Q1 2024 Distribution Solutions Group Inc Earnings Call

Operator: Good day, and welcome to the Distribution Solutions Group First Quarter 2024 Earnings Conference. At this time, all participants are in a listen-only mode.

Good day and welcome to the distribution solutions Group first quarter 2024 earnings Conference call.

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

Operator: We have a question and answer session following 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 Hoosier, with three-part advice. Sir, you may begin.

And a question and answer session will follow the formal presentation.

If anyone should require operator assistance joined 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 Stu.

Stu: Stephen Who's here with three part advisors, Sir you may begin.

Steven Hooser: Good morning, everyone, and welcome to the Distribution Solutions Group first quarter 2024 earnings 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 financial results slide deck that is posted on the company's website at investor.distributionsolutionsgroup.com. Please note that statements made 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 described.

Stu: Good morning, everyone and welcome to the distribution solutions group first quarter 2024 earnings call. Joining me on today's call, our DSD, Chairman and Chief Executive Officer, Bryan King and Executive Vice President and Chief Financial Officer, Ron Clayton <unk>.

Stu: In conjunction with today's call. We have provided our financial results slide deck that is posted on the company's website at Investor <unk> distribution solutions group Dot com.

Stu: Please note that statements made 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 described in.

Steven Hooser: 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, but we disclaim no obligation. Management will also refer to non-GAAP measures, and reconciliations to the nearest GAAP measures can be found at the end of our. The earnings release issued earlier today was posted on the investor relations section of our website.

Stu: 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 we may elect to update the forward looking statements, but disclaim no obligation to do so.

Stu: Management will also refer to non-GAAP measures and reconciliations to the nearest GAAP measures can be found at the end of our earnings release. The earnings release issued earlier today was posted on the Investor Relations section of our website.

Stu: A copy of the release has also been included in a current report on 8-K filed with the SEC.

Steven Hooser: A copy of the release has also been included in a current report on 8K filed with the FBI. Lastly, this call is being webcast on the Internet via the Distribution Solutions Group Investor Relations page on our website. A replay of the teleconference will be made available through May 16th, 2024. With that, I'd now like to turn the call over to Bryan King.

Stu: Lastly, this call is being webcast on the Internet via the distribution solutions group Investor Relations page on our website a replay of the teleconference will be made available through May 16, 2024 with that I'd now like to turn the call over to Bryan King Brian.

Bryan King: Thanks Steven and thank you all for joining us to review First Quarter 2024. I'll be starting on slide 4 to review the overall financial results. Our 2024 first quarter sales totaled $416 million, up 19.5% on strategic inorganic growth compared to the first quarter a year ago. As we signaled on our Q4 2023 call, DSG was up against double-digit comps in the first quarter of 2024 of nearly 14% and faced continued softness in certain end markets, which we will highlight later in the call.

Bryan King: Thanks, David and thank you all for joining us to review first quarter 2024.

Bryan King: I'll be starting on slide four to review overall financial results. Our 2024 first quarter sales totaled $416 million up 19, 5%.

Bryan King: Strategic inorganic growth compared to the first quarter a year ago as we signaled on our Q4 2023 call D. S. G was up against double digit comps in the first quarter of 2023 of nearly 14% and <unk>.

Bryan King: Face continued softness in certain end markets, which we will highlight later in the call.

Bryan King: Despite those continued pockets of softness, we maintained a positive organic trajectory on a two-year organic basis of 4.7%, which we acknowledge is below our expectation for organic growth that we require from our investment initiatives into the business when we use a longer time horizon.

Bryan King: Fight those continued pockets of softness we maintained a positive organic trajectory on a two year organic basis of four 7%, which we acknowledge is below our expectation for organic growth that were.

Bryan King: That we require from our investment initiatives into the business when we use a longer time horizon lens.

Bryan King: Consolidated EBITDA margins enjoyed a sequential improvement from 8.4% in the fourth quarter of 2023 to an adjusted EBITDA margin of 8.7% in the first quarter of 2024, but we're below where we expect them to be, partially because of the pockets of in-market softness, but also significantly influenced by the internal initiatives that we are executing, where there are near-term costs, but where real expense optimization and profitability and efficiency are getting un We continue to enjoy strong visibility into how those initiatives are reworking significant elements of our cost structure while visibly improving our value-added offering for our customers and customer-facing colleagues and refining the profitability discipline on that revenue across each of our three DSG verticals.

Bryan King: Consolidated EBITDA margins enjoyed a sequential improvement from eight 4% in the fourth quarter of 2023 to an adjusted EBITDA margin of eight 7% in the first quarter 2024, but were below where we expect them to be partially because of the pockets of end market softness, but also significantly influenced by the <unk>.

Bryan King: Initiatives that were executing where there are near term costs, but we're real expense optimization and profitability and efficiency is getting unlocked. We continue to enjoy strong visibility into how those initiatives are reworking significant elements of our cost structure, while visibly improving our value added offering for our.

Bryan King: <unk> and customer facing colleagues and refining the profitability discipline on that revenue across each of our three D. S. G verticals.

Bryan King: Today, I will reemphasize DSG's overarching goals and longer-term performance milestone objectives, reinforcing our confidence in the huge opportunity in front of us and the material progress we are making, even in the face of some marketplace softball. Accountability and Engagement, our collective team commitment. During our 2023 Investor Day last September, we shared that DSG's long-term value creation plans and programs were based on specific commercial growth These initiatives were, and continue to be, a bridge for us to grow into structurally higher margins while enjoying stronger organic growth and accelerating returns on invested capital over the next several years.

Bryan King: Today, I will reemphasize dsg's overarching goals and longer term performance milestone objectives, reinforcing our confidence and the huge opportunity in front of us and the material progress we are making even in the face of some marketplace softness and the accountability and engagement our collective team embraces.

Bryan King: During our 2023 Investor Day last September we shared the DSG has long term value creation plans and programs were based on specific commercial growth initiatives and process and structure optimization work streams.

Bryan King: These initiatives were and continue to be a bridge for us to grow into a structurally higher margins, while enjoying stronger organic growth and accelerating returns on invested capital over the next several years as.

