Distribution Solutions Group Inc

Previous wording

The following discussion and analysis of DSG's financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included in this Annual Report on Form 10-K, the audited consolidated financial statements and accompanying notes included in DSG's Annual Report on Form 10-K filed for the year ended December 31, 2022 and the Lawson Products, Inc. unaudited condensed consolidated financial statements and accompanying notes included in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022.

Current wording

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, the audited consolidated financial statements and accompanying notes included in DSG’s Annual Report on Form 10-K for the year ended December 31, 2023, filed on March 7, 2024, the audited consolidated financial statements and accompanying notes included in DSG’s Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 14, 2023 and the Lawson Products, Inc. unaudited condensed consolidated financial statements and accompanying notes included in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, filed on April 28, 2022.

Previous wording

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. The Mergers that were consummated on April 1, 2022 resulted in the combination of Lawson, TestEquity and Gexpro Services. For a description of the Mergers, refer to Item 1. Business and Note 1 – Nature of Operations and Basis of Presentation in Item 8. Financial Statements and Supplementary Data.

Current wording

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.

Previous wording

We manage and report our operating results through three reportable segments: Lawson, TestEquity and Gexpro Services. 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.

Current wording

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.

Previous wording

In addition to these three 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 and the results of a non-reportable segment.

Current wording

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.

Previous wording

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 47.1 in the year ended December 31, 2023 compared to 53.5 in theyear ended December 31, 2022.

Current wording

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 48.3 in the year ended December 31, 2024, compared to 47.1 in theyear ended December 31, 2023, and 53.5 in the year ended December 31, 2022.

Previous wording

Through the Hisco Transaction, TestEquity expanded its product offerings, including adhesives, chemicals and tapes as well as specialty materials such as electrostatic discharge, thermal management materials and static shielding bags. Hisco operates in 38 locations across North America, including its Precision Converting facilities that provide value-added fabrication and its Adhesive Materials Group that provides an array of custom repackaging solutions. Hisco also offers vendor-managed inventory and Radio Frequency Identification ("RFID") programs with specialized warehousing for chemical management, logistics services and cold storage.

Current wording

Through the Hisco Transaction, TestEquity expanded its product offerings, including adhesives, chemicals and tapes as well as specialty materials such as electrostatic discharge, thermal management materials and static shielding bags. Hisco operates in 32 locations across North America, including its Precision Converting facilities that provide value-added fabrication and its Adhesive Materials Group that provides an array of custom repackaging solutions. Hisco also offers vendor-managed inventory and Radio Frequency Identification (“RFID”) programs with specialized warehousing for chemical management, logistics services and cold storage.

Previous wording

Because of the nature of the information that may have been compromised, DSG was required to notify the parties whose information was potentially compromised of the incident as well as various governmental agencies and has taken other actions, such as offering credit monitoring services. At December 31, 2023, DSG had not incurred material costs as a result of the Cyber Incident. On April 4, 2023, aputative class action lawsuit was filed against DSG related to the Cyber Incident (the “Cyber Incident Suit”). For more information about the Cyber Incident Suit, refer to Note 15 – Commitments and Contingencies within Item 8. Financial Statements and Supplementary Data.

Current wording

Because of the nature of the information that may have been compromised, DSG was required to notify the parties whose information was potentially compromised of the incident as well as various governmental agencies and has taken other actions, such as offering credit monitoring services. On April 4, 2023, aputative class action lawsuit was filed against DSG related to the Cyber Incident (the “Cyber Incident Suit”). At December 31, 2024, DSG had not incurred material costs as a result of the Cyber Incident. For more information about the Cyber Incident Suit, refer to Note 15 – Commitments and Contingencies within Item 8. Financial Statements and Supplementary Data.

