Distribution Solutions Group Inc.
03/05/2026 | Press release | Distributed by Public on 03/05/2026 06:47
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of DSG's financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and related notes included in this Annual Report on Form 10-K.
This section of this Annual Report on Form 10-K generally discusses the years ended December 31, 2025 and 2024 and the year-over-year comparisons between the years ended December 31, 2025 and 2024. Discussions of items for the year ended December 31, 2023, and the year-over-year comparisons between the years ended December 31, 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in DSG's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 6, 2025.
References to "DSG", the "Company", "we", "our" or "us" refer to Distribution Solutions Group, Inc. and all entities consolidated in the accompanying consolidated financial statements.
Overview
Organization and Structure
DSG is a multi-platform specialty distribution company providing high touch, value-added distribution solutions to the maintenance, repair and operations ("MRO"), the original equipment manufacturer ("OEM") and the industrial technologies markets.
We manage and report our operating results through four reportable segments: Lawson, TestEquity, Gexpro Services and Canada Branch Division. A summary of our segments is presented below. For additional details about our segments, see Item 1. Business and Note 14 - Segment Information in Item 8. Financial Statements and Supplementary Data.
Lawsonis a distributor of specialty products and services to the industrial, commercial, institutional and government MRO marketplace.
TestEquityis a distributor of test and measurement equipment and solutions, industrial and electronic production supplies, vendor managed inventory programs, and converting, fabrication and adhesive solutions from its leading manufacturer partners supporting the aerospace and defense, wireless and communication, semiconductors, industrial electronics and automotive, and electronics manufacturing industries.
Gexpro Servicesis a global supply chain solutions provider, specializing in the development of mission critical production line management, aftermarket and field installation programs.
Canada Branch Divisioncombines the operations of our Bolt and Source Atlantic subsidiaries, which distribute industrial MRO supplies, safety products, fasteners, power tools and related value-add services to the Canadian MRO market through the sale of products and services via warehouse shipments and to its walk-up customers through 35 branch locations.
In addition to these four reportable segments, we have an "All Other" category which includes unallocated DSG holding company costs that are not directly attributable to the ongoing operating activities of our reportable segments.
Recent Events
2025 Debt Amendment
In December 2025, the Company amended and expanded the senior secured facility through 2030. The new facility includes $700 million of term debt and a revolving credit arrangement of $400 million, an increase over the previous revolver capacity of $255 million. Refer to Note 9 - Debt within Item 8. Financial Statements and Supplementary Data for additional information about the Amended Credit Agreement.
Share Repurchase Increase
In November 2025, the Board authorized a $30.0 million increase to the Company's existing stock repurchase program for shares of DSG common stock. As a result of the additional authorization, the aggregate repurchase authorization under the Company's repurchase program for shares of DSG common stock increased from $37.5 million to $67.5 million. The remaining availability for stock repurchases under the stock repurchase program was $32.9 million at December 31, 2025.
Sales Drivers
DSG believes that the Purchasing Managers Index ("PMI") published by the Institute for Supply Management is an indicative measure of the relative strength of the economic environment of the industry in which it operates. The PMI is a composite index of economic activity in the U.S. manufacturing sector. A measure of the PMI index above 50 is generally viewed as indicating an expansion of the manufacturing sector while a measure below 50 is generally viewed as representing a contraction.The average monthly PMI was 48.9 in the year ended December 31, 2025, compared to 48.3 inthe year ended December 31, 2024, and 47.1 in the year ended December 31, 2023.
Lawson Sales Drivers
The North American MRO market is highly fragmented. Lawson competes for business with several national distributors as well as a large number of regional and local distributors. The MRO business is impacted by the overall strength of the manufacturing sector of the U.S. economy.
Lawson's revenue is also influenced by the number of sales representatives and their productivity. Lawson plans to continue concentrating its efforts on increasing the productivity and size of its sales team. Additionally, Lawson drives revenue through the expansion of products sold to existing customers as well as attracting new customers and additional ship-to locations. Lawson also utilizes an inside sales team to help drive field sales representative productivity and also utilizes an e-commerce site to generate sales.
TestEquity Sales Drivers
The North American market for test and measurement, industrial, and electronic production supplies is highly fragmented, with competition ranging from global to regional distributors. We believe TestEquity stands out through its portfolio of specialized brands, technical knowledge, and digital platforms, each tailored to serve specific needs across the electronics lifecycle. These brands maintain unique identities and address every stage of the electronics process-from R&D to assembly and ongoing maintenance. This multi-brand approach enables TestEquity to offer an extensive product range, expert support, and tailored technical solutions, positioning it as a trusted partner across diverse customer requirements.
Revenue growth is fueled by TestEquity's comprehensive catalog of test and measurement equipment, electronic production supplies, and industrial tools, supported by a high-touch, consultative sales model. Strategic acquisitions have expanded its customer base and strengthened recurring rental revenue. We believe that continued investments in e-commerce, rising demand from high-growth sectors like aerospace and telecommunications, and TestEquity's strong positioning as a preferred vendor amid supplier consolidation will contribute to sustained momentum and long-term value creation.
