Q4 2023 Distribution Solutions Group Inc Earnings Call

Greetings and welcome to the distribution solutions group fourth quarter 2023 earnings Conference call.

Unknown Executive: Greetings. Welcome to the Distribution Solutions Group Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode.

At this time all participants are in a listen only mode.

Unknown Executive: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Steven Hooser. You may begin.

A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Please note this conference is being recorded.

I'll now turn the conference over to your host Steven Hooser, you may begin.

Steven Hooser: Good morning, everyone, and welcome to the Distribution Solutions Group fiscal year 2023 and fourth quarter earnings conference call. Joining me on today's call are DSG's Chairman and Chief Executive Officer, Bryan King, and Executive Vice President and Chief Financial Officer, Ron Knutson. In conjunction with today's call, we have provided a 2023 financial results slide deck posted on the company's investor relations website at investor.distributionsolutionsgroup.com. Please note that statements on this call and in today's press release contain forward-looking statements concerning goals, beliefs, expectations, strategies, plans, future operating results, and underlying assumptions that are subject to risk and uncertainties that could cause actual results to differ materially from those expressed or implied In addition, statements made during this call are based on the company's views as of today.

Good morning, everyone and welcome to the distribution solutions group fiscal year, 2023 and fourth quarter earnings Conference call. Joining me on today's call are Dst's, Chairman and Chief Executive Officer, Bryan King and Executive Vice President and Chief Financial Officer, Ron can Knutson, Inc.

In conjunction with today's call. We have provided a 2023 financial results slide deck posted on the company's Investor Relations website at Investor Dot distribution solutions group Dotcom.

Please note that statements on this call and in today's press release contain forward looking statements concerning goals beliefs expectations strategies plans future operating results and underlying assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied.

In addition statements made during this call are based on the company's views as of today. The company anticipates that future developments may cause those views to change and we may elect to update the forward looking statements made today, but disclaim no obligation to do so management will also refer to non-GAAP measures and reconciliations to the nearest GAAP.

Steven Hooser: The company anticipates that future developments may cause those views to change, and we may elect to update the forward-looking statements made today, but disclaim no obligation to do so. Management will also refer to non-GAAP measures, and reconciliations to the nearest GAAP measures can be found at the end of the earnings release. The earnings press release issued earlier today was posted on the investor relations section of our website. A copy of the release has also been included in a current report on Form 8K filed with the SEC.

<unk> can be found at the end of the earnings release. The earnings press release issued earlier today was posted on the Investor Relations section of our website a copy of the release has also been included in a current report on form 8-K filed with the SEC Lastly, this call is being webcast.

Steven Hooser: Lastly, this call is being webcast on the Internet via the Distribution Solutions Group Investor Relations page on the company's website. A replay of this teleconference will be available through March 21st, 2020. I will now turn the call over to Bryan King.

On the Internet via the distribution solutions group Investor Relations page on the company's website. A replay of this teleconference will be available through March 21, 2024, I will now turn the call over to Brian.

Ian.

Thanks, Steven and thank you all for joining us to review, our 2023 annual and fourth quarter results.

Bryan King: Thanks, Steven, and thank you all for joining us to review our 2023 annual and fourth quarter results. Let's begin with slide five. To review top-line financial results, our 2023 annual sales totaled $1.6 billion, up more than 36%, and comparable sales increased by almost 24%, despite ending the year with a choppier sales environment and a few important end markets, most notably, technology and renewables.

Let's begin with slide five to review top level financial results. Our 2023 annual sales totaled $1 $6 billion up more than 36% and comparable sales increased by almost 24% despite ending the year with a choppy sales environment in a few important end markets most notably.

Technology and renewables, we did see some destocking of inventory by our customers mirroring our own efforts to optimize working capital within the channel collectively which contributed to a 6% decline in organic sales for Q4.

Bryan King: We did see some de-stocking of inventory by our customers, mirroring our own efforts to optimize working capital within the channel collectively, which contributed to a 6% decline in organic sales for Q4. However, while this backdrop did not meet our expectations in the near term, our two-year organic stack sales increased almost 17% for the full year. Our marketplace traction around expanded value-added capabilities offers us confidence that we have assembled a platform of complementary specialty capabilities that will enjoy sustained market share growth. We ended 2023 with $157 million in adjusted EBITDA, up nearly 28%, and an EBITDA margin of 10%. During 2023, we generated significant cash from operations of $102 million, translating to a strong free cash flow conversion.

While this backdrop did not meet our expectation in the near term our two year organic stack sales increased almost 17% for the full year.

Our marketplace traction around expanded value added capabilities offers us confidence that we assembled a platform of complementary specialty capabilities that we'll enjoy sustained market share growth.

We ended 2023 with $157 million and adjusted EBITDA up nearly 28% and an EBITDA margin of 10% during.

During 2023, we generated significant cash from operations of $102 million translating to a strong free cash flow conversion.

Bryan King: 2023 was a successful year for Distribution Solutions Group, with tremendous work to drive long-term value balance with a mindfulness towards current profitability and cash generation. I congratulate our team on a job well done in what became a more choppy marketplace environment in September. Throughout the year, we invested with confidence in key long-term initiatives while adding critical talent and depth to our leadership team. Our employees have fostered a culture of collaborative accountability.

2023 was a successful year for distribution solutions group with tremendous work to drive long term value balanced with a mindfulness towards current profitability and cash generation.

I congratulate our team on a job well done and what became a more choppy marketplace environment in September.

Throughout the year, we invested with confidence in key long term initiatives, while adding critical talent and depth to our leadership teams.

Our employees have fostered a culture of collaborative accountability.

Bryan King: Essential for Driving Revenue Growth and Achieving Sustainably Higher Profitability, a goal shared by all stakeholders. This is being realized through enhanced cross-selling and value-added customer engagement, which are gaining traction in the market. By streamlining processes and optimizing resources, the team is making strategic improvements to support increasing the consolidated EBITDA margin into the teens and ensuring all business verticals operate with a margin above 12% within the next few years. These efforts align with our Investor Day objectives from September to elevate total EBITDA to over $450 million in the next five years. As eager as I am to demonstrate to our shareholder partners over the coming 24 months and beyond how current levers are driving future performance, the progress was not expected to be linear, even though we have a strong line of sight on attaining our outlined objectives. As the environment shifted, we exercised additional patience with some process retooling that we knew would result in significant profitability improvements. We were unable to start our DSG test equity HSCO integration and profitability improvement plan until their earn-out window for HSCO expired in November.

Essential for driving revenue growth and achieving sustainably higher profitability our goal shared by all stakeholders.

This is being realized through enhanced cross selling and value added customer engagements, which are gaining traction in the marketplace by.

By streamlining processes and optimizing resources the team is making strategic improvements to support increasing the consolidated EBITDA margin into the teens and ensuring all business verticals operate with a margin above 12% within the next few years. These efforts along with our Investor day objectives from September.

To elevate total EBITDA to over $450 million in the next five years.

As eager as I am to demonstrate to our shareholder partners over the coming 24 months and beyond how current levers are driving future performance. The progress was not expected to be linear even though we have strong line of sight on attaining our outlined objectives.

As the environment shifted we exercise additional patients with some process retooling that we knew would result in significant profitability improvements.

We were unable to start our DSG test equity his go integration and profitability improvement plan until their earn out window for his scale eclipsed in November.

Bryan King: Despite this, our disciplined execution around our long-term strategy delivered, one, revenue and margin growth, two, demonstrated improved profitability and returns, and three, reaped significant free cash flow that collectively created a lot of shareholder value. Most importantly, in 2023, we further optimize the initial foundation created by pulling together DSG, which will allow us to sustain high value-creating years through the foreseeable future. While our work to architect and tool DSG for significant future growth and shareholder value creation still leaves much to be done, we accomplished important strategic goals in 2023, and I will review some, not the least of which included the major acquisition of HSCO, which I will discuss first.

Despite this our disciplined execution around our long term strategy delivered one revenue and margin growth two demonstrated improved profitability and returns and three reaped significant free cash flow. They collectively created a lot of shareholder value.

Most importantly in 2023 we further optimized the initial foundation created by pulling together, DSG, which will allow us to sustain high value creating years through the foreseeable future.

While our work to architect and tool D. S. G for significant future growth and shareholder value creation still leaves much to be done we accomplished important strategic goals in 2023, I will review some not the least of which included the major acquisition of <unk> that I'll discuss first.

We added his go into the D. S G portfolio, which gives us a strategically important business that more tightly binds test equity with Jets Pro services and Lawson since.

Bryan King: We added Hisco to the DSG portfolio, which gives us a strategically important business that more tightly binds test equity with Jaxpro services in law. Since our purchase, our confidence has swelled with a better line of sight into an expanded set of cost synergies that we are well into unlocking through the Hisco integration with Test Equity Group and combining that vertical to leverage total spend and capabilities across DSG. To review, the Hisco acquisition added over $400 million of revenue to a base of $1.4 billion, producing an annualized sales lift of more than 30%. Hisco also created significant revenue opportunities across the DSG verticals through geographic footprint expansion opportunities, like in Mexico, and internal value-added capability additions for DSG through their Alliance Printing and Precision Converting divisions, as well as their VMI leadership in categories such as chemicals, solders, and adhesives Lawson & Jaxpro Services are already activating all of these benefits.

Since our purchase our confidence is swell with better line of sight into an expanded set of cost synergies that we are well into unlocking through the his go integration with tests equity group and combining that vertical the leveraged total spend and capabilities across the S. G.

To review the hysteria acquisition added over $400 million of revenue to a base of $1 $4 billion, producing an annualized sales lift of more than 30%.

<unk> also created significant revenue opportunities across the DSG verticals through geographic footprint expansion opportunities like in Mexico, and internal value added capability additions for DSG through their alliance printing and precision converting divisions as well as their via my leadership in categories such as chemicals.

<unk> and adhesives among others.

Lawson injects pro services are already activating all of these benefits. The hits go offering is also providing expanded deficiencies in coverage and capabilities for the tests equity. His go combined sales initiatives. Although we closed this acquisition in June 2023, due to the sellers earn out our initial integration plan was not <unk>.

Bryan King: The HISCO offering is also providing expanded efficiencies in coverage and capabilities for the TESS Equity-HISCO Combined Sales Initiative. However, although we closed this acquisition in June 2023 due to the seller's earn out, our initial integration plan was not launched until November when the earn out expired. Our integration plan, which includes optimizing the spending and capabilities between Hisco and the test equity group, is expected to have DSG enjoy significant run rate improvements from the industrial technologies vertical by the second half of 2024. Recall that we already announced a plan to take out $10 million of run rate operating costs from the test equity group, and those actions began in the fourth quarter and were informed, some by the capabilities brought by HSCO. Our 2024 cost realization for the industrial technology group also includes additional cost capability and facility optimization, much of which will also be enjoyed during 2024, but an equal amount that we don't expect to realize until 2025 or even 2026.

Launched until November when the earn out expired our integration plan, which includes optimizing the spending and capabilities between his go in the test equity group is expected to have D. S. G enjoy significant run rate improvements from the industrial technologies vertical by the second half of 2024.

Recall that we already announced our plan to take out $10 million of run rate operating costs from the test equity group and those actions began in the fourth quarter and were informed some by the capabilities brought by <unk>, Our 2024 cost realization for the industrial Technology Group also includes additional.

Cost capability and facility optimization much of which will also be enjoyed during 2024, but an equal amount that we don't expect to realize until 2025 or even 2026.

Some additional key accomplishments by Big business segment include.

Bryan King: Some additional key accomplishments by business segment include: Our MRO-focused business, Lawson Products, had a standout year. We launched an important Salesforce transformation in 2023, engaging 900 highly productive field sales reps and expanding our inside sales team to about 45 people from a de minimis size. Our plan in 2023 was to minimize the disruption of the rollout and fortify the sales force through the change process. We increasingly are leaning on data to optimize our Salesforce network and how to drive productivity and opportunity to earn for our sales people, and we are in the early stages of this effort.

Our MRO focused business Lawson products had a standout year.

We launched an important salesforce transformation in 2023, engaging 900 highly productive field sales reps and expanding our inside sales team to about 45 people from a de minimus size. Our plan in 2023 was to minimize the disruption of the rollout and fortify the sales force.

Of course through the change process, we increasingly are leaning on data to optimize our sales force network and how to drive the productivity and opportunity to earn for our salespeople and we're in the early stages of this effort.

Most importantly, this is allowing us to get better at focusing resources, where we can add the most value for customers, which is critical as we continue to refine having more product more expertise and more value added tools and capabilities to engage with those customers and having a more optimized and consistent sales force focus on those customers.

Bryan King: Most importantly, this is allowing us to get better at focusing resources where we can add the most value for customers, which is critical as we continue to refine having more products, more expertise, and more value-added tools and capabilities to engage with those customers. And having a more optimized and consistent sales force focused on those customers will be critical to getting our improved capabilities in front of them. This approach is working well, with good improvement in rep productivity realized in both the third quarter and fourth quarter.

Will be critical to getting our improved capabilities in front of them.

