Distribution Solutions (DSGR) 3 Aug 232023 Q2 Earnings call transcript

Greetings and welcome to the Distribution Solutions Group Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Mr. Steven Hooser.

You may begin.

gentlemen XXXX to earnings and Group Distribution ladies quarter second call. morning, and the welcome Solutions Good In conjunction the with QX at earnings today's call, we that investor.dstributionsolutionsgroup.com. been have has posted on company's website presentation IR provided a

materially uncertainties note results assumptions in press those and to that from goals, expectations, are release this operating to future and concerning the strategies, statements subject that plans, statements that forward-looking results Please actual on beliefs, call differ could made cause contain and described. risks underlying

will In release measures made the do the was this earlier nearest anticipates are at also to company's the obligation be forward-looking cause non-GAAP press measures of and also the call of on end views developments the made Investor company update change refer those earnings statements future reconciliations issued any addition, to to GAAP The The we Relations today during and statements to can section disclaim found the based the may today views to website. as on of posted release. that elect so. may earnings today. but Management

through A SEC. being of on the A release the call report been XX, with replay will Group has Investor Form August Solutions available Distribution webcast XXXX. the also This the website. X-K the on included copy current is company's on the filed via in also the of Internet be page Relations teleconference

DSG's and will now call Bryan? Officer. I Chief Executive Bryan the to Chairman turn over King,

our joining all thank quarter second results. you and Steven review for Thanks, to

benefits Group anchored our value-added execution. team's are significantly our portfolio relentless starting coupled Chief unlock President our improved Knutson, Ron first industry leadership the on scale, mission-critical half Joining to products, our we Financial results, call DSG's by me is focus with XXXX today's Officer. of and and Solutions talented Distribution strong Vice solutions with and delivered services broad positions, Executive for

organic earnings quarter strong of almost the the sales Slide up in on presentation. of second XX% quarterly included delivered We Starting X growth which X%. again quarter second

were over $X.XX, per up adjusted quarter from share. earnings comparable per share year Second the -- earnings prior was XX%

We of a the excess in in or adjusted also $XX XX.X% of margin quarter. generated EBITDA million

the fifth margin This EBITDA expansion. quarter year-over-year consecutive quarterly represents

Later, pleased We and have operating the of environment of a extremely in along commentary the with accelerate unlocking we and of of cost how are especially the future external investment initiatives in discussion working resources the important internal teams currently more XXXX unit a with executed, are on the shareholders. with our requiring performance operating on, we first dynamic that value sales to provide to quarter. for initiatives half will are lot second

itself are excited that a leader serve. in successfully as DSG We we markets has end the established

model increasing service our customer our with of We delivery and services. relationships to value-added high-touch are breadth well leverage products and positioned deepen

We unified the X on with the single are thrilled to a streamlined team equity. Hisco and test create June and platform acquisition integrating successfully and to have processes closed on are

expanded fully and synergies. sales We cost productivity realize expect meaningful to

an us. customer aligned all acceleration value allowing shareholder to engagement and at capabilities spend leverage improve identifying key DSG and and and are opportunities pipeline assembled applaud wins building respectfulness the their engagements. to the translate verticals successfully model, teams quite continue discretely and DSG in services within business our wallet through how cross-selling collective expands I and growing growth can our collegiality total goals prioritized expertise best only and how across our intimate have share they me Hisco across of across solid for continue significant the our with We to these DSG we products and leadership strong our grow contract to and of see common it expand how have will into

the flow as XXXX In and in of cash back years improve. free investments, made will accelerate coming flow specifically come these for reality and quarters underway and half I significantly to free cash the from conversion that process shareholders conjunction being for many benefit XXXX in to efforts a also with and investments expect our to in following improvements of

consistent how we of While current first remained rate environment our through about guarded remain our July, half could activity solid year. customers, the and weigh on it business our very with

efficient continue solutions proposition Our our markets. using customer-centric our deliver value and products experiences the engage marketplace sales to that important to organizations end that quality reinforce smart,

actively demand channels. are monitoring marketplace the and We each of our environment in forces

on strategic customized accounts. our to strong traction and especially customer DSG's relationships a leveraging expand getting customer engagement, experience are focus large We with

are this as efforts reducing of in and more priority the customer-centric cross-selling resistance verticals. to value-added organic company's strengthening we our is capabilities confident each offer We growth our our and reinforce trajectory

Moving Slide to X.

