DSGR - Earnings call transcript Q2 2022 | Distribution Solutions Group, Inc.

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Operator

Good morning, everyone, and welcome to the Distribution Solutions Group Second Quarter 2022 Earnings Call.

As a reminder, this conference call is being recorded.

Now I'd like to turn the call over to Sandy Martin, Three Part Advisors, to provide instructions to read the Safe Harbor statement. Please go ahead.

Sandy Martin

Good morning, ladies and gentlemen, and welcome to the Distribution Solutions Group Second Quarter 2022 Earnings Call. call, been provided IR posted investor.distributionsolutionsgroup.com. today's presentation QX website with has that on conjunction we a have earnings at In the company's

me Officer. and Ron call DSG's Executive for DSG's Joining and Executive Knutson, prepared Chief President Bryan Financial Chief Chairman; be King, today's and Officer Vice the on will remarks

from and financial perspective. During the providing be operational will an update an call, they on the business

cause Bob Lanuza, on Connors note as Additionally, join Brad in future well results Advisor from materially Russ statements described. operating Wallace, the concerning to are Frazee CEOs, company forward-looking underlying those that plans, and DSG for and and LKCM-Headwater call as could strategies, that Cesar will assumptions Please expectations, and the actual press the results this risks contain Partner operating session. subject differ goals, and release to beliefs, Q&A call that statements uncertainties

to been via call update any will as to including of GAAP may Bryan? nearest disclaims now company to the teleconference filed XXXX. webcast SEC. found refer press of on the Investor audio will Distribution made presented I statements based also included point, the XX, today, on The replay the be the turn be are in addition, views made is on Group that website. Internet at over report call those cause Management adjusted Bryan that measures, operating posted so. end adjusted with the section Reconciliations forward-looking on views company's the company's to non-GAAP adjusted The will this has income King. our consider available to the but being the also anticipates at August X-K change. A release. light. website. is EBITDA, to This do during the In through elect Solutions and the Form obligation some current may, Please earnings information Relations EPS. page of The the statements Investor copy earnings call today. release future this the issued company in of our today earlier on diluted measures of can A Relations release developments

Bryan King

morning, Thank Sandy, to the results excited good Distribution and organization. you everyone. Solutions share I'm you, of with Group combined our

the website As with our to Sandy refer our that mentioned, today. on please deck have to follow we along provided commentary slide

strategically companies. As specialty we by the bringing merger value-added X, recall, you'll X effective distribution completed high-touch April XXXX, together

is solutions, the of operational but let Distribution by financial Group each to a First, on from the TestEquity programs over second sales new Solutions kitting reps. implementing companies. offering leading I'd each start high-specification listeners. parts, the customers. Equipment services for C pointing developing few from our summarize will Services VMI like Lawson of of for of Ron the Test a and manufacturing supplies the X,XXX highlights Products of distributor leading specializing specialized any quickly MRO some under companies is operating of in Measurement and is partners. Class a distribution chain a comment solutions cover vendor-managed customized also the a of through of inventory toolkits Electronic its moment, quarter, details manufacturing provider and In me Production and & within the largely Gexpro and C parts, supply to out and quarter initiatives leader

translates the across million operating three almost quarter. a segments. of sales year EBITDA organic both which the reported nearly solid ago of $XXX We companies', grew the revenues. XX% On all X.X% XX% versus Organic growth basis, acquisition $XX and million for growth. strength our combined adjusted this organic the of sales. apples-to-apples of demonstrates an We quarter, sales consideration For growth into taking or grew before companies businesses from organic generated the to to acquisitions core

We by above all their at three as expectations. are or operating performing companies these results are encouraged

While year above All leading Each made large acquisition adjusted companies focused improvement as does operating communicated. the The we our on. be strategically X a dollars continues initiatives. DSC strategy of not progress EBITDA that we us and XX% company's provide the part an to EBITDA margins, and exit our companies overall formal are growth further experiencing strategy operating previously give adjusted significant to confidence expect remain which in businesses. guidance, teams XXXX both and of those margins

TEquipment During nearly acquisitions. XXXX, $XX annual Test the $XXX and aggregate, closed estimated acquisitions, million. adjusted Gexpro Services revenues four TestEquity on on Frontier annual of these over create Equipment million and In National Resolux EBITDA and and the closed acquisitions

fit relationships. All operating strategic into of incremental the acquisitions the accretive elements are direction and and supplier important these they also And to companies. provide nicely customer of complementary adding

remains support pipeline, to team businesses Looking our structured our and the close full. at meet funnel opportunities for M&A we each acquisition each diligence businesses, the are the continuously of to criteria. operating identify We've the that and evaluating transactions of

are our As on-going a significant part I of acquisitions strategy. mentioned,

are where at customers, with relationships they the cost identify with existing and makes to Additionally, leaders to and teams our three it theirs collaborating operating are synergies working and our companies expand together sense.