Gexpro Services Sales Drivers
The global supply chain solutions market is highly fragmented across Gexpro Services' key vertical segments. Gexpro Services' competitors range from large global distributors and manufacturers to small regional domestic distributors and manufacturers. Gexpro Services' revenue is influenced by our OEMs' production schedules, new product introduction launches, and service project needs.
Gexpro Services' strategy is to increase revenue through increasing wallet share with existing customers, customer-led geographic expansion, new customer development in its six key vertical markets and leveraging its portfolio of recent acquisitions to expand its installation and aftermarket services.
Canada Branch Division Sales Drivers
Canada Branch Division combines the operations of our Bolt and Source Atlantic subsidiaries, which distribute industrial MRO supplies, safety products, fasteners, power tools and related value-add services to the Canadian MRO market through the sale of products and services via warehouse shipments and to its walk-up customers through 35 branch locations. Source Atlantic was acquired in 2024 to expand DSG's operating footprint in the Canadian market.
Canada Branch Division's strategy is to grow revenue through increasing wallet share with existing customers, via introduction of new product lines and services in geographic areas that were underserviced previously. Additionally, Canada Branch Division will engage new customers and additional ship-to locations with its national sales team.
Supply Chain Disruptions and Tariffs
We continue to be affected by rising supplier costs caused by inflation, and increased tariffs, transportation and labor costs. We have instituted various price increases during 2023, 2024 and 2025 in response to rising supplier costs, increased tariffs, transportation and labor costs in order to attempt to manage our gross profit margins.
Factors Affecting Comparability to Prior Periods
Our results of operations are not directly comparable on a year-over-year basis due to various business combinations. We account for acquisitions under Accounting Standards Codification 805, Business Combinations ("ASC 805"). Accordingly, the results of acquisitions are only included subsequent to their respective acquisition dates. Refer to Note 3 - Business and Asset Acquisitions within Item 8. Financial Statements and Supplementary Data for a description of each acquisition completed in 2024 and the reportable segment that each acquisition's respective results of operations is included in.
Non-GAAP Financial Measures
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 reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain infrequently occurring, seasonal or non-operational items that impact the overall comparability. These 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.
Non-GAAP Adjusted EBITDA
Management believes Adjusted EBITDA is an important measure of the Company's operating performance and may provide investors with additional meaningful comparisons between current results and results in prior operating periods because Adjusted EBITDA excludes certain non-operational or non-cash items whose fluctuations from period to period do not necessarily correspond to changes in the operating performance of our business and consequently may impact the overall comparability from period to period. We define Adjusted EBITDA as operating income plus depreciation and amortization, stock-based compensation, severance and acquisition related retention costs, costs related to the execution and integration of acquisitions, amortization of fair value step-up resulting from acquisitions and other non-recurring items. Management uses operating income and Adjusted EBITDA to evaluate the performance of its reportable segments. See Note 14 - Segment Information within Item 8. Financial Statements and Supplementary Data for additional information about our reportable segments.
The following table provides a reconciliation of Net income (loss) to Adjusted EBITDA on a consolidated basis and Operating income (loss) to Adjusted EBITDA by segment for the years ended December 31, 2025 and 2024. A reconciliation of Net income (loss) to Adjusted EBITDA by segment is not provided because management does not determine or review net income at the segment level and does not allocate non-operating costs and expenses to its segments, such as income taxes, interest expense, and various other non-operating income and expense.
Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA (Unaudited)
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Year Ended December 31, 2025
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| (in thousands) | Lawson | TestEquity | Gexpro Services | Canada Branch Division | All Other | Consolidated | |||||||||||||||||||||||||||||
| Net income (loss) | $ | 8,345 | |||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | 11,066 | ||||||||||||||||||||||||||||||||||
| Other income (expense), net | 2,500 | ||||||||||||||||||||||||||||||||||
| Change in fair value of earnout liabilities | 1,000 | ||||||||||||||||||||||||||||||||||
| Interest expense | 55,352 | ||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | 18,763 | $ | 14,405 | $ | 48,811 | $ | 7,714 | $ | (11,430) | $ | 78,263 | |||||||||||||||||||||||
| Depreciation and amortization | 27,074 | 33,032 | 14,128 | 6,645 | - | 80,879 | |||||||||||||||||||||||||||||
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Stock-based compensation(1)
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2,926 | 1,787 | 413 | - | 1,546 | 6,672 | |||||||||||||||||||||||||||||
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Severance and acquisition related retention expenses(2)
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2,620 | 1,579 | 511 | 770 | - | 5,480 | |||||||||||||||||||||||||||||
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Acquisition related costs(3)
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109 | (178) | (129) | 329 | 34 | 165 | |||||||||||||||||||||||||||||
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Inventory step-up(4)
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- | - | - | - | - | - | |||||||||||||||||||||||||||||