This approach is working well with good improvement in rep productivity realized in both the third quarter and fourth quarter. We committed in 2022 that the DSG merger to significantly invest in Los and Salesforce infrastructure, which started in earnest in 2023.

Bryan King: We committed in 2022 that the DSG merger would significantly invest in Lawson's Salesforce infrastructure, which started in earnest in 2023. Although this is a multi-year, longer-term project, the early double-digit productivity lifts indicate a solid trajectory for the return we expect ahead. Across DSG, we are committed to executing on disciplined, inorganic growth through an acquisition model with tuck-ins that are both accretive financially and capability-wise. That said, some have taken longer than we expected to close, so we were excited to announce the purchase in early 2024 of the acquisition of Emergent Safety Supply as a strategic extension for Lawson products in the safety category.

Although this is a multi year longer term project. The early double digit productivity lifts indicate a solid trajectory for the return we expect ahead.

Across ESG, we are committed to execute on disciplined inorganic growth through and equip an acquisition model with tuck ins that are both accretive financially and capability wise.

That said some have taken longer than we expected to close. So we were excited to announce the purchase in early 2024 of the acquisition of emergent safety supply is a strategic extension for Lawson products and the safety category.

Brand and line extensions and safety and power tool categories as well as continuing to expand offerings in key products and private label categories will collectively allow our business units to grow improve margins and scale into new geographies and markets with limited risk.

Bryan King: Brand and line extensions in safety and power tool categories, as well as continuing to expand offerings in key product and private label categories, will collectively allow our business units to grow, improve margins, and scale into new geographies and markets with limited risk. We expect this to improve our cross-sale value proposition to existing customers of Jexpro services and the industrial technology customers of TestEquity. Jexpro Services continues to assume the leadership role in our synergistic cross-selling and upstreaming opportunities.

We expect this to improve our cross sale value proposition to existing customers of <unk> services and the industrial technology customers are test equity his scope.

Checks Pro services continues to assume the leadership role in our synergistic cross selling in upstream ing opportunities, our JAKKS pro services customers and more broadly DSG customers can now gain exposure on how to maximize the full range of DSC products and our expanded suite of value added capabilities for our.

Bryan King: Our JEXPRO Services customers, and more broadly DSG customers, can now gain exposure to how to maximize the full range of DSG products and our expanded suite of value-added capabilities for our customers. In 2023, we saw the first efforts of a more robust cross-selling message evolve from the 2022 initial successes into a more thoughtful and cohesive approach to engaging the market. This demonstrates credibility to customers and expands our offering with more product categories and more value-added capability. JXPRO Services enjoyed bringing home the first wave of successful engagements with some of our commercial and industrial customers, as well as championing wins in our aerospace and defense vertical, which translated into several million dollars for each broadened DSG engagement.

Mers.

In 2023, we saw the first efforts of a more robust cross selling message evolve from the 2022 initial successes into a more thoughtful and cohesive approach to engaging the market.

This demonstrates credibility to customers and expand our offering with more product categories and more value added capabilities.

<unk> services enjoyed bringing home the first wave of successful engagements with some of our commercial and industrial customers as.

As well as championing wins in our aerospace and defense vertical.

Which translated into several million dollars for each broadened DSG engagement.

Onstream synergies selling more products and capabilities to existing customers, including customers from the acquisitions. We made opened up most significantly in our renewables category.

Our 2022 acquisitions of frontier Reza locks and it S. I S set this up as those acquisitions allowed us to take former competitors and convert them to suppliers in 2023.

Bryan King: Downstream Synergies, selling more products and capabilities to existing customers, including customers from the acquisitions we made, opened up most significantly in our renewables category. Our 2022 acquisitions of Frontier, Resolux, and SIS set this up as those acquisitions allowed us to take former competitors and convert them to suppliers in 2023. These key channel partners coming together now offer a more comprehensive, differentiated offering to a much broader set of customers, coming from all of the acquisitions and JEXPRO services as well.

These key channel partners coming together now offer a more comprehensive differentiated offering to a much broader set of customers coming from all of the acquisitions and <unk> services as well.

This is set up an opportunity to further drive margin improvements at Jack Pro services, although much of the opportunities in front of us and we're in the renewables and markets.

These end markets are still extremely sluggish and dragged EBITDA margins down from prior year for those acquisitions below the jacks Pro services core during the last half of 2023, where arena, where we are now addressing integration cost out opportunities.

Bryan King: This has set up an opportunity to further drive margin improvements at Jexpro Services, although much of the opportunity is in front of us in the renewables end market. However, these end markets are still extremely sluggish and dragged EBITDA margins down from the prior year for those acquisitions below the JExpo services core during the last half of 2023, where we are now addressing integration cost-out opportunities. We anticipate that the renewables marketplace will open back up in 2024, a perspective reinforced by our book-to-bill, which is trending significantly positive. Finally, with the benefit of DSG, Jaxpro Services started to benefit from capturing e-commerce revenue, adding several million dollars of incremental revenue from e-commerce orders originating from large established accounts in our aerospace and defense end markets. Despite the choppy environment in the technology market that delayed several customers' projects into 2024 and that created a drag on EBITDA of over $8.4 million for the year and over $2.3 million for the fourth quarter, backlogs are building, and we are seeing margin improvements. While it is early, Jexpro Services has started the year with a healthy book to build.

We.

<unk> that the renewables marketplace will open back up in 2020 for a prospective reinforced by our book to Bill which is trending significantly positive.

Finally, with the benefit of D. S. G Jacks Pro services started to benefit and capturing E. Commerce revenue, adding several million dollars of incremental revenue from E. Commerce orders originating from large established accounts in our aerospace and defense end markets. Despite the choppy environment in the technology market the delayed several customers projects into.

<unk> 2024.

And that created a drag on EBITDA of over $8 $4 million for the year and over $2 $3 million for the for the fourth quarter backlogs are building and we are seeing margin improvements. While it is early jets Pro services has started the year with a healthy book to Bill.

The previously mentioned <unk> acquisition for our test equity group added significant scale to its north American operations, including Mexico.

In 2023, consistent with committing to getting the industrial technology vertical up to double digit EBITDA margins over the next couple of years, we worked on setting up the margin improvement initiatives and as I mentioned, we indicated we had taken initiatives in November to take out over $10 million of 'twenty 'twenty four run rate costs from the <unk>.

Bryan King: The previously mentioned HISCO acquisition for our test equity group added significant scale to its North American operations, including Mexico. In 2023, consistent with committing to getting the industrial technology vertical up to double-digit EBITDA margins over the next couple of years, we worked on setting up margin improvement initiatives. And as I mentioned, we indicated we had taken initiatives in November to take out over $10 million of 2024 run rate costs from the test equity group, informed by the imminent opportunity in November to start the combination of capabilities, facilities, and leadership with HISCO. Today, we understand more about the opportunity to leverage spend and resources and optimize capabilities at HSCO. Examples of these include some of the following.

First equity group informed by the imminent opportunity in November to start the combination of capabilities facilities and leadership with his scope.

Today, we understand more about the opportunity to leverage spend in resources and optimize capabilities at his scale. Examples of these include some of the following actions we've rationalized facilities restructured go to market, including head count reductions made changes to our sourcing and supply agreements rationalize unprofitable business with customer.

<unk> and streamline e-commerce efforts that allow for optimize search engine engine optimization and marketing spend.

There's a lot of spend opportunity yet to be unlocked here and it won't happen overnight, but most importantly, the commercial opportunity brought by his scale its people products capabilities and position in the marketplace to DSG is even more impactful and I'm pleased with the rapid progress and collaboration out of the team since they were able to stop.

Bryan King: We've rationalized facilities, restructured go-to-market, including headcount reductions, made changes to our sourcing and supply agreements, rationalized unprofitable business with customers, and streamlined e-commerce efforts that allow for optimized search engine optimization and marketing. There's a lot of spend opportunity yet to be unlocked here, and it won't happen overnight. But most importantly, the commercial opportunity brought by HSCO, its people, products, capabilities, and position in the marketplace, is even more impactful. And I'm pleased with the rapid progress and collaboration by the team since they were able to start tackling commercial initiatives together and together affect cost and process rationalization after the earn-out window expired in November. With that, I'd like to turn the call over to Ron to walk through the financials. Thank you, Bryan. And good morning, everyone.

Our tackling commercial initiatives together and together affecting cost in process rationalization after the earn out window expired in November.

With that I'd like to turn the call over to Ron to walk through the financials Ron.

Thank you, Brian and good morning, everyone.

You'll see on the following few slides that we expanded information on the three segments to include year to date information as well as the fourth quarter information.

Turning to slide six I will first summarize our business on a pro forma basis, which includes acquisitions for the full 12 months of 2023.

Washington represents 30% of total DSG revenue checks for services represents 23% and the test equity group represents 47% of revenue all on an adjusted revenue basis for 2023, our run rate adjusted revenue is now approximately one point.

Seven 5 billion and we serve over 180000 customers across more than 500000 skus.

Ronald J. Knutson: You'll see on the following few slides that we expanded information on the three segments to include year-to-date information as well as fourth quarter information. Turning to slide 6, I will first summarize our business on a pro forma basis, which includes acquisitions for the full 12 months of 2023. Lawson represents 30% of total DSG revenue, Jacks for Services represents 23%, and the Test Equity Group represents 47% of revenue, all on an adjusted revenue basis for 2023. Our run rate adjusted revenue is now approximately 1.75 billion, and we serve over 180,000 customers across more than 500,000 SKUs. Now turning to slide 7, I'll summarize reported results for the year and for the fourth quarter by segment. Consolidated revenue for the year was $1.57 billion, inclusive of pre-merger activity for Lawson in the first quarter of 2022.

Now turning to slide seven I'll summarize the reported results for the year and for the fourth quarter by segment.

Consolidated revenue for the year was 1.57 billion inclusive of the pre merger activity for loss and in the first quarter of 2022.

This represents an increase of $301 1 million or 23, 7%.

Post merger D. S. G acquired four companies, which accounted for approximately $267.5 million of the increase excluding these acquisitions organic sales for 2023 grew by 2.9% or 16, 7% on a two year.

Stacked basis.

For the quarter GAAP sales were $405 2 million, an increase of $76 4 million or 23, 2% primarily due to the acquisition.

Excluding the acquisitions not in Q4, a year ago organic Q4 sales declined six 4% solely driven by the continued delay of capital spending within the test and measurement business that tests equity and weaker sales in the technology and market at Jack's Pro server.

Ronald J. Knutson: This represents an increase of 301.1 million, or 23.7%. Post-merger, DSG acquired four companies, which accounted for approximately $267.5 million of the increase. Excluding these acquisitions, organic sales for 2023 grew by 2.9% or 16.7% on a two-year stacked basis. For the quarter, gap sales were $405.2 million, an increase of $76.4 million, or 23.2%, primarily due to the acquisition.

This is.

On a two year stacked basis organic sales were up approximately 10% for the quarter.

Excluding these two headwinds organic sales increased approximately 1% for the quarter.

2023 reflected strong growth in net margin dollars inclusive of the loss in pre merger results in 2022, adjusted EBITDA increased to 157 million in 2023 from 123 million a year ago full.

Full year 2023 represents 10% of sales versus nine 7% for all of 2022.

Ronald J. Knutson: Excluding the acquisitions not in Q4 a year ago, organic Q4 sales declined 6.4%, solely driven by the continued delay of capital spending within the test and measurement business at TestEquity and weaker sales in the technology and market at Jexpro Services. On a two-year stacked basis, organic sales were up approximately 10% for the quarter. Excluding these two headwinds, organic sales increased approximately 1% for the quarter.

A favorable outcome as anticipated the 20th twenty-three margins were reduced by approximately 50 bips from the acquisition of his skull.

For the fourth quarter, we generated adjusted EBITDA of $33 9 million or eight 4% of sales on seasonally fewer selling days in Q4 and the sales headwinds previously mentioned.

I'll expand further at the segment level on this in a minute.

We reported operating income for the full year of $43 million net of $40 3 million of acquisition related intangible amortization and 55 million of aggregate costs from stock based comp acquisition severance and retention related expenses merge.

Ronald J. Knutson: 2023 reflected strong growth in net margin dollars, inclusive of the loss in pre-merger results in 2022; adjusted EBITDA increased to $157 million in 2023 from $123 million a year ago. Full year 2023 represents 10% of sales versus 9.7% for all of 2022. As a favorable outcome, as anticipated, the 2023 margins were reduced by approximately 50 bps from the acquisition of Hisco. For the fourth quarter, we generated adjusted EBITDA of $33.9 million, or 8.4% of sales on seasonally fewer selling days in Q4 than the sales headwinds previously mentioned. I'll expand further at the segment level on this in a minute. We reported operating income for the full year of $43 million, net of $40.3 million of acquisition-related intangible amortization and $50.5 million of aggregate costs from stock-based comp, acquisition, severance, and retention-related expenses, merger and acquisition costs, and other non-recurring items. Adjusted Operating Income, inclusive of loss and for all of 2022, increased $19.9 million to $93.5 million. We reported a GAAP diluted loss per share of $0.20 for the full year, inclusive of higher depreciation and amortization and a valuation allowance on certain deferred tax assets compared to earnings per share of $0.21 a year ago.