Bryan King: As stated, our five-year goal is to increase total sales to over $3.3 billion, which our plan indicates will be driven about equally from organic and inorganic growth initiatives. And we expect that level of revenue will generate adjusted EBITDA in excess of $450 million and will significantly drive the returns on invested capital profile and earnings per share and free cash flow per share profiles of this highly value-added specialty distribution. All three of our verticals have a clear path with the assets we own today to deliver EBITDA margins consistent with our corporate objectives. Although we acknowledge that each of the three verticals currently enjoys a very different fully optimized structural EBITDA margin opportunity

Bryan King: As stated our five year goal is to increase total sales to over $3 $3 billion, which our plan indicates will be driven about equally from organic and inorganic growth initiatives and we expect that level of revenue will generate adjusted EBITDA in excess of $450 million. It will significantly drive the returns on invested capital.

Bryan King: It'll profile and earnings per share and free cash flow free cash flow per share profiles of its highly value added specialty distribution business.

Bryan King: All three of our verticals have a clear path with the assets, we own today to deliver EBITDA margins consistent with our corporate objective, although we acknowledge that each of the three verticals currently enjoy a very different fully optimized structural EBITDA margin opportunity.

Bryan King: We believe that the two acquisitions we have closed this year to consolidate with Lawson improve EBITDA margins and our return on invested capital. As we shared our detailed initiatives with investors last fall, I think it is important to hold ourselves accountable to our shareholder partners on our progression, acknowledging the pockets of in-market headwinds we have faced while offering discrete data points on the numerous initiatives that are confirming the foundation today for the exciting progression we expect will continue to unfold as we move DSG towards our defined future state. In January, we acquired Emergent Safety Supply, or ESS, under the Lawson Products banner.

Bryan King: We believe that the two acquisitions, we've closed this year to consolidate with Lawson improves EBITDA margins and our return on invested capital as we shared our detailed initiatives with investors last fall I think it is important to hold ourselves accountable with our shareholder partners on our progression acknowledging the pockets of end market headwinds.

Bryan King: We have faced while offering discrete data points on the numerous initiatives that are confirming the foundation today for the exciting progression. We expect will continue to unfold as we move D. S G towards our defined future state.

Bryan King: ESS is an example consistent with our inorganic investment objective of adding a commercial growth initiative, in this case, bolstering our safety offering to our MRO and OEM customers and expanding our existing VMI capabilities inside their facilities to offer a logical product category expansion requested by our customers and Salesforce. We believe it is one that is ubiquitous across our customer base, allowing for an increase in wallet share of existing customers and more earning opportunities and productivity for our Salesforce, allowing us to add some upgrades and talent depth in key areas of growth while augmenting and driving more opportunities for cross-selling, not only across our MRO offering but for our OEM relationships, where we recognize it would enhance our proposed MRO solution when introducing our MRO capabilities and categories to our OEM customer relationships.

Bryan King: In January we acquired emergent safety supplier Esf's under the Lawson Products' banner, yes.

Bryan King: <unk> is an example, consistent with our inorganic investment objective of adding a commercial growth initiatives. In this case bolstering our safety offering to our MRO and OEM customers and expanding our existing vms capabilities inside their facilities to offer a logical product category expansion requested by our customers.

Bryan King: And sales force. We believe it is one that is ubiquitous across our customer base, allowing for an increase in wallet share of existing customers and more earning opportunity and productivity for our sales force, allowing us to add some upgrades and talent depth in key areas of growth, while augmenting and driving more opportunities for cross selling now.

Bryan King: Only across our MRO offering, but for our OEM relationships, where we recognized it would enhance our proposed MRO solution, we're introducing our MRO capabilities in categories to our OEM customer relationships say.

Bryan King: Safety is a key category where our leadership team strongly believed that investing in an improved offering was an important organic growth acceleration opportunity through our existing relationships and service delivery models. We also announced the S&S Automotive Acquisition yesterday, which I will discuss in a moment. These two highly deliberate inorganic growth acquisitions highlight how we have identified opportunities within our DSG and specialty distribution relationships to engage businesses with product and service capabilities and deep customer relationships and marketplace presence.

Bryan King: Safety is a key category, where our leadership team strongly believes that investing in an improved offering was an important organic growth accelerating opportunity through our existing relationships and service delivery models.

Bryan King: We also announced <unk> automotive acquisition yesterday, which I will discuss in a moment.

Bryan King: These two highly deliberate inorganic growth acquisitions highlight how we have identified opportunities within our DSG and specialty distribution relationships to engage businesses with product and service capabilities and deep customer relationships and marketplace presence when combined with our existing network of offerings.

Bryan King: When combined with our existing network of offerings, this creates an enhanced DSG specialty offering improving and deepening our value proposition to our customers and allowing for improved sales optimization and cross-sell expansions focusing on our committed lens to driving higher structural returns across DSG, the vertical the acquisition is being acquired into, and higher structural returns on the acquisition itself. Reflecting on our capital allocation around acquisitions over the last 24 months.

Bryan King: This creates an enhanced ESG specialty offering improving and deepening our value proposition to our customers.

Bryan King: And allowing for improved sales optimization and cross sell expansions focusing on our committed lens to driving higher structural returns across ESG. The vertical the acquisition is being acquired into and higher structural returns on the acquisition itself.

Bryan King: Reflecting on our capital allocation around acquisitions over the last 24 months. We are excited about how they significantly enhance each of our verticals ability to accomplish our profitability objectives and customer engagement vision as well as drawing together the three verticals into a solutions focused DSG value proposition.

Bryan King: We are excited about how they significantly enhance each of our verticals' ability to accomplish our profitability objectives and customer engagement vision, as well as draw together the three verticals into a solutions-focused DSG value proposition. Looking across each of our specialty distribution verticals, we continue to progress dialogues with targeted acquisitions that add product or value-added capabilities, driving more scale to transform certain categories or lines of business to accelerate our efforts toward improved marketplace leadership and to generate meaningfully higher levels of free cash flow and returns on invested capital. ESS and S&S Automotive are great examples of strategic acquisitions that benefit our customers, sales teams, and shareholders.

