Distribution Solutions Group, Inc.

Previous wording

Canada Branch Division combines the operations of our Bolt Supply House (“Bolt”) and Source Atlantic Limited 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 38 branch locations.

Current wording

Canada Branch Division combines the operations of our Bolt Supply House (“Bolt”) and Source Atlantic Limited 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 37 branch locations.

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 50.1 in the three months ended March 31, 2025 compared to 49.1 in thethree months ended March 31, 2024.

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 49.4 in the six months ended June 30, 2025, compared to 48.9 in thesix months ended June 30, 2024.

Previous wording

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 38 branch locations. Source Atlantic was acquired to expand DSG’s operating footprint in the Canadian market.

Current wording

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 37 branch locations. Source Atlantic was acquired to expand DSG’s operating footprint in the Canadian market.

Previous wording

We continue to be affected byrising supplier costs caused by inflation and increased transportation and labor costs. We have instituted various price increases during 2024 and 2025 in response to rising supplier costs, as well as increased transportation and labor costs in order to manage our gross profit margins.

Current wording

We continue to be affected byrising supplier costs caused by inflation and increased tariffs, transportation and labor costs. We have instituted various price increases during 2024 and 2025 in response to rising supplier costs including tariffs, as well as increased transportation and labor costs in order to manage our gross profit margins.

Previous wording

Management believes Adjusted EBITDA is an important measure of the Company’s operating performanceand 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 within Item 1. Financial Statements for additional information about our reportable segments.

Current wording

Management believes Adjusted EBITDA is an important measure of the Company’s operating performanceand 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 the fair value step-up of inventory 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 1. Financial Statements for additional information about our reportable segments.

Previous wording

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 thethree months ended March 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.

Current wording

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 thethree and six months ended June 30, 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.

Previous wording

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

Current wording

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

Previous wording

Our consolidated revenue increased$61.9 million in the first quarter of 2025 compared to thefirst quarter of 2024 primarily driven by $50.8 million from acquisitions completed in 2024 and an increase in organic revenue of $11.1 million or 2.7%. Consolidated gross profit and Selling, general and administrative expenses also increased in thefirst quarter of 2025 compared to theprior year quarter, primarily driven by the inclusion of the ESS, S&S Automotive, Source Atlantic, TCR and ConRes TE acquisitions completed in 2024.

Current wording

Our consolidated revenue increased$62.9 million in the second quarter of 2025 compared to thesecond quarter of 2024 primarily driven by $48.8 million from acquisitions completed in 2024 and an increase in organic revenue of $14.1 million or 3.3%. Consolidated gross profit and Selling, general and administrative expenses also increased in thesecond quarter of 2025 compared to theprior year quarter, primarily driven by the inclusion of the S&S Automotive, Source Atlantic, TCR and ConRes TE acquisitions completed in 2024.

Previous wording

Gross profit increased $3.2 million, or 4.9%, to$68.2 million in the first quarter of 2025 compared to gross profit of $65.1 million in the prior year quarter primarily as a result of the inclusion of $4.5 million from the acquisitions completed in 2024. This was partially offset by a decrease in gross profit on lower legacy Lawson revenue. Lawson gross profit as a percent of revenue was 56.6% in the first quarter of 2025 compared to 55.1% in the prior year quarter. The gross profit margin percentage increase was primarily due to lower write-offs of obsolete and excess inventory and higher vendor rebates partially offset by a sales mix shift and a lower gross profit margin profile on revenue generated by the 2024 acquisitions compared to its organic profile.

Current wording

Gross profit increased $2.2 million, or 3.3%, to$68.6 million in the second quarter of 2025 compared to gross profit of $66.4 million in the prior year quarter primarily as a result of the inclusion of$3.0 million of additional gross profit from the acquisitions completed in 2024. This was partially offset by a decrease in gross profit on lower legacy Lawson revenue. Lawson gross profit as a percent of revenue was 55.2% in the second quarter of 2025 compared to 54.8% in the prior year quarter. The gross profit margin percentage increase was primarily due to lower amortization of the fair value step-up of inventory of $0.6 million related to the S&S Automotive Transaction and price increases partially offset by increased vendor costs.

Previous wording

During the three months ended March 31, 2025, Lawson generated Adjusted EBITDA of$14.3 million, an increase of$0.9 million from the same period a year agoprimarily driven by contributions ofapproximately $1.6 million generated by the acquisitions completed in 2024 offset bylower net margins on lower organic revenue.

Current wording

During the three months ended June 30, 2025, Lawson generated Adjusted EBITDA of$15.7 million, a decrease of$0.8 million from the same period a year agoprimarily driven by contributions ofapproximately $1.5 million of additional Adjusted EBITDA generated by the acquisitions completed in 2024 offset bylower net margins on lower organic revenue.

