Distribution Solutions Group, Inc. ((DSGR)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Distribution Solutions Group’s recent earnings call painted a mixed picture for investors. While the company showcased strong revenue growth and strategic advancements, particularly in segments like Gexpro Services and the Canadian branch, challenges persist. TestEquity and Lawson continue to grapple with margin pressures and sales force transformation issues, casting a shadow over the otherwise positive financial performance.
Revenue Growth
Distribution Solutions Group reported a robust 10.7% revenue growth for the quarter, driven by strong organic momentum. The company also noted an average daily sales increase of 6%, highlighting its ability to maintain a steady growth trajectory despite economic headwinds.
Increased Shareholder Returns
The company increased its adjusted earnings per share by 8.1% to $0.40 in the third quarter. Additionally, over $20 million in share buybacks were completed in the first nine months of 2025, underscoring the company’s commitment to enhancing shareholder value.
Strong Performance in Gexpro Services
Gexpro Services stood out with record adjusted EBITDA and an impressive organic revenue growth of 11.4%. The segment also achieved sequential EBITDA margin expansion, driven by strong performance in key sectors such as aerospace and defense.
Canadian Branch Improvements
The Canadian branch, particularly Source Atlantic, showed significant improvements with a 300 basis point increase in gross margin and effective expense rationalization. This contributed to a 7% sequential sales increase, reflecting successful operational enhancements.
TestEquity Margin Pressure
TestEquity faced challenges with a 90 basis point decline in adjusted EBITDA margin. The decrease was attributed to shifts in customer and product mix, along with higher employee-related costs, indicating areas that require strategic attention.
Lawson’s Sales Challenges
Lawson’s performance was hindered by a 2.2% decline in organic average daily sales from the second quarter. The company continues to face hurdles in transforming its sales force and achieving desired profitability levels.
EBITDA Margin Decline
Overall, the company’s EBITDA margins declined by 30 basis points compared to the previous quarter. This was primarily due to product and customer mix shifts and ongoing strategic investments, which are expected to yield long-term benefits.
Forward-Looking Guidance
Despite a challenging economic environment, Distribution Solutions Group remains optimistic about future growth. The company achieved a 10.7% revenue increase to $518 million in the third quarter, supported by strong organic growth and contributions from recent acquisitions. With adjusted EBITDA reaching $48.5 million, DSG is confident in its ability to continue enhancing profitability and shareholder returns in the coming quarters.
In conclusion, Distribution Solutions Group’s earnings call highlighted a blend of strong financial performance and ongoing challenges. While segments like Gexpro Services and the Canadian branch are thriving, areas such as TestEquity and Lawson require strategic focus to overcome margin and sales challenges. Overall, the company’s forward-looking guidance suggests a positive outlook for continued growth and profitability improvements.