with or we and three meetings takeout and near-term opportunities. with leaders those of The in responsible operating both company specific specific action Chicago, delivering meaning lines companies. work owners synergies the accountability, Leadership time are left teams for cost for that each recent our sales, streams specific During identified Summit items

near-term and accelerating growth earnings growth, to We seeing DSG earnings and that drive and success, are and sales creation sustainability create significant shareholders. all of results value I'm confident for will further of evidence these meaningful teams

few companies. it operational to let Ron, turn each the a initiatives me Before on comment over I three at of

protecting uptrend nice an given on in to strategic First, and leverage way the we the margins, it customers customer driving which our many a by the Lawson reviewing organization, of and while Products. area are of expanding our Lawson focus taken opportunity invest company. the great its resources. expanding across our has is want diligently margins This service we high-touch deliver done way Under a growing relationships. operating actions they to job new Gross Cesar's is leadership, best in and on there for to in. continue the are

in to strategic and objectives. Cesar and strong Additionally, processes Lawson with at upgrading its Suwanee, conveyor customer Georgia, earlier better leader, growth an its with the capabilities this expand improved is accountability efficiencies. distribution demand putting fulfill customer-centric profitability a DC systems to sales he's continues its changing and doubling the DC aggressive culture Calgary, inspiring and of network year place size and within their initiatives location, drive

able especially Gexpro drive The with services, Resolux Inflation positioned significant with Services renewables the Act. growth on and to completed been Gexpro teams the indexes is verticals based acquisitions have of margin this Second, Services technology freight a segment inflation. markets continuing for maintain well price percentage supply Frontier, and Gexpro impacted current are by increases Services. and and Reduction SIS. growth, environment. throughout tough And labor gross in increases materials, to raw inflationary

product A are test price backlog increases numbers the brought well. hitting Services equipment had the the TEquipment integrating starting The as We're continues extend project in Finally, has process increases, will seeing July secondary on of improve synergies. combined a is payment going sales in finally, The our timely in business. acquisition backlog. we team are are effect TEquipment acquisition Gexpro XXXX. an to that to to shortage of tending its shifting products customers outsourcing and offerings terms ahead in to into which business And supplier the and on from backlog chambers has from continued customer will manner. purchases via our develop while in the on is delivery sales orders. are Customers TestEquity. production positive of traction our helped our facility was from has affecting gaining of timely us of our & product caused sales push August. flowing in chip Inflation our challenges Supply and and delivering suppliers chain The and continue passed are Test lumpy of to swelling Projections online Measurement inventory key of lines. into delivery suppliers be reduce the manufacturers focusing increase price lumpiness still product stride, rebates a now customers.

also proactively we demand growth just growth the on continued versus row. a demand. organic demand month for the Electronic from seeing side to backlog reacting growing business. has production a replenishing shown in to consistent Soon, hope the business in start areas third that of of supply key We're

excited focused share work as keenly improving shareholder vision return. on We're activities diligently operations. these continue long-term their and Our also with to we leaders long-term plans and investors strategic share to operating create our to are company

the to turn Now dive the Ron into financials. over call I'd to Ron? to like

Ronald Knutson

Distribution morning, you excited good second share the Group. Solutions and everyone. results quarter Bryan, Thank you, to morning of this with We're

financial this three While quarter consolidated is results, it Lawson our results presenting TestEquity. second represents of services of initial and Gexpro the operating Products, our companies, quarter

this that is company, website before XXXX the our accounting of on discuss we our we the to the quarter comment Page me let Please initial second DSG. of of results. presentation the Given financial three posted IR combined reporting required that GAAP on quarter results turn presentation

and treated operating a the year, merger. recall, of filed under As is be combination as was the you required GAAP that three in this to earlier disclosed may the companies reverse proxy

be on the we a TestEquity combined control acquirer accounting quarter org keep ownership Products. as common few of and to review second basis, the they A Given of the items LKCM deemed mind in Gexpro to results. Lawson were Services by

comparative and second information of months. predecessor TestEquity XXXX Services for results the accounting Gexpro Products XX. And The for X from include of companies Gexpro for X through as full the June information TestEquity and given first merger three only all include X, org. April for acquirer The GAAP date year-to-date only quarter. XXXX The the includes Lawson the Services the April company quarter includes XXXX GAAP

we For adjusted results, the conversation Lawson are the comparing Products. be of slides the for for utilizing that premerger will morning of activity the this ease