Bryan King: Looking across each of our specialty distribution verticals, we continue to progress dialogues with targeted acquisitions that add product or value added capabilities driving more scale to transform certain categories or lines of business to accelerate our efforts towards improved marketplace leadership and to generate meaningfully.

Bryan King: Higher levels of free cash flow and returns on invested capital.

Bryan King: <unk> and SNS automotive are great examples of strategic acquisitions that benefits, our customers sales teams and shareholders the downstream impact.

Bryan King: The Downstream Impact of both acquisitions creates more customer engagement, more expertise in targeted product categories, and more solutions and services catered to our combined customers throughout, Expanded Cross-Selling Opportunities, and Better Sales Density. The outcome is positive, with higher productivity and compensation opportunities across each sales force while driving structurally higher EBITDA margins and returns on our invested capital. These downstream effects can be large and wide, and we believe they work toward creating durable and repeatable results and accelerate the organic growth rate of DSG.

Bryan King: Both acquisitions creates more customer engagement more expertise and targeted product categories and more solutions and services catered to our combined customers throughout expanded cross selling opportunities and better sales density.

Bryan King: The outcome is positive with higher productivity and compensation opportunity across each salesforce, while driving structurally higher EBITDA margins and returns on our invested capital. These downstream effects can be large and wide and we believed they work toward creating durable and repeatable results and accelerate the organic growth rate of DSG.

Bryan King: Turning to slide five, let's walk through key initiatives and in-market trends in each of our business verticals. Our MRO-focused business loss and products launched an important salesforce transformation in 2023 with a foundation built on a structure of approximately 900 high-producing and highly motivated field sales routes. We also expanded our inside sales team last fall to approximately 40 individuals from only a few and added 14 technical product specialists.

Bryan King: Turning to slide five let's walk through key initiatives and end market trends in each of our business verticals.

Bryan King: Our MRO focused business Lawson products launched an important salesforce transformation in 2023 with a foundation built on our structure of approximately 900 high producing and highly motivated field sales reps. We also expanded our inside sales team last fall to approximately 40 individuals from only a few.

Bryan King: And added 14 technical product specialists, we are in the early innings of this sales optimization program, which includes fine tuning our investments in working capital and technology tools to help our sales forces effectiveness and productivity as well as deliberate lens around designing and optimizing new sales territory.

Bryan King: We are in the early innings of this sales optimization program, which includes fine-tuning our investments in working capital and technology tools to help our sales force's effectiveness and productivity, as well as a deliberate lens around designing and optimizing new sales territories as we refocus our attention around driving opportunity for existing field sales reps and recruiting additional reps into a role with enhanced tools and opportunity. We are very pleased with early results as our productivity measured as sales reps per day increased 8% in quarter one over a year ago, on top of 18% and 15% improvements in the last two quarters of 2023.

Bryan King: As we refocus our attention around driving opportunity for existing field sales reps and recruiting additional reps into a role with enhanced tools and opportunity.

Bryan King: We are very pleased with early results as our productivity measured as sales reps per day increased 8% in quarter, one over a year ago on top of 18% and 15% improvements in the last two quarters of 2023.

Bryan King: We continue to analyze and leverage data to optimize our overall Salesforce network, including going live with our CRM tool in the first quarter, as well as an enhanced order entry tablet for our field sales reps to drive ease and productivity around placing customer orders and offering more insights to our salesperson about additional revenue opportunities to grow that customer. This full implementation of LAWSON CRM connects our entire sales force to the order management system.

Bryan King: We continue to analyze and leverage data to optimize our overall salesforce network, including going live with our CRM tool in the first quarter.

Bryan King: As well as an enhanced order entry tablet for our field sales reps to drive ease in productivity around placing customer orders and offering more insights to our salesperson about additional revenue opportunities to grow that customer.

Bryan King: This full implementation of loss in CRM connects our entire sales force into the order management system greatly improving our visibility into the sales organization and accelerating the ROI of our Salesforce transformation addressing our stated goal to improve both initial and structural earnings available to our sales force and.

Bryan King: Greatly improving our visibility into the sales organization and accelerating the ROI of our Salesforce transformation, addressing our stated goal to improve both the initial and structural earnings available to our Salesforce platform and enhance our service levels with our engaged customers while additionally driving a productivity lift that should improve our selling expense across our total revenue base and elevate our EBITDA margin structurally higher. As I mentioned, we are in the early stages of our progression, with defined milestones that should unfold this year and the next two, and we will continue to hold ourselves accountable, reporting consistently on this key initiative. In addition, Lawson continues to concentrate on product expansion and resources that customers truly value as part of our MRO service delivery intensive VMI offering.

Bryan King: Since our service levels with our engage customers, while additionally, driving our productivity lift that should improve our selling expense across our total revenue base and elevate our EBITA margins structurally higher.

Bryan King: As I mentioned, we are in the early stages of our progression with defined milestones that should unfold. This year in the next two and we will continue to hold ourselves accountable reporting consistently on this key initiative.

Bryan King: In addition, Lawson continues to concentrate on product expansion and resources that customers truly value as part of our MRO service delivery intensive via my offering.

Bryan King: We believe this is critical as we refine our product mix and increase our customer density, expertise, value-added tools, and capabilities to engage with new and existing customers. Our process and structure optimization efforts are improving how we go to market at Lawson and effectively utilize people, processes, and products. Lawson had a good first quarter, especially considering we were up against organic comp growth of over 19% reported in the prior year quarter. The two-year stack organic growth in the first quarter for Lawson Products was nearly 12%.

Bryan King: We believe this is critical as we refine our product mix and increased our customer density expertise value added tools and capabilities to engage with new and existing customers are processing structure optimization efforts are improving how we go to market it Lawson and effectively utilized people processes and.

Bryan King: Plus, we added a few million dollars of acquired sales from ESS for most of the first quarter. The biggest headwind to sustaining organic revenue growth this quarter was overwhelmingly government, where we have seen a delay in purchase orders, although we remain confident the dollars are there to be spent later this year. Yesterday, we announced another acquisition under the Lawson banner, S&S Automotive Group. S&S and our existing Kent Automotive business, which has enjoyed sustained leadership in our organic growth over the last few years, operate in large and growing markets in North America, such as auto collision repair and dealership aftermarket business. According to the National Automobile Dealers Association, there are 16,835 light vehicle dealerships in the United States.