Or in acquisition costs and other nonrecurring items.

Adjusted operating income inclusive of loss and for all of 2022 increased $19 9 million to $93 5 million.

We reported GAAP diluted loss per share of <unk> 20 cents for the full year inclusive of higher depreciation and amortization and a valuation allowance on certain deferred tax assets compared to earnings per share of 21 cents in the year ago.

Full year adjusted diluted EPS was $1 42 on higher outstanding shares.

It should be noted that starting in Q4, we began including total noncash amortization expense related to the acquired entities and added these dollars back when computing adjusted earnings per share, which benefited EPS by <unk> 16 cents on a tax effected base.

<unk> for the quarter.

Turning to slide eight let me now comment briefly on each of these segments.

Starting with Lawson sales were $468 7 million up nine 1% for the full year fourth quarter sales were $109 8 million as compared to $108 million a year ago quarter.

The increase for the full year and the quarter was driven by continued strong performance within the strategic business can't automotive and government military categories offset by softening sales within the Lawson core customers.

Washington's full year growth was achieved through price increased wallet share with existing customers and new customers in both our strategic accounts and our Kent automotive business.

As Brian highlighted loss and had a really strong 'twenty twenty-three all while continuing to invest in the business to strategically position itself for longer term success.

Ronald J. Knutson: Full-year adjusted diluted EPS was $1.42 on higher outstanding shares. It should be noted that starting in Q4, we began including total non-cash amortization expense related to the acquired entities and added these dollars back when computing adjusted earnings per share, which benefited EPS by 16 cents on a tax-affected basis for the quarter. Turning to slide 8, let me now comment briefly on each of these segments. Starting with Lawson, sales were 468.7 million, up 9.1% for the full year. Fourth quarter sales were $109.8 million as compared to $108 million a year ago. The increase for the full year and the quarter was driven by continued strong performance within the strategic business, Kent Automotive, and government military categories, offset by softening sales within the Lawson Corp customers.

We're still in the early innings of implementing initiatives to help our sales team become more productive.

However, we're very pleased with the initial results of a 15% lift in sales rep productivity this quarter on top of an 18% improvement achieved in Q3.

Lawson's adjusted EBITDA for the full year improved significantly to $63 7 million as compared to $38 6 million a year ago.

This improvement was primarily driven by sales and gross margin improvements, partially offset by increased compensation on higher sales levels and channel investments to better position us on a longer term basis.

For the quarter loss and realized adjusted EBITDA of $12 4 million or 11, 3% of sales as compared to 11.5 million a year ago quarter, a seven 8% improvement.

Lower sales on fewer selling days in Q4 compared to other quarters and fairly flat operating costs reduce loss in smart net margin in Q4 versus other quarters in the year.

Ronald J. Knutson: Lawson's full year growth was achieved through price, increased wallet share with existing customers, and new customers in both our strategic accounts and our Kent Automotive business. As Bryan highlighted, Lawson had a really strong 2023, all while continuing to invest in the business to strategically position itself for longer-term success. We're still in the early innings of implementing initiatives to help our sales team become more productive, but we're very pleased with the initial results of a 15% lift in sales rep productivity this quarter on top of an 18% improvement achieved in Q3. Lawson's adjusted EBITDA for the full year improved significantly to $63.7 million as compared to $38.6 million a year ago.

Turning to Jack's pro services on slide nine.

Total sales for the year increased five 3% to $405 7 million.

For the fourth quarter sales were $93 2 million down 6.9% solely from project related businesses, primarily within renewables and continued customer delays in the technology vertical including the semiconductor end markets.

2023 saw global semiconductor spending declined by roughly 10% as consumer electronics and automobile production drove softness and supply chains are adjusted.

The remainder of the base Jacks Pro services business increased six 2% with continued strength in the industrial power and renewables and markets.

G extra services largest vertical is now industrial power followed by renewables, which are expected to have secular strength for the next several quarters and years.

Ronald J. Knutson: This improvement was primarily driven by sales and gross margin improvements, partially offset by increased compensation on higher sales levels and channel investments to better position us on a longer term basis. For the quarter, Lawson realized adjusted EBITDA of $12.4 million, or 11.3% of sales, as compared to $11.5 million a year ago, a 7.8% improvement. Lower sales on fewer selling days in Q4 compared to other quarters on fairly flat operating costs reduced Lawson's net margin in Q4 versus other quarters in the year. Turning to Jacks4Services on slide 9.

We are continuing to invest in the business. However are cautious about certain weaker markets and those more sensitive to current macro economic issues.

Jets Pro services full year, adjusted EBITDA grew to $45 2 million or 11.1% of sales versus $43 2 million a year ago.

For the quarter, adjusted EBITDA was $8 8 million or nine 5% of sales.

Ronald J. Knutson: Total sales for the year increased 5.3% to $405.7 million. For the fourth quarter, sales were 93.2 million, down 6.9% solely from project-related businesses primarily within renewables and continued customer delays in the technology vertical, including the semiconductor end market. 2023 saw global semiconductor spending decline by roughly 10% as consumer electronics and automobile production drove softness, and Supply Chain Adjustment.

The decline as a percent of sales was primarily related to lower sales for the quarter in the higher margin technology vertical which put over $2 million of net margin pressure on the quarter.

We anticipate <unk> services will return to low double digit EBITDA margins in the first half of 'twenty 'twenty four on higher sales on a relatively flat fixed cost structure.

Lastly, I will turn to test equity group on slide 10.

Full year sales grew to $641 8 million, an increase of $249 4 million or 63, 6% driven primarily by the his go acquisition in 2023 and other acquisitions completed in 2022.

Ronald J. Knutson: The remainder of the Bay's Jaxpro Services business increased 6.2% with continued strength in industrial power in renewables and markets. Jacksboro Service's largest vertical is now industrial power, followed by renewables, which are expected to have secular strength for the next several quarters and years. We are continuing to invest in the business, but we are cautious about certain weaker markets and those more sensitive to current macroeconomic issues. Jacksonville Services' full year adjusted EBITDA grew to 45.2 million, or 11.1% of sales versus 43.2 million a year ago. For the quarter, Adjusted EBITDA was $8.8 million, or 9.5% of sales.

Excluding these acquisitions test equity sales were down 24 million or 8% for the year, primarily within the test and measurement business as we've discussed on previous calls the decline in this piece of our business is primarily related to delays in customers capital project spending.

Fourth quarter sales were up $85 3 million to 190.7 million with his go sales, adding $96.6 million and a decline in organic volume of 11, 4% on.

On a two year stacked basis test equity organic sales were up approximately three 1%.

Ronald J. Knutson: The decline as a percent of sales was primarily related to lower sales for the quarter in the higher margin technology vertical, which put over $2 million of net margin pressure on the quarter. We anticipate Jacksboro Services will return to low double-digit EBITDA margins in the first half of 2024 on higher sales on a relatively flat fixed cost. Lastly, I will turn to the test equity group on slide 10. Full year sales grew to $641.8 million, an increase of $249.4 million, or 63.6%, driven primarily by the Hisco acquisition in 2023 and other acquisitions completed in 2022. Excluding these acquisitions, test equity sales were down 24 million, or 8%, for the year, primarily within the test and measurement business.

Test equities adjusted EBITA for the full year was $43 3 million or six 7% of sales compared to $34 7 million or eight 9% a year ago Act.

Acquisitions made in 2022, and 'twenty twenty-three added approximately $19 7 million and adjusted EBITDA.

The decline in the test equities base business adjusted EBITDA was primarily related to lower sales levels in the test and measurement offset by cost normalization taken in Q4.

For the quarter test equities net margin was 11.8 million or six 2% of sales.

The lower margin for the quarter was primarily related to lower sales on capital related projects fewer seasonal selling days and additional operating expenses related to higher health insurance claims and employee compensation.

And as we think about 'twenty 'twenty four for tests equity, we will continue to focus on the integration of his go and test equity we remain committed to sequentially improving our margin profile as 'twenty 'twenty four duval ups through higher sales synergies to be realized on the combined company and the nonrecurring nature of <unk>.

Ronald J. Knutson: As we've discussed on previous calls, the decline in this piece of our business is primarily related to delays in customers' capital project spending. Fourth quarter sales were up $85.3 million to $190.7 million, with Hisco sales adding $96.6 million and a decline in organic volume of 11.4%. On a two-year stacked basis, test equity organic sales were up approximately 3.1%. Test equity adjusted EBITDA for the full year was $43.3 million, or 6.7% of sales compared to $34.7 million or 8.9% a year ago.

Some of the Q4 charges.

We anticipate a stronger second half of 'twenty 'twenty four for test equity.

As we continue to integrate his go.

And in some of the pickup in capital spending, allowing us to drive toward a double digit margin profile.

Moving to slide 11, we ended the year with nearly $300 million of liquidity, including $99 6 million of cash and cash equivalents and under $98 3 million under our existing credit facility.

As you know we amended our credit facility in 2023 from 500 million to 805 million to support the acquisition of his go and to free up liquidity for other acquisitions.

Ronald J. Knutson: Acquisitions made in 2022 and 2023 added approximately $19.7 million in adjusted EBIT dollars. The decline in the test equities-based business, Adjusted EBITDA, was primarily related to lower sales levels in the test and measurement offset by cost normalization taken in Q4. For the quarter, TestEquity's net margin was $11.8 million, or 6.2% of sales.

We're really pleased with the progress made in strengthening our balance sheet and ending 2023 at a leverage rate of 2.9 times, all while acquiring four businesses since forming D. S. G.

Ronald J. Knutson: The lower margin for the quarter was primarily related to lower sales on capital-related projects, fewer seasonal selling days, and additional operating expenses related to higher health insurance claims and employee compensation. As we think about 2024 for test equity, we will continue to focus on the integration of HSCO and test equity. We remain committed to sequentially improving our margin profile as 2024 develops through higher sales, synergies to be realized on the combined company, and the non-recurring nature of some of the Q4 charges. We anticipate a stronger second half of 2024 for test equity as we continue to integrate HISCO. And on some of the pickup in capital spending, allowing us to drive toward a double-digit margin profile. Moving to slide 11, we ended the year with nearly $300 million of liquidity, including $99.6 million of cash and cash equivalents and under $98.3 million under our existing credit facility.

Although we continue to support a robust working capital investment we are carefully managing inventory levels accounts receivable and accounts payable as evidenced by our ability to generate significant cash flow from operations of 102 million for the year.

Our cash conversion ratio defined as adjusted EBITDA less the change in working capital and less Capex divided by adjusted EBITDA was over 100% in 'twenty two 'twenty three.

Net capital expenditures, including rental equipment were $18 7 million for 2023, we.

We expect full year capex to be in the range of $16 million to $20 million or approximately 1% of revenue and 'twenty 'twenty four and have a similar cash flow conversion goal for 2024.

Before I turn it back to Brian I'd like to make some comments on how we see 'twenty 'twenty four developing.

As we've discussed over the past two quarters, we were up against tough comps with Q4, 2022 having been up 16.7% and that will continue into 'twenty 'twenty four with Q1, 2023 having been up nearly 14%.

Ronald J. Knutson: As you know, we amended our credit facility in 2023 from 500 million to 805 million to support the acquisition of Hisco and to free up liquidity for other acquisitions. We're really pleased with the progress made in strengthening our balance sheet and ending 2023 at a leverage rate of 2.9 times, all while acquiring four businesses since forming DSG. Although we continue to support a robust working capital investment, we are carefully managing inventory levels, accounts receivable, and accounts payable, as evidenced by our ability to generate significant cash flow from operations of $102 million for the year. Our cash conversion ratio, defined as adjusted EBITDA less the change in working capital and less CAPEX divided by adjusted EBITDA, was over 100% in 2023. Net capital expenditures, including rental equipment, were $18.7 million in 2023.

Given our fourth quarter results in the first quarter comp that we're up against we expect Q1 of 'twenty 'twenty four organic sales to be down versus a year ago in a range similar as what we experienced in the fourth quarter.

As we make traction on many of our initiatives is 'twenty 'twenty four develops and as comps against prior year soften we would expect organic sales growth to turn positive starting in the second half.

To achieve our internal sales plans, we will need some normalization of various end markets and some recovery of customer capital related projects spending.

While we recognize the Q4 margins are seasonally our weakest quarter and were softer than originally anticipated one quarter will not slow us down from our overall strategy, we will likely feel some of this margin pressure into the first quarter.

Ronald J. Knutson: We expect full-year CapEx to be in the range of $16 to $20 million, or approximately 1% of revenue, in 2024 and have a similar cash flow conversion goal for 2024. Before I turn it back to Bryan, I'd like to make some comments on how we see 2024 developing. As we've discussed over the past two quarters, we were up against tough comps with Q4 2022 having been up 16.7%, and that will continue into 2024 with Q1 2023 having been up nearly 14%. Given our fourth quarter results and the first quarter comp that we're up against, we expect Q1 2024 organic sales to be down versus a year ago in a range similar to what we experienced in the fourth quarter.