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Other non-recurring(5)
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150 | 326 | - | 172 | 3,134 | 3,782 | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 51,642 | $ | 50,951 | $ | 63,734 | $ | 15,630 | $ | (6,716) | $ | 175,241 | |||||||||||||||||||||||
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Year Ended December 31, 2024
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| (in thousands) | Lawson | TestEquity | Gexpro Services | Canada Branch Division | All Other | Consolidated | |||||||||||||||||||||||||||||
| Net income (loss) | $ | (7,332) | |||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | 6,796 | ||||||||||||||||||||||||||||||||||
| Other income (expense), net | 358 | ||||||||||||||||||||||||||||||||||
| Change in fair value of earnout liabilities | 988 | ||||||||||||||||||||||||||||||||||
| Interest expense | 55,145 | ||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | 14,555 | $ | 3,967 | $ | 36,533 | $ | 6,024 | $ | (5,124) | $ | 55,955 | |||||||||||||||||||||||
| Depreciation and amortization | 24,349 | 30,799 | 15,489 | 3,739 | - | 74,376 | |||||||||||||||||||||||||||||
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Stock-based compensation(1)
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4,132 | 433 | - | - | 668 | 5,233 | |||||||||||||||||||||||||||||
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Severance and acquisition related retention expenses(2)
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4,937 | 17,791 | 460 | 49 | (1) | 23,236 | |||||||||||||||||||||||||||||
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Acquisition related costs(3)
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7,023 | 2,251 | 1,501 | 23 | (656) | 10,142 | |||||||||||||||||||||||||||||
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Inventory step-up(4)
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1,066 | - | - | 1,816 | - | 2,882 | |||||||||||||||||||||||||||||
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Other non-recurring(5)
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337 | 1,047 | 1,792 | - | 257 | 3,433 | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 56,399 | $ | 56,288 | $ | 55,775 | $ | 11,651 | $ | (4,856) | $ | 175,257 | |||||||||||||||||||||||
(1) Expense (benefit) primarily for stock-based compensation, of which a portion varies with the Company's stock price.
(2)Includes severance expense from 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 and other non-recurring items.
Composition of Results of Operations
Segment revenue and Operating income (loss) by reportable segment includes sales to external customers and sales transactions between our segments, referred to as intersegment revenue, and the impact of those intersegment revenue transactions on operating activities. Reconciliations of segment revenue and Operating income (loss) to our consolidated results of operations in the consolidated financial statements are provided in Note 14 - Segment Information within Item 8. Financial Statements and Supplementary Data.
RESULTS OF OPERATIONS FOR 2025 AS COMPARED TO 2024
Consolidated Results of Operations
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| (Dollars in thousands) | Amount | % of Revenue | Amount | % of Revenue | |||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Lawson | $ | 481,088 | 24.3 | % | $ | 469,044 | 26.0 | % | |||||||||||||||
| TestEquity | 783,237 | 39.6 | % | 771,180 | 42.7 | % | |||||||||||||||||
| Gexpro Services | 496,655 | 25.1 | % | 440,723 | 24.4 | % | |||||||||||||||||
| Canada Branch Division | 221,426 | 11.2 | % | 125,099 | 6.9 | % | |||||||||||||||||
| Intersegment revenue elimination | (2,383) | (0.1) | % | (1,942) | (0.1) | % | |||||||||||||||||
| Total Revenue | 1,980,023 | 100.0 | % | 1,804,104 | 100.0 | % | |||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Lawson | 217,058 | 11.0 | % | 211,784 | 11.7 | % | |||||||||||||||||
| TestEquity | 613,707 | 31.0 | % | 595,368 | 33.0 | % | |||||||||||||||||
| Gexpro Services | 341,685 | 17.3 | % | 302,228 | 16.8 | % | |||||||||||||||||
| Canada Branch Division | 147,910 | 7.5 | % | 82,897 | 4.6 | % | |||||||||||||||||
| Intersegment cost of goods sold elimination | (2,375) | (0.1) | % | (1,948) | (0.1) | % | |||||||||||||||||
| Total Cost of goods sold | 1,317,985 | 66.6 | % | 1,190,329 | 66.0 | % | |||||||||||||||||
| Gross profit | 662,038 | 33.4 | % | 613,775 | 34.0 | % | |||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
| Lawson | 245,267 | 12.4 | % | 242,705 | 13.5 | % | |||||||||||||||||
| TestEquity | 155,125 | 7.8 | % | 171,845 | 9.5 | % | |||||||||||||||||
| Gexpro Services | 106,159 | 5.4 | % | 101,962 | 5.7 | % | |||||||||||||||||
| Canada Branch Division | 65,802 | 3.3 | % | 36,178 | 2.0 | % | |||||||||||||||||
| All Other | 11,422 | 0.6 | % | 5,130 | 0.3 | % | |||||||||||||||||
| Total Selling, general and administrative expenses | 583,775 | 29.5 | % | 557,820 | 30.9 | % | |||||||||||||||||
| Operating income (loss) | 78,263 | 4.0 | % | 55,955 | 3.1 | % | |||||||||||||||||
| Interest expense | (55,352) | (2.8) | % | (55,145) | (3.1) | % | |||||||||||||||||
| Change in fair value of earnout liabilities | (1,000) | (0.1) | % | (988) | (0.1) | % | |||||||||||||||||
| Other income (expense), net | (2,500) | (0.1) | % | (358) | - | % | |||||||||||||||||
| Income (loss) before income taxes | 19,411 | 1.0 | % | (536) | - | % | |||||||||||||||||
| Income tax expense (benefit) | 11,066 | 0.6 | % | 6,796 | 0.4 | % | |||||||||||||||||
| Net income (loss) | $ | 8,345 | 0.4 | % | $ | (7,332) | (0.4) | % | |||||||||||||||
Overview of Consolidated Results of Operations
Our consolidated revenue increased $175.9 million for 2025 compared to 2024 primarily driven by $121.5 million of revenue from acquisitions completed in 2024 and an increase in organic revenue of $54.4 million. ConsolidatedGross profit and Selling, general and administrative expenses also increased over the prior year primarily driven by the 2024 acquisitions of ESS, S&S Automotive, Source Atlantic, TCR and ConRes TE (each as defined in Note 3 - Business and Asset Acquisitions in Item 8. Financial Statements and Supplementary Data).