on Let verticals. me business briefly for provide updates of our initiatives each

is a Products vendor-managed leader in of Lawson First, distribution C-Parts services. inventory the MRO offering

the with with sales field demand key customers We team more become to positioning sales organization how lifetime the quarter, high-touch, shifts. progress. continued with and significant like pleased during to to within quarter greater recoveries financial critical the believe better second and make freight our sales inside second personnel pricing, organic the team well Lawson During value. aligned team our customer successfully and generates operational productive customer I'm XXXX, strategic serve field initiatives Also our base. Lawson customers managed high the growth of its

We customers. are will this confident drive growth approach that and with sustained more engagement long-term balanced

leadership, quarter. the first steps Under this took Cesar's we

our continue support to enhancing strategic supply digital to progressing by also customers chain We our technology and investments our map. on make road

Lawson. generation enhanced and to roll lead is tools months. expected mobile CRM in CRM the capabilities few out working in a The are We on capabilities at with diligently investment company's go-live

to all high-performing Our sales higher force. customers better compensation and goal serve for opportunities enable channels ultimately sales across efficiently, cross-sell sales better our reps be productive, for equipped our more to is growing be more drive

versus quarter high-spec We've quarter. year programs chain our them to combines upgrade Services Customers customers. around as Secondly, for Gexpro but solutions, strong OEM VMI C-Parts, value in the is offerings services. chain the renewables retrofit our largely the and the Gexpro electrical, side demand value-added be of prior for Services for OEM continue supply proposition kitting that delivered and the in expanded base. a across sequentially both mechanical with helping interested in leader solutions position and on partner accelerated specializing hardware OEMs, growing the not channel major cycle only product supply leadership with installed results, a

power recovery in demand vertical and and We've very seen remains aerospace industrial solid. the defense

value Importantly, tech defense and initiatives customers. platform e-commerce and successfully getting initially this additional include our and launching services a focus out aerospace on project our of year and Gexpro synergies kitting acquisitions, expanded services creation with

also pipeline customers opportunities partners solutions are expanded as working an and where through to product offer We our service us capabilities. of are additional around engaging

OEM to continue with customer programs intensely as where we to a is are provider of the embedded goal Our choice. win

acquisitions Our collaborative collective resources, and approach combinations offerings. footprint increases and and expertise the bolt-on and significantly benefits our through seen strategic

Thirdly, solutions seen moving delays. expenditure managed by technology in Vendor are and to R&D in sectors test higher the believe capital continue equity. second we sustained quarter. which show to capital We've of inventory strength strong and pressure the double-digit cost impacted

projects cancelled. not that learning are being teams Our are

out for However, several they being months. are pushed

made as by work the through refurbishment has us continue times we chambers lead last historic over increases quarter. backlog orders been on by for bookings As dynamics our of reducing in to we to see fourth Significant market change. our and XX%, quarter, rental mentioned progress allowing

from in many early expanded in We drive models will which just margins. begin stock should shipping time current XXXX

people, of Digital second We're optimizing in equity with in sales primarily as the integrate test process sites. growth X% the e-commerce were the and equity. technologies Hisco we up processes test equipment quarter, new from with tea and

costs, acquisition-related a moments. million cover also to addition we expenses that about $X Ron few of restructuring in So more recorded will in

production in delivery lower We shipping costs. and will times continue efficiencies, to synergies capture cost improved resulting and

are Regarding by results. higher a Hisco, build are accelerating our we margin and profile structural to early work encouraged

established In successfully embraced addition, cross-selling team is in quickly and efforts. DSG the Hisco engaging

have expect on the overall impact generation for a this profitability to cash flow this year. DSG and We beginning meaningful

the would to walk to I Ron? call over Ron that, With turn to financials. like through the

you, morning, Thank and good Bryan everyone.