But we are committed to continuing to drive margins upward, while continuing to strengthen the entire DSG platform.

I'll now turn the call back to Brian.

Thank you Ron.

We are pleased with 2023 and are even more excited about how our successful initiatives tackled during 'twenty twenty-three will drive our 2024 and 2025 performance.

Our prioritized focus on cash flow generation resulted in significant free cash flow in 2023.

Turning to slide 12, we continue to operate under a disciplined capital deployment strategy that drives focus around reducing capital intensity, where possible, increasing working capital efficiencies, which improves liquidity and reduces our net borrowings we ended the year with $99 $6 million of cash and <unk>.

Zero borrowed on our revolver, while enjoying a $430 million investment in net working capital.

Ronald J. Knutson: As we make traction on many of our initiatives as 2024 develops, and as comps against the prior year soften, we would expect organic sales growth to turn positive starting in the second half. However, to achieve our internal sales plans, we will need some normalization of various end markets and some recovery of customer capital-related project spending. While we recognize Q4 margins are seasonally our weakest quarter and were softer than originally anticipated, one quarter will not slow us down from our overall strategy. We will likely feel some of this margin pressure into the first quarter. But we are committed to continuing to drive margins upward while continuing to strengthen the entire DSG platform. I'll now turn the call back to Bryan. Thank you, Ron.

We are focused on continuing to structurally increase the return profile of the business both through operational discipline and process improvements, where we have a clear line of sight on those improvements and with our return profile. Additionally, benefiting from key acquisitions that will enhance our long term position in the <unk>.

Place.

While the current challenge backdrop for a couple of our end markets can create a short term distraction. We are passionate and committed to drive this business alongside deepening bench of innovative thought leadership with strong distribution experience.

Bryan King: We are pleased with 2023 and are even more excited about how our successful initiatives implemented during 2023 will drive our 2024 and 2025 performance. Our prioritized focus on cash flow generation resulted in significant free cash flow in 2023. Turning to slide 12, we continue to operate under a disciplined capital deployment strategy that drives the focus around reducing capital intensity where possible. Robert Connors, Unknown Attendee, Russell Frazee, Brad Hathaway, Matt Boyce, Cesar Lanuza, Russell Frazee, Brad Hathaway, Matt Boyce, Cesar Lanuza, Russell Frazee, Brad Hathaway, We ended the year with $99.6 million of cash and had zero borrowed on our revolver while enjoying a $430 million investment in networking capital.

We are aligned and collectively committed as large shareholders along with a shared vision from the board to capitalize on this excellent opportunity to further build this best in class specialty value added distributor.

With this shared vision and the strategy. We are executing we are managing our leverage appropriately at two nine times at year end and we are confident that we are well positioned to capitalize on accretive acquisitions to drive organic and inorganic growth to build a better D. S. G.

We use a disciplined approach to prioritize our capital investing.

Our acquisition priorities need to be informed by intensity of other operational and leadership priorities financial leverage and periodic decisions to invest in our own stock to that end. During 2023, we increased our share repurchase program by $25 million and repurchased 139000 share.

Bryan King: We are focused on continuing to structurally increase the return profile of the business, both through operational discipline and process improvements, where we have a clear line of sight on those improvements, and with our return profile additionally benefiting from key acquisitions that will enhance our long-term position in the marketplace. While the current challenge backdrop for a couple of our end markets can create a short-term distraction, we are passionate and committed to driving this business alongside a deepening bench of innovative thought leadership with strong distribution experience. We are aligned and collectively committed as large shareholders, along with a shared vision from the board, to capitalize on this excellent opportunity to further build this best-in-class specialty value-added distributor. With this shared vision and the strategy we are executing, we are managing our leverage appropriately at 2.9 times at year end, and we are confident that we are well positioned to capitalize on accretive acquisitions to drive organic and inorganic growth to build a better DSG.

Shares at an average cost of $26.09 per share during the fourth core.

Finally, we executed a successful oversubscribed rights offering and a two for one stock split in 2023 in order to balance our capital structure and liquidity objectives prudently as best we can for all our stakeholders.

As we said in the last quarter, we continually monitor macroeconomic and global shifts that may affect the dynamics and forecasts of our end markets. We're two plus months into 'twenty 'twenty, four and given a continuation of Choppiness. This year similar to the end of 2023, and even with certain tailwind to <unk>.

<unk> and 'twenty 'twenty four we expect that our our first quarter organic sales compression will likely be in a similar range to the fourth quarter of 2023.

Bryan King: We use a disciplined approach to prioritize our capital investment. Our acquisition priorities need to be informed by the intensity of other operational and leadership priorities, financial leverage, and periodic decisions to invest in our own stock. To that end, during 2023, we increased our share repurchase program by $25 million and repurchased 139,000 shares at an average cost of $26.09 per share during the fourth quarter.

We're also seeing encouraging indications through our increased quoting activity and our book to Bill that revenue Reacceleration could be spooling back up and those softer pockets.

These macro dynamics are significantly different than the invitation for expanded engagement that our customers are welcoming from the more robust offering each of the DSG verticals can now provide.

Bryan King: Finally, we executed a successful oversubscribed rights offering and a two-for-one stock split in 2023 in order to balance our capital structure and liquidity objectives prudently as best we can for all our stakeholders. As we said in the last quarter, we continually monitor macroeconomic and global shifts that may affect the dynamics and forecasts of our end market. We are two plus months into 2024, and given a continuation of choppiness this year, similar to the end of 2023, and even with certain tailwinds expected in 2024, we expect that our first quarter organic sales compression will likely be in a similar range to the fourth quarter of 2023. We're also seeing encouraging indications through our increased quoting activity and our book-to-bill that revenue re-acceleration could be These macro-dynamics are significantly different from the invitation for expanded engagement that our customers are welcoming from the more robust offering each of the DSG verticals can now provide. Turning to slide 13.

Turning to slide 13 full.

<unk> full year and fourth quarter results demonstrated our ability to benefit from our diverse end markets to achieve a 10% EBITDA margin.

Our cross selling initiatives are still in the early innings still cross selling is becoming more natural across our teams and we are finding better and different ways to increase sales through long standing relationships with our best customers. We're very pleased with our progress of acquired business initiatives and believe we can incrementally improve margins.

In our industrial technology vertical between the exciting test equity and his co synergy opportunities over the over the next several quarters as well as improved margins across our other acquisitions made over the past two years.

We plan to continue to act on accretive bolt on acquisitions that fit our M&A criteria and it reinforced ESG has expanded aperture around high value high touch specialty distribution capabilities.

The acquisitions initiatives and actions taken in 2023 and 'twenty 'twenty four are critically important as they deliberately scale up the profitability capabilities and intrinsic value of D. S. G across each of the business units setting the successful course for the next five years and beyond.

Bryan King: Full year and fourth quarter results demonstrated our ability to benefit from our diverse end markets to achieve a 10% EBITDA margin. However, our cross-selling initiatives are still in the early innings. Still, cross-selling is becoming more natural across our teams, and we are finding better and different ways to increase sales through longstanding relationships with our best customers. We're very pleased with our progress on acquired business initiatives and believe we can incrementally improve margins in our industrial technology vertical between the exciting TestEquity and Hisco Synergy opportunities over the next several quarters, as well as improve margins across our other acquisitions made over the past two years. We plan to continue to act on accretive, bolt-on acquisitions that fit our M&A criteria and that reinforce DSG's expanded aperture around high-value, high-touch specialty distribution capabilities.

We plan to continue to make good prudent decisions that create value improve the long term return profile of the business and generate cash.

To wrap up as chairman and Chief Executive Officer of D. S G and as managing partner of L. K C. M headwater, where we enjoy a very large interest in D. S. G. We are exceptionally well aligned and committed to our investors and Dsg's objective.

You have my commitment along with the DSG in L. K C. M. Headwater teams that together, we remain relentlessly focus around driving steep and sustained long term value creation for our shareholders.

Bryan King: The acquisitions, initiatives, and actions taken in 2023 and 2024 are critically important as they deliberately scale up the profitability, capabilities, and intrinsic value of DSG across each of the business units, setting a successful course for the next five years and beyond. We plan to continue to make good, prudent decisions that create value, improve the long-term return profile of the business, and generate cash. To wrap up, as Chairman and Chief Executive Officer of DSG and as Managing Partner of LKCM Headwater, where we enjoy a very large interest in DSG, we are exceptionally well aligned and committed to our investors and DSG's objectives.

With that operator, we would like to take questions from analysts and investors.

Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment please call for questions.

Okay.

Your first question for today is from Max <unk> with Stephens, Inc.

Good morning, Thank you for taking my questions.

Good morning, Matt.

So on a sequential basis has <unk> consolidated the STR revenue trended first for U S.

Unknown Executive: You have my commitment, along with the DSG and LKCM Headwater teams, that together we remain relentlessly focused on driving steep and sustained long-term value creation for our shareholders. With that said, Operator, we would like to take questions from analysts and investors. Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in question. You may press star 2 if you would like to remove your question from the queue.

And for the remainder of March are there any noteworthy negative or positive factors that are that might change that trajectory going forward.

Yeah Max.

This is rod I'll take that so.

Keith.

Keep in mind for us.

Nowadays, we generally experience within our overall business typically Q4 is our weakest quarter, probably followed by.

Q1, and then Q2 and Q3 are certainly the strongest quarters.

Unknown Executive: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. Coordinator. Your first question for today is from Max Chain with Steven. Good morning. Thank you for taking my questions. Good morning, Zach.

Sequentially, you know, where we are today in terms of the first couple of months.

You know I would call it kind of flat versus where we exited the fourth quarter.

In terms of in terms of March.

It is a 21 day selling month force. This year. So no I wouldn't say I know Brian commented on some of the.

Unknown Executive: Morning, Matt. Morning. So on a sequential basis, how has 1Q consolidated DSGR revenue trended versus 4Q? And for the remainder of March, are there any noteworthy negative or positive factors that might change that trajectory going forward? Yeah, Max, Max. This is Ron. I'll take that.

Some of the ordering process and so forth.

But.

The March is typically a generally at 23 eight months for us this one's a little bit shorter so the first quarter only had 63 selling days so.

So we wont see is quite a bit of of the leverage advantage on 2020, one day, Mark as we would've twenty-three but.

Ronald J. Knutson: So, you know, keep in mind, you know, for us, the seasonality that we generally experience within our overall business. Typically, you know, Q4 is our weakest quarter, probably followed by Q1, and then Q2 and Q3 are certainly the strongest quarters. You know, sequentially, you know, where we are today in terms of the first couple of months, I would call it kind of flat versus, you know, where we exited the fourth quarter. You know, in terms of March, it is a 21 day selling month for us this year. So, you know, I wouldn't say I know. Brian commented on some of the, you know, some of the ordering process and so forth coming in. But, March is typically a 23 day month for us this month, a little bit shorter.

Specifically answer your question. The first couple of months of the year or kind of flat sequentially versus Q4.

Okay got it thanks for the color Mike.

And my second question is regarding suggested EBITDA margins kind of a similar question, but on a sequential basis. How is consolidated margins trend in the first <unk> and are there any noteworthy factors in March that may change that trajectory.

Yeah.

I'll jump in on that one as well so.

We don't provide formal guidance.

In terms of in terms of the year I know, both Brian and I made some comments in our prepared remarks.

Yes.

Do you feel that will.

Experience some of the margin pressure in Q1 similar to what we saw in Q4.

Ronald J. Knutson: So the first quarter only had 63 selling days. So, you know, we won't see, you know, quite a bit of a leverage advantage on a 23 on a 21 day month as we would have 23, but, you know, to specifically answer your question, the first couple of months of the year are kind of flat sequentially versus Q4. Got it. Thanks for the color.

Just given given where the overall sales are trending out so.

Nothing I would say nothing unusual there in terms of what we're expecting.

Here in the month of March either but.

Again without without getting into too much specifics I think we're going to we're going to continue to see a little bit of that margin pressure here in the first quarter and probably early into the second quarter.

Thanks for the color and I'll turn it back.

Thanks Max.

Ronald J. Knutson: And my second question is regarding Hodgesity Bedal margins. Kind of a similar question. But yeah, on a sequential basis, how have consolidated margins trended in the first four Qs and are there any noteworthy factors in March that may change that trajectory? Yeah, I'll jump in on that one as well. So, as you know, we don't provide formal guidance in terms of the year.

Your next question for today is from Kevin Steinke with Barrington Research.

Good morning, Brian and run.

I wanted to.

Yeah.

Good morning.

I wanted to ask about the Ron your comments about.

Looking to.

Ronald J. Knutson: I know both Bryan and I made some comments in our prepared remarks that we do feel that we'll experience some margin pressure in Q1, similar to what we saw in Q4, just given where the overall sales are trending out. So, you know, nothing, I would say, nothing unusual there in terms of what we're expecting here in the month of March either. But, again, without getting into too many specifics, I think we're going to continue to see a little bit of that margin pressure here in the first quarter and probably early into the second quarter. Thanks for the color, and I'll turn it back.

