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    Distribution Solutions Group (DSGR)

    DSGR Q3 2024: Gexpro Posts Double-Digit Growth, Q4 EBITDA >10%

    Reported on Jun 19, 2025 (Before Market Open)
    Pre-Earnings Price$40.24Last close (Oct 30, 2024)
    Post-Earnings Price$40.00Open (Oct 31, 2024)
    Price Change
    $-0.24(-0.60%)
    • Gexpro Services Recovery & Margin Expansion: Management emphasized a robust sequential revenue recovery in Gexpro Services—with double-digit growth in key segments like technology, renewables, and aerospace—and highlighted improved margins, which underpins a bullish view on the company’s ability to rebound in challenging markets.
    • Accelerated Sales Force & Territory Expansion: The Q&A revealed a proactive push in hiring—with monthly sales rep additions up by about 50% compared to historical levels—and the creation of significant new sales territories designed to boost organic revenue and productivity, which supports a strong growth outlook.
    • Strategic Acquisition Synergies & ROIC Improvement: Executives stressed that recent acquisitions are beginning to deliver expected earnings synergies and margin enhancements. They pointed to a clear pathway for improving returns on invested capital as integrations mature and operating leverage improves, bolstering confidence in long‐term value creation.
    • Integration Pressure and Margin Concerns: The conference highlighted that recent acquisitions have weighed on margins due to integration expenses and delayed realization of synergies, which could continue to pressure profitability.
    • Sales Force Execution Risks: Questions regarding Lawson's new sales territories and the slower-than-expected ramp-up in sales rep count indicate challenges in efficiently expanding organic revenue, potentially impacting future growth.
    • End Market Uncertainty: Persistent softness in key segments—such as electronics assembly and certain government-driven channels—and concerns over whether recovered end markets can consistently support growth create additional risk.
    1. ROIC Improvements
      Q: How will ROIC improve post-acquisitions?
      A: Management explained that although acquisitions initially depress ROIC, integrating them with cost‐synergy benefits and enhanced cross‐selling will effectively lower acquisition multiples—from 8x to 6x—and drive incremental returns over time.

    2. Margin Outlook
      Q: Will Q4 deliver double-digit adjusted EBITDA?
      A: Management expects Q4 to maintain double-digit adjusted EBITDA margins, even with slightly fewer selling days, as consistent daily sales of about $6.5–$7 million support strong performance.

    3. Working Capital
      Q: Can working capital efficiency improve ROIC?
      A: Improved working capital management—with conversion rates moving from 80% to 90%—will bolster the overall efficiency and contribute positively to ROIC.

    4. Gexpro Recovery
      Q: How is Gexpro’s recovery shaping up?
      A: The recovery is being driven by renewed momentum in key end markets like renewables and semiconductors, with sequential revenue gains and growing customer wins signaling enhanced performance.

    5. Lawson Territories
      Q: Are new Lawson territories largely greenfield?
      A: Management clarified that the majority of the ~130 new sales territories are greenfield opportunities designed to offer larger, untapped revenue potential and more productive start-ups for new reps.

    6. Recruiting Pipeline
      Q: How robust is the sales rep recruiting pipeline?
      A: With monthly sales rep hires up by 50% compared to historical trends and a target to reach 1,000 reps, the recruiting pipeline is robust and well aligned to support future growth.

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