DSG(DSGR) - 2024 Q3 - Quarterly Report

Acquisitions - DSG completed the acquisition of Source Atlantic Limited on August 14, 2024, to expand its operating footprint in the Canadian market [139]. - The company acquired S&S Automotive Inc. on May 1, 2024, to enhance Lawson's services and products in the automotive market [140]. - The company completed several acquisitions in 2024, contributing significantly to revenue growth and operational performance [174]. - Revenue increased by $25.5 million, or 188.7$39.1 million in Q3 2024 compared to $13.5 million in Q3 2023, driven by$24.7 million from the acquisition of Source Atlantic [199]. - Revenue for the Canada Branch increased by $23.4 million, or 54.9$66.1 million in the first nine months of 2024, primarily due to the acquisition of Source Atlantic [239]. - Selling, general and administrative expenses rose by $5.8 million to$19.3 million in the first nine months of 2024, with approximately $5.4 million attributed to the Source Atlantic acquisition [241]. - Adjusted EBITDA for the Canada Branch Division was$7.4 million, an increase of $1.3 million from the same period a year ago, driven by the Source Atlantic acquisition [242]. Financial Performance - Consolidated net income for the three months ended September 30, 2024, was$21,921,000, compared to a net loss of $1,568,000 for the same period in 2023 [167]. - Adjusted EBITDA for the three months ended September 30, 2024, was$49,110,000, an increase from $43,703,000 in the same period of 2023, reflecting a year-over-year growth of approximately 12.5$18,947,000, compared to $12,783,000 for the same period in 2023, indicating a significant improvement [167]. - For the nine months ended September 30, 2024, consolidated net income was$18,593,000, compared to a net loss of $3,954,000 for the same period in 2023 [170]. - Total revenue for the nine months ended September 30, 2024, reached$130,358,000, compared to $123,156,000 for the same period in 2023, showing a growth of approximately 5.7$45.4 million, a decrease of $5.8 million from the same period a year ago [220]. - The company experienced a net income of$18.6 million in the first nine months of 2024, compared to a net income of $7.4 million in the same period of 2023 [210]. Revenue and Profitability - Consolidated revenue increased by$29.1 million, or 6.6%, to $468.0 million in Q3 2024 compared to Q3 2023, driven by$38.1 million from acquisitions and offset by a decline in organic revenue of $9.0 million, or 2.1$158.8 million, representing a gross profit margin of 33.9%, compared to $145.3 million and 33.1$7.4 million to $139.9 million, accounting for 29.9$12.4 million, or 6.0%, to $195.2 million in Q3 2024, primarily due to a slowdown in the electronics assembly market [185]. - Lawson's revenue increased by$3.5 million, or 3.0%, to $118.0 million, driven by$13.4 million from acquisitions, despite a decline in sales to core customers [178]. - Gexpro Services reported a revenue increase of $12.9 million, or 12.5$116.1 million, primarily due to increased sales in the renewable energy vertical market [192]. - Gross profit margin decreased to 32.1% in Q3 2024 from 43.6% in the prior year quarter, attributed to the lower margin profile of Source Atlantic [200]. Expenses and Costs - The company reported a significant increase in severance and acquisition-related retention expenses, totaling $22,597,000 for the nine months ended September 30, 2024, compared to$10,478,000 in the same period of 2023 [170]. - Interest expense for the three months ended September 30, 2024, was $15,160,000, up from$12,895,000 in the same period of 2023, representing an increase of approximately 17.6% [168]. - Selling, general and administrative expenses increased by $9.8 million to$185.8 million in the first nine months of 2024, driven by acquisitions and higher severance costs [219]. - Interest expense increased by $9.7 million in the first nine months of 2024, primarily due to higher interest rates and increased borrowings related to acquisitions [245]. Cash Flow and Financing - Net cash provided by operating activities was$10.7 million for the nine months ended September 30, 2024, a decrease of $63.3 million compared to$74.1 million in the same period of 2023 [251]. - Net cash used in investing activities was $205.4 million for the nine months ended September 30, 2024, primarily due to acquisitions and capital expenditures [255]. - Net cash provided by financing activities was$171.9 million for the nine months ended September 30, 2024, primarily from borrowings under the credit facility [257]. - As of September 30, 2024, the company had $61.3 million in cash and cash equivalents, down from$83.9 million on December 31, 2023 [249]. - The company had contractual commitments to purchase approximately $178.8 million of products from suppliers and contractors over the next twelve months [264]. - The company repurchased 85,644 shares of common stock at an average cost of$30.13 per share for a total cost of $2.6 million during the first nine months of 2024 [267]. Strategic Initiatives - DSG plans to grow organically by exploring new channels to reach customers and expanding digital capabilities across its platform [144]. - The company aims to increase revenue through customer-led geographic expansion and leveraging its portfolio of recent acquisitions in Gexpro Services [153]. - The company is focusing on market expansion and new product development as part of its strategic initiatives for future growth [172].