Solutions Slide results share of Distribution X. second morning Turning excited to quarter our We're you with to this Group. strong

year summarize QX strong results. line On me results bottom-line basis, a we over reported ago. Let top a combined and

through organic X.X% volume sales mentioned, XX.X% As Bryan and growing expansion. we of with growth reported total price both sales

The a year over dollars. adjusted income $XX reported GAAP threefold exceeding with continued DSG improved bringing reflect results EBITDA QX margin together quarter since ago. growth in million, second a first

positive Our capital from working in cash movement flows improvements. operations generated momentum focus our and continued on with

a on Page now I'll basis, our of which presentation. of X walk specific through is of this of numbers the most some on combined

which growth was First, consolidated by $XX.X million or million, coming $XXX from from the driven of revenue of was acquisitions, quarter revenue plus quarter increased the million approximately $XX.X million XXXX, over Hisco. XX.X% $XX organic second second for

acquisition excluding EBITDA by other compared to million an operating Second, severance year stock-based of costs, was quarter. and to compensation, XX.X% basis, or improved XX% million reported $XX.X million costs, On adjusted items, adjusted revenues. ago GAAP $X.X $XX.X income million $X.X or a merger-related nearly nonrecurring

is year per percentage And share down diluted an anticipate. diluted the of quarter. $X.XX for QX, year GAAP versus quarter to we adjusted ago. third, a EPS XX bps $X.XX approximately ago to basis, which was initial the reported slightly of compared On of was X $X.XX weeks $X.XX the loss for a quarter a from including decline the of related earnings did While Hisco we for the

sales briefly let $XXX.X other The each increase nearly on year Automotive Supply strategic the government X, ago nearly organically they XX% XX%; for segment up were The Please by grew Starting up reporting that ADS segment. the XX%, X.X% core the comment up Lawson Turning Lawson, the million within of or as note average sales, performance not in to this a second Kent Slide of was over me included quarter. and with business, XX%. are now business up Bolt XXXX. quarter daily driven over include the does all businesses. strong

with increased versus our quarter business. achieved Lawson's During the share increased existing growth during Kent relationships, in ago. Automotive approximately within in or volume unit customer was wallet a and large the quarter, particular, accounts through of new year strategic customers X.X%

rolling out investments and away out individuals, to the become quarter, implementation help additional conversions, inside with from in During sales smaller account assist This technical months CRM its the sales Lawson to reps our field reps help to specialists productive. to strategic tool. X we included businesses grow more managers accounts, continued are and build infrastructure X to our government

its about of of their these We're steady improvements business. in help to the they as to continues our realize overdue percentage. Lawson excited representatives growth field long-term sales margin expand gross book investments

and against up sales given net some and freight price costs lower as largest continue to we're higher realization, our While mix faster costs base. customers growing we our have over been headwinds leveraging see shift expansion a

margin gross EBITDA year million a to partially sales. increased EBITDA ago the quarter and versus $XX.X adjusted higher improved million in to offset ago by by Lawson's quarter, was as compared on XX.X% adjusted driven year a sales quarter. of X.X% Lawson's a adjusted improvements, compensation of primarily EBITDA sales the $X.X percent

got out its may that start of You the strongest seen. an recall gate with Lawson we've quarter that QX extremely in with strong

our we percentage service combined of with and offerings efficiency their our improve through During sales brought better our the of some sequentially and previously mentioned should effectiveness customers, to second the I that depending down which launched infrastructure That, long-term upon channel quarter, the initiative additional needs the slightly. investments size force.

and half and grow profile. EBITDA is on well $XX.X the a going first the are positioned from million these we However, with year, positioned the basis. million adjusted doubled Lawson investments nearly accelerated long-term an well its In company the grow to company to to margin $XX.X of

mix and relationships. of although delivered with by X X and to was all Services softer over Gexpro industrial headwind sales as nice million sales in shift for XXXX, Total sales from to growth. growth. the a $XXX.X was the second verticals with existing of organic markets. growth were price. expansion were than sales Approximately the aerospace semiconductor new increase more and million The power the $X.X XXXX, aggregate X.X% customer the customers on year-over-year driven of from market quarter Profitability X. quarter increase came an volume from Turning primarily of Slide of defense second offset the end in rest improved,

VMI, Gexpro cost the kitting, close product customer and customers and and Services the its world-class of with customers necessary Services the management support Gexpro continues attract through supply with to to its services base total deliver new to expand ensure works customers. extremely and value they offerings, including OEM relationships project to to ability for existing its the their cycle. and services chain simplify have ownership improve production creation

quarter million managing of Gexpro XXXX. Services expanded improvements year continues to market in through varying million adjusted and end quarter for as margin of Gexpro $XX.X their ago make incremental compared the $XX.X to profile or in XX.X% cycles. Services in EBITDA or first to XX.X% XX.X% sales the

turn primarily million Sales acquisitions. I'll XX. the to $XX.X to XX% Slide driven grew on Lastly, or by recent the test for equity quarter $XXX.X million,

