Distribution Solutions Group Announces 2026 Second Quarter Results

About this update from Distribution Solutions Group, Inc.

Distribution Solutions Group, Inc. (NASDAQ:DSGR) ("DSG" or the "Company") , a premier specialty distribution company, today announced consolidated results for the second quarter ended June 30, 2026. This press release is supplemented by an earnings presentation at https://investor.distributionsolutionsgroup.com/news/events . Subsequent to the second quarter, on July 15, 2026, the Company entered into a definitive merger agreement (the "Merger Agreement") under which newly formed entities controlled by LKCM Headwater Investments, LLC (collectively, “LKCM Headwater”), already owner of approximately 79% of the Company's outstanding common shares, will acquire all of the outstanding shares of common stock of DSG not already owned by LKCM Headwater and its affiliates for $35.00 per share in cash. The following represents a summary of certain operating results (unaudited). See the reconciliations of GAAP to non-GAAP measures in Tables 2, 3 and 4.   Three Months Ended   June 30,   March 31, (Dollars in thousands)   2026       2025     % Change     2026     % Change Revenue $ 557,734     $ 502,437     11.0 %   $ 495,995     12.4 %                     Operating income $ 27,868     $ 26,826     3.9 %   $ 13,630     104.5 % Non-GAAP adjusted operating income $ 45,216     $ 39,873     13.4 %   $ 29,113     55.3 %                     Net income (loss) $ 8,494     $ 5,003     69.8 %   $ 382     N/M   Non-GAAP adjusted EBITDA $ 53,933     $ 48,561     11.1 %   $ 37,833     42.6 %                     Operating income (loss) as a percent of revenue   5.0 %     5.3 %   -30bps     2.7 %   230bps Adjusted EBITDA as a percent of revenue   9.7 %     9.7 %   0bps     7.6 %   210bps N/M - Not meaningful Revenue increased 11.0% year-over-year to $557.7 million, driven by organic sales growth of 10.2% with daily sales improvement across all of the verticals. The first quarter acquisition of Eastern Valve contributed approximately $4.1 million of revenue in the second quarter. Sequentially, revenue increased 12.4% over the first quarter on two additional selling days. Profitability improved sequentially on higher sales. Adjusted EBITDA margin as a percentage of sales was 9.7%, a sequential improvement of 210bps, while a sequential improvement in operating income to $27.9 million drove improved adjusted earnings per share from $0.24 to $0.47. Improved profitability and working capital management in the quarter drove cash flows from operations to $22.0 million for the quarter, an improvement over cash flows used in operations of $20.4 million in the first quarter of 2026. 2026 Second Quarter Summary (1) Revenue increased $55.3 million or 11.0% to $557.7 million, primarily driven by organic sales growth of 10.2% and $4.1 million of incremental revenue from the acquisition closed in the first quarter of 2026. Sequentially, organic sales grew 12.4% with organic average daily sales growing 8.1% over the first quarter of 2026. Gross margin decreased from 33.9% to 32.3% primarily due to customer and vertical sales mix shifts and higher tariff rates on inbound shipments partially offset by pricing benefits realized. Operating income was $27.9 million, net of $11.1 million of non-cash acquired intangible amortization and $6.2 million of non-recurring severance and acquisition-related retention costs, stock-based compensation, acquisition-related costs and other non-recurring items. This compares to operating income of $26.8 million in the prior year quarter which was net of $11.7 million of intangible amortization and $1.4 million of non-recurring items. Adjusted operating income, excluding these non-cash and non-recurring items, was $45.2 million in the current quarter compared to $39.9 million in the year-ago quarter and $29.1 million in the first quarter of 2026. Net income was $8.5 million for the quarter compared to net income of $5.0 million in the year-ago quarter. Diluted net earnings per share was $0.18 for the quarter compared to diluted net earnings per share of $0.11 in the year-ago quarter. Non-GAAP adjusted diluted earnings per share was $0.47 compared to $0.35 for the same period a year ago and $0.24 for the first quarter of 2026. Adjusted EBITDA was $53.9 million, or 9.7% of sales, compared to $48.6 million, or 9.7% of sales in the prior year quarter and $37.8 million or 7.6% of sales in the first quarter of 2026. Cash provided