Previous wording

Our results of operations for the year ended December 31, 2023 are not directly comparable to prior results for the year ended December 31, 2022 due to the Mergers that were completed on April 1, 2022. The Mergers were accounted for as a reverse merger under the acquisition method of accounting in accordance with the accounting guidance for reverse acquisitions as provided in Accounting Standards Codification 805, Business Combinations ("ASC 805"). Under this guidance, TestEquity and Gexpro Services were treated as a combined entity as the accounting acquirer for financial reporting purposes, and DSG was identified as the accounting acquiree. This determination was primarily made as TestEquity and Gexpro Services were under the common control of an entity that owned a majority of the voting rights of the combined entity, and therefore, only DSG experienced a change in control. Accordingly, the consolidated financial statements for the year ended December 31, 2022 reflect the results of operations of TestEquity and Gexpro Services on a consolidated basis for the full year, and the results of operations of DSG's legacy Lawson business are only included subsequent to the April 1, 2022 Merger Date. The combined operations of all three entities are included in the consolidated financial statements for the full year ended December 31, 2023.

Current wording

On April 1, 2022 (the “Merger Date”) we completed the Mergers whereby TestEquity and Gexpro Services became wholly-owned subsidiaries of DSG. The Mergers were accounted for as a reverse merger under the accounting guidance for reverse acquisitions as provided in ASC 805. Under this guidance, TestEquity and Gexpro Services were treated as a combined entity as the accounting acquirer for financial reporting purposes, and DSG was identified as the accounting acquiree. This determination was primarily made as TestEquity and Gexpro Services were under the common control of an entity that owned a majority of the voting rights of the combined entity, and therefore, only DSG experienced a change in control. Accordingly, the results of operations for the year ended December 31, 2022 include the results of operations of TestEquity and Gexpro Services on a consolidated basis for the full year, and the results of operations of DSG’s legacy Lawson, Canada Branch Division and All Other have only been included subsequent to the April 1, 2022 Merger Date.

Previous wording

For management to discuss Lawson's operating results on a comparable basis, Lawson's GAAP results of operations were adjusted to include Lawson's historical pre-merger components of operating income, prior to the April 1, 2022 Merger Date, along with pre-merger pro forma adjustments prepared under SEC Regulation S-X Article 11, in order to reflect the total operating activities attributable to Lawson for each period presented. Management believes this supplemental information provides the most meaningful basis of comparison for Lawson's operations, is more useful in identifying current business trends, and is important for the users of our financial statements in understanding Lawson's business. Refer to Note 1 – Nature of Operations and Basis of Presentation and Note 3 – Business Acquisitions within Item 8. Financial Statements and Supplementary Data for information about the Mergers.

Current wording

For management to discuss Lawson’s and Canada Branch Division’s operating results on a comparable basis, Lawson’s and Canada Branch Division’s GAAP results of operations were adjusted to include Lawson’s and Canada Branch Division’s historical pre-merger components of operating income, prior to the April 1, 2022 Merger Date, along with pre-merger pro forma adjustments prepared under SEC Regulation S-X Article 11, in order to reflect the total operating activities attributable to Lawson and Canada Branch Division for each period presented. Management believes this supplemental information provides the most meaningful basis of comparison for Lawson’s and Canada Branch Division’s operations, is more useful in identifying current business trends, and is important for the users of our financial statements in understanding Lawson’s and Canada Branch Division’s businesses. Refer to Note 1 – Nature of Operations and Basis of Presentation and Note 3 – Business and Asset Acquisitions within Item 8. Financial Statements and Supplementary Data for information about the Mergers.

Previous wording

This supplemental information may not reflect the actual results we would have achieved had the Mergers occurred at the beginning of 2022, and should not be viewed as a substitute for the results of operations presented in accordance with GAAP. Lawson's historical operating results prior to the Mergers were obtained from the unaudited condensed consolidated financial statements included in the Lawson Products, Inc. Quarterly Report on Form 10-Q filed for the quarterly period ended March 31, 2022. The pro forma adjustments were obtained from the unaudited pro forma condensed combined financial information included in DSG's Current Report on Form 8-K/A filed on August 24, 2023.

Current wording

This supplemental information may not reflect the actual results we would have achieved had the Mergers occurred at the beginning of 2022 and should not be viewed as a substitute for the results of operations presented in accordance with GAAP. Lawson’s and Canada Branch Division’s historical operating results prior to the Mergers were obtained from the unaudited condensed consolidated financial statements included in the Lawson Products, Inc. Quarterly Report on Form 10-Q filed for the quarterly period ended March 31, 2022. The pro forma adjustments were obtained from the unaudited pro forma condensed combined financial information included in DSG’s Current Report on Form 8-K/A filed on August 24, 2023.