<unk> returned to positive organic growth in the second half of 'twenty 'twenty four and.

You said that you know would be somewhat dependent on pick up in your some of the softer end markets.

But you know.

Just trying to get a sense as to your line of sight.

And to no pension potential pick up in those end markets. I know you talked about the pipeline building and Jeff's role for technology and renewables.

And then it sounds like you expect some capital spend return on test and measurement equipment and test the equity so.

Just any more color.

Unknown Executive: Thanks, Rax. Your next question for today is from Kevin Steinke with Barrington. Hey, good morning, Bryan and Ron. I wanted to ask you something about, Good morning.

On your expectations.

The pickup in demand in the line of sight you have there.

Okay.

No.

Go ahead, Ryan either either one of us but.

Bryan King: I wanted to ask you about, Ron, your comments about, Unknown Speaker, looking to return to positive organic growth in the second half of 2024. And you said it would be somewhat dependent on, you know, picking up in your some of the softer end markets. But you know, you're just trying to get a sense of your line of sight into, you know, potential pickup in those end markets. I know you talked about the pipeline building in JEXPRO for, you know, technology and renewables.

Kevin you know that Ron.

Ron gave some and you just highlighted the three areas that we've been most focused on because there where we're we've seen that.

The only real softness if you look at.

It tested the industrial technology division or test equity.

23 of the $24 million of drag that we had on revenue.

Last year was specifically from the test and measurement equipment.

There were specific inventory.

Stocking dynamics that were going on in the marketplace there.

And we maybe they made the wrong decision, but we decided to step out of selling equipment.

Unknown Executive: And then, you know, it sounds like you expect some capital spend return on test and measurement equipment and test equity. So just any more color on your expectations for the pickup and demand and the line of sight you have there.

At margins that we saw some competitors kind of try and blow out inventory to get their inventory levels at the end of the year.

Right sized and so that that overhang is.

Bryan King: Kevin, you know, Ron gave some, and you just highlighted the three areas that we've been most focused on because they're where we are. The only real softness, if you look at the Industrial Technology Division or Test Equity, 23 of the $24 million of drag that we had on revenue last year was specifically from test and measurement equipment. And there were specific inventory de-stocking dynamics that were going on in the marketplace there. And we maybe made the wrong decision, but we decided to step out of selling equipment at margins that we saw some competitors kind of try and blow out inventory to get their inventory levels at the end of the year right-sized. And so that overhang is, you know, the normalization of inventory levels from some of our peers that seem to work through the system.

Of normalization of inventory levels from some of our peers. It seemed to work through the system and we've seen quite a bit more.

Requests for the activity level of.

A quotation has gone up quite a bit as we've gone into this year, although and we know that that our customers have budgeted for spend but we're not saying the spending dollars being released yet.

Yet at the pace that we would want to see to feel like that that business normalized.

But we expect that it will and we also arent saying is.

The the more.

On disciplined.

Our approach in some of our competitors have kind of gotten out of the marketplace.

With their inventory positions that they took on when our channel partners were struggling to get product you know it was kind of the same issue that we've seen in other parts of our business is not just at the S. G where the supply chain lead to people puffing orders or expanding there.

Bryan King: And we've seen quite a bit more requests for quotations; the activity level of quotations has gone up quite a bit as we've gone into this year, although, and we know that our customers have budgeted for spend, but we're not seeing the spending dollars being released yet at the pace that we would want to see to feel like that that business is normalized. But we expect that it will.

Their efforts to try and.

Gather inventory and then there was a destocking level that we saw and we saw it in other end markets as well at DSG towards the end of last year.

The most acute spot where we felt it and saw it was a test and measurement and we may have made it.

Bryan King: And we also aren't seeing the more undisciplined approach, and some of our competitors have kind of gotten out of the marketplace with their inventory positions that they took on when our channel partners were struggling to get product. You know, it was kind of the same issue that we've seen in other parts of our businesses, not just at DSG, where the supply chain led to people puffing orders or expanding their efforts to try and gather inventory. And then there was a de-stocking level that we saw, and we saw it in other end markets as well as at DSG towards the end of last year. The most acute spot where we felt it and saw it was the test of measurement.

We rustled a lot with the decision of whether or not to participate in the marketplace as people were selling stuff at margins that were significantly lower than what we've historically sold test and measurement equipment for and that's debated itself on the renewables side. You know, we've just seen a delay in some of the project spend and also some of the.

The Internet MRO packaging that we've kind of our kits that we put together to be able to address.

Some of the reworks, there's a lot of the installed base.

On the renewable side.

But our book to Bill as.

Is this high as I've seen it in the renewable space currently.

Bryan King: And we may have made it, you know; we wrestled a lot with the decision on whether or not to participate in the marketplace as people were selling stuff at margins that were significantly lower than what we've historically sold test and measurement equipment for. And that's abated itself. On the renewables side, you know, we've just seen a delay in some of the project spend and also some of the MRO packaging that we have in our kits that we put together to be able to address some of the reworks of a lot of the installed base on the renewable side. But our book to bill is as high as I've seen it in the renewable space currently. But we and so we expect that to flow through in revenues, but it's it's still been sluggish getting back to the levels that we would expect, you know, out of an area that we're really excited about participating in as a leader in that market in front of us. On the semiconductor side, we took a pretty good punch last year. I tried to highlight it specifically with the actual dollar drag that we had.

And so we expect that to flow through and revenues, but it's.

It's still been sluggish of getting back to the levels.

We would expect.

Out of an area that we're really.

Excited about participating in as a leader.

To that end market.

In front of us on the semiconductor side, we took a pretty good.

Pumps last year I tried to highlight it specifically with the actual dollar drag that we had revenues were down 50% and the renewal and that in the semiconductor space for <unk> last year. It had the biggest impact on our earnings for the <unk> Pro Division.

That $88.3 million $8 4 million dollar drag that we had for the year on EBITDA.

That that end market is still kind of book to bills, not where we'd like to see it yet.

But you know our customers, we're still engaged with them and we're working currently on ways to expand.

Our our current wallet share with them.

Bryan King: You know, revenues were down 50 percent in the renewal in the semiconductor space for Jaxpro last year. It had the biggest impact on our earnings for the Jaxpro division, that eight point three million dollar, eight point four million dollar drag that we had for the year on EBITDA. That market is still, you know, kind of a book to bills, not where we'd like to see it yet.

And as we also it's kind of been interesting we've seen.

A shift with some of them with one of our customers in particular and another one that we're working with.

Where some of their production has moved away from the U S. At the same time as we're working actively with a number of customers on new expanded fabrication capacity in the U S, which we all kind of think or would expect with the chip back but.

Bryan King: But, you know, our customers, we're still engaged with them, and we're working currently on ways to expand our current wallet share with them. And as we also, it's kind of been interesting, we've seen a shift with some of, with one of our customers in particular, and another one that we're working with, where some of their production has moved away from the U.S. At the same time as we're working actively with a number of customers on new, expanded fabrication capacity in the U.S., which we all kind of think, or, you know, would expect with the CHIP Act, but it's not been, you know, kind of as seamless as we would have, you know, as we'd like to see, as we've seen some shifting overseas from customers at the same time as we're seeing new plants being built domestically.

But it's not been you know kind of as seamless as we would have.

He'd like to see.

As we've seen some shifting overseas.

Some customers at the same time, as we're saying new plants.

Being built domestically.

So there's a there's some choppiness still on that end market, we expect that by the second half of the year, that's really where the back half of the year.

At element that we've kind of laid out their projects pro.

We expect to see more of a renewed.

Ah restored level of activity there.

On the semiconductors that.

Other end markets have actually held up quite well.

So if you take those those challenges out our organic growth rate, we would have had flat to positive organic growth in each of those verticals without those headwinds.

Bryan King: So there's some choppiness still in that end market, but we expect that by the second half of the year, that's really where the back half of the year element that we've kind of laid out there for Jaxpro, we expect to see more of a renewed or restored level of activity there, on the semiconductors that the other end markets have actually held up quite well. And so, you know, if you take those challenges out, you know, our organic growth rate, we would have had, you know, flat to positive organic growth in each of those verticals without those headwinds. All right, makes sense.

Alright makes sense.

Yeah.

Yes.

The only other thing Kevin that you know.

In terms of just.

Thinking about headwinds that we had last year.

But also.

Celebrating.

The great work that was done it would be the sales force.

Kind of transition that we did at Los <unk> we.

Got the benefit of more productivity out of our sellers.

Reorganized some of the ways that they serve their customers and some are and some of that.

Bryan King: Unknown Speaker: The only other thing, Kevin, in terms of just thinking about the headwinds that we had last year but also, you know, celebrating the great work that was done, it would be the Salesforce kind of transition that we did at Lawson. You know, we got the benefit of more productivity out of our sellers. We've reorganized some of the ways that they serve their customers and some of the efficiency with which we lean on those sellers in their particular selling territories. And so that has created, you know, some level of choppiness that, you know, we think that You know, we kind of knew that it would probably lift margins but create some drag on organic growth last year. We just didn't expect that we would also have a drag on the other two verticals at the same time.

The efficiency with which we laid on all of those sellers and their particular.

Selling territories in and so that has had that is created.

Some level of Choppiness.

<unk>.

We think that.

Yeah, we kind of we knew that it would probably lift margins, but create some drag on organic growth last year.

We just didn't expect that we would also have the drag on the other two verticals at the same time. So we thought we'd get the benefit of the EBITDA flow through with a little bit of a drag on organic sales growth at at loss and while we would also we were enjoying through the first half of last year and into the third quarter really.

Bryan King: So we thought we'd get the benefit of the EBITDA flow through with a little bit of a drag on organic sales growth at Lawson. While we would also, you know, we were enjoying through the first half of last year and into the third quarter, really strong in market strength on a blended basis across the other two verticals, which we thought would kind of not highlight as much the drag on of the Salesforce reorganization on organic growth. But that was very much of a deliberate objective to be able to bring the structural profitability of Lawson closer to where we think it should be over time. Okay, thank you.

Strong in market still strength.

On a blended basis across the other two verticals, which we thought would kind of.

Not highlight as much the drag on.

Of the Salesforce reorganization on organic growth, but that was very much of a deliberate objective to be able to bring the structural profitability of Lawson up closer to where we think it should be over time.

Okay. Thank you.

Bryan King: And just following up on that, you know, when you talk about the expectations for a better second half of 2024, you know, in discussions with your clients, how much does the macro outlook play into, you know, the building pipelines and what have you? I guess we've just been hearing more generally from various companies that, you know, they're getting more comfortable with the way inflation is trending and the possibility of interest rate cuts at some point this year. Yeah, is that that kind of factoring into your client's thought process and starting to move forward with some spend, you know, on some of the more interest rate sensitive things like renewable development, etc. Yeah, Kevin, I mean, for me, the best example of that is just seeing the book to bill on some of the markets that have been more sensitive to inflation or to interest rates, like renewables. So renewables have the highest book to bill currently of any of the markets that we, you know, that we serve.

And just following up on that.

You talk about the XP.

Our expectations for a better second half of 2024.

In discussions with your clients how much does the macro outlook play into the building pipelines and what have you I guess, we've just been hearing.

More generally from various companies that.

You know they are getting more comfortable with the.

The way inflation is trending in the possibility of interest rate cuts at some point this year.

Yeah. It was that that kind of factoring into your clients thought process and starting to move forward with some spend on some of the more interest rate sensitive things like renewable development et cetera.

Yes, Kevin I mean for me. The Best example of that is just stay in the book to Bill on some of the markets that have been more sensitive to inflation or to interest rates like the renewables.

Renewables have the highest book to Bill currently has any of the markets that we.

We serve but instead of that that in and of itself to me is an indication that there is confidence.

Bryan King: But instead of that, that, in and of itself, to me, is an indication that there's confidence in that end market, anyway, which has been probably the most sensitive of our end markets to interest rates and kind of the overhang or concern about a recession. And they're moving forward with projects that, you know, in their engagements with us around the request for proposals and then, obviously, booking orders with us. But those won't translate into the revenue list, we don't think, until later in the year than the first quarter. That's probably the best industry for me to use as a proxy for the question you asked.

In that end market any way, which has been probably the most sensitive of our end markets to interest rates and.

Kind of the overhang or concerned about a recession.

And they are moving forward with projects that you know that.

Yes.

And their engagements with us around that.

Yeah.

Request for proposals and then obviously booking.

Orders with us.

But those won't translate into route into the revenue lift we don't think until.

Until later in the year then.

The first quarter.

That's probably the best industry for me to use as a proxy for the question you asked but I do think that there's two other elements that we're saying is.

Bryan King: But you know, I do think that there are two other elements that we're seeing. You know, just like we were able to destock some quite a bit during last year, we watched our customers do the same. And so, you know, the concerns that we all had about, you know, inflation, and every time we reordered a product, being passed through on us from our vendors, you know, we had customers who were experiencing the same from us. And then everyone was puffing up their orders some, or carrying more inventory, both because of the concern about an inflationary price increase, as well as the concern around supply chain disruptions. Test and measurement was an area where we've seen a real overhang on supply chain disruption.