Now turning five. Slide to

On the the line strong line summarize and Let top bottom three operating principal across me results. basis, a we companies. combined reported quarter second results

combined mentioned, nearly the the Bryan strong have revenues. date, a acquired sales organic future. for four $XXX growth million of in within we annual demand will and remains To customer acquisitions Broadly, reported on that product XX%. total backlog of increasing in TestEquity XXXX, closed we help As of

savings three cross-selling companies operating or cost realizing at on levels. operating progress early business. customer and good performance made in among companies also new finally, with our three the wins above And expected have on was We all

to Turning six. Slide

Let basis. were combined me million. $XXX first on discuss DSG a Consolidated sales

of of Although inclusion the TestEquity from and growth business this basis, on acquisitions quarter sales $XX.X the both XXXX not GAAP the over of million represents driven by and of and Services the a coming an Lawson growth million by in the made XX%. Products with Lawson a necessarily XXXX. of inclusion a second XXX% commencing quarter and increase XX% On $XX.X Organic nearly meaningful, basis XXXX. in or of like-for-like basis, second from increased organic nearly comparative with XXXX, of acquisitions Gexpro

quarter. $X.X ago reported Second, operating million $X.X GAAP to year was million income a compared

negatively costs, On quarter acquisitions into value XXXX sales. half The improved million higher XXXX opening impacted increase. Operating million by intangible compensation that of expense fair the and XXXX stock-based taking million from onetime Lawson Products. second approximately basis, one of about the adjusted drove income account made these items, of to or balance and $XX.X results higher were EBITDA an merger-related to $XX.X adjusted $X.X X.X% related by amortization of sheet in

slide ended cash on facility. to existing available with sheet From million million of on liquidity of $XX.X moving $XX.X credit and a Now our quarter hand we seven. perspective, the under balance

the time million line TestEquity X.X primarily existing XXXX. outstanding half and approximately net the of We debt, as of our the acquisitions given debt Gexpro Services during $XXX a merger debt quarter acquisitions the well of of consolidating a as leverage as in made at during by expectations also reported the the result ended We with the with ratio first quarter. of made times

manage XX four EBITDA intend months in our to to we range. the debt trailing three adjusted times previously leverage As to net communicated,

companies. each of on individual comment the Let X me now operating

XX-Q, the upon segment operating three the companies. based have Within down reporting we broken our

not all Let in with for start is quarter on Products me numbers or Product that Please GAAP the of $XXX.X included Bolt numbers remember that other note Please in since it are XXXX. million reported the the sales is for the Lawson Slide second Supply accounting for segment. the were first XXXX Lawson the they quarter. nine. Lawson acquiree, this as now excludes comparative reporting first in GAAP

segment over EBITDA over on up and as the grew adjusted was and sales up of strong of approximately XX%, price. increase the by XX% business Automotive basis, first increase XX.X% adjusted The offset business, quarter a Kent driven the sales However, driven a points the quarter. X.X% Bolt strategic was over second The and Supply a XX%, versus an quarter, XX% of a down sales. core increase XXXX up note, being within by sequentially year government performance ago the XXXX. quarter percentage had Lawson great Sales partially organic were XX.X% side were nearly X%. in XX up XX%, by year ago Of

before customer All of quarter XX.X% an accounts. strategic gross of expenses in with existing particular, share certain expansion Lawson's growth, and quarter margins increased margin. of during within relationships, growth reclassification the or organic the into new was the through Lawson wallet of selling large customers in realized to

was in and in of the up opening for amortization, also reserves first versus up quarter as late XX.X% in balance step-up improvement well loss XX.X% from reported put was adjusted in realized and in nonrecurring margin inventory XX.X%, XXXX items adjustments of for the GAAP The operating quarter margin being net ago the gross value million previously gross XXXX. place second is the fair in half quarter, of Lawson's lower driven $X.X quarter primarily the Excluding XXXX. XXXX second price the mentioned. by sheet year first as a of the

and improved XXXX, Lawson's of as million quarter by to as of driven ago margin the items these compared primarily gross first improvements. the Excluding $X.X adjusted well the million in EBITDA previous million and a for year quarters, quarter EBITDA $X.X adjusted sales to $X

XX. and Omni, acquisitions SIS XXXX. the second that by Services the Total Of to were and XXXX, Gexpro Slide of quarter closed approximately in NEF $XX.X In Services million sales on was Turning $XX.X for on XXXX. Gexpro transactions. increase, driven XXXX million

and Gexpro Frontier Services earlier March in on on And on so Resolux XXXX, year the in XX. transaction far, closed the

the Excluding by grew X%. acquisitions these impact organic sales the on of second quarter,

to was Gexpro that All Services the $X.X gross the continue a offset strategic by for lower compared XX.X% are quarter. of Gross Reported with margin businesses. These increase year and agreements. margins of expanding Gexpro sales to to $X.X renewables. recently end the supplier gross or acquired efforts of was be from the XX, ago Gexpro new unchanged year the driven TestEquity Services new in development over by through the to movement on by have margins and been price. expansion XX.X% or primarily Slide expanded million partially some quarter sourcing million for Acquisitions team approximately a EBITDA also And ago existing slighter adjusted the relationships $XX.X or as grew of strong quarter. Sales million The in drove quarter had markets sales of supplier longer-term managed XX.X%, improvements, exception the increase. $XX turn the I'll quarter. for toward Services which earnings the XX%. million of lastly, aggregate operates headwinds customers, customer in