Refer to Results by Reportable Segment below for a complete discussion of our results of operations.
Results by Reportable Segment
Lawson Segment
| Year Ended December 31, | Change | ||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | Amount | % | |||||||||||||||||||
| Revenue from external customers | $ | 480,768 | $ | 468,976 | $ | 11,792 | 2.5 | % | |||||||||||||||
| Intersegment revenue | 320 | 68 | 252 | 370.6 | % | ||||||||||||||||||
| Revenue | 481,088 | 469,044 | 12,044 | 2.6 | % | ||||||||||||||||||
| Cost of goods sold | 217,058 | 211,784 | 5,274 | 2.5 | % | ||||||||||||||||||
| Gross profit | 264,030 | 257,260 | 6,770 | 2.6 | % | ||||||||||||||||||
| Selling, general and administrative expenses | 245,267 | 242,705 | 2,562 | 1.1 | % | ||||||||||||||||||
| Operating income (loss) | $ | 18,763 | $ | 14,555 | $ | 4,208 | 28.9 | % | |||||||||||||||
| Gross profit margin | 54.9 | % | 54.8 | % | |||||||||||||||||||
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Adjusted EBITDA(1)
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$ | 51,642 | $ | 56,399 | $ | (4,757) | (8.4) | % | |||||||||||||||
(1)Refer to the Non-GAAP Adjusted EBITDA section in Overview for a reconciliation of operating income to Adjusted EBITDA.
Revenue and Gross Profit
Revenue increased $12.0 million, or 2.6%, to $481.1 millionin 2025compared to revenue of $469.0 millionin 2024. The increase was primarily driven by $17.0 million of additional revenue generated from the acquisitions completed in 2024, partially offset by a decline in military customer sales of $5.2 million.
Gross profit increased $6.8 million, or 2.6%, to $264.0 millionin 2025compared to gross profit of $257.3 millionin 2024 primarily as a result of the inclusion of $9.2 million of additional gross profit from the acquisitions completed in 2024 partially offset by lower revenue for legacy Lawson. Lawson gross profit as a percentage of revenue was 54.9% in 2025 compared to gross profit as a percentage of revenue of 54.8% in the prior year.
Selling, General and Administrative Expenses
Selling, general and administrative expensesconsist of compensation and support for Lawson sales representatives as well as expenses to operate Lawson's distribution network and overhead expenses.
Selling, general and administrative expenses increased $2.6 million to $245.3 million in 2025 compared to $242.7 million in 2024. The increase was driven primarily by additional selling, general and administrative expenses of approximately $3.8 million due to the acquisitions completed in 2024, higher employee related costs of $5.8 million and higher depreciation and amortization expense of $2.7 million partially offset by a decrease in severance expense, merger and acquisition expenses and stock based compensation of $2.3 million, $6.9 million and $1.2 million, respectively.
Adjusted EBITDA
During 2025, Lawson generated Adjusted EBITDA of $51.6 million, a decreaseof 8.4% or $4.8 millionfrom the prior year primarily driven by lower organic revenue and higher selling, general and administrative expenses primarily from higher
employee related costs,partially offset by additional contributions of approximately $4.4 million generated by the acquisitions completed in 2024.
TestEquity Segment
| Year Ended December 31, | Change | ||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | Amount | % | |||||||||||||||||||
| Revenue from external customers | $ | 782,367 | $ | 770,866 | $ | 11,501 | 1.5 | % | |||||||||||||||
| Intersegment revenue | 870 | 314 | 556 | 177.1 | % | ||||||||||||||||||
| Revenue | 783,237 | 771,180 | 12,057 | 1.6 | % | ||||||||||||||||||
| Cost of goods sold | 613,707 | 595,368 | 18,339 | 3.1 | % | ||||||||||||||||||
| Gross profit | 169,530 | 175,812 | (6,282) | (3.6) | % | ||||||||||||||||||
| Selling, general and administrative expenses | 155,125 | 171,845 | (16,720) | (9.7) | % | ||||||||||||||||||
| Operating income (loss) | $ | 14,405 | $ | 3,967 | $ | 10,438 | 263.1 | % | |||||||||||||||
| Gross profit margin | 21.6 | % | 22.8 | % | |||||||||||||||||||
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Adjusted EBITDA(1)
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$ | 50,951 | $ | 56,288 | $ | (5,337) | (9.5) | % | |||||||||||||||
(1)Refer to the Non-GAAP Adjusted EBITDA section in Overview for a reconciliation of operating income (loss) to Adjusted EBITDA.