Bryan King: <unk>.

Bryan King: <unk> had a good first quarter, especially considering we were up against organic comp growth of over 19% reported in prior year quarter.

Bryan King: The two year stack organic growth in the first quarter for Lawson products was nearly 12% plus.

Bryan King: Plus we added a few million dollars of acquired sales from <unk> for most of the first quarter. The biggest headwind is sustaining organic revenue growth. This quarter was overwhelmingly government, where we have seen a delay in purchase orders. Although we remain confident the dollars are there to be spent later this year.

Bryan King: Yesterday, we announced another acquisition under the loss in banner SNS automotive group SNS and our existing Kent automotive business, which has enjoyed sustained leadership in our organic growth. The last few years operating in large and growing markets in North America, such as auto collision repair and dealership app.

Bryan King: Market businesses. According to the National Automobile dealers Association. There are 16835 light vehicle dealerships in the United States. Those dealers wrote $264 million repair orders in 2023 with total part sales of $142 billion. Additionally.

Bryan King: Those dealers wrote 264 million repair orders in 2023, with total part sales of $142 billion. Additionally, only 34% of dealers have auto body shop capabilities. By adding S&S to the Kent offering, we can improve our customer value proposition with more SKUs and services tailored to this large market. Kent focuses primarily on collision repair centers in the US and Canada, where S&S focuses more on auto dealerships in the Midwest, where they have strong density and market share.

Bryan King: Only 34% of dealers have auto body shop capabilities.

Bryan King: By adding <unk> to the kit offering we can improve our customer value proposition with more skus and services tailored to this large market.

Bryan King: Can't focus primary focus is primarily on collision repair centers in the U S and Canada, whereas SNS focuses more on auto dealerships in the Midwest, where they have strong density and market share.

Bryan King: These business go-to-market models are similar, with both organizations offering value-added, high-touch customer engagement. They each have complementary product leadership that allows each company to credibly expand their product offering with their existing customers, significantly enhancing the organic growth opportunity. We believe increasing our market density, especially in the Midwest geographies and leveraging facilities and exceptional localized human capital will immediately increase our sales force productivity and improve our margin for our total automotive division.

Bryan King: These business go to market models are similar.

Bryan King: With both organizations offering value added high touch customer engagement.

Bryan King: They each have complementary product leadership that allows each company to credibly expand their product offering with their existing customers significantly enhancing the organic growth opportunity.

Bryan King: We believe increasing our market density, especially in the Midwest geographies and leveraging facilities and exceptional localized human capital will immediately increase our salesforce productivity and improve our margin for our total automotive division.

Bryan King: We are confident that combining Kent with S&S will allow us to drive our EBITDA margins for this business above our target margins for DSG and to drive our Kent and S&S returns on invested capital to specialty distribution market leadership levels. Our deliberate structural lift in the return profile and market leadership presence, with this acquisition of our automotive repair line of business inside of Lawson, is an exceptional example of what we have and expect to continue to accomplish with targeted strategic acquisitions at DSG. As expected, the first quarter returned double-digit EBITDA margins for JEXPRO Services.

Bryan King: We are confident that combining Kent with SNS will allow us to drive our EBITDA margins for this business above our target margins for DSG and to drive our kitten SNS returns on invested capital to specialty distribution market leadership levels are deliberate structural lift and the return profile and market leadership presence.

Bryan King: With this acquisition of our automotive repair line of business inside of Lawson is an exceptional example of what we have and expect to continue to accomplish with targeted strategic acquisitions at DSG.

Bryan King: As expected the first quarter returned to double digit EBITDA margins for <unk> Pro services, although the core business was down slightly compared to the prior year on tough comps sales grew sequentially by four 2% compared to the fourth quarter on comparable days, we also experienced strong double digit sequential and quarter over quarter.

Bryan King: Although the core business was down slightly compared to the prior year on tough comps, sales grew sequentially by 4.2% compared to the fourth quarter on comparable days. We also experienced strong double-digit sequential and quarter-over-quarter improvements in the sales and the aerospace and defense vertical. Also, in the A&D end markets, we are excited about the lift in the number of new projects and services, including new kidding awards and VMI plant production services.

Bryan King: Improvements in the sales in the aerospace and defense vertical also in the A&D end markets. We are excited about the lift in the number of new projects and services, including New Kitting Awards and Vms plant production services, we are winning and implementing new program awards faster than expected.

Bryan King: We are winning and implementing new program awards faster than expected, which builds our backlog and positions us well for the remainder of 2024 and beyond. It also gives us confidence about the enhanced value GEXPRO Services brings to its customers as part of DSG.

Bryan King: Which builds our backlog and positions us well for the remainder of 2024 and onto the future.

Bryan King: It also offers us confidence about the enhanced value Jeff's pro services brings to its customers as part of D. S. G and with the value added capabilities, we invested in with our last couple of years of tuck in acquisitions.

Bryan King: And with the value-added capabilities we invested in with our last couple of years of tuck-in acquisitions. And no one is more excited about the Hisco acquisition and its expanded capabilities, product lines, and strong geographic presence in Mexico than the Jexpro Services team, except perhaps Cesar and the Lawson team. Our technology and markets, which were such a drag during 2023 to profitability in the Jexpro Services division, especially in the last half of last year and in the first quarter of 2024, continue to be down compared to a year ago, dragging on EBITDA and EBITDA margin for the division, partly due to the tougher comps in the first part of 2023.

Bryan King: And no one is more excited about the history of acquisition and it has expanded capabilities product lines as strong geographic presence in Mexico, then the jacks Pro services team, we except perhaps saves are in the Lawson team, our technology end markets, which were such a drag during 2023 to profitability and the Jets Pro services Division.

Bryan King: Especially in the last half of last year in the first quarter of 2024 continue to be down compared to a year ago dragging on EBITDA and EBITDA margin for the division, partly due to the tougher comps in the first part of 2023.