Previous wording

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 the Mergers and other acquisitions, inventory net realizable value adjustments, amortization of fair value step-up resulting from the Mergers and other 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 of our consolidated financial statements within Item 8. Financial Statements and Supplementary Data for additional information about our reportable segments.

Current wording

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, inventory net realizable value adjustments, 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 of our consolidated financial statements within Item 8. Financial Statements and Supplementary Data for additional information about our reportable segments.

Previous wording

(2) Includes severance expense from actions taken in 2023 and 2022 not related to a formal restructuring plan and acquisition related retention expenses for the Hisco Transaction.

Current wording

(2) Includes severance expense from actions taken not related to a formal restructuring plan and acquisition related retention expenses.

Previous wording

(3) Transaction and integration costs related to the Mergers and other acquisitions.

Current wording

(3) Transaction and integration costs related to acquisitions.

Previous wording

(6) Other non-recurring costs consist of non-capitalized deferred financing costs incurred in conjunction with the 2023 Amended Credit Agreement, certain non-recurring strategic projects and other non-recurring items.

Current wording

(6) Other non-recurring costs consist of certain non-recurring strategic projects and other non-recurring items.

Previous wording

(7) Includes the operating results of Lawson and All Other subsequent, but not prior, to the April 1, 2022 Merger Date in accordance with GAAP accounting guidance for reverse acquisitions.

Current wording

(7)Includes the operating results of Lawson, Canada Branch Division and All Other subsequent, but not prior, to the April 1, 2022 Merger Date in accordance with GAAP accounting guidance for reverse acquisitions.

Previous wording

The following results of operations for the year ended December 31, 2023 include the combined operations of DSG. The following results of operations for the year ended December 31, 2022 include the accounts of the TestEquity and Gexpro Services combined entity, as the accounting acquirer, for the full year, and the results of DSG's legacy Lawson business have only been included for activity subsequent, and not prior, to the April 1, 2022 Merger Date.

Current wording

The following results of operations for the years ended December 31, 2024 and 2023 include the combined operations of DSG, while the following results of operations for the year ended December 31, 2022 include the accounts of the TestEquity and Gexpro Services combined entity, as the accounting acquirer, for the full year, and the results of DSG’s legacy Lawson, Canada Branch Division and All Other businesses have only been included for activity subsequent, and not prior, to the April 1, 2022 Merger Date.

Previous wording

(2) Includes the operating results of All Other subsequent, but not prior, to the April 1, 2022 Merger Date.

Current wording

(1) Includes the operating results of Lawson, Canada Branch Division and All Other subsequent, but not prior, to the April 1, 2022 Merger Date.

Previous wording

Our consolidated results of operations include the financial impact of the Mergers that were completed on April 1, 2022 and the other acquisitions completed in 2023 and 2022. The increase in gross profit for 2023 compared to 2022 was primarily due to the inclusion of Lawson operations only subsequent, and not prior, to the Merger Date and the Hisco and other acquisitions completed in 2023 and 2022. Expenses for 2023 were impacted by the other acquisitions completed in 2023 and 2022.

Current wording

Our consolidated results of operations include the financial impact of the Mergers that were completed on April 1, 2022 and the other acquisitions completed in 2023 and 2022. The increase in gross profit for 2023 compared to 2022 was primarily due to the inclusion of Lawson and Canada Branch Division operations only subsequent, and not prior, to the Merger Date and to the Hisco and other acquisitions completed in 2023 and 2022. Expenses for 2023 were impacted by the other acquisitions completed in 2023 and 2022.

Previous wording

Revenue increased$143.6 million, or 44.2%, to$468.7 million in 2023 compared to revenue of$324.8 million in the same period of 2022 primarily due to $125.3 million of revenue in the first quarter of 2023 with no comparable amount in 2022 due to the inclusion of Lawson operations beginning on the Merger Date and not including any Lawson operations prior to the Merger Date. The remaining increase was primarily driven by strengthening sales to Lawson's strategic and governmental customers and automotive end market customers from a combination of organic growth and the realization of price increases enacted throughout 2022 and 2023 to offset rising supplier costs.