Revenue and Gross Profit
Revenue increased $12.1 million, or 1.6%, to $783.2 millionin 2025 compared to $771.2 millionin 2024. The increase was primarily driven by $7.2 millionof revenue generated from the acquisition completed in 2024, and an increase of $19.0 million in the test and measurement, rentals, chambers, fabrication value added and calibration business, partially offset by a $14.1 million decrease in electronic production supplies and printing value added services.
Gross profit decreased $6.3 millionto $169.5 millionin 2025compared to $175.8 millionin 2024. The decrease was primarily driven by $3.4 million of higher depreciation expense due to the expansion of the rental equipment fleet from the 2024 acquisition of ConRes TE and a sales mix shift toward test and measurement which have lower margins. TestEquity gross profit as a percentage of revenue decreased to 21.6% in 2025compared to 22.8% in the prior year primarily due to higher depreciation expense on the expanded rental equipment fleet, higher inventory write-offs of $1.2 million and a shift in sales mix toward test and measurement which have lower margins partially offset by favorability in vendor rebates.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of compensation and support for TestEquity's sales representatives and expenses to operate TestEquity's distribution network and overhead expenses.
Selling, general and administrative expenses decreased $16.7 millionto $155.1 million in 2025compared to $171.8 millionin 2024. The decrease was primarily driven by adecrease in severance and acquisition related retention expense of $16.2 million and merger and acquisition expenses of$2.4 million primarily related to the 2023 acquisition of Hisco, partially offset by an increase in stock based compensation of $1.4 million.
Adjusted EBITDA
During 2025, TestEquity generated Adjusted EBITDA of $51.0 million, a decreaseof $5.3 million,or 9.5%, from the same period a year ago primarily driven by lower gross margins and higher employee compensation expenses partially offset by additional net margins of $7.7 milliongenerated from the 2024 acquisition of ConRes TE.
Gexpro Services Segment
| Year Ended December 31, | Change | ||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | Amount | % | |||||||||||||||||||
| Revenue from external customers | $ | 495,495 | $ | 439,163 | $ | 56,332 | 12.8 | % | |||||||||||||||
| Intersegment revenue | 1,160 | 1,560 | (400) | (25.6) | % | ||||||||||||||||||
| Revenue | 496,655 | 440,723 | 55,932 | 12.7 | % | ||||||||||||||||||
| Cost of goods sold | 341,685 | 302,228 | 39,457 | 13.1 | % | ||||||||||||||||||
| Gross profit | 154,970 | 138,495 | 16,475 | 11.9 | % | ||||||||||||||||||
| Selling, general and administrative expenses | 106,159 | 101,962 | 4,197 | 4.1 | % | ||||||||||||||||||
| Operating income (loss) | $ | 48,811 | $ | 36,533 | $ | 12,278 | 33.6 | % | |||||||||||||||
| Gross profit margin | 31.2 | % | 31.4 | % | |||||||||||||||||||
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Adjusted EBITDA(1)
|
$ | 63,734 | $ | 55,775 | $ | 7,959 | 14.3 | % | |||||||||||||||
(1)Refer to the Non-GAAP Adjusted EBITDA section in Overview for a reconciliation of operating income to Adjusted EBITDA.
Revenue and Gross Profit
Revenue increased$55.9 million, or 12.7%, to $496.7 million in 2025 compared to $440.7 million in 2024. There was one less selling day in the year ended December 31, 2025, compared to the same period a year ago. A selling day generally represents a business day in which Gexpro Services ships products to its customers. Average daily sales increased 13.1%over the same period a year ago. The increase in revenue was primarily driven by increased sales in the renewable energy, aerospace and defense and technology vertical markets of $25.3 million, $15.8 million, and $8.0 million, respectively, and additional revenue generated from the 2024 acquisition of TCR of $3.9 million. This was partially offset by softness within the consumer and industrial vertical market. Tariff costs passed through in the form of product price increases accounted for approximately 1.6% or $7.1 million of the 2025revenue growth.
Gross profit increased$16.5 million to $155.0 million in 2025 compared to $138.5 million in 2024 primarily due to higher revenue. Gexpro Services' gross profit as a percentage of revenue was 31.2% in 2025 compared to 31.4% in the prior year period. The gross profit margin percentage decrease for 2025 was primarily the result of a sales mix shift and tariff costs not recovered through price increases to customers.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of sales and marketing expenses primarily relating to compensation, costs associated with supporting Gexpro Services' service facilities, overhead expenses within finance, legal, human resources and information technology, and other costs required to operate Gexpro Services' business.