by operations was $22.0 million for the quarter. Uses of cash for the quarter included net capital expenditures of $7.7 million. The Company ended the quarter with total liquidity of $420.2 million, consisting of $75.5 million of cash (restricted and unrestricted) and $344.7 million available under its credit facility with net debt leverage of 3.4x. (1) See reconciliation of GAAP to non-GAAP measures in tables 2, 3 and 4. Additional Information on Proposed Merger Agreement LKCM Headwater and its affiliates currently own approximately 79% of DSG’s outstanding common stock. J. Bryan King, DSG’s Chairman and Chief Executive Officer, is the Managing Partner of LKCM Headwater. The $35.00 per share purchase price represents an increase of $5.50 per share over LKCM Headwater’s initial non-binding proposal of $29.50 per share submitted to the Company’s Board of Directors on March 14, 2026 (the “Initial Proposal”), and an approximately 81% premium to the Company’s closing share price of $19.31 on March 13, 2026, the last trading day prior to public disclosure of LKCM Headwater’s proposal. Upon completion of the transaction, the Company will become a privately held company 100% controlled by LKCM Headwater and its affiliates, and the Company’s common stock will no longer be listed on Nasdaq. Following LKCM Headwater’s delivery of the Initial Proposal and in light of LKCM Headwater’s existing ownership position and Mr. King’s roles with both LKCM Headwater and the Company, the board of directors of the Company (the “Board”) formed a special committee consisting of disinterested directors (the “Special Committee”) to evaluate the Initial Proposal and negotiate a potential transaction with LKCM Headwater. The Special Committee unanimously approved the transaction and recommended that the Board approve the transaction. The Board, upon the Special Committee’s unanimous recommendation, with certain directors recusing themselves from the vote, approved the transaction. In connection with the Merger Agreement, we amended our existing credit agreement to permit, subject to its terms and conditions, revolving loans to be used to finance the Merger and related amounts. The closing of the transaction is subject to customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), the absence of legal restraints prohibiting the transaction, and stockholder approvals (including the approval of a majority of the votes cast by holders of DSG common stock not owned by LKCM Headwater and its affiliates). The transaction is not subject to a financing condition; however, in connection with the execution of the merger agreement, the Company entered into an amendment to its existing credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, pursuant to which, subject to the applicable terms and conditions of the Company’s credit agreement, proceeds of revolving loans may be used to finance the transactions contemplated by the merger agreement. For additional information and defined terms, see our Current Report on Form 8-K filed with the SEC on July 16, 2026. Additional Information About the Merger and Where to Find It In connection with the proposed Merger, the Company intends to file with the U.S. Securities and Exchange Commission (the “SEC”) a proxy statement on Schedule 14A (the “Proxy Statement”), and the Company, LKCM Headwater and certain of their respective affiliates intend to jointly file with the SEC a transaction statement on Schedule 13E-3 (the “Schedule 13E-3”). The definitive Proxy Statement will be sent or otherwise made available to stockholders of the Company. This communication is not a substitute for the Proxy Statement, the Schedule 13E-3 or any other document that the Company may file with the SEC in connection with the proposed Merger. BEFORE MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE PROXY STATEMENT, THE SCHEDULE 13E-3 AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY AND THE PROPOSED MERGER. Investors and security holders will be able to obtain copies of the Proxy Statement, the Schedule 13E-3 and other documents filed with the SEC by the Company free of charge from the SEC’s website at www.sec.gov or from the Company’s website. Participants in the Solicitation The Company and certain of its directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the Company stockholders in connection with the proposed transaction. Information regarding the Company’s directors and executive officers is available in the Company’s proxy