Hisco Drives DSG’s Major 3Q Gains; Organic Slides - Modern Distribution Management

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Hisco Drives DSG’s Major 3Q Gains; Organic Slides

The distributor's $269 million acquistion of Hisco this spring figures to drive big year-over-year gains through the first half of 2024.
Distribution Solutions Group DSG

MRO supplies and electronic test products distributor Distribution Solutions Group reported its 2023 third quarter results on Nov. 2, showing continued major sales gains from its acquisition of Hisco this past spring, while organic sales declined.

Fort Worth, Texas-based DSG reported total 3Q sales of $439 million, up $91.8 million and 26.4% year-over-year, with acquisitions driving $106.3 million of increase. Meanwhile, organic revenue declined 4.2%, primarily driven by softness in the company’s TestEquity vertical. 

Hisco, which was acquired in early June for $269 million. It was No. 39 on MDM’s 2023 Top Industrial Distributors List, while DSG was No. 27.

Premium: Breaking Down the DSG-Hisco Acquisition and its Market Impact (April 2023)

DSG’s 3Q gross margin of 33.1% fell 120 basis points year-over-year, while operating margin of 2.9% was less than half of the 6.3% of a year earlier.

The company posted a 3Q net loss of $1.57 million, compared to a $16.5 million gain a year earlier.

DSG’s 3Q adjusted EBITDA of $43.7 million jumped 25.9% year-over-year, while adjusted EBITDA margin held at 10.0%. Excluding Hisco, that margin was 10.7%.

“We are well underway integrating Hisco’s business into TestEquity and continue to recognize the benefits of building a broader customer base and reach, a larger geographic footprint and an enhanced product offering,” DSG Chairman and CEO Bryan King said in the company’s financial release. “While it’s still in the early days of integration with the rest of DSG, we are discovering additional opportunities Hisco offers to achieve revenue and cost synergies across the entire group.”

By DSG business unit in 3Q:

  • TestEquity (47% of sales): Sales of $207.7 million soared 77.9% year-over-year, driven by acquisitions, while organic sales fell 13.2%. Adjusted EBITDA margin of 6.9% trailed the 8.7% of a year earlier.
  • Lawson Products (30% of sales): Sales of $114.5 million increased 4.6% year-over-year, with same-day sales up 6.3%. Adjusted EBITDA margin of 14.6% jumped from the 8.8% of a year earlier. The unit ended 3Q with approximately 900 sales reps, and 3Q daily sales per rep productivity improved 18% year-over-year.
  • Gexpro Services (23% of sales): Sales of $103.2 million were flat year-over-year. Adjusted EBITDA margin of 11.2% dipped from the 12.0% of a year earlier.

On Aug. 15, DSG announced that its board of directors had approved and declared a two-for-one split of the company’s common stock, valued at $1.00 per share.

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