Selling, general, and administrative expenses increased $4.2 millionto $106.2 million in 2025compared to $102.0 million in 2024. The increase was primarily due to $2.0 million of additional expenses driven by the 2024 acquisition of TCR,investments of $2.0 million to support 2025 new commercial investments, an increase in stock-based compensation of $0.4 million and additional expenses to support the increase in revenue. These were partially offset by lower merger and acquisition expenses of $1.6 million and a reduction to non-recurring strategic project consulting costs of $1.8 million.
Adjusted EBITDA
During 2025, Gexpro Services generated Adjusted EBITDA of $63.7 million, an increaseof$8.0 million, or 14.3%from 2024 primarily driven by higher organic revenue, managing gross profit margins and leveraging Selling, general, and administrative expenses over a higher sales base.
Canada Branch Division Segment
| Year Ended December 31, | Change | ||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | Amount | % | |||||||||||||||||||
| Revenue from external customers | $ | 221,393 | $ | 125,099 | $ | 96,294 | 77.0 | % | |||||||||||||||
| Intersegment revenue | 33 | - | 33 | - | % | ||||||||||||||||||
| Revenue | 221,426 | 125,099 | 96,327 | 77.0 | % | ||||||||||||||||||
| Cost of goods sold | 147,910 | 82,897 | 65,013 | 78.4 | % | ||||||||||||||||||
| Gross profit | 73,516 | 42,202 | 31,314 | 74.2 | % | ||||||||||||||||||
| Selling, general and administrative expenses | 65,802 | 36,178 | 29,624 | 81.9 | % | ||||||||||||||||||
| Operating income (loss) | $ | 7,714 | $ | 6,024 | $ | 1,690 | 28.1 | % | |||||||||||||||
| Gross profit margin | 33.2 | % | 33.7 | % | |||||||||||||||||||
|
Adjusted EBITDA(1)
|
$ | 15,630 | $ | 11,651 | $ | 3,979 | 34.2 | % | |||||||||||||||
(1)Refer to the Non-GAAP Adjusted EBITDA section in Overview for a reconciliation of operating income to Adjusted EBITDA.
Revenue and Gross Profit
Revenue increased $96.3 million, or 77.0%, to $221.4 million in 2025 compared to $125.1 millionin 2024. The increase was primarily driven by $93.4 millionof additional revenue generated from the acquisition of Source Atlantic completed in 2024.
Gross profit increased $31.3 million to $73.5 million in 2025 compared to gross profit of $42.2 million in 2024 primarily as a result of the inclusion of $30.7 million of additional gross profit from the acquisition of Source Atlantic completed in 2024. Gross profit as a percentage of revenue decreased to 33.2%in 2025 compared to 33.7%in the prior year primarily due to the lower gross profit margin profile of Source Atlantic as compared to Bolt.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for Canada Branch Division consist of compensation, expenses to operate its distribution network and branch locations and overhead expenses.
Selling, general and administrative expenses increased $29.6 millionto $65.8 millionin 2025 compared to $36.2 million in 2024. Approximately $29.6 million of the increased expenses, including depreciation, was driven by the acquisition of Source Atlantic completed in 2024.
Adjusted EBITDA
During 2025, Canada Branch Divisiongenerated Adjusted EBITDA of $15.6 million, an increase of $4.0 million, or 34.2% from the same period a year ago with an increase of approximately $3.4 million driven by the acquisition of SourceAtlantic completed in 2024.
Consolidated Non-operating Income and Expense
| Year Ended December 31, | Change | ||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | Amount | % | |||||||||||||||||||
| Interest expense | $ | (55,352) | $ | (55,145) | $ | (207) | 0.4 | % | |||||||||||||||
| Change in fair value of earnout liabilities | $ | (1,000) | $ | (988) | $ | (12) | 1.2 | % | |||||||||||||||
| Other income (expense), net | $ | (2,500) | $ | (358) | $ | (2,142) | N/M | ||||||||||||||||
| Income tax expense (benefit) | $ | 11,066 | $ | 6,796 | $ | 4,270 | 62.8 | % | |||||||||||||||
N/MNot meaningful
Interest Expense
Interest expense was flat in 2025 compared to 2024 as higher average borrowings in 2025 were partially offset with lower interest rates in 2025.
Change in Fair Value of Earnout Liabilities
The$1.0 millionexpense in 2025 and the $1.0 million expense in 2024 related to the change in fair value of the earnout liabilities associated with the Frontier acquisition.
Other Income (Expense), Net
Other income (expense), net consists of effects of changes in foreign currency exchange rates, interest income, net and other non-operating income and expenditures. The$2.1 million change in 2025 compared to 2024 was primarily due to unfavorable changes in foreign currency exchange rates and an unfavorable decrease in interest income.