During on sales the closed was equipment second XXXX, million increase we acquisitions Of Hisco. quarter, second test closed test million $XX.X $XX approximately key in national the and that, Instrumex X these equipment quarter million from the And the and of on XXXX, and equity in generated Hisco. quarter for acquisitions, $XX.X of from in came QX.

capital a Bryan of Organic sales, versus softening previously on. commented tied the business sales decrease X% sales with of down in measurement test as year and and were more is to The and customer piece measurement a closely EPS projects. a ago the test

delayed in our back up and and not into We cancelled. XXXX XXXX. in early that are anticipate late our is volumes others projects sense space Our performance these will with consistent pick and is that

second equity sales how benefit of X% adjusted EBITDA as thinking of to remove begin year with softening over ended plan the the to resources $X commenced an On costs next, basis, through year test ago with Hisco's this $X.X the which representing of later flexibility the million or increase will of leveraged quarter company integration T&M and of million, and annual out folded had a sales an the in in nearly more quarter at the of $XXX,XXX June. legacy be business

XX. Slide to on Moving

joined million. facility. $XXX able accomplish plus X were to from quarter, difficult from credit that strategy a support the bank the facility to validates our committed bank million which this market in of We During our existing very our $XXX expanded we our additional credit group, banks

to issued of manage financial offering. million increase transaction, additional revolver, rights also and acquisitions. us These existing Hisco the pay our we the for capacity our close actions Additionally, allowed our X shareholders on common stock to range stock leverage a within down future $XXX guided overall through

existing From to $XXX.X an $XX.X million our unrestricted and facility. million capital, credit have we cash approximately access under of available

earnings for of As a on quarter ended $XXX the that accordion of Hisco net debt primarily additional acquisition. leverage increased have and X.Xx, part facility, an feature. at taking ratio debt we the million We also on

accelerate our deleveraging with growth. able the even and past XX offering and So deleverage months, support acquisitions been and company scale multiple we've improve inorganic to to over the further additional

April X, to merger and manage X.Xx. at reference, net This our our leverage leverage For date, was range. the progress time our of X the with the to consistent XXXX is debt intention prudently Xx levels our in debt

equipment in Our with million rental improvements. was working for assets during positive generated $XX capital flows Net quarter from operations CapEx inclusive to and of T&M year movement continued capital $X.X investment cash equipment, of full of expect focus our used on million, the is sales. a expenditures, most which million quarter the be the to grow in discretionary to rental we range also $XX supports which

up we We wanted I over Bryan, increase a to back strong for generated call company's quarter. to adjusted are million first continue also and growth providing quarter our comparison. conjunction also during Hisco to strategy. very the that a power We're quarter, the fire over very tough facility, on in excited we closing more the for reiterate financial the EBITDA performance quarter, in significant a the turn over us the year with credit I with Before $XX our how expanded ago pleased

for the to businesses of XXXX. planned continue execute their on initiatives All

Services great team. to the and position Products, equity continue for results monitor to deliver and Thank market their welcome and to will Lawson the sheet to continued and teams We focus balance at you entire commitment these Hisco prudently trends. operating test financial we current as our manage Gexpro

the turn call Bryan. now over back to I'll

Thank you, Ron.

fit a growth, balance share our and believe Slide investing allocation markets is model through evolve approach is to DSG's important, and as leverage We in occasionally to change our acquisitions U.S. that especially opportunistic disciplined investors with XX. turn it to in Let's to our as with and between buybacks. in well of both global quickly on a working capital businesses focused discuss approach strategic core prudent capital intensity, deployment. capital as

the solutions, key from recognize is customers specialty to uniquely goal and shareholder DSG celebrate. as and this enduring organic even capital Since for that differentiators as asset-light planned we have strategic to an high-touch, into benefit value-added services inorganic we and business through customizable continue with to well-positioned Our have value. with distributor distribution an that clearly capabilities platform built our more acquisitions scale deliberate are commitment working as that well structure, accelerating growth our aligned investments utilizing

just And quarter, of leverage the Our of we to is with targeted be of approximately post-closing the flow. At X% Hisco weeks quarter, capital the second had working in to end the at leverage cash accelerating the X.Xx. range. net million X will of end X% our continue $XXX

capital last to shareholders. investment working facilitated our over growth the accelerating Our organic drive profitability focus year in our drives that for

continues to compounding our capital continue for and of to easy on us. is value all of there the be owning the we leading a build investors. Finally, scale company We the interest return in of long-term of to seek solutions. It why opportunities DSG breadth appreciate understand highest benefit an to see with products shareholder specialty obsessive the incremental effects and distribution commitment with invested and from