Test the Backlog Thus, the of quickly During to of of where TEquipment TestEquity in sales customer with are has lumpy product as and that chamber increasing we business upon & Supplies added quarter Combined We challenges. ended two supply from some remainder receipt National Test we quarter, chain closed be given the sales the of XXXX able for Test the anticipate the business. Production Measurement this product. to XXXX will XXXX in orders XX.X% and the Xx Equipment. sales business ship XXXX. increased $XX.X have million growth Electronic as Measurement their the second acquisitions & and second both acquisitions, well on organic

million driven increase XXXX ended XXXX of acquisitions $X.X second this or approximately chain we On momentum issues. previously result Having positive that an inconsistent However, been will adjusted as into $X at vendor sales million XXXX due of million backorders a in that from to $X XXXX. on-going half quarter. million, delivery the I of and of was over and ago second $X move EBITDA an supply X.X% Of mentioned. the level nearly year earnings of has increase into quarter representing basis,

as call of we across and strength by With by complemented the a progress adjusted now strong acquisitions. just are to Before back for second on turn organic I'll Bryan. Bryan let the double-digit this growth very path exhibited our growth of and back strategic sales our our the I the over initial DSG reporting the pleased X.X% EBITDA million quarter solid $XX.X combined our or with of quarter. for closing are me the the call sales. quarter turn platform, realized of we believe results, emphasize some remarks, being to our that

Bryan King

Thank to speaks initial that would really companies. page This quarter XX. I itself, in you, our our of start and Page we echo Ron. for have off gotten great I'll to direct you combined comment a Ron's

quarter supply Second and organically adjusted scale to to streamline demonstrated customers for to both to We remain businesses ability chain and and stabilize, opportunities leverage while that to growth, our business the and believe about look results drive strong going are the EBITDA. their confident ways to report their substantial results. by operating continue acquisition

their that, the those line Our Operator? to are wallet supply positioned Gexpro Services them to share Lawson I with TestEquity support for and businesses partnering through customers with to would and partner We're chain to Products, our with goals. customers like questions. solutions. expanding With open accomplish comprehensive well up

Operator

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

Your live. is line

Kevin Steinke

them they operating cross-selling, mentioned with services just you're have competitor? displacing wondering I surface all to been of they kind that progress on Or think typically depending one customers maybe dynamic able different when companies. is were assume, something customer. before typically cross-selling about how a Good -- about outsourcing and using the haven't into maybe the about you I'm your of I bringing conversations you on you operating wanted among that cross-sell? morning. to before. that the are situations, we ask companies of had Are When you as been

Bryan King

Yes. closely Cesar on those on, This great tee let and two collaborating up as Bob he on is to working one have been customers. businesses, a some

don't why you hit Bob, So it?

Bob Connors

there come It's managing line, value-added a blue-chip Services, supermarkets, every Gexpro tell production Bryan. you, expand to Herzog, you, customers include Officer, And us XX for question. I Ray the great and services, been myself BMI, we're capabilities service the over day, bringing our Kanban to our years MRO. I've systems. asking OEMs And their this Chief doing and continue and Thank actually Commercial can to at who's

For independently, us working that investment, be expertise. capital, not brick-and-mortar it would to significant in matter a and terms of do subject just trade

natural bat. us what's we're XXX it's quick to for going complete mostly what the looking off So us who expect ownership And total surprising platform. and what It's they're Services platform and cost well And we they're total us tap Gexpro full shocked just is Lawson opportunities of literally to Customers, has VMI as top TestEquity supplier service with looking customers of well is right together. be But not just our capabilities how now but got in at the for did improvement. the pull received to offering. Lawson, to supplement accounts through best-in-class to conversions as the the we rationalization, seeing looking for. terms a many

the put R&D, of you basically proposition, which package services as value Equipment, just customer. that on the strength as service business enhance a can offering the Test test line well TCO and together products the not to when really MRO and production bring & their packages together So of but of services you can and is

Kevin Steinke

at like helpful point? anything know I don't get any Great. this seen didn't call, That's of but but right. that on of it economic impacting at All color. is immediately guess economic the seem your or beginning indicating it, you I doesn't lot uncertainty slowdown have I of a businesses

