Strong Operating Results: Sales of $347 Million; Organic Sales Growth of 15%

Board Increases Share Repurchase Plan to $12.5 Million

Distribution Solutions Group, Inc. (NASDAQ:DSGR) ("DSG" or the "Company"), a leading specialty distributor providing high touch, value-added distribution solutions to the maintenance, repair & operations (MRO), original equipment manufacturer (OEM) and industrial technologies markets today announced consolidated results for the third quarter ended September 30, 2022. Presentations are supplemented by a series of slides appearing on the Company’s investor relations home page at www.distributionsolutionsgroup.com.

Note Regarding Reverse Merger Accounting

As a result of the April 1, 2022 merger of Lawson Products, Gexpro Services and TestEquity, our financial results are reported under reverse merger accounting treatment as required by generally accepted accounting principles ("GAAP"). Accordingly, Lawson Products results are included only for the period following the April 1, 2022 merger closing date. GAAP results for the three and nine months ended September 30, 2021 include the combined results of Gexpro Services and TestEquity. GAAP results for the three months ended September 30, 2022 include the results of Lawson Products, Gexpro Services and TestEquity and GAAP results for the nine months ended September 30, 2022 include the results of Lawson Products for the six months after the April 1, 2022 merger closing date as well as the results of Gexpro Services and TestEquity for the full nine months.

The following represents a summary of certain operating results (unaudited). See reconciliation of GAAP to non-GAAP measures in table 2.

Bryan King, CEO and Chairman of the Board, said, “We are excited to report strong third quarter results for DSG. These results support our confidence in the strategic combination of Lawson Products, Gexpro Services and TestEquity earlier this year. Each of the operating companies had strong performance during the quarter on significant sales growth over the year ago quarter with solid sequential sales increases over the second quarter of 2022. The leadership teams of all three companies are demonstrating outstanding focus on sales growth, leveraging best practices and driving incremental cost synergies. We are excited about the future of these best-in-class specialty distributors and believe we can drive significant value creation for all shareholders.

“Third quarter net sales grew to $347.2 million including sales from acquisitions and organic growth of 15.4% through price and volume increases. This, in turn, grew our adjusted EBITDA by $13.5 million from a year ago, to $34.7 million or 10.0% of adjusted net sales. While Q3 is our seasonally strongest quarter, it was negatively impacted by higher compensation and healthcare costs. We continue to focus on improving operating margins across the three operating companies.

"While the global market outlook remains cautious, we are investing in growth and in high ROIC projects to improve our return profile and strengthen our competitive positioning. Although demand is strong today, we are managing our business to rapidly adapt to changing market conditions. We continue to build our leadership positions in the specialty distribution industry, and believe that our disciplined execution of planned strategies will position us well to capture market share in this environment. We plan to prudently manage the business for growth, returns and cash flow as we maximize long-term value for shareholders,” concluded Mr. King.

Third Quarter Highlights ⁽¹⁾

• GAAP net sales were $347.2 million, an increase of $215.1 million or 162.8%. Non-GAAP adjusted net sales increased approximately $109.5 million or 46.1% driven by organic growth of 15.4% and $68.4 million of additional sales from companies acquired in 2021 and 2022 other than Lawson Products.

• Reported operating income was $22.0 million or 6.3% of net sales including merger related costs, an inventory net realizable value adjustment and amortization expense as a result of the reverse merger acquisition accounting. This represents an improvement of $16.5 million over the prior year. Non-GAAP adjusted EBITDA increased by $13.5 million from the prior year period to $34.7 million or 10.0% of adjusted net sales.

• Earnings per diluted share was $0.84 for the quarter compared to $0.12 in the year ago quarter. Non-GAAP diluted earnings per share was $0.64 in the third quarter 2022 compared to $0.25 for the same period a year ago 2021.

• The Company ended the quarter with $25.2 million of cash on hand and $75.1 million of availability under its credit facility.

• In November, the Board authorized an increase of the existing share buy-back program from $7.5 million to $12.5 million. During the quarter, the Company repurchased approximately 54,000 shares of its common stock for an aggregate price of $1.9 million which leaves $7.6 million available under its expanded authorized share repurchase plan.
  