Just like we were able to destock.

You know quite a bit during last year, we watched our customers do the same and so.

The concerns that we all had about.

Inflation and every time, we reorder the product being having pricing pass through on us from our vendors, we had customers who were experiencing the same from us.

And then at one one was puffing their order some.

We're carrying more inventory both because of the concern about an inflationary price increase as well as the concern around supply chain disruptions.

Test and measurement was an area, where we had seen a real overhanging on supply chain disruption.

Bryan King: And, you know, distributors like us, or rental companies that are similar to us, took in, you know, kind of went out and took inventory positions in an effort to, you know, try and smooth the challenging backdrop that we had from the vendor, the manufacturer getting us product. And once that, you know, that manufacturer and many of our manufacturers started being able to deliver products more seamlessly again, all of us started looking at how much incremental working capital we could put in place during, you know, 2022. And we started taking dollars out of it. So we worked down our working capital last year. And with interest rates high, carrying working capital is a real burden.

Distributors like us or rental companies that are somewhat off took him kind of went out and took inventory positions in an effort to.

Try and.

Smooth the challenging <unk>.

Drop that we had from the vendor for the manufacturer getting us product.

And once that.

That manufacturer and many of our manufacturers started.

Being able to deliver product more seamlessly again.

All of US started looking at how much incremental working capital we put in place during.

2022, and we started taking dollars out of it so we work down our working capital last year.

And with interest rates high carrying working capital as a real burden.

Bryan King: I mean, it has a real cost to it where when you're in a much lower interest rate environment, you don't really charge yourself as much for carrying that extra inventory. So we, we think that, you know, a lot of that overhang of working capitalists work through the system, our in, in business activity levels are good across most all of our industries. And so, You know, the choppiness that we have felt in the kind of the tested measurements starting in September and then through the Semiconductor before that and then with renewables delayed through the fourth quarter in the first quarter You know, it's it's definitely put a you know, a bit of a drag on our organic growth objectives That we had put it out there for everybody, but it's not put a drag on it in any way that Gives us any lack of confidence in where we're headed The other part that's been really very much more reassuring has been and we just came out of all day You know yesterday we were in the last two days We had leadership from the three companies mostly led by really the Jaxpro team Getting together, you know having the Hisco team there working through how they're tackling more cross-selling and more shared customer relationships And while that's taken, you know, probably it's slower to get some of these bigger customers to migrate or to change where they're buying their their content from in leaning on for services, we're seeing a significant amount of interest. And we also have a much, we have a much better go to market, you know, message today about the consolidated ways that we can, or the collaborative ways that our three verticals can work together when we talk to a prospective customer. And that's evolving even more now that we've got Hisco's capabilities in the fold.

It has a real cost to it where when youre in a much lower interest rate environment, you don't really charged yourself as much for sharing that extra inventory.

So we.

We think that there's a lot of that overhang of working capitals worked through the system.

Our.

And in business activity levels are good.

Across most all of our industries and so.

The choppiness that we have felt in the <unk>.

With test and measurement starting in September and then through the.

Semiconductor before that and then with renewables delayed through the fourth quarter and the first quarter.

It's definitely put a.

A bit of a drag on our organic growth objectives.

That we had put it out there for everybody, but it's not put a drag on it anyway.

Gives us any lack of confidence in where we're headed.

The other part that's been really very much more reassuring has been and we just came out of all day yesterday, we were at in the last two days, we had leadership from the three companies, mostly led by really the <unk> protein.

Getting together, having a his co team there working through how they're.

They're tackling.

More cross selling and more shared customer relationships and while that's taken probably it's slower to get some of these bigger customers to migrate or to change where they're buying they're there.

Their content from.

And leaning on for services.

We're seeing a significant amount of interest and we also have a much.

We have a much better go to market message today about the consolidated.

No I'm ways that we can collaboratively.

Dave ways that our three verticals can work together when we talk to prospective customer.

That's evolving even more now that we've got <unk> capabilities in the fold viscose.

Bryan King: Hisco, you know, really has a lot to link to share in terms of capabilities, both with Lawson and Jaxpro services. And we knew that when we started chasing Hisco years ago and thought that it would be a critical piece, a linchpin piece, to our broader DSG strategy. And we're glad, you know, just in the last couple of days, you know, being able to listen to the way that the Hisco team is working with the Jaxpro services team, for instance, on specific customers that have asked for us to bring the three verticals capabilities together to solve some major manufacturers' objectives. Yeah, that's probably the most encouraging and fun for me to see. Okay, great.

It really has a lot to link to share in terms of capabilities, both with loss in <unk> services, and we knew that when we well we started chase and his go years ago.

And thought that it would be a critical piece alleged pin piece to our broader DSG strategy.

And we'll go out.

Just in the last couple of days being able to listen to the way that the <unk> team is working with the Jets Pro services team for instance on specific customers that have asked for us to bring.

The the three verticals.

Capabilities together to solve some major.

Manufacturers.

Our objectives.

That's been probably the most encouraging and fun for me to say.

Okay, Great and just lastly, I wanted to ask about.

Bryan King: And just lastly, I wanted to ask about The Organic Revenue Trends in Lawson Products. You mentioned continued good progress with strategic and automotive and government verticals, but some softening in Lawson's core customer base. Yeah, the organic growth rate just stepped down a bit sequentially, three Q to four Q. Have you seen a more noticeable softening in that core customer basis, or anything we should be thinking about as we kind of move into 2024 here on that front? Yeah, Kevin, this is Ron.

The.

The organic revenue trends and loss and products.

You mentioned continued.

Good good progress with strategic Kent, automotive and government verticals.

But some softening and losses core customer base.

Yeah, the organic growth rate, just stepped down a bit sequentially.

<unk> have you seen a more noticeable softening in that core customer basis.

Anything we should be thinking about as we kind of move into 2024 here on that front.

Yes, Kevin this is Ron so yeah, you're spot on in terms of the where we saw most of the strength in in 2023 was.

Ronald J. Knutson: So yeah, you're, you're spot on in terms of the strategic business, you know, where we saw most of the strength in 2023 was our strategic business. We continue to develop, you know, good customer relationships, servicing more of their locations, and the Kent automotive business continues to grow nicely. And, and so for us, it's a real balance, right, in terms of sales rep productivity that we were able to achieve, you know, 15% on top of 18% in the third quarter. So we feel really good about that.

Our strategic business, we continue to develop good customer relationships servicing more of their locations. The Kent automotive business continues to grow nicely.

And so for us, it's a real balance right in terms of.

The sales rep productivity that we were able to achieve 15% on top of 18% in the third quarter. So we feel really good about that.

Ronald J. Knutson: Where, you know, we are seeing some weakness is within the core base, which does make up about 50% of Lawson's customer base now. And I think, you know, it's, I would say it's probably twofold. One is, you know, we're finding more strategic accounts and more Kent automotive business. We really have to have a focused effort on where that where that how that customer gets serviced. And I think part of that is, you know, probably naturally taking a little bit away from, you know, probably a little bit of cannibalization from our core customer base. You know, the nice piece that we've done really throughout 2023 is we've made really pretty significant investments in, you know, inside sales, technical sales specialists, lead development reps, you know, really the infrastructure that can help support our sales reps. And we have them actively working on those core customers that, you know, that we've not seen a sale for in the last couple of months, let's call it that. So, yeah, a little bit of weakness there.

Where.

Where we are seeing some weakness is within within the core base, which does make up about 50% of <unk>.

Washington's customer base now and.

<unk>.

I would say, it's probably twofold one is.

Is were.

Signing more strategic accounts and more Kent automotive business, we really have to have a focused effort on where that where that how that customer gets serviced.

And I think part of that is probably naturally taking a little bit away from.

Probably a little bit of cannibalization from our from our core customer base the nice piece.

We've done really throughout 2023, as we've made really pretty.

Significant investments in <unk>.

Inside sales technical sales specialists lead development reps.

Really the infrastructure that can help support our sales reps and we have them actively working on those core customers that.

We've not seen a sale for the last couple of months, let's call. It so yeah, a little bit of weakness there but.

Bryan King: But I would say that there is a heavy, heavy focus internally within Lawson. That not only do we need to be able to support these other, you know, growing kind of pieces of our business, but really get our way back into our core customers to make sure that we can, you know, see growth there as well. Ron, I want to just add something.

I would say that there is a heavy heavy focus internally within Lawson.

That's.

Not only do we need to be able to support these other growing kind of pieces of our business.

But really getting our way back into our core customers to make sure that we.

See growth there as well.

Ron I wanted to just adds have been Kevin.

Bryan King: Kevin, the Salesforce transformation that we took on last year was one that was very deliberate around trying to expand profitability at a loss. And it was both to expand profitability in Lawson, and it was also, you know, absolutely focused on being able to expand the earnings opportunity for our outside sales team. And so to do that, we had to make sure that they were spending their time where they were, where they needed to be spending it to drive, you know, longer-term traction and revenue growth. And a lot of the time, when you really broke it down, a lot of their time was being spent on a lot of very small customers that we don't want to leave, but we needed to manage how our outside salespeople were engaging with them. And so when you really fully burdened their time and our resources, a lot of those little accounts were not profitable on a contribution basis.

The sales force transformation.

That we took on last year.

<unk> was one that was very deliberate around trying to expand profitability of Lawson and it was both to expand profitability loss than anyone else's.

Absolutely focused on being able to expand that.

The earnings opportunity for our outside sales team.

So to do that we had to make sure that they were spending their time, where they were where they needed to be spending it to drive.

Longer term traction in revenue growth and a lot of the time when you really broke it down a lot of their time was being spent on a lot of very small customers that we don't want to leave but we needed to manage how are are outside salespeople, we're engaging with them and so when you really fully burdened.

Their time and our resources there a lot of those little accounts were.

Not profitable on.

On a contribution basis and so we knew that until that's part of the reason why we've address them with some other tools and ways to cover them. So that the sale of the outside sales person not spending as much time inside of those accounts and we've re.

Bryan King: And so we knew that, and so that's part of the reason why we addressed them with some other tools on ways to cover them so that the salesperson, the outside salesperson, is not spending as much time inside of those accounts. And we've re-, so that core, you know, it's got some movement in it. And so it's not, when I look at it and I look at the drag in different pockets of it around, you know, organic revenue growth right now, I have to take some of the noise out of how we're serving those customers differently today because we're actually making more money on how we're serving them on less dollars that are coming or kind of coming through that channel, that small, tiny end of our channel.

So that core.

Got some movement in it.

So it's not when I look at it and I look at the drag in different pockets of it around.

Organic revenue growth right now I have to take some of the noise out of how we're serving those customers differently today, because we're actually making more money on how we're serving them on on less dollars that are coming that are kind of that are coming through that channel that small tiny and of our channel.

Bryan King: And so, you know, there's that compression element that we had to had to tackle. And, you know, certainly, with not having as much, you know, of a tailwind of economic growth last year at the end of the year, it, at the same time as we were doing that compression, slowed the organic growth rate of loss more than we probably anticipated it would, just because of the backdrop. Okay, fair enough. Thanks for taking the questions. I will turn it back over.

And so you know.

There's that compression element that we had to had to tackle.

And certainly with not having as much.

To have a tailwind of economic growth last year at the end of the year.

At the same time as we're doing that compression it slowed the organic growth rate of loss in.

Like we anticipated it would but more than than we probably anticipated just because of the backdrop.

Okay fair enough. Thanks for taking the questions I will turn it back over.

Ronald J. Knutson: Thanks, Kevin. Thank you, Kevin. Your next question is from Ken Newman with KeyBank Capital Markets. Hey, good morning, guys. Hey, Ken.

Thanks, Kevin Thank you Kevin.

Your next question is from Ken Newman with Keybanc capital markets.

Hey, good morning, Ken.

Hey, guys good morning.

Unknown Executive: Morning. So, uh, you know, first, I guess, you know, obviously, it sounds like a bit of a slow start here into 2024. I think it sounds like you, you expect the benefits from the cost-out initiatives and improved activity, maybe in the second half. Curious, I mean, do you think the operating leverage for EBITDA is able to get back to that, you know, your target of 20 to 30% starting in the second half? Or is that more of a 2025 opportunity?

So.

First I guess, obviously it sounds like a bit of a slow start here and into 2024.

I think it sounds like you expect the benefits from the cost out initiatives and improving activity maybe in the second half.

Curious I mean do you think the operating leverage for EBITDA is able to get back to that.

<unk> target of 20% to 30% starting in the second half or is that more of a 2025 opportunity at this point.

I started just want make sure I just yeah just to make sure I understand your question. Your question is on the on the flow through correct on the operating leverage correct incremental EBITDA margins, yeah, Yeah yeah.