statement for its most recent annual meeting of stockholders and in other documents filed by the Company with the SEC. Additional information regarding the interests of those persons and other persons who may be deemed participants in the proposed transaction will be included in the Proxy Statement and Schedule 13E-3 when they are filed with the SEC. To the extent holdings of the Company’s securities by its directors or executive officers have changed since the amounts set forth in such 2026 proxy statement, such changes have been or will be reflected on Initial Statements of Beneficial Ownership on Form 3 or Statements of Change in Ownership on Form 4 filed with the SEC. About Distribution Solutions Group, Inc. Distribution Solutions Group ("DSG") is a premier multi-platform specialty distribution company providing high touch, value-added distribution solutions to the maintenance, repair & operations (MRO), the original equipment manufacturer (OEM) and the industrial technologies markets. DSG was formed through the strategic combination of Lawson Products, a leader in MRO distribution of C-parts, Gexpro Services, a leading global supply chain services provider to manufacturing customers, and TestEquity, a leader in electronic test & measurement solutions. Through its collective businesses, DSG is dedicated to helping customers lower their total cost of operation by increasing productivity and efficiency with the right products, expert technical support and fast, reliable delivery to be a one-stop solution provider. DSG serves approximately 220,000 customers in several diverse end markets supported by approximately 4,300 dedicated employees and strong vendor partnerships. DSG ships from strategically located distribution and service centers to customers in North America, Europe, Asia, South America and the Middle East. For more information on Distribution Solutions Group, please visit www.distributionsolutionsgroup.com . Cautionary Note Regarding Forward-Looking Statements This release 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" provisions under the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. The Terms "aim," "anticipate," "believe," "contemplates," "continues," "could," "ensure," "estimate," "expect," "forecasts," "if," "intend," "likely," "may," "might," "objective," "outlook," "plan," "positioned," "potential," "predict," "probable," "project," "shall," "should," "strategy," "will," "would," and variations of them and other words and terms of similar meaning and expression (and the negatives of such words and terms) are intended to identify forward-looking statements. Forward-looking statements can also be identified by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements are based on current expectations and involve inherent risks, uncertainties and assumptions, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. DSG can give no assurance that any goal or plan set forth in forward-looking statements can be achieved and DSG cautions readers not to place undue reliance on such statements. DSG undertakes no obligation to release publicly any revisions to forward-looking statements as a result of new information, future events or otherwise. Each forward-looking statement speaks only as of the date on which such statement is made, and DSG undertakes no obligation to update any such statement to reflect events or circumstances arising after such date. Actual results may differ materially from those projected as a result of certain risks and uncertainties. Factors that could cause or contribute to such differences or that might otherwise impact DSG's business, financial condition and results of operations include the risk that the proposed Merger may not be completed in a timely manner or at all, the failure to satisfy closing conditions, including receipt of the requisite stockholder approvals and expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act, the risk that borrowings under the Company's credit agreement may not be available to finance the Merger consideration, the possibility that competing offers or acquisition proposals will be made, the occurrence of events giving rise to termination of the Merger Agreement, including in circumstances requiring payment of the termination fee, the effect of the pendency of the proposed Merger on the Company’s business relationships, operating results and business generally, the effect of the announcement or pendency of the proposed Merger on the Company’s