Distribution Solutions Group Inc
For the period ended Dec 31, 2023. Filed Apr 10, 2024.
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Dec 31, 2023 · Filed Apr 10, 2024
Contents
Appendix A
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 includes for the year ended December 31, 2022 certain results of pre-merger Lawson and excludes for all periods 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 years ended December 31, 2023 and 2022. 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.
| Reconciliation of GAAP Revenue to Pro Forma Revenue and GAAP Operating Income (Loss) to Non-GAAP Adjusted EBITDA | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| YTD 2023 and YTD 2022 | |||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Lawson · Gexpro Services · TestEquity · Other · Eliminations · Consolidated DSG | |||||||||||||||||||
| Year Ended · 2023 · 2022 · 2023 · 2022 · 2023 · 2022 · 2023 · 2022 · 2023 · 2022 · 2023 · 2022 | |||||||||||||||||||
| Revenue from external customers | $468,379 | $324,783 | $404,490 | $385,326 | $641,643 | $392,358 | $55,890 | $48,955 | $— | $— | $1,570,402 | $1,151,422 | |||||||
| Intersegment revenue | 332 | — | 1,243 | — | 125 | — | — | — | (1,700) | — | — | — | |||||||
| Revenue | 468,711 | 324,783 | 405,733 | 385,326 | 641,768 | 392,358 | 55,890 | 48,955 | (1,700) | — | 1,570,402 | 1,151,422 | |||||||
| Pre-merger revenue(1) | — | 104,902 | — | — | — | — | — | 12,975 | — | — | — | 117,877 | |||||||
| Pro forma revenue | $468,711 | $429,685 | $405,733 | $385,326 | $641,768 | $392,358 | $55,890 | $61,930 | $(1,700) | $— | $1,570,402 | $1,269,299 | |||||||
| Operating income (loss) | $32,498 | $6,536 | $27,000 | $21,291 | $(16,465) | $11,375 | $(42) | $2,584 | $42,991 | $41,786 | |||||||||
| Pre-merger operating income(1) | — | 11,096 | — | — | — | — | — | 980 | — | 12,076 | |||||||||
| Pro forma merger adjustments(2) | — | (4,086) | — | — | — | — | — | — | — | (4,086) | |||||||||
| Pro forma operating income (loss) | 32,498 | 13,546 | 27,000 | 21,291 | (16,465) | 11,375 | (42) | 3,564 | 42,991 | 49,776 | |||||||||
| Depreciation and amortization | 19,532 | 14,716 | 15,986 | 15,175 | 26,002 | 17,480 | 2,068 | 2,080 | 63,588 | 49,451 | |||||||||
| Adjustments: | |||||||||||||||||||
| Merger and acquisition related costs(3) | 3,015 | 7,672 | 1,081 | 5,957 | 6,215 | 4,786 | 1,250 | — | 11,561 | 18,415 | |||||||||
| Stock-based compensation(4) | 7,940 | (4,237) | — | — | — | — | — | — | 7,940 | (4,237) | |||||||||
| Severance and acquisition related retention expenses(5) | 476 | 2,050 | 238 | 266 | 23,949 | 1,095 | 3 | 11 | 24,666 | 3,422 | |||||||||
| Inventory net realizable value adjustment(6) | — | 1,737 | — | — | — | — | — | — | — | 1,737 | |||||||||
| Inventory step-up(7) | — | 1,943 | — | 163 | 3,582 | — | — | 761 | 3,582 | 2,867 | |||||||||
| Other non-recurring(8) | 202 | 1,199 | 886 | 354 | — | — | 1,620 | 44 | 2,708 | 1,597 | |||||||||
| Non-GAAP adjusted EBITDA | $63,663 | $38,626 | $45,191 | $43,206 | $43,283 | $34,736 | $4,899 | $6,460 | $157,036 | $123,028 | |||||||||
| Operating income (loss) as a percent of revenue | 6.9% | 2.0% | 6.7% | 5.5% | (2.6)% | 2.9% | (0.1)% | 5.3% | 2.7% | 3.6% | |||||||||
| Adjusted EBITDA as a percent of revenue | 13.6% | 11.9% | 11.1% | 11.2% | 6.7% | 8.9% | 8.8% | 13.2% | 10.0% | 10.7% | |||||||||
| Adjusted EBITDA as a percent of pro forma revenue | 13.6% | 9.0% | 11.1% | 11.2% | 6.7% | 8.9% | 8.8% | 10.4% | 10.0% | 9.7% | |||||||||
(1) Represents Lawson Products pre-merger revenue and operating income
(2)Represents Lawson Products pro forma adjustments related to the merger consisting primarily of amortization of intangibles and stock based compensation
(3)Transaction and integration costs related to the mergers and other acquisitions
(4) Expense (benefit) primarily for stock-based compensation, of which a portion varies with the Company’s stock price
(5) Includes severance expense for actions taken in 2023 and 2022, not related to a formal restructuring plan and acquisition related retention expenses for the Hisco acquisition
(6)Inventory net realizable value adjustment recorded to reduce inventory related to discontinued products where the anticipated net realizable value was lower than the cost reflected in our records
(7)Inventory fair value step-up adjustment for Lawson resulting from the reverse merger acquisition accounting and acquisition accounting for additional acquisitions completed by Gexpro Services or TestEquity
(8) Other non-recurring costs consist of non-capitalized deferred financing costs incurred in conjunction with the 2023 credit agreement amendment, certain non-recurring strategic projects and other non-recurring items
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