Unknown Executive: Robert Connors, Thomas Moll, Kenneth Newman, Ronald Knutson, Bryan King, Cesar Lanuza, Russell Frazee, Bradley Wallace, Katie Fleischer, Matt Boyce, Distribution We believe that we can get there in the second half of this year. I mean, that's not a, you know, we don't believe that that's going to take us into 25 to get there. I think that it's a, it's a natural follow through to some of the, you know, commentary this morning just around, you know, seeing, you know, a stronger second half than the first half for us. So, you know, we're, you know, we. You know, we're not, even though we're seeing some some margin pressure here in the in the first quarter, you know, as we look at, you know, bridging our way from Q, you know, from Q1 into Q2 and into Q3, you know, we, we clearly see, you know, incremental margin lift as we work, you know, sequentially from quarter to quarter. So yeah, we've not backed away from that, that overall, you know, call it 25% operating leverage is, is sales start to turn. Later in the year.

<unk> it.

Yes, we believe that we can get there in the second half of this year I mean, that's not a.

We don't believe that that's going to take us into 'twenty five to get there I think that it's a it's a natural follow through to some of the.

Commentary this morning just around.

King.

A stronger second half than the first half for us so.

Where we are.

We're not even though we're seeing some margin pressure here in the in the first quarter.

As we look at bridging our way from Q from Q1 into Q2 and into Q3, we clearly see.

Incremental margin lift as we work sequentially from quarter to quarter. So yeah, we've not backed away from that that overall call. It 25% operating leverage is as sales start to turn here later in the year.

Got it okay.

Bryan King: John, just to make sure that I understand the question. So, I don't know that we've, if anything, as we're taking out expenses and improving operating leverage in the business, you know, operating leverage has not been taken down. We've certainly suffered over the last, you know, several months and, or end of the fourth quarter and the current, January, February trend, consistent with that, just the challenge of having, you know, fixed costs that are not getting carried by as much top-line revenue. And so, there's the negative contribution margin that's dragged some on EBITDA, but at the same time, we have very deliberate cost-out measures that were in place that And many of those we couldn't really tackle till November with the HSCO earn out being eclipsed.

To make sure that I understand the question. So I don't know that if anything as we're taking out expenses and we are improving operating leverage in the business. The operating leverage has not been taken down we certainly suffered over the last several.

Several months.

And into the fourth quarter and.

<unk>.

The January and February trends consistent with that just the challenge of having fixed.

Fixed costs that are not.

Getting carried by as much topline revenue and so theyre negative contribution margin that's drags them on EBITDA, but at the same time, we are very deliberate cost out measures that were in place.

We had identified and been working through over the last 18 months and many of those we couldnt really tackled till November.

The hesco.

Earn out being eclipsed and so there is.

Bryan King: And so, we should see and be able to talk about, you know, the $10 million that we alluded to in our last earnings call that we started tackling on the test equity front is now being matched up with another $7 million or so that we're able to work from the other side of the merger on kind of pulling together the industrial technology side. So, there's $17 million that we're working on cost out there that we should be able to realize this year. And that's, you know, that's something that while we'll get more visibility on it in a better, you know, kind of back half of the year selling environment is only taking operating leverage at some level up from whatever it was baselined before. We've also got spending leverage opportunities that we're taking on where we're, you know, able to improve our leverage on each dollar spent across the DSG platform. So, that's in addition to, you know, and we had been working on that starting 18 months ago.

We should see.

And be able to talk about.

The $10 million that we alluded to in our last conference call earnings call that will be that we started tackling on the test equity front.

Now being matched up with another.

$7 million or so that we're able to work from the other side of the merger on.

Kind of pulling together the industrial technology side. So there's 17 million that we're working on cost out there that we should be able to realize this year and.

And that's so that's.

That's something that wall, where people will get more visibility on it.

Better kind of back half of the year selling environment is only taking operating leverage at some level up.

From whatever it was baseline before.

We've also got less spending leverage opportunities that we're taking on where were able to improve our R. R.

Our leverage on each dollar spent.

Cross the DSG platform. So Thats in addition to.

And we had been working on that starting 18 months ago. Some of that didn't roll all the way through the P&L last year and there were still initiatives that we were able and are able to tackle that or discrete initiatives that we identified.

Bryan King: Some of that didn't roll all the way through the P&L last year, and there were still initiatives that we were able and are able to tackle that are discrete initiatives that we identified as we've been working through the total consolidated, Spend objectives on the DSG platform. Those are expanding the operating leverage opportunity going forward. And so I want to make sure that we understand where the baseline is; whatever the baseline was beforehand, we've not taken it down; we've actually expanded it. But our challenge has been, you know, having these in market softness pockets that are a real distraction for all of us.

As we've been working through the total consolidated.

Spend objectives.

On the on the DST platform dose those are expanding the operating leverage opportunity going in the future.

And so I want to make sure that we understand where the baseline is whatever the baseline was beforehand, we've not taken it down we've actually expanded it.

But our challenge has been having these end market softness pockets.

That are a real distraction for all of us.

Bryan King: But and then just, you know, I want to see more organic revenue growth out of our cross selling, and get to that sooner. And it's, you know, taken a little bit more time to knock down some of the targets that we've laid out there for specific customer opportunities that we have a line of sight on. Yes, no, that makes a lot of sense.

And then just.

I want to see more.

Organic revenue growth out of our cross selling in our.

And getting to that sooner.

And it's.

Taken.

A little bit more time to knock down some of the targets that we've laid out there.

For specific customer opportunities that we have.

Have a line of sight on.

Yes, no that makes a lot of sense and actually kind of leaves a bit into my follow up here.

Bryan King: And it actually kind of leads a bit into my follow-up question here, which is, you know, maybe a follow-up to Kevin's last question here on Lawson. But I mean, Ron, is there any color on what pricing benefits there have been in that segment this quarter? Because obviously, you guys have seen or talked a little bit about customer destocking, maybe offset by some inflationary pricing benefits. How do we think about the flow-through of price through sales and margins, both into this last quarter and then the first quarter, maybe the rest of the year? Because I would imagine that flow-through might be a bit more extensive on the pricing aspect rather than on the volume. Yeah, I would say, Ken, really, in the first half of the year, we were getting, you know, more of the price increases that were put in place later in 2022 that flowed through into early 23.

Which is.

Maybe a follow up to Kevin's last question here on loss in but I mean, Ron is there any color on what pricing benefits have been in that segment. This quarter. Because obviously you guys have seen or talked a little bit about customer destocking.

Maybe offset by some inflationary pricing benefits.

How how do we think about the flow through of price through sales and margin both into.

This last quarter, and then first quarter and maybe the rest of the year, because I would imagine that flow through might be a bit more extensive on the pricing aspect rather than on the volumes.

Yes, I would yes I would.

As they can in the in the really in the first half of the year.

We're getting.

More of the price increases.

<unk> put in place later in 2022 that flow through into into early 'twenty three.

Bryan King: When we look at our overall unit volume being shipped out the door, it's, you know, I would say that it's kind of flattened out in that core. So, you know, we saw more of a decline in the core volume in the first half of the year. And then really, you know, in the second half of the year and even here into January and February, it kind of hit what we would call a low point, and it's been running relatively, you know, flat.

We look at our overall unit volume being shipped out the door.

I would say that it's kind of flattened out in that core so we saw.

We saw.

More of a decline in the core volume in the first half of the year and then really in the second half of the year and even here into January and February.

Hit that what we would call kind of a low point and it's been running relatively flat.

Ronald J. Knutson: So, I think that, you know, some of that pressure that we saw on the core business is really more so, you know, took place as we were transitioning some of the sales reps earlier in the year with some of the disruption that we did, or I wouldn't call it, maybe, disruption. It was some of the plan changes, but, you know, we've kind of leveled that off at this point, and we don't see volumes decreasing here in the second half of 23, and actually, it's picked up a little bit here in January and February. So, but you're right. I mean, in 2023, you know, you know, a big chunk of our overall growth was really related to price. Yeah, especially in the first half of the year because we had significant pricing initiatives that Ron and Cesar and each of the teams put in place during 2022.

So I think that some of that pressure that we saw in the core business.

<unk> is really more so took place as we were transitioning some of the sales reps earlier in the year with some of the disruption that we did or I wouldnt call. It maybe disruption with some of the planned changes.

But.

We've kind of leveled off at this point and we don't see volumes decreasing here in the second half of 'twenty, three and actually it's ticked up a little bit here in January and February so.

But you're right I mean 2023.

A big chunk of our overall growth was was really related to price.

Yeah.

Especially in the first year.

Yes.

Because we had the we.

We had significant pricing initiatives that Ron and saves are in each of the teams put in place during 2022.

Ronald J. Knutson: And as we eclipsed those in 23, you know, you know that we had the first half of 2023; we were getting the benefit of the 2022 pricing initiatives that had not rolled through for the full 12 months. And most of that was done by, you know, early or mid last year. I can remember. I mean, I don't, I don't know, I'm trying to think Ron, if you can give us any specifics about pricing initiatives that we took on last year. And there are some small ones inside of like Jaxpro on resetting contract terms at around 1231 metrics.

And as we eclipse those in 'twenty three.

No.

We had the first half of 2023 week.

We were getting the benefit of the 2022 pricing initiatives that had not roll through for the full 12 months right.

Alright, and in most all of that was done by.

Early or mid last year, if I can I mean, I don't I don't know if I'm trying to think Ron if you can give us any specifics about pricing initiatives.

Initiatives that we took on last year.

And there are some small ones inside of like <unk> on resetting contract terms at around 12, 31 metrics and so when we've got a contract that was kind of ended up those pricing.

Bryan King: And so when we've got a contract, you know, those kind of end up, those pricing resets don't take place until the contract resets. And, but in terms of, you know, dynamic pricing activities, or I say outside of kind of some dynamic pricing initiatives, we took some specific pricing actions during the inflationary period more so, the higher inflationary period that we were feeling in 2022 coming from our supplier. Yeah, that's right. Yeah, there were there were there were there was a limited price.

Resets don't take place until the contract resets and but in terms of dynamic pricing activities.

I'd say outside of kind of some dynamic pricing initiatives, we took some specific pricing actions.

During the inflationary more.

The higher inflationary periods that we were feeling in 2022 coming from our suppliers.

Yeah, that's right Yeah. There were yes. There were there were there was a limited price I mean, we were.

Ronald J. Knutson: I mean, we were, you know, very selective around price increases in the second half of 23. But you're right, Brian, that the majority of it was the carryover effect of what we did in 2022. And then, you know, being surgical, going after just specific products or specific areas that we knew we had to, you know, keep margins up on, you know, in the latter half, but but there, but it was pretty much, Got it. That's helpful. Maybe I could just squeeze one more in here.

We're very selective around price increases in the second half of 'twenty, three but you're right Brian that the majority of it was the what was the carryover effect of what we did in 2022 and then.

Being surgically going after just specific products or specific areas that we knew we had to.

Keep margins up on you know in the latter half, but but but it was pretty limited.

Got it that's helpful. Maybe if I could just squeeze one more in here.

Bryan King: Just on the supply chain, you know, I know there's a lot of moving pieces, but curious if you have any color on just how much of your inventory is coming from over the water, maybe from the Red Sea and the shipping lane dynamics there. And maybe just any color on whether you're seeing some impacts from transport logistics expenses creeping one way or the other. Yeah, I can see it from an expense standpoint on the transportation side. You know, we certainly felt more of it in 2022. 2023 really seemed to normalize for us. We've not seen anything 10 at this point that is starting to have a, you know, a dramatic impact on us from an overall cost standpoint. It's we're just, we're not, we're just not seeing it yet. You know, if it's, if it's yet to come, but we've not seen it here in the second half of 23, or at least in the first couple of months into 24.

On the supply chain I know theres, a lot of moving pieces, but curious if you have any color on just how much of your inventory is coming from over the water maybe from the Red Sea in the shipping Lane dynamics there.

And maybe just any color on whether youre seeing some impacts from transport logistics expenses, creating one way or the other.

Yeah Heather.

From an expense standpoint on the on the on the transportation side.

We certainly felt more of it in 2022 23 really seemed to normalize for us.

We've not seen.

Anything 10 at this point that is starting to have a.

A dramatic impact on us from an overall cost standpoint, we're just we're not we're just not seeing it yet.

Is that yet to come but we've not seen it here in the second half of 'twenty three or at least in the first couple of months into <unk> into 'twenty four.

Yep.

Understood.

On your on your Middle quiet Middle question on margins I've been reminded in here that.

Ronald J. Knutson: understood. And Ken, on your middle question on margins, I've been reminded here that we do have very specific initiatives that are more surgical, that are a part of our gross margin strategy, that we're walking gross margins up in some different verticals, the different parts of the business, and that's, but that's not going to be this, you know, that's the sort of step where you see 10 or 20, 25 BIPs at That's not kind of the more pricing initiatives that we took that would be the ones that you would wonder whether or not when you see a top line number, whether or not there's a volume versus pricing. These are more very specific gross margin objectives that we've got to, that are taking place at the, at the vertical levels to drive gross margins up to a more appropriate level. I got it.

We are we do have very specific initiatives that are more surgical bidder, a part of our gross margin strategy that we're walking.

Gross margins in some.

