Distribution Solutions Group, Inc. Q3 FY2025 earnings call

• The third quarter demonstrated 10.7% revenue growth, with 4 consecutive quarters of organic sales increase and year - to - date organic sales increase of 4% over 2024.
• Demand was healthy in aerospace and defense, renewables, semiconductor - related technology and industrial power.
• Adjusted earnings per share increased by 8.1% to $0.40. More than $20 million of share buybacks in the first 9 months of 2025. Operating cash flow was over $38 million and adjusted EBITDA was $48.5 million.
• TestEquity: Barry Litwin completed first 90 days, developed unified strategy across 3 core categories, restructured leadership architecture. Specialty products and VMI offerings are higher - margin growth opportunities.
• Gexpro Services: Delivered record adjusted EBITDA, 100 basis point EBITDA margin expansion since first quarter, investing in organic and inorganic priorities.
• Lawson: Focus on multiyear sales force transformation, added over 60 net new sales representatives, CRM adoption exceeds 70%, e - commerce channel showing improved customer conversion ratios.

TestEquity Group

• Third quarter sales were $206.5 million with average daily sales up 5.8% versus a year ago. Specialty products and VMI offerings represent higher - margin growth opportunities. The ConRes acquisition completed in 2024 continues to perform well.

Gexpro Services

• Third quarter revenue was $130.5 million, up 11.4% from the year - ago quarter. Adjusted EBITDA was a record $17.8 million, representing 13.6% of sales. Organic average daily sales were up 3.7% sequentially from Q2. It continues to invest in the business to capture top - line revenue growth.

Lawson

• Third quarter sales totaled $121.5 million, representing a 3% organic sales increase in average daily sales. Sales rep counts have increased to approximately 930. CRM adoption now exceeds 70%.

Canadian segment

• Third quarter sales in U.S. dollars were $60 million. Excluding revenues acquired from Source Atlantic, organic sales for Bolt Supply increased 6.5% over a year ago. Third quarter adjusted EBITDA was $5.8 million or 9.6% of sales, a significant increase of 300 basis points over the second quarter.

• Maintaining a cautious outlook for the fourth quarter given tougher year - over - year comparisons.
• Fourth quarter has 61 selling days compared to 64 in the third quarter of 2025.
• Aware of tough sales comps heading into the fourth quarter for Gexpro Services.

• Macro environment challenges such as inflation, tariffs and higher interest rates.
• Uncertainty regarding the time it will take for investments in TestEquity and Lawson to realize returns and impact margins.
• Short - term financial performance pressure due to internal investment priorities in a dynamic marketplace.

Q: Cautious is the word regarding the look into fourth quarter. Can you share what October looks like just in terms of the organic pacing? And when you say cautious, are we meant to take that as more likely than not, you could be down year - over - year organic?

A: Ron Knutson said October is a bit skewed with 23 selling days. September was the strongest month in the third quarter. John King said cautious was mainly about the number of selling days in the quarter, not reflecting on October relative to September.

Q: On the consolidated EBITDA margin percentage side, any big callouts that should drive a variance, whether positive or negative versus the 9.4% that you just reported?

A: Ronald Knutson said about 30 bps of the margin change are investments in the organization, and about 80 bps are timing or non - recurring items like incentive accruals or inventory purchasing. There are no significant large one - time items anticipated in the fourth quarter.

Q: I wanted to just follow up on the Canada branch margin, really nice sequential improvement there. It sounds like you still have a couple of facility consolidations to go. But I'm just trying to think about the sustainability of that margin going forward as well as if there's still a little room for additional uplift there?

A: Ronald Knutson said the Canada business is broken into Bolt Supply and Source Atlantic. Bolt performs well, they have a path to exceed 10% margin on Source Atlantic on a stand - alone basis, well on the way but not at the end state yet.