Bryan King: However, we are encouraged to see that first quarter sales to our technology customers improved sequentially compared to the third and fourth quarters of 2023, citing an increase in new orders and hopefully messaging that we are past the trough of this semiconductor cycle. Regarding the semiconductor industry, as it was an important element of the profitability that we missed out on for most of last year and some of this first quarter, we hear that most companies are signaling trough-level sales in the first quarter, with auto chip sales reporting better than expected results and core industrial sales improving.

Bryan King: However, we are encouraged to see that first quarter sales to our technology customers improved sequentially compared to the third and fourth quarters of 2023, citing an increase in new orders and hopefully messaging, we're past the trough of the semiconductor cycle.

Bryan King: Regarding the semiconductor industry as it was an important element of the profitability that we missed out on for most of last year and some of this first quarter. We hear that most companies are signaling trough level sales in the first quarter with auto chip sales reporting better than expected results in core industrial sales improving.

Bryan King: It's also worth noting that our renewables business is slowly ramping upward with recent sequential improvements between the fourth quarter of 2023 and the first quarter of 2024, and our customers are reflecting confidence in the progression. Our overall confidence in the OEM business is supported by an increase in gross margins for year-over-year results and sequential margin improvement. On a sales comparison basis, we are past our toughest quarter comparisons of the year and are excited that our project services backlog is growing.

Bryan King: Worth, noting that our renewables business is slowly ramp upward with recent sequential improvements between the fourth quarter of 'twenty three in the first quarter of 'twenty, four and our customers are reflecting confidence in the progression.

Bryan King: Our overall confidence in the OEM business is supported by an increase in gross margins for year over year results and sequential margin improvements.

Bryan King: On a sales comparison basis, we're past our toughest quarter comparisons of the year and are excited that our project services backlog is growing well.

Bryan King: We're also excited to see a ramp in our new VMI program wins, market share growth, and wallet share expansion with many longstanding customers. On a sequential basis, all of our end markets are either stabilized or growing, which gives us more confidence year over year, and we expect sequential improvements as 2024 develops. Also, starting last year, our project-based businesses from the Frontier, Resolux, and SIS 2022 acquisitions started positioning us as strategic suppliers instead of competitors with those three now business units of Jexpro Services, which with our expanded capabilities and touch points brought by coming together, especially in a market like renewables that is seeing activity from customers precedent to a real revenue recovery from a tough year last year, is allowing us to expand our market share.

Bryan King: We're also excited to see a ramp in our new Vms program wins market share growth and wallet share expansion with many longstanding customers.

Bryan King: On a sequential basis all of our end markets are either stabilized or growing which gives us more confidence year over year, and we expect sequential improvement as 2024 develops.

Bryan King: Also starting last year, our project based businesses from the frontier reservoir and S. I S 2022 acquisitions, starting positioning us as strategic suppliers instead of competitors with those three now business units objects pro services, which with our expanded capabilities and touch points brought by coming together.

Bryan King: Especially in a market like renewables that is seeing activity from customers precedent to a real revenue recovery from a tough year last year is allowing us to expand our market share.

Bryan King: Those complementary tuck-in acquisitions enhance the expanded capabilities we now enjoy and will continue to benefit us in 2024 and beyond. As a refresher, adding those key channel partners offers us a more comprehensive and differentiated solution to a broader customer base, which supports our stated objective around JEXPRO Service's Margin Expansion Plan by doing more of the value-added work around the source product versus leaning more on being the leading OEM partner for speccing, sourcing, and managing Class C parts already in the form of a finished good product.

Bryan King: Those complementary tuck in acquisitions enhanced expanded capabilities, we now enjoy and we will continue to benefit us in 2024 and on.

Bryan King: As a refresher, adding those key channel partners offers us a more comprehensive and differentiated solution to a broader customer base, which supports our stated objective around Jeff's Pro services margin expansion plan by doing more of the value added work around the source product versus leaning more on being the leading OEM partner.

Bryan King: For spec ing sourcing and managing classy parts already in the form of a finished good product and.

Bryan King: The JEXPRO Services business unit also benefits from an expanded investment in e-commerce capabilities, adding several million dollars of incremental revenue from e-commerce orders from established aerospace and defense accounts. As we mentioned last year, Jexpro Services started the year with a healthy book-to-bill pipeline, growing it as it progressed into 2024. Turning to the Test Equity Group, the electronic and specialty production supplies categories remained soft in the first quarter and were impacted by difficult sales comparisons from this time last year, weighing on the OEM as well as the MRO parts of the test equity group. Weakness in sales into wireless communications and semiconductor production also weighed on the OEM and MRO parts of the group.

Bryan King: The <unk> services business unit also benefits from an expanded investment in ecommerce capabilities, adding several million dollars of incremental revenue from E. Commerce E. Commerce orders from established aerospace and defense accounts as we mentioned last year <unk> services started the year with a healthy book to Bill pipeline growing yet.

Bryan King: As it as it progressed into 2024.

Bryan King: Turning to test equity group, the electronic and specialty production supplies categories remained soft in the first quarter and were impacted by difficult sales comparisons from this time last year weighing on the OEM as well as the MRO parts of the test equity group weakness in sales into wireless communications and semi.

Bryan King: Conductor production also weighed on the OEM and MRO parts of the group the.

Bryan King: The biggest drag on revenue and profitability, though, for the test equity group continues to be test and measurement in markets, which became more challenged in late September by what appeared to be an anxiousness around continued spending on capital equipment as the extended interest rate tightening cycle started weighing on business confidence and on capital spending on R&D towards the end of last year. The revenue pressure and marketplace impacts were exacerbated by the product surplus in the channel by some of our suppliers and competitors after a period of supply chain disruption coming out of COVID that delayed delivery on customers' orders and perhaps over-messaged to manufacturers and suppliers about where demand was playing out.

Bryan King: The biggest drag on revenue and profitability. So for the test equity group continues to be the test and measurement in markets, which became more challenged in late September by what appeared to be an anxiousness around continued spending on capital equipment as the extended interest rate tightening cycle started weighing on business confidence.

Bryan King: And on capital spending on R&D towards the end of last year.

Bryan King: The revenue pressure and marketplace impacts were exacerbated by the product surplus in the channel by some of our suppliers and competitors. After a period of supply chain disruption coming out of Covid, the delay delivery on customers' orders and perhaps over message to manufacturers and suppliers about where demand was playing out.