Ronald Knutson

Good morning Knutson. Kevin, it's Ron

centers. not I jump shipped this, service the in comment of CEOs unit say other on centers in really certainly, as I'll really distribution the slowdown of seen the well. terms would and then businesses, out And So volume three being across can we've the a and

interesting we're a not currently. it's metrics, look we seeing So our of at internal much indication as slowdown really

is In fact, an prepared we the back the referenced even in demand indicator strong for the backlog is increase remarks on that that customer that out there. still the there's TestEquity -- customer

indicating So and certainly conscious we're surface are as a it. us. keeping the for But out not of here here we would not close there, commentary but sit today, tabs anything slowdown on a seeing that anything that's we're we've indicate on slowdown, seen

Kevin Steinke

in we there this Lawson Understood. guess, to necessary talked realized are think offset pace and that all more but going of price might to increases segments to to ability keep your I do within about implement your across only inflation All terms being of your inflation. inflation you Lawson, Products, your Where forward? -- right. or with price When operating increases be about regard you stand, with not it

Ronald Knutson

Yes, again. Ron this is Kevin,

and basis, So is supplier nearly on grew that basis combined related. all all XX% X% offset And the really, companies piece as basis the about able at on across a three as that as price three of a as of three of if to pass along companies some an -- companies, XX% freight have On all to well we combined. really for look labor we combined increases long cost it. organic price well the been increases

along. we're But customer have on I been side. say to the price businesses, I realizing across that passing our open understanding the the cost we're been seeing end for along task would accept that, to have and those being part, to effectively would to the an most say our increases. And three that increases customers not the accepted It's able easy the customers. they're by generally, So get the that pass always increases,

Kevin Steinke

hear. That's right. to good All

you including guess, going confidence to about margin and when plus factors expansion about can you bit expansion, confidence that gives that margin? I XX% exit margin the drove the your just EBITDA year that So more adjusted last at adjusted a little just you're results, expansion, Lawson or the what what we year-over-year, think -- talk terms in year, margin of

Ronald Knutson

that one, take I'll Yes. Kevin.

both as were and and well. as at so And X.X% we at as the we if year first nice really quarter mentioned look expansion ago, the ended expansion prepared I well in Bryan as a where our quarter remarks, really, you

items of got to question to would lot of teams as goes I working those kind that that a the around earlier opportunities opportunities. back working trying of are driving three and we've together your there's XXX Bob accounts us that some the that confidence the of say So is a top confidence, to mentioned, few are well across all expand And really organizations gives one identify already relationships. identified in terms those sales

So that from some we -- strong us just a and perspective, are perspective, that certainly three bring a well. a we together demand the as then we're confidence didn't it. from wasn't at piece is of cost looking And gives unit the fact that additional The companies seeing strategy.

focusing are as certainly the we're in combined platform well. on basis a there on out that costs across take However, that can we

throughout margin in confidence the we move XXXX. what's as the additional my then really, and say cost our would cost being sales within into the a commented of we're out areas basis. seeing a of synergies is as that this on, operating lot And those the well take I an combined individual company So in revenue opportunities and rest basis going from of place on and Bryan individual XXXX as and expansion couple is factoring And companies. mind, the then building

Bryan King

together with that costs I'd business make and way acquisitions didn't and early that -- add didn't we too bring into the the three the the in Gexpro to would TestEquity the integrating there's -- any in Kevin. I stages would try we're of still while also their of disrupt that leverage companies the relationship there, have And add units. also folded we customers. much

specific work come significant of and the of our companies that that just with team have works We leaders out amount all portfolio gains were trying lot a of that a objectives energy, as efficiency focus well then in just And inside of the through to also you made leadership a to and still investment where but drill selling they there's team of of a of synergy three enthusiasm, on lot Chicago that companies opportunities as going acquisitions they our lot we're came with your are we've there. back opportunities question. into recently, with down together a Gexpro of through very capture teams that summit opportunities, when -- of going team. for then cross-selling out the each and And to operations lot our functional earlier TestEquity of working the to

Kevin Steinke

All right. about And I pipeline. to acquisition just the want ask Great. lastly,

I what you strong. X right You Is of Can size? remains more your And just of the in any it on mentioned us, operating seeing it all companies? give guess, terms valuations you're look flavor of types opportunities across like now?