Previous wording

Gross profit decreased $0.4 million to $41.8 million in the first quarter of 2025 compared to gross profit of $42.2 million in the prior year quarter. The decrease was primarily driven by higher depreciation expense due to an expanded rental equipment fleet. TestEquity gross profit as a percent of revenue decreased to 22.1% in thefirst quarter of 2025 compared to 22.5% in the prior year quarter primarily due to higher depreciation expense.

Current wording

Gross profit decreased $3.2 million to $42.6 million in the second quarter of 2025 compared to gross profit of $45.8 million in the prior year quarter. The decrease was primarily driven by higher depreciation expense due to an expanded rental equipment fleet from the acquisition of ConRes TE. TestEquity gross profit as a percent of revenue decreased to 21.8% in thesecond quarter of 2025 compared to 23.2% in the prior year quarter primarily due to higher depreciation expense.

Previous wording

Selling, general and administrative expenses decreased $10.7 million to$37.6 million inthe first quarter of 2025 compared to $48.3 million in the prior year quarter. The decrease was primarily driven by lower severance and acquisition related retention expenses of $9.2 million, lower merger and acquisition expenses of$0.7 million and a higher gain on the sale of rental equipment of $0.4 million.

Current wording

Selling, general and administrative expenses decreased $7.3 million to$37.8 million inthe second quarter of 2025 compared to $45.1 million in the prior year quarter. The decrease was primarily driven by lower severance and acquisition related retention expenses of $6.3 million, lower merger and acquisition expenses of$0.3 million and a higher gain on the sale of rental equipment of $0.4 million.

Previous wording

During the three months ended March 31, 2025, TestEquity generated Adjusted EBITDA of $12.8 million, an increase of $1.2 million from the same period a year ago, which was primarily driven by increased revenue and a higher gain on sale of rental equipment.

Current wording

During the three months ended June 30, 2025, TestEquity generated Adjusted EBITDA of $13.5 million, a decrease of $2.0 million from the same period a year ago, which was primarily driven by a decrease in revenue and lower gross profit margins, partially offset by net margins of $1.6 million generated from 2024 acquisitions.

Previous wording

Gross profit increased $6.4 million to $37.1 millionin thefirst quarter of 2025 compared to gross profit of$30.8 million in the prior year quarter, primarily on higher revenue. Gexpro Services gross profit as a percent of revenue remained flat at 31.2% in thefirst quarter of 2025 compared to 31.2% in the prior year quarter.

Current wording

Gross profit increased $6.8 million to $40.0 millionin thesecond quarter of 2025 compared to gross profit of$33.2 million in the prior year quarter, primarily on higher revenue. Gexpro Services gross profit as a percent of revenue increased to 31.3% in thesecond quarter of 2025 compared to 31.0% in the prior year quarter as a result of ashift in sales toward higher margin profile customers.

Previous wording

During the three months ended March 31, 2025, Gexpro Services generated Adjusted EBITDA of $15.0 million, an increase of$4.2 million from the same period a year ago primarily driven by higher organic revenue, gross profit margin management and leveraging its Selling, general, and administrative expenses over a higher sales base.

Current wording

During the three months ended June 30, 2025, Gexpro Services generated Adjusted EBITDA of $17.1 million, an increase of$4.3 million from the same period a year ago primarily driven by higher organic revenue, gross profit margin management and leveraging its Selling, general, and administrative expenses over a higher sales base.

Previous wording

Revenue increased $38.0 million to$50.5 millionin thefirst quarter of 2025 compared to $12.5 million in the first quarter of 2024 primarily driven by$37.4 million of revenue generated by the 2024 acquisition of Source Atlantic.

Current wording

Revenue increased $41.4 million to$55.9 millionin thesecond quarter of 2025 compared to $14.5 million in the second quarter of 2024 primarily driven by$41.3 million of revenue generated by the 2024 acquisition of Source Atlantic.

Previous wording

Gross profit increased $11.5 million to $16.9 million in the first quarter of 2025 compared to gross profit of $5.4 million in the prior year quarter primarily from the inclusion ofgross profit of$11.3 million from the 2024 acquisition of Source Atlantic. Gross profit as a percent of revenue decreased to 33.4% in thefirst quarter of 2025 compared to 43.1% in the prior year quarter primarily due to the lower gross profit margin profile of Source Atlantic as compared to Bolt.

Current wording

Gross profit increased $12.8 million to $19.0 million in the second quarter of 2025 compared to gross profit of $6.2 million in the prior year quarter primarily from the inclusion ofgross profit of$12.6 million from the 2024 acquisition of Source Atlantic. Gross profit as a percent of revenue decreased to 33.9% in thesecond quarter of 2025 compared to 42.6% in the prior year quarter primarily due to the lower gross profit margin profile of Source Atlantic as compared to Bolt.