business relationships, operating results, employees, customers, suppliers, financing sources and other business counterparties, risks related to diverting management’s attention from the Company’s ongoing business operations, the risk of litigation relating to the proposed Merger, the risks that DSG may encounter difficulties integrating the business of DSG with the business of other companies that DSG has combined with or may otherwise combine with and that certain assumptions with respect to such business or transactions could prove to be inaccurate. Certain risks associated with DSG's business are also discussed from time to time in the reports DSG files with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K or other reports the Company may file from time to time with the Securities and Exchange Commission, which should be reviewed carefully. No Offer or Solicitation This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote, consent or approval, in any jurisdiction pursuant to or in connection with the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. -TABLES FOLLOW- Distribution Solutions Group, Inc. Condensed Consolidated Balance Sheets (Dollars in thousands, except share data) (Unaudited)     June 30, 2026   December 31, 2025 ASSETS       Current assets:       Cash and cash equivalents $ 66,938     $ 61,753   Restricted cash   8,542       13,573   Accounts receivable, less allowances   331,649       271,331   Inventories   378,734       353,374   Prepaid expenses and other current assets   45,938       46,893   Total current assets   831,801       746,924   Property, plant and equipment, net   124,376       126,605   Rental equipment, net   42,123       38,956   Goodwill   473,663       467,905   Deferred tax asset, net   1,132       1,196   Customer relationships intangibles, net   131,403       143,503   Trade names and other intangibles, net   75,000       82,552   Cash value of life insurance   22,738       21,567   Right of use operating lease assets   107,605       111,117   Other assets   7,450       8,296   Total assets $ 1,817,291     $ 1,748,621   LIABILITIES AND STOCKHOLDERS' EQUITY       Current liabilities:       Accounts payable $ 188,115     $ 151,234   Current portion of long-term debt   35,840       35,470   Current portion of lease liabilities   21,334       20,624   Accrued expenses and other current liabilities   81,564       84,137   Total current liabilities   326,853       291,465   Long-term debt, less current portion, net   693,658       664,196   Lease liabilities   94,641       98,821   Deferred tax liability, net   20,890       20,147   Other liabilities   26,534       24,645   Total liabilities   1,162,576       1,099,274   Stockholders' equity:       Preferred stock, $1 par value:       Authorized - 500,000 shares, issued and outstanding — None   —       —   Common stock, $1 par value:       Authorized - 70,000,000 shares Issued - 47,924,087 and 47,860,312 shares, respectively Outstanding - 46,238,315 and 46,180,700 shares, respectively   46,238       46,180   Capital in excess of par value   690,706       686,183   Retained deficit   (24,818 )     (33,694 ) Treasury stock – 1,685,772 and 1,679,612 shares, respectively   (44,159 )     (43,998 ) Accumulated other comprehensive income (loss)   (13,252 )     (5,324 ) Total stockholders' equity   654,715       649,347   Total liabilities and stockholders' equity $ 1,817,291     $ 1,748,621   Distribution Solutions Group, Inc. Condensed Consolidated Statements of Operations (Dollars in thousands, except per share data) (Unaudited)     Three Months Ended   Six Months Ended   June 30,   June 30,     2026       2025       2026       2025                   Revenue $ 557,734     $ 502,437     $ 1,053,729     $ 980,466   Cost of goods sold   377,598       332,353       710,254       646,402   Gross profit   180,136       170,084       343,475       334,064                   Selling, general and administrative expenses   152,268       143,258       301,977       287,141                   Operating income (loss)   27,868       26,826       41,498       46,923                   Interest expense   (12,991 )     (14,238 )     (25,162 )     (28,453 ) Change in fair value of earnout liabilities   —       —       —       (1,000 ) Other income (expense), net   (486 )     (726 )     (1,188 )     (94 )                 Income (loss) before income taxes   14,391       11,862       15,148       17,376   Income tax expense (benefit)   5,897       6,859       6,272       9,112                   Net income (loss) $ 8,494     $ 5,003     $ 8,876     $ 8,264                   Basic income (loss) per share of common stock $ 0.18     $ 0.11     $ 0.19     $ 0.18                   Diluted income (loss) per share of common stock $ 0.18     $ 0.11     $ 0.19     $ 0.17                   Basic weighted average shares outstanding   46,210,991       46,381,194       46,200,851       46,490,702                   Diluted weighted average shares outstanding   46,432,540       46,562,690       47,062,216       47,295,547   Distribution Solutions Group, Inc. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited)     Six Months Ended June 30,     2026       2025   Operating activities       Net income (loss) $ 8,876     $ 8,264   Adjustments to reconcile to net cash used in operating activities:       Depreciation and amortization   39,589       40,317   Amortization of debt issuance costs   879       1,752   Stock-based compensation   4,582       2,224   Deferred income taxes   (576 )     1,793   Change in fair value of earnout liabilities   —       1,000   (Gain) loss on sale of rental equipment   (3,033 )     (2,129 ) (Gain) loss on sale of property, plant and equipment   (626 )     (543 ) Charge for step-up of acquired inventory   94       —   Net realizable value adjustment and write-offs for obsolete and excess inventory   2,748       4,907   Bad debt expense   2,040       2,119   Changes in operating assets and liabilities, net of acquisitions:       Accounts receivable   (63,023 )     (31,048 ) Inventories   (29,458 )     (1,470 ) Prepaid expenses and other current assets   3,554       (16,364 ) Accounts payable   37,231       15,552   Accrued expenses and other current liabilities   (2,018 )     1,216   Other changes in operating assets and liabilities   763       946   Net cash provided by (used in) operating activities   1,622       28,536   Investing activities       Purchases of property, plant and equipment   (8,903 )     (10,289 ) Proceeds from sale of property, plant and equipment   826       990   Business acquisitions, net of cash acquired   (16,536 )     (1,426 ) Purchases of rental equipment   (11,744 )     (7,177 ) Proceeds from sale of rental equipment   6,553       5,913   Net cash provided by (used in) investing activities   (29,804 )     (11,989 ) Financing activities       Proceeds from revolving lines of credit   262,973       196,652   Payments on revolving lines of credit   (216,119 )     (195,865 ) Payments on term loans   (17,500 )     (20,125 ) Repurchase of common stock   15       (20,256 ) Shares repurchased held in treasury   (178 )     (45 ) Stock option exercises   —       877   Payment of financing lease principal   (329 )     (296 ) Net cash provided by (used in) financing activities   28,862       (39,058 ) Effect of exchange rate changes on cash and cash equivalents   (526 )     2,548   Increase (decrease) in cash, cash equivalents and restricted cash   154       (19,963 ) Cash, cash equivalents and restricted cash at beginning of period   75,326       81,726   Cash, cash equivalents and restricted cash at end of period $ 75,480     $ 61,763   Cash and cash equivalents $ 66,938     $ 47,430   Restricted cash   8,542       14,333   Total cash, cash equivalents and restricted cash $ 75,480     $ 61,763   Distribution Solutions Group, Inc. Table 1 - Selected Segment Financial Data (Dollars in thousands) (Unaudited)           Three Months Ended   June 30,     2026       2025   Revenue:       Lawson Products $ 125,498     $ 124,313   Canada Branch Division   63,717       55,852   Gexpro Services   140,146       127,807   TestEquity   228,994       195,046   Intersegment revenue elimination   (621 )     (581 ) Total $ 557,734     $ 502,437           Operating income (loss):       Lawson Products $ 2,542     $ 7,975   Canada Branch Division   3,829       1,751   Gexpro Services   14,532       13,902   TestEquity   10,768       4,813   All Other   (3,803 )     (1,615 ) Total $ 27,868     $ 26,826   DISTRIBUTION SOLUTIONS GROUP, INC. SEC REGULATION G GAAP RECONCILIATIONS The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, the Company's management believes that certain non-GAAP financial measures may provide users of this financial information with additional meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflections of underlying trends of the business because they provide a comparison of historical information that excludes certain non-operational or non-cash items that impact the overall comparability. See Tables below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three months ended June 30, 2026 and 2025 and the three months ended March 31, 2026. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. Distribution Solutions Group, Inc. Table 2 - Reconciliation of GAAP Net Income (Loss) and GAAP Operating Income (Loss) to Non-GAAP Adjusted EBITDA (Dollars in thousands) (Unaudited)               Three Months Ended   June 30,   March 31,     2026       2025       2026   Net income (loss) $ 8,494     $ 5,003     $ 382   Income tax expense (benefit)   5,897       6,859       375   Other income (expense), net   486       726       702   Interest expense   12,991       14,238       12,171   Operating income (loss)   27,868       26,826       13,630   Depreciation and amortization   19,865       20,338       19,724   Stock-based compensation (1)   2,158       1,250       2,424   Severance and acquisition related retention expenses (2)   2,204       355       1,141   Acquisition related costs (3)   335       (208 )     753   Inventory step-up (4)   70       —       24   Other non-recurring (5)   1,433       —       137   Non-GAAP adjusted EBITDA $ 53,933     $ 48,561     $ 37,833               Operating income (loss) as a percent of revenue   5.0 %     5.3 %     2.7 %             Adjusted EBITDA as a percent of revenue   9.7 %     9.7 %     7.6 % (1) Expense (benefit) primarily for stock-based compensation, of which a portion varies with the Company's stock price. (2) Includes severance expense for actions taken not related to a formal restructuring plan and acquisition related retention expenses. (3) Transaction and integration costs related to acquisitions. (4) Inventory fair value step-up adjustment for acquisition accounting related to acquisitions completed. (5) Other non-recurring costs consist of certain non-recurring strategic projects, costs related to the proposed Merger and other non-recurring items. Distribution Solutions Group, Inc. Table 3 - Reconciliation of GAAP Net Income (Loss) and GAAP Diluted EPS to Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted EPS (Dollars in thousands, except per share data) (Unaudited)               Three Months Ended   June 30, 2026   June 30, 2025   March 31,2026   Amount   Diluted EPS (2)   Amount   Diluted EPS (2)   Amount   Diluted EPS (2) Net income (loss) $ 8,494     $ 0.18     $ 5,003     $ 0.11     $ 382     $ 0.01                           Pretax adjustments:                       Stock-based compensation   2,158       0.05       1,250       0.03       2,424       0.05   Acquisition related costs   335       0.01       (208 )     —       753       0.02   Amortization of intangible assets   11,148       0.24       11,650       0.25       11,004       0.23   Severance and acquisition related retention expenses   2,204       0.05       355       0.01       1,141       0.02   Inventory step-up   70       —       —       —       24       —   Other non-recurring   1,433       0.03       —       —       137       —   Total pretax adjustments   17,348       0.38       13,047       0.29       15,483       0.32   Tax effect on adjustments (1)/(3)   (4,543 )     (0.11 )     (3,135 )     (0.08 )     (4,423 )     (0.09 ) Deferred tax asset valuation allowance (3)/(4)   754       0.02       1,536       0.03       47       —   Non-GAAP adjusted net income $ 22,053     $ 0.47     $ 16,451     $ 0.35     $ 11,489     $ 0.24 (1) The adjustment to the income tax expense (benefit) is determined by excluding the non-GAAP adjustments by jurisdiction. (2) Pretax adjustments to diluted EPS calculated on 46.433 million, 46.563 million and 47.030 million diluted shares for the second quarter of 2026 and 2025, and the first quarter of 2026, respectively. (3) The quarter-to-date amounts are derived from the current period year-to-date amount less the previous quarter year-to-date amount. (4) The estimated impact to the deferred tax asset valuation allowance from interest expense limitations under Section 163(j) determined by including the non-GAAP adjustments by jurisdiction. Distribution Solutions Group, Inc. Table 4 - Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Adjusted Operating Income (Dollars in thousands) (Unaudited)               Three Months Ended   June 30,   March 31,     2026     2025       2026 Operating income (loss) $ 27,868   $ 26,826     $ 13,630             Gross profit adjustments:           Inventory step-up (1)   70     —       24 Total gross profit adjustments   70     —       24             Selling, general and administrative expenses adjustments:           Acquisition related costs (2)   335     (208 )     753 Amortization of intangible assets   11,148     11,650       11,004 Stock-based compensation (3)   2,158     1,250       2,424 Severance and acquisition related retention expenses (4)   2,204     355       1,141 Other non-recurring (5)   1,433     —       137 Total selling, general and administrative adjustments   17,278     13,047       15,459             Total adjustments   17,348     13,047       15,483 Non-GAAP adjusted operating income $ 45,216   $ 39,873     $ 29,113 (1) Inventory fair value step-up adjustment for acquisition accounting related to acquisitions completed. (2) Transaction and integration costs related to acquisitions. (3) Expense (benefit) primarily for stock-based compensation, of which a portion varies with the Company's stock price. (4) Includes severance expense for actions taken not related to a formal restructuring plan and acquisition related retention expenses. (5) Other non-recurring costs consist of certain non-recurring strategic projects, costs related to the proposed Merger and other non-recurring items. Distribution Solutions Group, Inc. Table 5 - Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Adjusted EBITDA Q2 2026 and Q2 2025 (Dollars in thousands) (Unaudited)                                             Lawson Products   Gexpro Services   TestEquity   Canada Branch Division   All Other   Eliminations   Consolidated DSG Quarter Ended Q2 2026 Q2 2025   Q2 2026 Q2 2025   Q2 2026 Q2 2025   Q2 2026 Q2 2025   Q2 2026 Q2 2025   Q2 2026 Q2 2025   Q2 2026 Q2 2025 Revenue from external customers $ 125,403   $ 124,287     $ 139,727   $ 127,474     $ 228,921   $ 194,830     $ 63,683   $ 55,846     $ —   $ —     $ —   $ —     $ 557,734   $ 502,437   Intersegment revenue   95     26       419     333       73     216       34     6       —     —       (621 )   (581 )     —     —   Revenue $ 125,498   $ 124,313     $ 140,146   $ 127,807     $ 228,994   $ 195,046     $ 63,717   $ 55,852     $ —   $ —     $ (621 ) $ (581 )   $ 557,734   $ 502,437                                             Operating income (loss) $ 2,542   $ 7,975     $ 14,532   $ 13,902     $ 10,768   $ 4,813     $ 3,829   $ 1,751     $ (3,803 ) $ (1,615 )         $ 27,868   $ 26,826                                             Depreciation and amortization   6,744     6,808       3,041     3,532       8,246     8,280       1,834     1,718       —     —             19,865     20,338   Adjustments:                                         Acquisition related costs(1)   357     12       4     (397 )     61     29       (87 )   148       —     —             335     (208 ) Stock-based compensation(2)   777     775       404     18       507     168       —     —       470     289             2,158     1,250   Severance and acquisition related retention expenses(3)   1,399     139       319     27       382     187       20     3       84     (1 )           2,204     355   Inventory step-up(4)   —     —       —     —       —     —       70     —       —     —             70     —   Other non-recurring(5)   91     —       —     —       27     —       40     —       1,275     —             1,433     —                                             Non-GAAP adjusted EBITDA $ 11,910   $ 15,709     $ 18,300   $ 17,082     $ 19,991   $ 13,477     $ 5,706   $ 3,620     $ (1,974 ) $ (1,327 )         $ 53,933   $ 48,561                                             Operating income (loss) as a percent of revenue   2.0 %   6.4 %     10.4 %   10.9 %     4.7 %   2.5 %     6.0 %   3.1 %     N/M     N/M             5.0 %   5.3 % Adjusted EBITDA as a percent of revenue   9.5 %   12.6 %     13.1 %   13.4 %     8.7 %   6.9 %     9.0 %   6.5 %     N/M     N/M             9.7 %   9.7 % (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 expense from actions taken not related to a formal restructuring plan and acquisition related retention expenses. (4) Inventory fair value step-up adjustment for acquisition accounting related to acquisitions completed. (5) Other non-recurring costs consist of certain non-recurring strategic projects, costs related to the proposed Merger and other non-recurring items. N/M - Not meaningful   View source version on businesswire.com: https://www.businesswire.com/news/home/20260805630925/en/

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