Bryan King: A shift in customer behavior caught the channel with too much product on hand. As some tried to push excess product, profitability for most was doubly impacted by weakness in sales and unnatural discounting in temporary pricing activity, which only further stimulates unnatural demand and customer behavior and prolongs the disruptive period in the channel.

Bryan King: <unk>.

Bryan King: A shift in customer behavior caused the channel with too much product on hand.

Bryan King: As some tried to push excess product profitability for most was doubly impacted by weakness in sales and then a natural discounting and temporary pricing activity, which only further stimulates unnatural demand and customer behavior and prolongs the disruptive period in the channel with.

Bryan King: We thought much of the dynamic was done by the end of the year, but then we saw some of this behavior lingering in the first quarter. We certainly believe there was a better backdrop around inventory, pricing, and demand by the end of the quarter than existed throughout the fourth quarter. We believe trends will continue to normalize as the year progresses against weaker comparisons and less rebalancing of inventory in the channel, but it's taken longer than expected. But we don't have enough conviction to call this an inflection around a re-acceleration.

Bryan King: We thought much of the dynamic was done by the end of the year, but then saw some of this behavior lingering in the first quarter.

Bryan King: We certainly believe there was a better backdrop around inventory pricing and demand by the end of the quarter than existed throughout the fourth quarter.

Bryan King: We believe trends will continue to normalize as the year progresses against weaker comparisons and less rebalancing of inventory in the channel, but it has taken longer than expected.

Bryan King: We don't have enough conviction to call an inflection.

Bryan King: And a reacceleration there appears to be some stability, returning and the customer demand, which with cleaner inventories, we expect will help profitability.

Bryan King: There appears to be some stability returning in customer demand, which with cleaner inventories we expect will help profitability. Since the fourth quarter of 2023, we've identified more synergies opportunities bringing HSCO into the test equity group, as we now believe approximately $15 million of cost synergies will be realized during 2024 as we work through integrating HSCO and test equity, up from the $10 million that we indicated was our estimate at the end of 2023.

Bryan King: Since the fourth quarter of 2023, we've identified more synergy opportunities, bringing his go into this test equity group as we now believe approximately $15 million of cost synergies will be realized during 2024 as we worked through integrating <unk> and test equity up from the 10 million that we indicated was our estimate at the end of.

Bryan King: 2023.

Bryan King: Real progress is being made, although expenses associated with integration efforts are still flowing through, masking some of the underlying progress to structural margins. Hisco Mexico and TestEquity Mexico, for instance, have been integrated, and four facilities have been closed, as well as some duplicative warehouse headcount has been relieved. In the U.S. and Canada, another five consolidations have been completed, and two more are in process. This footprint rationalization saves over $1.2 million annually.

Bryan King: Real progress is being made although expenses associated with the integration efforts are still flowing through masking some of the underlying progress the structural margins <unk>, Mexico and test equity Mexico for instance have been integrated and four facilities have been closed as well as some duplicative warehouse head count has been relieved in the.

Bryan King: And Canada. Another five consolidations have been completed and two more are in process. This footprint rationalization saves over $1 $2 million annually. One of the facilities allows us to exit a less optimized one building that we believe will also release for $95 million of cash back to the balance sheet.

Bryan King: One of the facilities allows us to exit a less optimized, owned building that we believe will also release $4.95 million of cash back to the balance sheet as we sell it. Additionally, given the softness of sales in the T&M business, we are actively identifying and accelerating further opportunities for cost rationalization. Adjusted EBITDA for the test equity group improved but is down versus a year ago.

Bryan King: As we sell it. Additionally.

Bryan King: Additionally, given the softness of sales in the T. N M business, we are actively identifying and accelerating further opportunities for cost rationalization.

Bryan King: Adjusted EBITDA for the test equity group improved but is down versus a year ago. However, gross margins have stabilized despite sales headwinds over the last two quarters and gross margin initiatives identified during our underwriting across our recent acquisitions are starting to yield a meaningful impact at levels ahead of where we underwrote at this point.

Bryan King: However, gross margins have stabilized despite sales headwinds over the last two quarters, and gross margin initiatives identified during our underwriting across our recent acquisitions are starting to yield a meaningful impact at levels ahead of where we underwrote at this point, masked some by the noisiness of the soft end markets and the continued inventory channel messiness and softness in the test and measurement marketplace. We realize it will take several quarters to see the real run rate benefits of our structural changes to improve overall margins.

Bryan King: Mask some by the noisy ness of the soft end markets and the continued inventory channel Messiness and softness in the test and measurement marketplace.

Bryan King: We realize it will take several quarters to see the real run rate benefits of our structural changes to improved overall margins, but as an example by building the first layer of strategic pricing discipline in the pricing model escoe for their small customers differentiating pricing from their largest customers. We saw gross margins increased by almost 150 basis points. Okay.

Bryan King: But as an example, by building the first layer of strategic pricing discipline in the pricing model at Hisco for their small customers, differentiating pricing from their largest customers, we saw gross margins increase by almost 150 basis points across all of Hisco just in the first quarter. Test Equity Group is a big ship to turn, and we're very pleased with the HISCO acquisition, both in how this complementary and strategic acquisition improves the mix shift towards a more reoccurring OEM and MRO offering. As well as enhances the profitability and scale of this industrial technologies business unit with more consumables and lower price points that serve the electronics assembly and lab equipment customers.

Bryan King: Ross all of this go just in the first quarter.

Bryan King: <unk> equity group as it is a big ship to turn and we're very pleased with the <unk> acquisition. Both in how this complementary and strategic acquisition improves the mix shift towards a more reoccurring OE in OEM and MRO offering.

Bryan King: As well as enhances the profitability and scale of this industrial technologies business unit with more consumables and lower price points that serve the electronics Assembly and lab equipment customers.

Bryan King: With Hisco's addition, the steep engagement this business unit now has with Jexpro Services and Lawson is remarkably different as they work together with real added benefits to work to expand their collective engagements with their long-standing customers and new ones that have requested us to bid on contracts with a lens toward a broader DSG set of capabilities. With the HISCO addition, there is now a combined revenue growth initiative populated with a very capable team of sales leadership from each of the three verticals and some of the specialty business unit leaders.