Bryan King

This opportunity. is a great

if worked IDG we sold really went for you There's who we now we three Matt been the We 'XX of working on who's teams the the leading team operational then with he's M&A to recruited industrial the quintupled from than business. with public after significantly DSG. well as of Brad group, Wallace back professionals team are closely a team company, one. had Sonepar. effort back our When dialogues and of have bought lot the over inside remember there as there with management before and EBITDA a a great Carlisle, our Boyce, inside And M&A helped the the and team, more that conversations IDG Matt He Kevin, and we were him distribution back able there. to in us it at bring acquisitions. leading that

Matt with and lead had and then been a brought he we to Bob there. brought One leading worked colleague. of to effort then whole efforts with has in them the over us years ago moved the And then kind and of in work

you've fill don't so why there, in got Brad, Kevin? any And if detail for color you

Bradley Wallace

say multiples. a going are with pretty all platforms. acquisition to up we've targeting on we've robust those pipeline it's realizing And line And been after pretty of in I that We've that now. turns much cheapen cost where on potentially the seven would savings spread say of I got say We're Bryan some back activity alluded seeing would valuations couple to the it's Kevin, Yes, a I'd out. them. the X across three times multiple of historically earlier.

combining pipeline working And so with we having were focused different integrating fill and We're are that excited a now they're that continuing market six working super acquired on as a that acquisitions out done. months now diligently But conditions a dedicated we're about all really ago. Russ, team Bob about have the say the it happy on they than bit well businesses and both would they've Cesar little is as and on pipeline. obviously robust to I M&A. that -- excited

Bryan King

Brad, have that bring equity may platforms I the think kind range to private of if historically that the add with to for on expect in platform ones of lower there convinced the distribution the them that. to said. more the the that firepower what size of to way we're we multiples, see opportunities and of times, there kind end. versus may current Kevin, environment that us acquisitions be think yet as end out is environment But the Brad the we're that higher range that built. I'm back, not just a -- about accomplish there X% or number we cheapen are the the EBITDA the towards would firms -- that -- be to to require X% quality that they've and cost strategically trying -- us we focused see mode. to of the X isn't we better for But meaning a that the appropriate that being businesses large to X may opportunities they them with down,

that which sourced, we're While playing really renewables, ready side, market seeing directly is least And think largely markets on these a I'm about demand. shot that going other arm to lower what end the than in we seeing, the to on which improve, industrial working acquisitions sellers a we're to we're government, get robust still we're end also we're in in each of at are are the not sure the take the on multiple.

performance at on businesses the years. we're with that largely business is So pre-COVID looking consistent

Kevin Steinke

here. I'll color. Okay. in one just helpful That's sneak one really last And

You mentioned its an to the isolated some about the That there? on you're where I package it? headwinds. Is going Congress. mentioned shot a way in the What's in like you there And be through there's spending could you thinking you're guess renewables, that kind arm. are it's working of referring area presentation, way -- the that

Bryan King

wait can't to renewables. Bob talk about

why you... Bob, So don't

Bob Connors

really forthcoming and So the electric of reduction we're inflation wind, about solar a as investment things. well couple as vehicle. the for excited One,

It's we going So saw for Senate the House positive. vote, through that's next. us, the

profitable think the for largest said, we and to in as most one arm good So XX% Bryan going a be and it's it's our businesses. of that, shot and services renewables down

forward. going forward, that the for the the see again, continue to also to a commitment improve. that Science Act, business strong confidence going back and go that's, billion to will business segment us XX-year sustain with investment, of and tailwinds lot So CHIPS gives the a I'll $XX technology And

Kevin Steinke

appreciate Well thanks for questions, Thanks for I That’s had. the taking all all the it. insight.

Bryan King

Kevin. Thanks

Operator

Thank you.

next Your KeyBanc from Newman [ph] coming is Capital. from Ben question

is Your live. line

Kenneth Newman

from Ken Good KeyBanc. Yes, morning there. it’s Newman

Bryan King

Hey Ken.

Kenneth Newman

morning. Good

the provide businesses curious restatements. could quarter question, Really, for a the perspective, first the segments. sure have August prior trends I'm I'm my from for you little just color year just of order some of for a these we business each if since on revenue through don't cadence Just seasonality for

quarter move last we as XQ the well? sense about on the any think then So seasonality into to of typical XQ and each how from -- as the for should we

Ronald Knutson

this. Ron take Knutson. I'll This is Ken, Yes.

we So that typically, are to stronger all is in three quarters. comes just selling XX look that When we of XXXX, days third across what and the at second really for the QX. number quarter QX honestly, here generally XX and it we And down quite have days selling I'm XX the calendar generally in business sorry, some of the would days. see and XX of second a is quarter, in --

just the the a So the based slowdown But When of indication look I upon how how at we'll selling days. fourth really into quarter the saw I of far, what is we've in we as a second see say posted we we that that the we into naturally quarter the of the little results and we you're is good a But quarter would what in terms guidance, well. bit quarter think strong quarter that a consistent the was. enter started weeks it, seen as has don't second formal five that call quarter really aware. third so as first, mode provide