Slide Turning XX. to

maintaining focused overall Our improving business. at return profile building as on distribution goal DSG profitable a remains specialty and principal our scale by

profitability Second goals. our while many longer-term the quarter results initiatives that objectives in We business. and advancing balancing Hisco accelerate adding of significant know accomplished investments our will current

analyze we that with value our focused fit We robust continue be to accelerating our criteria. selective as pipeline opportunities acquisition carefully

maximize customers our and and actions believe our to shareholder streamline all full are position better to from who the working DSG accelerated generates our today like associates value. We decisions thank to team company potential. serve operations, its I'd that and optimize

to key I like you are September Fort for open know in we would I operational Worth. featuring hosting Investor showcase so include initiatives an Watson our questions, the and and products, Day show on a plan share it Before We that test let tell XX to solutions. each products unique equity that investors can and of will services understand better and Gexpro up

We get across and build value. will mini members elements daily engaging attending and that event believe get team webcast are LKCM-Headwater may by know to audio but benefit the Day DSG to at streams the and the works live most working countless you shareholder Investor

IR yet, our registered please team more out to not you've If reach details. for

you take and investors. like now, operator, Thank analysts today. to questions And your we from time would for

Instructions] coming Steinke [Operator Research. first question is Your Barrington Kevin from of

I the about not, wanted by price to of way if versus start volume me roughly asking off volume quarter? to give is and the kind breakdown X% organic there? you and half half growth the think about that organic the second in Or the growth breakdown price and of can

is jump I Yes, Ron. Kevin, in on this one. can that

So it each companies. of the individual varied little bit a X by

on organic of mentioned lower rest X.X we price north Lawson's XX-XX, down equity test it's that the the X.X% If about a little they and that XX%, of the organic to X% volume. side, and organic, services of growth price kind being price, of about bit you growth on volume. on About that was split of was And then same at were X%. look was that X% and offset Gexpro volume down the points of

that. just all in of then flattish, with So volume X remainder average take price kind up you companies, the kind if and slightly being of the in, the between maybe operating of weighted

is breakdown your by that specific what question. that asked but you hopefully, more company maybe than hopefully, So answers

discussion that No, touched okay, some well. the And of on as But segment great. Yes. know in great. perfect. that's I you Well, that's

your solid lapped been that you have similar implementing? mentioned largely price into remained continue trends we the that benefit has side Should on And we prepared activity organic about in I July. the of type July? the volume think comments So in increases think business you've

Yes. I'll that well. as one on jump in

XXXX. the half in of half So on put I place more in -- of the would changes of say year, business, increases the those more that Lawson that took in so particular some we second the the second we'll start of lapping place of in that

to -- would we're lap piece I throughout we're I a of dynamic for of the Gexpro say test the early think probably more in starting was XXXX. some And those. So and stages little pricing bit

little the And consistent. we're a second we as half probably more Lawson numbers that's lapping think the on of bit probably tougher year. But think I some the in So side, so kind bit. to where far quarter, were here of in about just we a just in overall what flattish second July, month to little flattish the we've of the down seen

little where kind the strange a there's to we're some bit of yet We up company based upon seeing But kind -- of by varies how markets. little continue And end to it a operating that. fall. within again, dynamics bit calendars some as some softening see of you end with of the

has of sales, number. July. basically So that daily daily services in average bit X-week a little see impacts our average the Gexpro especially Typically, compression a which sales we

but where of So on QX flattish kind at about versus basis. today we're consolidated in as a numbers think I the reported

don't just a we love Lawson, last you on specific weren't did we specifics more and on had actions year. why loss where And to year. -- give the spots they last I'd him we I him so in pricing July where -- little give did detail Ron, Ron, more take lapping, on

was later it the year. So in

to and see benefit initiative benefit Lawson. late I of action or had loss some We're of July did volumes specifically August it both September. both going in to as price your have the to Was had that a it specific pricing. related had it think answer we some -- So was question, and September

It was just.