Current wording

Revenue increased$143.9 million, or 44.3%, to$468.7 million in 2023 compared to revenue of$324.8 million in the same period of 2022 primarily due to $125.3 million of revenue in the first quarter of 2023 with no comparable amount in 2022 due to the inclusion of Lawson operations beginning on the Merger Date and not including any Lawson operations prior to the Merger Date. The remaining increase was primarily driven by strengthening sales to Lawson’s strategic and governmental customers and automotive end market customers from a combination of organic growth and the realization of price increases enacted throughout 2022 and 2023 to offset rising supplier costs.

Previous wording

For management to discuss Lawson's operating results on a comparable basis, Lawson's GAAP results of operations were adjusted to include Lawson's historical pre-merger components of operating income, prior to the April 1, 2022 Merger Date, along with pre-merger pro forma adjustments prepared under SEC Regulation S-X Article 11, in order to reflect the total operating activities attributable to Lawson for each period presented. These pro forma results presented in the table below are referred to within this supplemental results of operations discussion as "pro forma".

Current wording

For management to discuss Lawson’s operating results on a comparable basis, Lawson’s GAAP results of operations were adjusted to include Lawson’s historical pre-merger components of operating income, prior to the April 1, 2022 Merger Date, along with pre-merger pro forma adjustments prepared under SEC Regulation S-X Article 11, in order to reflect the total operating activities attributable to Lawson for each period presented. These pro forma results presented in the tables below are referred to within this supplemental results of operations discussion concerning Lawson as “pro forma”.

Previous wording

(2)Operating income prepared in accordance with GAAP, which includes Lawson’s results of operations subsequent, but not prior, to the April 1, 2022 Merger Date. See Note 1 – Nature of Operations and Basis of Presentation and Note 3 – Business Acquisitions within Item 8. Financial Statements and Supplementary Data.

Current wording

(1)Operating income prepared in accordance with GAAP, which includes Lawson’s results of operations subsequent, but not prior, to the April 1, 2022 Merger Date. See Note 1 – Nature of Operations and Basis of Presentation.

Previous wording

(3)Lawson's results of operations for the three months ended March 31, 2022, which occurred prior to the April 1, 2022 Merger Date and were not included in the Company's GAAP operating results under reverse merger acquisition accounting.

Current wording

(2)Lawson’s results of operations for the three months ended March 31, 2022, which occurred prior to the April 1, 2022 Merger Date and were not included in the Company’s GAAP operating results under reverse merger acquisition accounting.

Previous wording

(5)Lawson's pro forma results of operations adjusted for comparability on a period-over-period basis. These results represent Lawson’s total operating activities for the year ended 2022, regardless of the Merger Date (that is, they reflect both pre- and post-Merger results of Lawson, including the pro forma adjustments related to the pre-Merger period).

Current wording

(4)Lawson’s pro forma results of operations adjusted for comparability on a period-over-period basis. These results represent Lawson’s total operating activities for the year ended 2022, regardless of the Merger Date (that is, they reflect both pre- and post-Merger results of Lawson, including the pro forma adjustments related to the pre-Merger period).

Previous wording

(1)For comparability purposes, Lawson's GAAP results of operations were adjusted to include the historical unaudited results of Lawson prior to the Merger Dateand certain pro-forma adjustments including the incremental expense related to the fair value adjustment of share-based compensation awards and incremental depreciation and amortization expense related to the fair value adjustments of property, plant and equipment and identifiable intangible assets. Refer to the section Factors Affecting Comparability to Prior Periods and the section Supplemental Information -Lawson Pro Forma Operating Income and Non-GAAP Adjusted EBITDAfor more information related to the calculation of adjusted amounts.

Current wording

(1)For comparability purposes, Lawson’s GAAP results of operations were adjusted to include the historical unaudited results of Lawson prior to the Merger Dateand certain pro-forma adjustments including the incremental expense related to the fair value adjustment of share-based compensation awards and incremental depreciation and amortization expense related to the fair value adjustments of property, plant and equipment and identifiable intangible assets. Refer to the section Factors Affecting Comparability to Prior Periods and the section 2022 Supplemental Information -Lawson and Canada Branch Division Pro Forma Operating Income and Non-GAAP Adjusted EBITDAand the section Lawson Pro Forma Results - Calculation of Supplemental Information (Unaudited)for more information related to the calculation of adjusted amounts.