Bryan King: With <unk> addition, the steep engagement. This business unit now has with <unk> services and loss and is remarkably different as they work together with real added benefits and working to expand our collective engagements with their long standing customers and new ones that have requested us to bid on contracts with the lens towards a broader DSG set of capabilities.

Bryan King: With the <unk> addition, there is now a combined revenue growth initiative populated with a very capable team of sales leadership from each of the three verticals and some of the specialty business unit leaders. There is also significant enthusiasm at loss in <unk> services leadership teams around the added footprint that <unk> brings.

Bryan King: There's also significant enthusiasm among the Lawson and Jaxpro Services leadership teams around the added footprint that HISCO brings with significant scale throughout North America, most specifically offering a platform for our customers requesting Jaxpro Services and Lawson to expand their engagements into Mexico. Distribution Solutions Group serves a broad, diverse set of end markets with over 180,000 customers. We deliver and ship from strategically located distribution and service centers to customers throughout North America and Europe, Asia, South America, and the Middle East.

Bryan King: With significant scale throughout North America, most specifically offering a platform for our customers requesting jets pro services and Lawson to expand their engagements into Mexico.

Bryan King: Distribution solutions group serves a broad diverse set of end markets with over 180000 customers, we deliver and shift from strategically located distribution and service centers to customers throughout North America, and Europe, Asia, South America, and the Middle East.

Bryan King: Our decentralized operations that maintain brand identity and integrity, coupled with an integrated growth platform, offer DSG's customers access to unique, differentiated, high-touch products and solutions, sourcing advantages, and expertise through businesses that leverage best practices to deliver world-class service to our customers every day. With that, I'd like to turn the call over to Ron to walk through the financials. Thank you, Bryan, and good morning, everyone.

Bryan King: Our decentralized operations that maintain brand identity and integrity, coupled with an integrated growth platform offer dst's customers access to unique differentiated high touch products and solutions sourcing advantage and expertise through businesses that leverage best practices to deliver world class service to our customers.

Bryan King: Every day with that I'd like to turn the call to Ron to walk through the financials.

Ron: Thank you, Brian and good morning, everyone turning to slide five I will first summarize our business, which includes our acquisitions for the trailing 12 months, Washington represents 31% of total DSG revenue <unk> services, 23% and the test equity group represents 46%.

Ronald J. Knutson: Turning to slide 5, I will first summarize our business, which includes our acquisitions for the trailing 12 months. Lawson represents 31% of total DSG revenue, Jaxpro Services 23%, and the Test Equity Group represents 46% of revenue. Our run rate adjusted revenue is now approximately $1.73 billion, and as Bryan mentioned, we serve over 180,000 customers across more than 500,000 SKUs. Now turning to slide 6, I'll summarize the reported results for the first quarter, and then I'll break out each reporting segment.

Ronald J. Knutson: <unk> of revenues.

Ronald J. Knutson: Our run rate adjusted revenue is now approximately 173 billion and as Brian mentioned, we serve over 180000 customers across more than 500000 skus.

Ronald J. Knutson: Now turning to slide six I'll summarize the reported results for the first quarter and then I'll break out each reporting segment.

Ronald J. Knutson: Consolidated revenue for the quarter was $416.1 million. This represents an increase of 67.8 million, or 19.5%, primarily driven by the 2023 and 2024 acquisitions. Excluding the acquisitions, organic sales declined by 8.6% on a comparable day basis, but grew 4.7% on a two-year stacked basis.

Ronald J. Knutson: Consolidated revenue for the quarter was $416 1 million. This represents an increase of $67 8 million or 19, 5%, primarily driven by the 2023 and 2024 acquisitions.

Ronald J. Knutson: Excluding the acquisitions organic sales declined by eight 6% on a comparable day basis. However grew four 7% on a two year stacked basis.

Ronald J. Knutson: The organic decline versus a year ago was driven primarily within the test and measurement business and very strong comps from a year ago in all verticals.

Ronald J. Knutson: The organic decline versus a year ago was driven primarily within the test and measurement business and very strong comps from a year ago in all verticals. On a sequential basis versus the fourth quarter of 2023, organic sales grew by 2.1% as we saw several end markets, such as technology, strengthen sequentially and also realize continued strong sales in aerospace and defense.

Ronald J. Knutson: On a sequential basis versus the fourth quarter of 2023 <unk>.

Ronald J. Knutson: Organic sales grew by two 1% as we saw several end markets such as technology strengthened sequentially and also realize continued strong sales in aerospace and defense.

Ronald J. Knutson: Q1 of 2024 reflected growth in net margin dollars of $2.2 million versus the fourth quarter of 2023. As indicated on the Q4 2023 earnings call, we expected margin pressure in the first half of 2024. While the quarter ended with softer sales, our margin profile came in line with our near-term expectations. For the quarter, we generated adjusted EBITDA of $36.1 million, or 8.7% of sales, a sequential improvement over 8.4% in Q4, and I'll expand further at the segment level here in a minute.

Ronald J. Knutson: Q1 of 2024 reflected growth in net margin dollars of $2 2 million versus the fourth quarter of 2023.

Ronald J. Knutson: As indicated on the Q4 2023 earnings call, we expected margin pressure in the first half of 2024.

Ronald J. Knutson: While the quarter ended with softer sales or margin profile came in line with our near term expectations.

Ronald J. Knutson: For the quarter, we generated adjusted EBITDA of $36 1 million or eight 7% of sales a sequential improvement over eight 4% in Q4.

Ronald J. Knutson: I'll expand further at the segment level here in a minute.

Ronald J. Knutson: We reported operating income of $2.8 million for the quarter, net of $10.7 million of acquisition-related and tangible amortization, and $16.2 million of aggregate costs from stock-based compensation, acquisition Severance and Retention-related Expenses, Merger and Acquisition Costs, and other non-recurring items. Adjusted operating income was $29.8 million as compared to $32.8 million a year ago quarter and $28 million in the fourth quarter of 2023. We reported a GAAP diluted loss per share of 11 cents for the quarter, inclusive of higher depreciation and amortization and a valuation allowance on certain deferred tax assets, compared to earnings per share of 14 cents a year ago.