able less take So pieces those later. where contracts until Gexpro terms action that a to from lot on last of spots those us to on price longer cycle actually specifically year some of skating services to We you've ability were. got way support of be in the kind had

those bit course in as of the a really around And we it were in some some through Gexpro dynamic we And this year year, of -- it year. pricing on kind last the started get that through cases, was the had there. we later benefit more moved the action. then services, little that reset became pressures actions context give rolling of we price to So it as contracts was inflationary they into to

action So those it point day, particular SKUs side. were we taken. was of blended into dynamically a the started sourcing kind price on I to less of seeing of become in on more a single what

be And to specific point so into in to clean, move of becomes will, kind what to points as XXXX. able it less time if you we back

And so that's -- gives some I'm you context. that hopeful that,

side, legacy is, think sales we that on the we OEM softening the first context Hisco want activities test offer I capital the all, as a customers. the I towards of out years we're equipment and business On the the as that a kind repeat legacy business I spend longer bought of is of from enjoyed because revenue did would X/X opposed that of for the or MRO of saw would term tied equity, Hisco equity what number there test that to of itself, was really of what glad unit that its that lot test to last and we've more and business characterize measurement have we've which offers sales bench more have really

the most softness across renewed DSG -- interesting customers. active or to piece and level been pieces kind a see expand I we've the X/X kind tied it, equally, -- either kind we've on And that's pressure in one equipment have going that all platform we to of test more needs. that but their with those which of, of some of guess, piece were flow in going the was margins. that is of kind equity that the there of On some that's been of seen we order interest gross to more their historic of there's there capital -- of our to that we've favorable dialogues has we're now been had that area sliding -- replace that think spend. got But And

been has other of. benefit to The the

higher delayed margin one rental for to with to deferred access. purchases come fleet. of drag seen how think influence measurement dollars and our on spoke have gross shift side more real historically rental has obviously for been a asked associated we We -- capital investing as the And that's specifically does side with that their that's or about it. on have equipment. They things I have a that people It then test into on spend on the And a test equity equipment support that into pricing. drag last to in us finally were ago It's through a that we that we but the to environment been top got goods lap locked been having fourth over And the quarter, had revenue a the out more several margins here drag had the some been orders chamber where a worked and has will actually line. has side. years bit over a we of And little different in get cost sold we we a from burden backlog. in year the our

the on to capabilities allows large of us had a us manufacturing it revenue for -- it us chambers a again our backlog get and to support We our accelerating and to our allows margin. that chamber on we've contract the side have start expanded out healthier those much back there because

I'm EBITDA think wondering we should how about margins. adjusted just

half second of margins. to inclusion guess, I the can in would just organic expansion? layering largely quickly how comps, second we offset beyond, tougher mentioned, you about to margin talked of the improve in margin to XX-basis I half be some margins? in look started Just start year that improve XX by think basis margin Hisco Or he Ron, the the we the and we headwind any Hisco points point sequentially you I Hisco quarter, first mean think the run on about As just direction and plans from versus also Should to Hisco color being year-over-year. helpful.

Bryan. Sure, can Yes, I start. that. start Yes, I'll with

we Hisco transaction, you're we that to But -- on the the the yes, that Kevin, they'll QX to margins that when on -- overall you're sit underway clearly, Hisco basis. that overall when we announced bring as up on down shorter-term our really we we sequential the expectation did through margin DSG. process impact today, QX. integration a knew margins were that from would the is margin the anticipate come which we those it So And well will of spot profile work

So X have think weeks, were second in they and the here full So interesting to quarter part in QX right? we about only the quarter in them was in for for QX. the bringing

it's to a by action Hisco. we the last of around not without items over of would around that margin tough the from and or I the whether guidance other answer expansion year. going objectives bit here question offset entities say of specific be a entirely is X is giving the specific integration to months What have So very

to on on up bit, did can comment taken Services how the pick When saw as cost third starting they to has around their cycling have And incremental side. there a a see we ability will We continue market we to basis some to just great thinking able deliver. on equity test in Lawson to here where the well growth. we even margin quarter. organic -- help that they end start end the be continues and as And focus those actions the about of away Gexpro that expansion markets right that on already

in that terms little giving here without that QX -- actions a a specific the in we're of you So context -- might we're that but you helps after QX so of without percentage and taking. it -- you give giving some hopefully, just bit of going

guess, is to of to want quarter we've just to that that's earn-out it right? one Hisco. and is the me element let if of as this going transaction that onto dovetail at or the end to There I'm -- that October, I got an flag thing Ron, I -- Hisco relates it is Yes, Ron, kind

Yes, October.