Previous wording

Cash and cash equivalents were $83.9 million on December 31, 2023 compared to $24.6 million on December 31, 2022.

Current wording

Cash and cash equivalents were $66.5 million on December 31, 2024 compared to $83.9 million on December 31, 2023.

Previous wording

The Company believes its current balances of cash and cash equivalents, availability under its 2023 Amended Credit Agreement and cash flows from operations will be sufficient to meet its liquidity needs for the next twelve months. As of December 31, 2023, the Company had $83.9 million of cash and cash equivalents and $198.3 million of borrowing availability remaining, net of outstanding letters of credit, under the 2023 Amended Credit Agreement.

Current wording

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. On August 14, 2024, the Company borrowed $200 million under the incremental term loan of the Amended Credit Agreement. The Company used a portion of these proceeds to fund the Source Atlantic Transaction. As of December 31, 2024, the Company had $66.5 million of cash and cash equivalents and $253.0 million of borrowing availability remaining, net of outstanding letters of credit, under the Amended Credit Agreement.

Previous wording

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 2023 Amended Credit Agreement mature in April 2027. Required principal payments on the 2023 Amended Credit Agreement for the next twelve months are$30.3 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 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) will not have a material adverse impact on our liquidity.

Current wording

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 April 2027. Required principal payments on the Amended Credit Agreement for the next twelve months are$40.3 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 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) will not have a material adverse impact on our liquidity.

Previous wording

Net cash used in investing activities for theyear ended December 31, 2022 was $126.7 million, primarily due to acquisitions completed by TestEquity and Gexpro Services, as well as purchases of property, plant and equipment and rental equipment which was partially offset by the sale of rental equipment.

Current wording

Net cash used in investing activities for the year ended December 31, 2024 was $229.7 million, primarily due to the purchase of ESS, S&SAutomotive, Source Atlantic, TCR and certain assets of 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.

Previous wording

Net cash used in investing activities for the year ended December 31, 2023 was $278.5 million, primarily due to the Hisco Transaction, as well as purchases of property, plant and equipment and rental equipment which was partially offset by the sale of rental equipment.

Current wording

Net cash used in investing activities for theyear ended December 31, 2023 was $278.5 million, primarily due to the Hisco Transaction, as well as purchases of property, plant and equipment and rental equipment which was partially offset by the sale of rental equipment.

Previous wording

Net cash provided by financing activities for the year ended December 31, 2023 was $250.4 million due to proceeds from the 2023 Amended Credit Agreement and the Rights Offering partially offset by repayment of previous indebtedness and principal payments on the term loans. In conjunction with the Hisco Transaction, the Company borrowed $305.0 million under the incremental term loan facility on June 8, 2023 and raised approximately $98.5 million, net of offering costs, through the Rights Offering which closed during the second quarter of 2023. During 2023, deferred financing costs of $3.4 million were incurred related to the 2023 Amended Credit Agreement.

Current wording

Net cash provided by financing activities for the year ended December 31, 2023 was $250.4 million, due to borrowings under the Company’s credit facility and proceeds from a rights offering that we completed during the second quarter of 2023, partially offset by repayment of previous indebtedness and principal payments on the term loans. In conjunction with the Hisco Transaction, the Company borrowed $305.0 million under the incremental term loan facility on June 8, 2023 and raised approximately $98.5 million, net of offering costs, through the rights offering. During 2023, deferred financing costs of $3.4 million were incurred related to the First Amendment, dated June 8, 2023, to the Company’s credit facility.

Previous wording

On June 8, 2023, in connection with the Hisco Transaction, DSG entered into the First Amendment, which amended and replaced the Amended and Restated Credit Agreement dated April 1, 2022 with the 2023 Amended Credit Agreement, and provided for a $305 million incremental term loan facility. The 2023 Amended Credit Agreement also provides for the Company to increase the commitments from time to time by up to $200 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.

