critical applications • Private, employee-owned SEC-registered investment advisor • ESP - Value-added provider of mission-cri
Slide 21: Questions?
Questions? Visit our websites for more information www.lawsonproducts.com www.testequity.com www.gexproservices.com www.lkcmheadwater.com www.distributionsolutionsgroup.com DSG Investor Presentation
Slide 22: Investor Contacts
Investor Contacts Three Part Advisors, LLC (214) 872-2710 Steven Hooser shooser@threepa.com Sandy Martin smartin@threepa.com 22 DSG Investor Presentation
Slide 23: Appendix
Appendix DSG Investor Presentation
Slide 24: Q3 2024 Consolidated Financial Highlights
Q3 2024 Consolidated Financial Highlights Results Inclusive of Pre-Acquisition Results ✓ Adjusted Revenue and adjusted EBITDA below include the reported GAAP results and the pre-acquisition results of other businesses that were acquired at any time during the Q3 2023-Q3 2024 period. Adjusted Revenue
Slide 25: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Q3 Revenue and Adjusted EBITDA Reconciliation ($000s) (Unaudited) 1. Transaction and integration costs related to acquisitions 2. Expense (benefit) primarily for stock-based compensation, of which a portion varies with the Company’s stock price 3. Includes severance
Slide 26: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted Revenue and Adjusted EBITDA Reconciliation ($000s) Results Inclusive of Other Acquisitions – Pre-Acquisition Date (Unaudited) References to table footnotes on slide 27 Results are presented on an Adjusted (Non-GAAP) and continuing operations basis 26
Slide 27: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Adjusted Revenue and EBITDA Reconciliation – Table Footnotes 1. Represents additional revenue and operating income of acquisitions prior to their acquisition dates not in reported GAAP results 2. Transaction and integration costs related to acquisitions 3. Expense (b
Slide 28: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations GAAP Net Income (Loss) and GAAP Diluted EPS to Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted EPS Reconciliation ($000s, except per share data) (Unaudited) 1. The adjustment to the income tax expense (benefit) determined by including the non-GAAP adjustme
Slide 29: Historical Acquisitions
Historical Acquisitions COMPANY FOCUS STRATEGIC RATIONALE CLOSING DATE REVENUE (1) PURCHASE PRICE Industrial ▪ Expanded geographic coverage and expanded customer base with an additional ~22,000 customer locations January 2017 $45.1 $25.0 Technologies ▪ Complementary value-added products / services (
Slide 30: Historical Acquisitions (Continued)
Historical Acquisitions (Continued) COMPANY FOCUS STRATEGIC RATIONALE CLOSING DATE REVENUE (1) PURCHASE PRICE ▪ Leading global renewables supplier within the OEM segment OEM January 2022 $31.9 $38.0 ▪ Opened new strategic markets in Europe, the Middle East, and Asia ▪ Enhances B & C-class product an
Slide 31: Who We Are
Who We Are DSG is a best-in-class specialty distribution company providing high-touch, value-added distribution solutions to the MRO, OEM, and Industrial Technologies verticals in a diversified set of end markets. We take a solutions-based approach to serving our customers the way they want to be se
Distribution Solutions Group — Stephens Annual Investment Conference 2024 on 6ix