October.

have are as their management targets. be clean -- that we in set got elements And expect able some numbers a with they sure a to real growth right profitability But -- and that as making for would we've now, to hit. that, we to team. opportunity will around for relationship great are which there include really that tough was So them well reach that

that stewardship sure kind their with give make to them there. profile want we margin opportunity get kind to we October of of So of the through every

month the getting that those test of us itself. forward June equity looking to actions for So the on in it's the to took easier how take businesses integrated we side are

at out opportunity of $X X why that's side we them we we've looked that love team businesses equity the make have that took hit wanted management call call the has we together, that out to we of is on to earnout. actions so every would the test when wanted sure And Hisco come we them played to the we as didn't that for and million and actions the

and quarter, get some it and initiatives to it the it opportunity Hisco business now to equity would there the higher we test relates relates allowed There and whole levers the to longer-term whole side. like real to when about to business One test X are test test going speak have test fact allows as a across that more that Hisco Hisco us opportunities to been for have the there. forward and by think the equity when structural side. is structurally and together take itself are There there's this margin how we during total will than margin a gross structural allows side as equity fourth equity that margin with -- are that on equity we margin, the the see where action third that faster, Hisco gets vertical about higher

the without test year last it. months. And the end that, towards the that at operating get double-digit equity before or the moving of to EBITDA targeted been had XX as for margin of team to Hisco of year. And end the been part the objective that's We has that's

continue softer out MRO OEM confident equity also that you spend of of the equity There's that that and the of last us are capital the if revenue during the especially X/X kind of quarter. the plus will test we've and the repeat in in of get the being where kind like really called test and marching tested direction. side. to volumes you that seen, some on now just benches stabilization, and measurement we digital they We the the of growth X% side are revenue, feel out That's with

part's spending So growing growing. been softness been the the but consumables side. on capital that The been have has

platform. to is margins Services capabilities Watson Lawson, contribution the allowing us look services test to those then have The some the or margin capabilities we at margin capabilities to Now, that cost that. in Gexpro margin up. seeing ought the on side. the that that pull more test allow Services optimize to there levered are expo that at allowing that side And of are value-added to the And we Hisco we the on us opportunities on whole Lawson's across that of approach the profile much the it back Hisco both way and structure division look that the equity And and has enjoys. of structural highest to back where the Hisco But that side. are some there's Gexpro pulling -- got has value-added are some because the across are opportunities that

Lawson real out we their on that of and key they're able also traction to services gate. where of cross-sell Hisco They've expansion and great with Gexpro -- an the have more the half able the specifically to players good seen the -- capabilities south embedded some additionally, transaction very Hisco opportunity And and we've been the deeply into with assigned customers been seen the geographic they've of the team to border. being grow the

coming Newman Your Markets. of from next is question Capital Ken KeyBanc

detailed you to gave of pretty I going Ron, So for very, good a answers, questions ask. some lot very answers my here was

on here just [ph]. one So, ask maybe I'll

to of probably that resist, I've color some for not side the trying years for many that Yes, I'll that calls my these afterwards. team get XX years, the been asking. Ken, offer asking me its of you're being on it's in with questions given other trouble to so hard

orders hearing about you equity how are components this you're especially we electrical more all quarters? Curious of question, my Gexpro. lead in if earnings view bit for these are that tax and a demand that in coming as with seeing you customers season impacting Well, improving, at do touch And today? some times revising that guys maybe

to Ron, ways months ago answer took XX were concerned months -- talk there's when some our influenced that purchases ago guess, X year of times lead well, have specifically we or I then times. about we that lead question. about ago were own also a One the XX how to and actions is

to working capital X intensity And got across take in a last our next business, so able we've posture months, on our working and the over the over investment of it across the or should we X identified up investment in we've to X verticals capital take our our maybe years, to kind get businesses benefit the specifically increased X to certainly more months the so. us, that capital opportunities that working today being lean allow a of through

I last we called flow -- cash We flow. cash that's where good free this conversion So had quarter. free in out

have that next to better think X over we'll X time point I the in some at months.

