DEF 14A: Distribution Solutions Group Announces Date for Annual Stockholders Meeting and Details 2023 Performance

Distribution Solutions Group will hold its annual stockholders meeting virtually on May 23, 2024, and highlights its strategic achievements and financial results for 2023.

Summary

• Distribution Solutions Group (DSG) will hold its Annual Meeting of Stockholders online on May 23, 2024.
• The meeting will cover the election of seven directors, ratification of Grant Thornton, LLP as the independent auditor, and an advisory vote on executive compensation.
• In 2023, DSG aligned its results with strategic initiatives and made progress toward long-term value creation.
• The company plans to drive sustainable growth through its service models in fragmented end markets.
• DSG's vision includes leveraging its platform for organic and inorganic growth, profitability, and cash flow.
• Key corporate governance initiatives include a board diversity policy, a social and environmental responsibility policy, and an anti-hedging policy.
• The Board of Directors recommends voting FOR the election of director nominees, the ratification of Grant Thornton, LLP, and the approval of executive compensation.
• As of March 28, 2024, there were 47,597,864 shares of DSG common stock outstanding and entitled to vote.
• Luther King Capital Management Corporation beneficially owns 76.4% of the outstanding shares.
• The company's revenue was $1.57 billion in 2023, a 36.4% increase compared to 2022.
• Organic revenue grew 2.9% for 2023 versus 2022, with the remaining increase driven by acquisitions.
• Non-GAAP adjusted EBITDA grew to $157.0 million in 2023, or 10.0% of revenue.
• GAAP Diluted loss per share was $0.20 for the year.
• Non-GAAP adjusted diluted earnings per share was $1.42.
• The company ended 2023 with total liquidity of $298 million.
• The annual stock price appreciation from fiscal year-ending 2022 to 2023 was 71.2%.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook, highlighting revenue growth and strategic initiatives, but is tempered by a GAAP loss per share.

Positives

• Revenue increased by 36.4% to $1.57 billion in 2023.
• Organic revenue showed growth of 2.9% in 2023.
• Non-GAAP adjusted EBITDA increased to $157.0 million.
• The company has a strong liquidity position with $298 million at the end of 2023.
• The annual stock price appreciation from fiscal year-ending 2022 to 2023 was 71.2%.

Negatives

• GAAP Diluted loss per share was $0.20 for the year.

Risks

• Cybersecurity is identified as a key enterprise risk, requiring ongoing management and oversight.
• The company's future performance is subject to various risks outlined in its Annual Report on Form 10-K.

Future Outlook

The company expects to continue accelerating growth in 2024 and beyond through its acquisition pipeline and aims to capitalize on secular tailwinds for long-term value creation.

Management Comments

• Our leadership team in 2023 demonstrated its ability to accelerate growth through accretive acquisitions, organic growth, and key operational improvement programs.
• We remain excited about our acquisition pipeline, which we expect to continue to accelerate growth in 2024 and beyond.
• Our vision is to leverage our distinct platform of products, solutions, and capabilities to capitalize on strong secular tailwinds, organic and inorganic growth, and long-term profitability and cash flow, creating long-term value for our shareholders.

Industry Context

DSG operates in the specialty distribution market, which is characterized by fragmented end markets. The company aims to achieve scale and leverage its high-touch service models to drive sustainable growth.

Comparison to Industry Standards

• The document benchmarks executive compensation against a peer group including Applied Industrial Technologies, Inc., Kadant Inc., and Barnes Group Inc.
• The DSG peer group had a median revenue of approximately $1.469 billion and a market capitalization of $1.499 billion for 2023 compared to DSGs 2023 revenue of $1.570 billion and market capitalization of $1.478 billion.
• The OPG consists of 14 companies with similar industry classification and revenues to that of the operating companies including AMPCO-Pittsburgh Corp. and Hurco Companies, Inc.
• The OPG companies had 2023 median revenue of approximately $452 million as compared to the operating companies 2023 revenue of $525 million for Lawson, $406 million for Gexpro and $642 million for TestEquity.

Corporate Governance

Related Party Transactions

• Subsequent to the Mergers, individuals employed by LKCM Headwater Operations, LLC, a related party of LKCM, have provided the Company with certain consulting services in order to identify cost savings, revenue enhancements and operational synergies of the combined companies.
• As of December 31, 2023, an expense of $0.6 million was recorded within Selling, general and administrative expenses within the Consolidated Statements of Operations and Comprehensive Income (Loss), reflecting expenses accrued during 2023 for these consulting services.

Stakeholder Impact

• The company aims to create long-term value for its shareholders through organic and inorganic growth, profitability, and cash flow.
• The company is committed to understanding, monitoring and managing our social and environmental impact, and we recognize the importance of this responsibility as a discipline that helps us manage risks.

Next Steps

• Stockholders are urged to vote using one of the available voting options outlined on the proxy card.
• The Board and the Compensation Committee will review the voting results and take into account the outcome when considering future executive compensation arrangements.

Key Dates

Keywords

Distribution Solutions Group, Annual Meeting, Stockholders, Executive Compensation, Financial Performance, Corporate Governance, Grant Thornton, Revenue, EBITDA, Directors