DSG(DSGR) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported revenue of $1.8 billion for fiscal 2024, an increase of almost 15%, primarily driven by strategic acquisitions [8] - Adjusted free cash flow grew to$ 175 million, reflecting strong operational performance [8] - The trailing twelve-month total revenues were approximately $1.95 billion, indicating significant growth since the 2021 pre-merger results [10] Business Line Data and Key Metrics Changes - Lawson Products reported Q4 sales of$ 111.8 million, with organic sales down 10.9% due to lower rep counts and military sales decline [53] - Gexpro Services experienced a revenue increase of 27.4% year-over-year, reaching $118.8 million, driven by organic expansion [58] - Test Equity Group's sales were$ 191.3 million, with adjusted EBITDA of $14.8 million, reflecting a positive growth trajectory in test and measurement [60] Market Data and Key Metrics Changes - The aerospace and defense, technology, and renewables markets showed sequential growth, contributing to Gexpro Services' performance [34] - Military sales for Lawson were down over 50%, significantly impacting total sales [32] - The company noted improvements in market conditions, particularly in the OEM vertical, which is expected to enhance performance in 2025 [17] Company Strategy and Development Direction - The company is focused on strategic acquisitions to broaden scale and geographic footprint, with five acquisitions completed in 2024 [12] - Investments in sales force and technology are aimed at enhancing customer engagement and long-term profitability [19][24] - The company is prioritizing high-growth opportunities in Southeast Asia and integrating recent acquisitions to drive future growth [14][35] Management's Comments on Operating Environment and Future Outlook - Management acknowledged persistent macro headwinds but expressed confidence in the company's positioning for record performance in 2025 as market conditions improve [17] - The company is optimistic about the recovery in end markets and expects to see sales and margins build quickly as conditions normalize [46] - Management highlighted the importance of adapting to new regulatory environments and potential impacts from government spending [72] Other Important Information - The company ended Q4 with approximately$ 473 million in net working capital and $335 million in liquidity [61] - Debt leverage at the end of Q4 was 3.5 times, with a targeted range of three to four times [62] - The company repurchased$ 2.6 million of stock during fiscal 2024 as part of its capital allocation strategy [64] Q&A Session Summary Question: Can you provide insights on quarter-to-date sales levels across DSG compared to Q4? - Management indicated that Lawson has started strong in Q1, with sales up compared to the previous year, while consolidated sales are relatively flat [84][86] Question: How have consolidated margins trended in Q1 versus Q4? - Margins are expected to improve as 2025 develops, particularly with the realization of synergies from recent acquisitions [88][89] Question: Was the fourth quarter organic revenue growth of 3.5% a positive surprise? - Management noted that the fourth quarter was firmer than expected, reflecting better performance in several verticals [98][100] Question: What is the outlook for Lawson's margins moving through 2025? - Management expects gradual improvement in margins as investments in the sales force begin to yield results, despite challenges from military sales [106][114]