Current wording

On August 14, 2024, in connection with the Source Atlantic Transaction, DSG entered into the Third Amendment, which provided for an additional $200 million incremental term loan and a $55 million increase in the Company’s senior secured revolving credit facility, and permits the Company to increase the commitments under the credit facility from time to time by up to $300 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.

Previous wording

The 2023 Amended Credit Agreement includes a $200 million senior secured revolving credit facility, a $250 million senior secured initial term loan facility, a $305 million incremental term loan and a $50 million senior secured delayed draw term loan facility. Refer to Note 9 – Debt within Item 8. Financial Statements and Supplementary Data for a description of the 2023 Amended Credit Agreement.

Current wording

As amended, the Amended Credit Agreement includes a $255 million senior secured revolving credit facility, a $250 million senior secured initial term loan facility, $505 million of incremental term loans, and a $50 million senior secured delayed draw term loan facility. Refer to Note 9 – Debt within Item 8. Financial Statements and Supplementary Data for a description of the Amended Credit Agreement.

Previous wording

On December 31, 2023, we had $574.7 million in outstanding borrowings under the 2023 Amended Credit Agreement and $198.3 million of borrowing availability remaining, net of outstanding letters of credit, under the senior secured revolving credit facility component.

Current wording

On December 31, 2024, we had $739.9 million in outstanding borrowings under the Amended Credit Agreement and $253.0 million of borrowing availability remaining, net of outstanding letters of credit, under the senior secured revolving credit facility component.

Previous wording

As of December 31, 2023, we were in compliance with all financial covenants under our 2023 Amended Credit Agreement. While we were in compliance with our financial covenants as of December 31, 2023, failure to meet the covenant requirements of the 2023 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.

Current wording

As of December 31, 2024, 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, 2024, 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.

Previous wording

As of December 31, 2023, we had contractual commitments to purchase approximately $146 million of products from our suppliers and contractors over the next twelve months.

Current wording

As of December 31, 2024, we had contractual commitments to purchase approximately $173 million of products from our suppliers and contractors over the next twelve months.

Previous wording

During theyear ended December 31, 2023, total capital expenditures for property, plant and equipment and rental equipment were $24.7 million excluding proceeds from the sale of rental equipment. The Company expects to spend appro ximately $16 million to $20 million for capital expenditures during 2024 to support ongoing operations.

Current wording

During theyear ended December 31, 2024, total capital expenditures for property, plant and equipment and rental equipment were$23.2 million excluding proceeds from the sale of rental equipment. The Company expects to spend appro ximately $20 million to $25 million for capital expenditures during 2025 to support ongoing operations.

Previous wording

During 2023, the Company repurchased 138,725 shares of DSG common stock at an average cost of $26.09 per share for a total cost of $3.6 million. During 2022, the Company repurchased 108,178 shares of DSG common stock at an average cost of $17.93 per share for a total cost of $1.9 million. The remaining availability for stock repurchases under the program was $29.0 million at December 31, 2023. See Note 11 – Stockholders' Equity within Item 8. Financial Statements and Supplementary Data for further information.

Current wording

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. During 2023, the Company repurchased 138,725 shares of DSG common stock at an average cost of $26.09 per share for a total cost of $3.6 million. The remaining availability for stock repurchases under the program was $26.4 million at December 31, 2024. See Note 11 – Stockholders’ Equity within Item 8. Financial Statements and Supplementary Data for further information.

Previous wording

As part of the Purchase Agreement, DSG will also pay $37.5 million in cash or DSG common stock in retention bonuses to certain Hisco employees that remain employed with Hisco or its affiliates for at least twelve months after the closing of the Hisco Transaction. Pursuant to the Purchase Agreement, the Company paid $1.8 million of the retention bonuses during 2023 and will pay $34.6 million during 2024, with the remaining balance of $1.1 million to be paid in 2025.

Current wording

Under the Hisco Purchase Agreement, DSG became obligated to pay $37.5 million in cash or DSG common stock in retention bonuses to certain Hisco employees that remain employed with Hisco or its affiliates for at least twelve months after the closing of the Hisco Transaction. Pursuant to the Hisco Purchase Agreement, the Company paid $1.8 million of the retention bonuses in 2023 and $34.6 million in 2024, with the remaining balance of $1.1 million to be paid in 2025.