Income Tax Expense (Benefit)
Income tax expense was $11.1 million, a 57.0% effective tax rate for the yearended December 31, 2025 compared to income tax expense of $6.8 million and a (1,267.9)% effective tax rate for the prior year. The change in the year-over-year effective tax rate was primarily due to a change in valuation allowances related to interest expense limitation deferred tax assets. The disproportionate effective tax rates were caused by limitations on the deductibility of interest expense and other permanent items on pre-tax income for the year ended December 31, 2025, compared to a small pre-tax loss in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalentswere $61.8 million on December 31, 2025, compared to $66.5 million on December 31, 2024.
The Company believes its current balances of cash and cash equivalents, availability under its Amended Credit Agreement and cash flows from operations will be sufficient to meet its liquidity needs for the next twelve months. In December 2025, the Company amended and expanded the senior secured facility through 2030. The new facility includes $700 million of term debt and a revolving credit arrangement of $400 million, an increase over the previous revolver capacity of $255 million. The Company used the proceeds from the initial term loan to repay the existing $709 million outstanding under the Original Credit Agreement (as defined in Note 9 - Debt within Item 8. Financial Statements and Supplementary Data). Refer to Note 9 - Debt within Item 8. Financial Statements and Supplementary Data for additional information about the Amended Credit Agreement. As of December 31, 2025, the Company had $61.8 million of cash and cash equivalents and$393.7 million of borrowing availability remaining, net of outstanding letters of credit, under the Amended Credit Agreement.
Our primary short-term and long-term liquidity and capital resource needs are to finance operating expenses, working capital, capital expenditures, potential business acquisitions, strategic initiatives and general corporate purposes. Our current debt obligations under the Amended Credit Agreement mature in December 2030. Required principal payments on the Amended Credit Agreement for the next twelve months are $35.0 million. Refer to Note 9 - Debt within Item 8. Financial Statements and Supplementary Data for additional information related to our debt obligations. Access to debt capital markets has historically provided the Company with sources of liquidity, beyond normal operating cash flows. We do not currently anticipate having difficulty in obtaining financing from those markets in the future, however, we cannot provide assurance that unforeseen events or events beyond our control (such as a potential tightening of debt capital markets, including in response to the implementation of new tariffs as part of the U.S. trade policy and any reciprocal or retaliatory tariffs thereto) will not have a material adverse impact on our liquidity.
Sources and Uses of Cash
The following table presents a summary of our cash flows:
| (in thousands) | December 31, 2025 | December 31, 2024 | Change | ||||||||||||||
| Net cash provided by (used in) operating activities | $ | 83,849 | $ | 56,453 | $ | 27,396 | |||||||||||
| Net cash provided by (used in) investing activities | $ | (29,492) | $ | (229,683) | $ | 200,191 | |||||||||||
| Net cash provided by (used in) financing activities | $ | (64,266) | $ | 159,301 | $ | (223,567) | |||||||||||
Cash Provided by (Used in) Operating Activities
Net cash provided by operations for the year ended December 31, 2025 was $83.8 million primarily due to net income including non-cash items, partially offset by investments in trade working capital and other net cash flow items.
Net cash provided by operations for the year ended December 31, 2024 was $56.5 million, primarily due to non-cash items, partially offset by a net loss, payments of $34.6 million related to the Hisco retention bonuses and other net cash flow items.
Cash Provided by (Used in) Investing Activities
Net cash used in investing activities for the year ended December 31, 2025 was $29.5 million, primarily due to the purchase of property, plant and equipment and rental equipment, partially offset by the sale of property, plant and equipment and rental equipment.
Net cash used in investing activities for the year endedDecember 31, 2024 was $229.7 million, primarily due to the purchase of ESS, S&S Automotive, Source Atlantic, TCR and ConRes TE as well as purchases of property, plant and equipment and rental equipment. This was partially offset by the sale of property, plant and equipment and rental equipment.
Cash Provided by (Used in) Financing Activities
Net cash used in financing activities for the year ended December 31, 2025 was $64.3 million primarily due to the repayment of previous indebtedness in conjunction with the December 2025 debt refinancing of the Original Credit Agreement with the Amended Credit Agreement, principal payments on the previous term loans and repurchases of DSG common stock under the repurchase program. This was partially offset by proceeds from the Amended Credit Agreement. During 2025, deferred financing costs of $4.6 million were incurred related to the Amended Credit Agreement.
Net cash provided by financing activities for the year ended December 31, 2024 was $159.3 million primarily due to borrowings under the Company's credit facility partially offset by principal payments on the term loans. In conjunction with the Source Atlantic Transaction, the Company borrowed $200 million under the incremental term loan facility on August 14, 2024. During 2024, deferred financing costs of $2.1 million were incurred related to the Original Credit Agreement.
Financing and Capital Requirements
Credit Facility
In December 2025, the Company amended and expanded the senior secured facility through 2030. The new facility includes $700 million of term debt and a revolving credit arrangement of $400 million, an increase over the previous revolver capacity of $255 million and permits the Company to increase the commitments under the credit facility from time to time by up to $500 million in the aggregate, subject to, among other things, receipt of additional commitments from existing and/or new lenders and pro forma compliance with certain financial covenants. The Company used the proceeds from the initial term loan to repay the existing $709 million outstanding under the Original Credit Agreement. Refer to Note 9 - Debt within Item 8. Financial Statements and Supplementary Data for additional information about the Amended Credit Agreement.