  
  
  ⁽¹⁾ See reconciliation of GAAP to non-GAAP measures in tables 2 and 3.

The following represents a summary of certain operating results for each reportable segment (unaudited). See reconciliation of GAAP to non-GAAP measures in table 2.

Conference Call

Distribution Solutions Group, Inc. will conduct a conference call with investors to discuss third quarter 2022 results at 9:00 a.m. Eastern Time on November 3, 2022. The conference call is available by direct dial at 1-888-506-0062 in the U.S. or 1-973-528-0011 from outside of the U.S. The participant access code is 648011. A replay of the conference call will be available by telephone approximately two hours after completion of the call through November 17, 2022. Callers can access the replay by dialing 1-877-481-4010 in the U.S. or 1-919-882-2331 outside the U.S. The PIN access number for the replay is 46486#. A streaming audio of the call and an archived replay will also be available on the investor relations page of Distribution Solutions Group’s website. Presentations may be supplemented by a series of slides appearing on the company’s investor relations home page at www.distributionsolutionsgroup.com.

About Distribution Solutions Group, Inc.

Distribution Solutions Group (“DSG”) is a best-in-class specialty distribution company providing high touch, value-added distribution solutions to the maintenance, repair & operations (MRO), the original equipment manufacturer (OEM) and the industrial technologies markets. DSG was formed through the strategic combination of Lawson Products, a leader in MRO distribution of C-parts, Gexpro Services, a leading global supply chain services provider to manufacturing customers, and TestEquity, a leader in electronic test & measurement solutions.

Through its collective businesses, DSG is dedicated to helping customers lower their total cost of operation by increasing productivity and efficiency with the right products, expert technical support and fast, reliable delivery to be a one-stop solution provider. DSG serves 120,000+ long-standing customers in several diverse end markets supported by more than 3,000 dedicated employees and strong vendor partnerships. DSG ships from strategically located distribution and service centers to customers in North America, Europe, Asia, South America and the Middle East.

For more information on Distribution Solutions Group please visit www.distributionsolutionsgroup.com.

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. The terms “aim,” “anticipate,” “believe,” “contemplates,” “continues,” “could,” “ensure,” “estimate,” “expect,” “forecasts,” “if,” “intend,” “likely,” “may,” “might,” “objective,” “outlook,” “plan,” “positioned,” “potential,” “predict,” “probable,” “project,” “shall,” “should,” “strategy,” “will,” “would,” and other words and terms of similar meaning and expression are intended to identify forward-looking statements. Forward-looking statements can also be identified by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements are based on current expectations and involve inherent risks, uncertainties and assumptions, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. DSG can give no assurance that any goal or plan set forth in forward-looking statements can be achieved and DSG cautions readers not to place undue reliance on such statements, which speak only as of the date made. DSG undertakes no obligation to release publicly any revisions to forward-looking statements as a result of new information, future events or otherwise. Actual results may differ materially from those projected as a result of certain risks and uncertainties. Certain risks associated with DSG’s business are also discussed from time to time in the reports DSG files with the SEC, including DSG’s (formerly Lawson Products, Inc.) Annual Report on Form 10-K for the fiscal year ended December 31, 2021, DSG’s Quarterly Reports on Form 10-Q and DSG’s Current Reports on Form 8-K. In addition, the following factors, among others, could cause actual outcomes and results to differ materially from those discussed in the forward-looking statements: (i) whether or not the terms of the earnout provisions in either of the merger agreements will be satisfied such that DSG would be required to issue additional shares of common stock in connection with the mergers; (ii) unanticipated difficulties or expenditures relating to the mergers; (iii) the risk that stockholder litigation in connection with the mergers results in significant costs of defense, indemnification and liability; and (iv) any problems arising in combining the businesses of Lawson Products, TestEquity and Gexpro Services, which may result in the combined company not operating as effectively and efficiently as expected to any forward-looking statements whether as a result of new information, future events or otherwise.

-TABLES FOLLOW-

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, the Company's management believes that certain non-GAAP financial measures may provide users of this financial information with additional meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that includes for the three months ended September 30, 2021 certain results of pre-merger Lawson Products and excludes certain non-operational items that impact the overall comparability. See Tables below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three months ended September 30, 2022 and 2021. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.

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