Previous wording

Selling, general and administrative expenses increased $11.7 million to$16.2 million inthe first quarter of 2025 compared to $4.5 million in the prior year quarter. Approximately $11.8 million of the increased expenses was driven by the 2024 acquisition of Source Atlantic.

Current wording

Selling, general and administrative expenses increased $12.5 million to$17.2 million inthe second quarter of 2025 compared to $4.7 million in the prior year quarter. Approximately $12.7 million of the increased expenses was driven by the 2024 acquisition of Source Atlantic.

Previous wording

During the three months ended March 31, 2025, Canada Branch Division generated Adjusted EBITDA of$2.6 million, an increase of $1.2 million from the same period a year ago, primarily driven by contributions of approximately$0.9 million generated by the 2024 acquisition of Source Atlantic.

Current wording

During the three months ended June 30, 2025, Canada Branch Division generated Adjusted EBITDA of$3.6 million, an increase of $1.6 million from the same period a year ago, primarily driven by contributions of approximately$1.3 million generated by the 2024 acquisition of Source Atlantic.

Previous wording

Interest expense increased$2.4 million in thefirst quarter of 2025 compared tothe prior year quarter primarily due to higher outstanding borrowings related to the 2024 acquisitions of S&S Automotive, Source Atlantic, TCR and ConRes TE.

Current wording

Interest expense increased$1.4 million in thesecond quarter of 2025 compared tothe prior year quarter primarily due to higher outstanding borrowings related to the 2024 acquisitions of S&S Automotive, Source Atlantic, TCR and ConRes TE.

Previous wording

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 $0.9 million change in the first quarter of 2025 compared to the same period of 2024 is primarily due to the gain on the sale of property, plant and equipment.

Current wording

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 $1.1 million change in the second quarter of 2025 compared to the same period of 2024 is primarily due to unfavorable changes in foreign currency exchange rates and a decrease in interest income.

Previous wording

Income tax expense was $2.3 million, a 40.9% effective tax rate for the three months ended March 31, 2025 compared to an income tax benefit of $4.1 million and a 43.8% effective tax rate for the three months ended March 31, 2024. The change in the year-over-year effective tax rate was primarily due to a change in valuation allowances related to interest expense limitation on deferred tax assets, state taxes and foreign income. The income tax expense recorded in the first quarter of 2025 is based on the estimated year-end effective tax rate.

Current wording

Income tax expense was $6.9 million, a 57.8% effective tax rate for the three months ended June 30, 2025 compared to an income tax benefit of $0.2 million and a (10.5)% effective tax rate for the three months ended June 30, 2024. The change in the year-over-year effective tax rate was primarily due to a change in valuation allowances related to interest expense limitation on deferred tax assets, state taxes and foreign income. The income tax expense recorded in the second quarter of 2025 is based on the estimated year-end effective tax rate.

Previous wording

Revenue increased $2.3 million, or 1.9%, to $120.5 million in thefirst quarter of 2025 compared to $118.2 million in thefirst quarter of 2024. The increase was primarily driven by $10.4 million of revenue generated from the acquisitions completed in 2024, partially offset by a decline in legacy Lawson revenue due to soft sales across the business of $8.1 million.

Current wording

Revenue increased $5.5 million, or 2.3%, to$244.8 million in the firstsix months of 2025 compared to revenue of$239.3 million in the same period of 2024. The increase was primarily driven by $14.7 million of additional revenue generated from the acquisitions completed in 2024, partially offset by a decline in legacy Lawson revenue due to soft sales across the business of $9.2 million.

Previous wording

Revenue increased $20.3 million, or 20.5%, to$118.9 millionin thefirst quarter of 2025 compared to $98.7 million in the first quarter of 2024. The increase in revenue was primarily driven by increased sales in the renewable energy, technology, aerospace and defense and transportation vertical markets of $14.7 million, $5.1 million, $4.1 million and $1.5 million, respectively, and was partially offset by softness within the consumer and industrial and industrial power vertical markets of $1.6 million and $4.0 million, respectively.

Current wording

Revenue increased $40.9 million, or 19.9%, to$246.7 million in the firstsix months of 2025 compared to$205.8 million in the same period of 2024. The increase in revenue was primarily driven by increased sales in the renewable energy, aerospace and defense and technology vertical markets of $24.5 million, $10.2 million and $6.6 million, respectively, and additional revenue generated from the 2024 acquisition of TCR. This was partially offset by softness within the industrial power vertical market.

Previous wording

The $1.0 million expense in thefirst quarter of 2025 related to the change in fair value of the earnout liabilities associated with the Frontier acquisition.

Current wording

The $1.0 million expense in the first six months of 2025 related to the change in fair value of the earnout liabilities associated with the Frontier acquisition.