On December 31, 2025, we had $704.4 millionin outstanding borrowings under the Amended Credit Agreement and $393.7 million of borrowing availability remaining, net of outstanding letters of credit, under the senior secured revolving credit facility component.
As of December 31, 2025, we were in compliance with all financial covenants under our Amended Credit Agreement. While we were in compliance with our financial covenants as of December 31, 2025, failure to meet the covenant requirements of the Amended Credit Agreement in future quarters could lead to higher financing costs and increased restrictions, reduce or eliminate our ability to borrow funds, or accelerate the payment of our indebtedness and could have a material adverse effect on our business, financial condition and results of operations.
Purchase Commitments
As of December 31, 2025, we had contractual commitments to purchase approximately $240 million of products from our suppliers and contractors over the next twelve months.
Capital Expenditures
During the year ended December 31, 2025, total net capital expenditures for property, plant and equipment and rental equipmentwere $26.8 million including proceeds from the sale of property, plant and equipment andrental equipment. The Company expects to spend approximately $25 million to $30 million for net capital expenditures during 2026 to support ongoing operations.
Stock Repurchase Program
The Company's Board of Directors previously authorized a stock repurchase program that permits the Company to repurchase DSG common stock. The timing and the amount of any repurchases will be determined by management under parameters established by the Board of Directors and depend on various factors including an evaluation of our stock price, corporate and regulatory requirements, capital availability and other market conditions. In November 2025, the Board of Directors increased the existing stock repurchase program by $30.0 million bringing the total authorized stock repurchase program to $67.5 million.
During2025, the Company repurchased 776,924 shares of DSG common stock at an average cost of $30.26 per share for a total cost of $23.5 million. During 2024,the Company repurchased 85,644 shares of DSG common stock at an average cost of $30.13 per share for a total cost of $2.6 million. The remaining availability for stock repurchases under the program was $32.9 million at December 31, 2025. See Note 11 - Stockholders' Equity within Item 8. Financial Statements and Supplementary Data for further information.
CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES
We have disclosed our significant accounting policies in Note 2 - Summary of Significant Accounting Policies within Item 8. Financial Statements and Supplementary Data. The following provides information on the accounts requiring more significant estimates.
Income Taxes- Deferred tax assets or liabilities reflect temporary differences between amounts of assets and liabilities for financial and tax reporting. Such amounts are adjusted, as appropriate, to reflect changes in enacted tax rates expected to be in effect when the temporary differences reverse. Significant judgment is required in determining income tax provisions as well as deferred tax asset and liability balances, including the estimation of valuation allowances and the evaluation of uncertain tax positions.
Goodwill Impairment -Goodwill represents the cost of business acquisitions in excess of the fair value of identifiable net tangible and intangibleassets acquired. The Company reviews goodwill for potential impairment annually on October 1st, or when an event or other circumstances change that would more likely than not reduce the fair value of the asset below its carrying value.
The first step in the multi-step process to determine if goodwill has been impaired and to what degree is to review the relevant qualitative factors that could cause the fair value of the reporting unit to decrease below the carrying value of the reporting unit. The Company considers factors such as macroeconomic, industry and market conditions, cost factors, overall
financial performance and other relevant factors that would affect the individual reporting units. If the Company determines that it is more likely than not that the fair value of the reporting unit is greater than the carrying value of the reporting unit, then no further impairment testing is needed. If the Company determines that it is more likely than not that the carrying value of the reporting unit is greater than the fair value of the reporting unit, the Company will move to the next step in the process. The Company will estimate the fair value of the reporting unit and compare it to the reporting unit's carrying value. If the carrying value of the reporting unit exceeds its fair value, the Company will record an impairment of goodwill equal to the amount the carrying value of the reporting unit exceeds its fair value, up to the total amount of goodwill previously recognized.
Business Combinations - We allocate the purchase price paid for assets acquired and liabilities assumed in connection with our acquisitions based on their estimated fair values at the time of acquisition. This allocation involves a number of assumptions, estimates, and judgments in determining the fair value, as of the acquisition date, of the following:
•intangible assets, including the valuation methodology (the relief of royalty method for trade names and multi-period excess earnings method for customer relationships), estimations of future cash flows, discount rates, royalty rates, recurring revenue attributed to customer relationships, and our assumed market segment share, as well as the estimated useful life of intangible assets;
•deferred tax assets and liabilities, uncertain tax positions, and tax-related valuation allowances;
•inventory;
•property, plant and equipment;
•pre-existing liabilities or legal claims;
•contingent consideration, including estimating the likelihood and timing of achieving the relevant thresholds; and
•goodwill as measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.
Our assumptions and estimates are based upon comparable market data and information obtained from our management and the management of the acquired companies. We allocate goodwill to the reporting units of the business that are expected to benefit from the business combination.
Distribution Solutions Group Inc. published this content on March 05, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 05, 2026 at 12:48 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]