Different parts of the different verticals in different parts of that and that's it.

That's not going to be.

That's the sort of stuff, where you see 10 or 2025 bps.

At a time, that's not kind of the more pricing initiatives that we took that are would be the ones that you would wonder whether or not when you see a topline number whether or not there was volume versus pricing. These are more very specific gross margin objectives that we've got two that are taking place at the <unk>.

A vertical levels to drive gross margins up to a more appropriate level.

Okay.

Got it very helpful. Thanks.

Bryan King: Very helpful. Thanks. Yep. Your next question is from Brad Hathaway with Farview. Morning, Brad. One moment. Brad, your line is live. Do you have me now?

Yep.

Your next question is from Brad Hathaway with fare far view.

Good morning, Brad.

Yeah.

If we lose Brad at one moment.

Brad Your line is live.

Unknown Executive: We got you. Yep. Perfect. I was worried that 75 minutes, 75 minutes into the call that we lost you completely. No, I understood. I'll try to be quick.

Do you have any now.

We got you yes.

I was worried that 75 minutes 75 minutes into the call that you that we have lost you lately.

No I understood I will try to be quick.

Now you're good.

Bryan King: Now you're good. Appreciate the incremental color on kind of, I guess, some of the macro headwinds because I guess, obviously, I think people kind of look at the overall macro environment and feel more benign about it. But I guess the PMI is sub-50, and you're seeing some things in your specific industries. What I was curious, though, to ask, and that's something that's been covered pretty well, is with regard to Hisco. You haven't really started the integration yet until December, correct? Yes, I'd say that we started taking some actions in November, but they really didn't have any impact on either the top line or profitability. Okay, but yeah, that's right. So we weren't allowed to start taking action until November.

I appreciate the incremental color on kind of I guess some of the macro headwinds because I guess, obviously I think people kind of look at the overall macro environment. If you are more benign about it but I guess the PMI is up 50 and Youre seeing some things in your specific industries.

What I was curious, though to ask I've got something been covered pretty well with.

With regards to Hesco.

So you haven't really started the integration yet till December correct.

Yes.

I would say that we started taking some actions in November but they really didn't have any impact to either top line or profitability.

Okay, but yes, that's right. So we weren't allowed to start taking actions until November.

Bryan King: And really, in November, when we started moving things around, it was on the test equity side, not on the HSCO side. I'm just, because I think, you know, for what I guess now we'll call test equity or industrial technologies, you made a comment that you kind of see this midterm path to, I think, 12% margins, if that's correct. And I guess, yeah, I was wondering, is the Hisco integration a major factor in that?

Really you know November when we started moving things around it was on the test equity side not on the <unk> side.

Understood because I think for I guess now called cut back what are your industrial technologies. You made a comment that you kind of see this mid term path to adding 12% margins if thats correct and I guess I was wondering is the <unk> integration the major factor in that or are there. Other building blocks you got a point to you to get from where we are now in contrast equity.

Bryan King: Or are there other building blocks you can kind of point to get from where we are now and kind of test equity to that kind of more midterm goal? Yeah, so there's, there are other building blocks, Brad, that, you know, the way that I kind of bridged it is that, in my mind, in any way, that we've got very discrete numbers that we're working through, but there's about 200 basis points of cost leveraging or spend leveraging on an EBITDA basis, you know, kind of 200 or 200 basis points of revenue that we have a line of sight that Or that we should get the benefit of this year.

That kind of more midterm goal.

Yeah. So there's a there are other building blocks.

Brad that what I, the way that I kind of bridged. It is in my mind in any way and we've got very discrete.

The numbers that we're working through but there is about 200 basis points of <unk>.

Cost leveraging our spend leveraging.

On an EBITDA basis kind of 200 or 200 basis points of revenue.

That we have a line of sight that we're working through this year.

Or that we should get the benefit of this year, there's another equal amount that that won't flow through the P&L until that fully flow through until the 'twenty five or or in some cases 26, so theres kind of a total of 400 basis points.

Bryan King: There's another equal amount that won't flow through the P&L until the, you know, fully flows through until the 25, or in some cases, 26. So there's kind of a total of 400 basis points that the team has identified in the effort, kind of synergistic opportunities there. And then there's, In addition to that, and that's, you know, across the total volume of that industrial technologies group, there are additional elements that we are working towards to drive volume, leverage profitability, that we see in terms of being able to bring the Hisco capabilities to all of DSG. An example that it lifts margins quite a bit for everybody was one that we will work through in the last day, if we have everybody together, would be the printing and labeling capabilities that are owned by Cisco, taking on volume that is needed from Jaxpro, for instance.

The team has identified in.

In an effort to kind of synergistic opportunities there and then there is.

In addition to that.

And that's across the total volume of that industrial technologies group.

There are additional elements that we are working towards to drive.

Volume.

<unk> profitability.

That that we are.

That we see in terms of being able to.

<unk>.

<unk> capabilities too.

All the DSG.

An example that it did it lifts margins quite a bit for everybody. It was one that we will work through in the last.

A day.

Today, as we had everybody together would be the printing and labeling capabilities that are.

Owned by Kitco.

Taking on volume.

That is needed from <unk> for instance, and so you end up with.

Bryan King: And so you end up with, you know, a lift because we're getting more throughput on a facility that was a very good facility, but not one that was operating it at a level of capacity, you know, kind of capacity utilization. It would pull the gross margins and EBITDA margins of that alliance. Alliance Printing Business to where, you know, it really drops a lot more dollars. So, there's a number of those things. There are also things like there are other capabilities that are specific, you know, kind of value-added capabilities that Jaxpro is leaning into Hisco or leaning into TestEquity that expands the structural margins of TestEquity and Hisco in certain categories, and those are outside of the 400 basis points that I alluded to earlier.

A lift because we're getting more throughput on a facility that was.

Very good facility, but not one that was operating it.

At a level of <unk>.

Capacity utilization that would pull the the the.

Gross margins and EBITDA margins of that.

Uh huh.

That alliance.

Alliance printing business.

To where it really drops a lot more dollar so theres a number of those things there's also things like.

There's other capabilities that are specific.

<unk>.

Value added capabilities that Jack <unk> is leaning into hesco or leaning into test equity that expands the structural margins of test equity in ESCO in certain categories.

And those are outside of the 400 basis points that I alluded to earlier.

Got it.

Bryan King: So there does need to be, you know, there's no doubt about it, to get to 12%, we've got to get back to, you know, the normalized top line. So there's a full 200 basis points that is leveraging the spend dollars that we expect that we'll get, you know, just from getting through this test and measurement overhang of product and delayed purchasing and then also getting the organic revenue baseline back to where it should be. Okay, so just to make sure I'm clear, in Q4 23, 23 is roughly 6%. So to bridge that 600 bits, it's roughly 400 bits from some kind of synergies and 200 bits from volume leverage. Is that kind of correct?

Uh huh.

There does need to be there's no doubt about it to get to the 12% we've got to get back to the normalized topline. So there's there's a full 200 basis points that is a spin is leveraging the spend dollars.

We expect that we'll get just from getting through this test and measurement overhang of product in and delayed purchasing.

And then also getting.

Getting the organic revenue baseline back to where it should be.

Okay. So just to make sure Im clear in Q4, 23 was roughly 6% so to bridge that 600 bps. It's roughly 400 bps from kind of synergies in 200 bps from volume leverage as that kind of correct that.

Bryan King: That's about right. Yeah, that's great. Excellent. That's all I have for now.

It's about right.

Great excellent.

John Bryan King: Thank you. Yeah, okay. Thank you. Your next question is from John Krueger with JAG Capital. Hey, Bryan, thanks for taking the question. I just want to ask you something.

Okay. Thank you.

Yes, okay.

Thank you.

Your next question is from John Kreger with J a G capital.

Hey, Brian Thanks for taking the question here.

John S SKU.

Bryan King: I just wanted to ask you how you're thinking about buybacks and keeping that free float available to other investors. You tell me where the stock price is, and I'll tell you what we're doing on the buyback. Not really, but I mean, we're that specific in what we're looking at exactly what the terminal value that we're trying to build in the business is. And we've got a capital allocation model that's quite specific.

I just wanted to ask you, how you're thinking about buybacks and keeping that free float available to other investors.

[laughter] yeah.

Thank you.

Can you tell me, where the stock price is and I'll tell you what we're doing on the buyback.

Not really but I mean, we where that where that specific in what we are we're looking at exactly what the terminal value and that we're trying to build in the business is and we've got in our capital allocation model.

Quite specific.

Bryan King: It's taken us longer to get some of our M&A done candidly during the last half of last year. You know, the disruption in some of these pockets of market that we've talked about this morning, like renewables or, you know, semiconductors specifically, as well as some other, you know, noisiness in the channels, has impacted some of the people that we have direct dialogues with that are not in a process that aren't necessarily having to sell their business but want to be a part of DSG. And so it's slowed down some of our, you know, kind of getting to the goal line on M&A that are specific capabilities or expansions of our reach that we want to have in some of our, you know, kind of long-term, you know, value proposition that we want to pull together with DSG.

It's taken us longer to get some of our M&A done candidly during the <unk>.

Last half of last year.

The disruption in some of these pocketed in market that we've talked about this morning like renewables or semiconductor.

Semiconductor specifically as.

As well as some other.

Noisy Ness and.

And the channels.

Have impacted some of the people that work that we have direct dialogues with it or not in a process that arent necessarily.

Having to sell their business, but want to be a part of DSG and so it's slowed down some of our kind of getting to the goal line on M&A that are specific.

Capabilities or expansion to.

R R.

Our reach that we want to have.

And some of our kind of long term.

Our value.

Proposition that we want to pull together with DSG. So as those things have slowed kind of now we see have good line of sight on some of those right now, but as those have kind of.

Bryan King: So as those things have slowed, you know, we have good line of sight on some of those right now, but as those have kind of not happened as quickly and we're generating cash, we want to make sure that we're mindful of exactly what we're doing with our shareholders' cash while we're sitting on that additional liquidity. And so if the stock price is where it is... at too significant of a discount from what we think the terminal value of the business would be if we wanted to sell the company, then we're going to buy back shares. But, you know, we don't want to buy back shares.

Not happened as quickly and we are generating cash.

We want to make sure that we're mindful of exactly what we're doing with our shareholders' cash.

While we're sitting on that additional liquidity.

And so if the stock prices where it is.

It too significant of a discount of what we think that.

The terminal value of the business would be if we wanted to sell the company and then we're going to win.

In a buyback shares.

But we don't want to buy back shares.

Bryan King: So, but, but we will, but we, you know, it's part of a very disciplined capital allocation. I, you know, I wanted to make sure that we continue to improve the flow. That's why we did the stock split. That's why we're, you know, making sure that we try and get out, get out in the marketplace, meet shareholders like yourself, and go on the road. But, you know, that's to make sure that our shareholders are confident in what we're trying to execute on and that, you know, where we can, we want to improve liquidity for everybody, but we're not sellers. And, you know, I'm a net buyer. So, and the business itself is doing what we wanted to do at its core; the team is performing really well against a lot of very discreet objectives to drive value longer term for all of us. And so, if we think that the right thing to do for all the shareholders is to use liquidity to buy shares, then we'll do it.

So but.

But we will.

It's part of a very disciplined capital allocation.

I wanted to make sure that we continue to improve the flows that's why we did the stock split that's why we're making sure that we try and get out get out in the marketplace and see.

Shareholders like yourself.

And go on the road, but.

You know that's that's to make sure that that our shareholders are confident in what we're trying to execute on them.

But where we can we want to improve liquidity for everybody, but we're not sellers and.

Net buyer.

So.

And the business itself as.

Is doing what we wanted to do at its core the team is performing really well against a lot of very discreet.

Objectives.

To drive value longer term for all of us and so if we think that the right thing to do for all the shareholders is to use liquidity to buy shares and will do it.

Bryan King: I appreciate it. Thanks. Sure.

I appreciate it thanks.

Sure.

Bryan King: Thank you for your support. We have reached the end of the question and answer session, and I will now turn the call over to Bryan for closing remarks. Thank you. Well, we look forward to speaking with you all again when we report our first quarter results in early May. Additionally, as I alluded to just a minute ago, we are planning a multi-city, non-deal road show starting on the East Coast and covering parts of the Midwest during the last week of March. We also have several investor conferences scheduled for this spring. We appreciate everybody's time today, and we absolutely thank the 3,700 DSG associates for a great 2023. They put a lot into it.

Thank you for your support.

We have reached the end of our question and answer session and I will now turn the call over to Brian for closing remarks.

Thank you.

Well, we look forward to speaking with everyone again, when we report our first quarter results in early May.

Additionally, I alluded to just a minute ago, we're planning a multi city non deal roadshow, starting on the east coast and covering parts of the Midwest during the last week of March.

Also have an investor.

Several investor conferences scheduled for this spring.

We appreciate everybody's time today, and we absolutely think that 3700 DSG associates for a great 2023.

They put a lot into it.

Unknown Executive: And thank you. Have a great day. Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

And thank you have a great day.

Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.