next the working months. an release We've that took story as levels it kind back we where challenge levels and one allowing the related It's be anxiety and it's heart our also gets getting we've to And not That's their strong amplified have you -- inventory with and about kind lead to to been customers had through and look our will. got money over able lot were person of because costs. there's capital inflationary in pressure on and we tied in a game the to of or be there's kind stories, the the of that initiatives or have it to go and at the is telephone to to it's back there's tells end, one specifically might times then X has levels concern lot a we of where to production if impact. now the some of us of that But person of Gexpro next kind to well inventory adequate that services from of think exacting that a of actions really of re-laid anxiety freight to purchasing. old we're stocking OEM That their that part it. X more you we're because narrated less as up going there we on worried production fishing and exactly And got less maybe are support what their needs. gets

risk some with of us bunch forecasting we our just piece line. the of flexibility of good their a side slow major small on a down why And for to of associated that our out not that and stock a There's on would popped manufacturing -- customers out of us. understand specifically, they so paying level

orders concerned X weeks. your takes pulling that used And because it, to seeing, it Bryan, call normal for about the are months clarify to you're -- back of widget on my I'm back product more question it here. now demand customers X take, and

seeing And don't so out far. have as order they Are that to today? you

to customer X that availability that a we last Yes, it that's are at about been or to X our themselves. destocking I certainly, absolutely they earnings that have for to would had deeper of it But order was I said going, quarter going in because they seeing we that over this that's last think going I the we're something seeing. taking were in of acceleration some some whether and last think that own think for but to and I so peaked year were about even it last I anticipating team our destocking investors be we've some lead call I that concerns not some stocked we some were I it ago said out been months level seeing level were call the to our in that the an was some customer the months now see because I said on it. I we right talked times quarter's on alluded happen is levels influence calling to And at were X place. happening, the see and think If the it not

seeing public over more capital. it's that's your a aren't lot of out so levels we longer. inventory more see we're that our think yes, how the of like is much a they're saw fair on some saying customers more some bit we of the place side, playing out seeing last this we on conversations the think internal look I the call don't part. about was think working we even working on steepening second of And than of so July. been quarter. on we're down we And in taking or we maybe and during a But what a months a as kind any yet of of that had X dampener because month that quarter Any didn't very a our own have of performance of But happening,

color we're more seeing where might any on is seen that? Ron some more have where it. areas it or we You have may specific

on piece Lawson only add a Bryan, business. Ken, that, the The we're to I short-cycle is Yes. side, would

really difficult for have buildup of it's little don't to build They up. our a to a customers So have stock.

And so our just we we customers. -- I quickly with turned mean,

of long-term the impact on less a Generally, for with agreements that that on Lawson of business. we have customers Services, Services probably Gexpro side So the the side. Gexpro

normal process we what there's would as cycle call is year. to results agree impacting Gexpro little not just production And movement, Bryan, it, pullback But than so a again, our so quarter-to-quarter. probably see huge of certainly a with of it's probably further not well Services from I any bit probably dramatically connected the that the part bump last a we saw I and

hearing those long-term Ron, I so would hold to thinking And said Services inventory. required we that even I on has it and it you got sometimes kind helpful. contracts Gexpro and just of about what are say reflecting and

on So it our that happening been sheet. they has pulling if what's they're anything, it. balance inventory because as now And need is

And they anxiousness on their for we've we're able that's end, little levels buffered a to work our been customers as about has on I'm being And our so carrying aren't real their end. inventory of that bit. own the any buffer carrying down our where us carrying kind talking buffer

back cash that us. for into So actually should translate

from they some order On test equity, there elements are that there the some shelf-life us. on products of

have be it conversations gotten I've but not a it. side that been asking the our to test -- on we've about. been consistently the seen answer continue back in concerned concerned I has And are I'm that specifically about have test so on not we equity question been something we that. be It's seeing

two. well. So those Ron short And of side answered very cycle those Lawson, I the then think are

offer there. color any So wouldn't I more

further questions for queue. to in to closing remarks. appear no We back going now any hand to Bryan the over I'm have

you. test on Appreciate participating -- we're businesses We together what and across The Thank your support with -- coming today nicely. appreciate doing it, operator. are very everybody with DSG.

out got we business made those a with investments to with important that process. As during the to moving called the alluded business the we're are and very long-term pleased We've wanted headed earlier and some it's parts. We in think the to of lot think I decisions invest from some we we value quarter from and we second a those and going for where impacting we're forward. a how shareholders structural margin of

-- of any we day. and our and discussion Worth or Foot DSG Day We encourage would look a us forward detail in with that to participate to are the to analysts September come lot of a that on and forum end more at in investors interested more Investor having this talking any in

the Thank you your very appreciate we balance and time. of much summer. good a Have

conclude This everybody. today's you, Thank conference. does

your may participation. for You have wonderful and at a your this day. disconnect lines Thank you time