So here bit nice same, what posted. little the same than we greater ago. we year of quarter a I from increases And call it, even what over a would the in really saw second in say range, the in maybe kind

so we So the saw early that in the continued trends far quarter. have here

Kenneth Newman

on in quarters? the the Lawson about And taking, have in in contributions like further price, that that a like in or you're then quarter think you peaked solid I seems good think ramps sounds really here X% second Products I of orders consolidated. that price context it do think just When improvement XX% likely Understood. coming price the

Ronald Knutson

It suppliers slowed seen second quarter. increases Yes. saw in down not our the that have many is cost what we've -- what from we of from dramatically the

three margins closely companies those we're base. monitoring supplier all in -- increases are So continuing our from monitoring very and

So it's forecast we'll individual any not to and slowdown, company this of out. perspective. from a But on it an stay little would tough say, seeing great I top we're

to XXXX. continue we'll see actions that we of price suspect as the throughout I move So rest

Kenneth Newman

Right.

versus in In segment color chain growth? slippage the push here. supply give was backlog much maybe impacted color order that increases if delivery more backlog, that there that so, how the TestEquity just bit if quarter? revenues a or But terms then understand pretty a little of out remains And us challenging any sense this I of some

Bryan King

talk want you to that? about Russ,

Russell Frazee

suppliers that couple the I our We've with can the from since over shortage. the one. Yes, coming slippage a take thanks. continuous years COVID chip of seen orders past started in

I been months, maintaining can about see the that see that haven't it I and but seen it XX turn quickly get over It's next get don't increase. it We we much very we when our the don't We from back deliveries lumpy same. changing in. suppliers, increasing.

Our suppliers help are fill working toward allocating their chips in the to proper backlog. the way

ever comfortable we'll is working to backlog now over through right it's we're its next than the been, at months. be that Our that XX XX peak but

Kenneth Newman

about chip some of chips equipment the types about that of I going being should are within the chips Is processes? product. mean the maybe shortages newer leading-edge chips, of that and versus more segment, of how the kind chips I think edge into older built trailing the the Yes. I that new -- think the for it -- When are of sort

Russell Frazee

since going older There's newer not quickly both. production as the of a It's a into a a they're would, for. as backlog quite mix. there's still normally The it's chips, of chips so lot they combination

Kenneth Newman

Okay. just more for And me. one

the do Just generation if help into in I been or didn't about for outlook change understand Maybe we capital hear or just a mention working where that And how of build there's flow cash cash a to the quarter. ended? back cash think generation half? the us and

Ronald Knutson

Ron... this Ken, Yes. is

Bryan King

ahead, Go Ron.

Ronald Knutson

Yes, I I on in that. can Bryan. can start, jump

level for So we flat combined I would quarter or on where for first of I was flow quarter, our basis, pretty as first the debt well, well say our cash opened transaction say, the -- X. the initial for with our a April even

of I'll the with, few, into would in costs that this quarter a one-off than what items enter some through. However, payables merger run this we or higher did initial first at. -- we probably had still of terms coming keep normally transaction what I And in call merger-related mind say, the quite would

we one-off quarter we to anticipate letting generation and through and fourth -- well. cash normalized say, and levels. trade payables back really will impacted that, sorry, quarter as I'm as in into the clear here get of the items the third that these by quarters, those second clear be through. was, this into the So third first But flow I the would Certainly, some

capital individual we companies. tightly operating within working -- all very manage we're again, So the

a through well. as have around process we go comprehensive managing CapEx We

we're So the half of our here be in normalized that the comfortable to year. latter back we'll levels

Kenneth Newman

you a excess out would normalize fair I the cash what if in could Is here to you XXX% define for Can I perspective? that me net be is start things year in is mean, normalized free of from chain just flow -- -- of supply it cash that businesses? to income remind consolidated think mean, or how it the generation

Ronald Knutson

Yes. points. data -- let What A couple I me yes, of that. answer

comment we terms of of And of terms organic a that I'll in from that will then expansion the $XX CapEx on sales. anticipate So really is of be on the we year. in -- perspective, this the an million would the $XX annual other working range the million CapEx just in kind needs to on basis piece business capital

historically, back, would working on you a So sales. a some as if companies you and there's back But historically, opportunities XX% of capital operate basis, look X about look here. certainly combined -- all if percent at

principal of those funding payments. two in of of you debt cash flow the a interest probably in So have pieces on well math largest the that the can the we kind on the in terms But terms do or And service of of that then the means cash. in go-forward as of terms what uses are free probably basis. of

Kenneth Newman

Alright. Thanks for the color.