Previous wording

Cash and cash equivalents were $65.4 million on March 31, 2025 compared to $66.5 million on December 31, 2024.

Current wording

Cash and cash equivalents were $47.4 million on June 30, 2025 compared to $66.5 million on December 31, 2024.

Previous 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. As of March 31, 2025, the Company had $65.4 million of cash and cash equivalents and $224.7 million of borrowing availability remaining, net of outstanding letters of credit, under the 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. As of June 30, 2025, the Company had $47.4 million of cash and cash equivalents and $252.7 million of borrowing availability remaining, net of outstanding letters of credit, under the Amended Credit Agreement.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2025 was $4.8 million primarily due to net income including non-cash items offset by investments in trade working capital and other net cash flow items.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2025 was $28.5 million primarily due to net income including non-cash items partially offset by investments in trade working capital and other net cash flow items.

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2024 was $6.6 million, primarily due to non-cash items and partially offset by a net loss and investments in trade working capital to support higher sales and other net cash flow items.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2024 was $28.0 million, primarily due to non-cash items, partially offset by a net loss and investments in trade working capital to support higher sales and other net cash flow items.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2025 was $5.1 million, primarily due to purchases of property, plant and equipment and rental equipment which was partially offset by the sale of property, plant and equipment and rental equipment.

Current wording

Net cash used in investing activities for the six months ended June 30, 2025 was $12.0 million, primarily due to purchases of property, plant and equipment and rental equipment which was partially offset by the sale of property, plant and equipment and rental equipment.

Previous wording

Net cash used in investing activities for thethree months ended March 31, 2024 was $16.0 million, primarily due to the ESS Transaction as well as purchases of property, plant and equipment and rental equipment, and was partially offset by the sale of rental equipment.

Current wording

Net cash used in investing activities for thesix months ended June 30, 2024 was $102.4 million, primarily due to the purchase of ESS and S&S Automotive, 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 used in financing activities for the three months ended March 31, 2024 was $4.0 million primarily due to principal payments on the term loans and net payments on the revolving credit facility.

Current wording

Net cash used in financing activities for the six months ended June 30, 2025 was $39.1 million primarily due to principal payments on the term loans and repurchases of DSG common stock under the repurchase program, partially offset by net borrowings on the revolving credit facility.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2025 was $7.6 million primarily due to net borrowings on the revolving credit facility partially offset by principal payments on the term loans and share repurchases.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2024 was $33.2 million primarily due to net proceeds on the revolving credit facility, partially offset by principal payments on the term loan.

Previous wording

On March 31, 2025, we had $758.0 million in outstanding borrowings under the Amended Credit Agreement and $224.7 million of borrowing availability remaining, net of outstanding letters of credit, under the senior secured revolving credit facility component.

Current wording

On June 30, 2025, we had $720.6 million in outstanding borrowings under the Amended Credit Agreement and $252.7 million of borrowing availability remaining, net of outstanding letters of credit, under the senior secured revolving credit facility component.

Previous wording

As of March 31, 2025, we had contractual commitments to purchase approximately $181.1 million of products from our suppliers and contractors over the next twelve months.

Current wording

As of June 30, 2025, we had contractual commitments to purchase approximately $181.0 million of products from our suppliers and contractors over the next twelve months.

Previous wording

During thethree months ended March 31, 2025, total net capital expenditures for property, plant and equipment and rental equipment were$5.1 million including proceeds from the sale of property, plant and equipment and rental equipment. The Company expects to spend appro ximately $20.0 million to $25.0 million for net capital expenditures during the full fiscal 2025 year to support ongoing operations.

Current wording

During thesix months ended June 30, 2025, total net capital expenditures for property, plant and equipment and rental equipment were$10.6 million including proceeds from the sale of property, plant and equipment and rental equipment. The Company expects to spend appro ximately $20.0 million to $25.0 million for net capital expenditures during the full fiscal 2025 year to support ongoing operations.

Previous wording

During the first three months of 2025, the Company repurchased 320,638 shares of DSG common stock under the repurchase program at an average cost of $34.94 per share for a total cost of $11.2 million. No shares were repurchased during the first three months of 2024. The remaining availability for stock repurchases under the program was$15.2 million as of March 31, 2025. See Note 11 – Stockholders’ Equity within Item 1. Financial Statements for further information.

Current wording

During thesix months ended June 30, 2025, the Company repurchased 653,213 shares of DSG common stock under the repurchase program at an average cost of $30.69 per share for a total cost of $20.0 million. During thesix months ended June 30, 2024, the Company repurchased 55,844 shares of DSG common stock under the repurchase program at an average cost of $30.14 per share for a total cost of $1.7 million. The remaining availability for stock repurchases under the program was$6.3 million as of June 30, 2025. See Note 11 – Stockholders’ Equity within Item 1. Financial Statements for further information.