Operator

Far you.[Operator coming Hathaway Thank Instructions] from View. Brad Your next question is from

live. is line Your

Brad Hathaway

from the towards we the confidence mean that? and do progression kind mean, feel and I about as guess summit it is guess confidence talked commentary Hi, you how of on on seeing to I kind among growth and previously? of I -- profitability great. teams, the teams I the all that the how into you're the EBITDA hear year. the the kind on both midterm discussion of look quarter. everyone. positive this really your was for the on about on incredible an path of Congrats based EBITDA you mean curious, what has Most changed the I'm that kind the I

Bryan King

made get all, a nice year it been I the XX of the we of through Well, in proposal first XXXX. May mean first it's really just May since to of right? over one, in was months or XX,

about how terms X we together, to opportunities continuing of of belt, just they collaboratively the thoughtfully get feel the add leverage underwrote together to really and uncover both the to we how and than about than to abilities get cash we first EBITDA. using everyone for to we're are be on cross-selling thought the not obviously, to businesses and the strategic so straight of efficient. in some the under how right that revenue and business, the out platform work the flow And the is could better a the more scale to to bringing and acquisitions And good opportunities together larger bringing to which of are then about thinking that acquisition grow working to continue gate more when free benefits kind

is operating to think at margins margins, we're that's thing And -- feeling right years. it, Brad, as going -- over other the the up in this progression be think managing X the the improve EBITDA inflationary or kind nice, their of purchasing of is that the I several each next the I So their terms we're looking pressures a margins margins and -- order on the that of job great teams in actually that done passing inventory have to their is on through price through to visibility and actions. sustain into

of last model, We're is flow of the X. actions price some thing that's that that, on I would that in through that. mean you ground day do don't to helpful. think the after seeing still we've so And taken. if on the inflationary recapture lose it I get an hard environment, you It's some

the I is working so here culturally well CEOs confidence on phone they their think and a -- together. and how on And teams of well that comes from that big part our are and three the are

in see a us. of lot front of So we progress

Brad Hathaway

I helpful. Excellent. mean, I That's operating That's really it teams guess And -- three just great. all great. like are seems

for that effort. one? process. that in the least somewhat a at guess all can serves, the there deal on of you you any just there kind on pipeline. update If was was in thank Is memory that's of So provide small kind M&A I all question proxy, something Gexpro And that other X

Bryan King

where you on Bob Brad, about that we want to are or talk company?

Bradley Wallace

Yes.

in Brad, So, say I Wallace Brad is process. still here. is this speaking it would

take own, their of qualify that life think a transactions certain -- this would M&A as that. and I

in we the but to later are innings ninth than We inning. before, were yet the not we're

is process. it and in hook still the still on So

Brad Hathaway

the has that the got, is from done? The And are completed -- it. they've all transactions all ones Got that TestEquity proxy? those

Bradley Wallace

they have. Yes,

Brad Hathaway

it. Got

Okay.

proxy for X Gexpro X this yet. just the it's that's So not in there

Bradley Wallace

the there working the they we weren't as are the that there's correct. far proxy. Referencing proxy the as were as is mentioned not in others that that I are proxy But back pipeline in -- that that those to earlier, included in were as along

Brad Hathaway

quarter. pipeline one understand out you very a No, you only I noted in that straight I Well, the the I XXX%. have just was with specifically out really first come about is but that. great come Great. I different. not curious say have would guys think

all you thank here. for So to the and effort development look forward the

Bryan King

you. thank engagement. your Brad, We appreciate

Brad Hathaway

Bryan. Thanks,

Operator

session. will the back conference Please Thank concludes ahead. go I Q&A to hand you. now remarks. our Bryan closing That King for

Bryan King

us, together proud been hard effort, now, there the business. Midwest for months to new everyone the work right going present Ron of listening merger to for the our shareholders. and and is together Thank the the that businesses, through the these really in see to double get you. teams let's work how of order Three on new couple way in to accounting Conference The a August thank great that GAAP of welcome have IDEAS complicated enthusiastic that a the anyone six to support -- interest, exercises And our Well, the work us get of person. to to and over of more you We to out follow-ups of we've the one and business to continued able been has are challenges -- be working -- Advisors reach summer accounting of hard calendar to his done reverse obviously, a collaborate like August work we on we're any hope XX. Ron, to with or the they've and have a months, a last XX please are of Lots We're on and have if today. anyone in. that marketplace teams conversation. investors held are for with questions going would Thank management of this Chicago and involved nine And value units and to We is rest be us three has Parts you, more over that the call you that with is or lot those team what in as at in which then and and to seeing a unlock the the effectively have and meet months where for and about to to we're appreciate today. welcome along your the last journey, soon. business we

Operator

today's Thank you, event. and ladies concludes This gentlemen.

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

Distribution Solutions (DSGR) 13 Aug 222022 Q2 Earnings call transcript