Ronald J. Knutson: We reported operating income of $2 8 million for the quarter net of $10 7 million of acquisition related intangible amortization and $16 2 million of aggregate costs from stock based compensation.

Ronald J. Knutson: Acquisitions, severance and retention related expenses merger and acquisition costs and other nonrecurring items.

Ronald J. Knutson: Adjusted operating income was $29 8 million as compared to $32 8 million a year ago quarter, and 28 million in the fourth quarter of 2023.

Ronald J. Knutson: We reported GAAP diluted loss per share of 11 for the quarter inclusive of higher depreciation and amortization and evaluation allowance on certain deferred tax assets compared to earnings per share of <unk> 14 cents in the year ago.

Ronald J. Knutson: Adjusted Diluted EPS was $0.25 for the quarter on 4.2 million more shares outstanding than a year ago. Turning to slide 7, let me now comment briefly on each of the segments. Starting with the loss in products, sales were 118.2 million, down 4.2% on comparable days, primarily from very strong comps a year ago of nearly 20%. As compared to the fourth quarter, sales increased 7.6% or 4.2% on a same-day basis.

Ronald J. Knutson: Adjusted diluted EPS was <unk> 25 for the quarter on $4 2 million more shares outstanding than a year ago.

Ronald J. Knutson: Turning to slide seven let me now comment briefly on each of the segments.

Ronald J. Knutson: Starting with Lawson products sales were $118 2 million down four 2% on comparable days, primarily from very strong comps a year ago of nearly 20%.

Ronald J. Knutson: As compared to the fourth quarter sales increased seven 6% or four 2% on a same day basis.

Ronald J. Knutson: This growth was driven by the acquisition of Emergent Safety Supply in January, which contributed approximately $2.3 million in sales in the first quarter, plus organic daily growth of 2.2%. Growth continues both over a year ago and sequentially within our strategic and Kent automotive customers, offset by softening sales due to the loss in core customers. As Bryan highlighted, Lawson is coming off of a really strong 2023, all while continuing to invest in its business to strategically position itself for long-term success. We are still in the early innings of implementing initiatives to help our sales team become more productive while fine-tuning our sales investments to grow sales.

Ronald J. Knutson: This growth was driven by the acquisition of emergent safety supply in January which contributed approximately $2 3 million in sales in the first quarter plus organic daily growth of two 2%.

Ronald J. Knutson: Growth continues both over a year ago and sequentially within our strategic and Kent automotive customers offset by softening sales to the loss in core customers.

Ronald J. Knutson: As Brian highlighted Lawson is coming off of a really strong 2023, all while continuing to invest in its business to strategic position itself for long term success.

Ronald J. Knutson: We are still in the early innings of implementing initiatives to help our sales team become more productive while fine tuning our sales investments to grow sales.

Ronald J. Knutson: We're very pleased with the initial improvement in our sales rep productivity, resulting in an 8% lift this quarter, on top of 18% and 15% realized in the last two quarters of 2023. We have open field sales rep positions that we are actively recruiting for in the right territories that should help drive sequential sales growth in future quarters. For the quarter, Lawson realized adjusted EBITDA of $13.4 million, or 11.4% of sales. While this is down versus a year ago due to lower sales in our 2023 investments, sequentially adjusted EBITDA grew by one million with a slight margin expansion. Turning to Jaxpro Services on slide 8.

Ronald J. Knutson: We're very pleased with the initial improvement in our sales rep productivity, resulting in an 8% lift this quarter on top of 18% and 15% realized in the last two quarters of 2023.

Ronald J. Knutson: We have open field sales rep positions that we are actively recruiting for in the right territories that should help drive sequential sales growth in future quarters.

Ronald J. Knutson: For the quarter Lawson realized adjusted EBITDA of $13 4 million or 11, 4% of sales.

Ronald J. Knutson: While this is down versus a year ago quarter on lower sales in our 2023 investments sequentially adjusted EBITDA grew by $1 million with a slight margin expansion.

Ronald J. Knutson: Turning to <unk> services on slide eight total sales for the quarter decreased two 3% to $98 7 million. However, increased four 2% on comparable days from the fourth quarter of 2023.

Ronald J. Knutson: Total sales for the quarter decreased 2.3% to $98.7 million, but they increased 4.2% on comparable days from the fourth quarter of 2023. As discussed in the past, comps against the prior year are tough given the flattening of sales and the technology end market in 2023. That vertical was down nearly 26% from a year ago quarter. However, we are seeing signs of improvement as Q1 2024 sales within that end market exceeded sales in both Q3 and Q4 2023 on a standalone basis. 2023 saw global semiconductor spending decline roughly 10% as consumer electronics and automobile production drove softness in supply chains adjusted, which certainly is impacting our year-over-year comparison.

Ronald J. Knutson: As discussed in the past comps against the prior year, our tough given the flattening of sales in the technology end market in 2023.

Ronald J. Knutson: That vertical was down nearly 26% from a year ago quarter. However, we are seeing signs of improvement in Q1 2024 sales within that end market exceeded sales in both Q3 and Q4 2023 on a stand alone basis.

Ronald J. Knutson: <unk> 2023 saw global semiconductor spending declined roughly 10% as consumer electronics and automobile production drove softness in supply chains, adjusted which certainly is impacting our year over year comparisons.

Ronald J. Knutson: Two acquired businesses would sell into the renewable space and also put pressure on year-over-year comps. Excluding the technology and renewables and markets, sales grew 3% over a year ago quarter and 4.2% over Q4, giving us additional confidence for the remainder of 2024. Jacksboro Services has continued to see strong demand in the aerospace and defense vertical, up 24% over a year ago and 15% over Q4. We continue to invest in the business, attracting new customers and new opportunities within existing customers.

Ronald J. Knutson: You acquired businesses, which sell into the renewable space also put pressure on year over year comps.

Ronald J. Knutson: Excluding the technology and renewables end markets sales grew 3% over a year ago quarter, and four 2% over Q4, giving us additional confidence for the remainder of 2024.

Ronald J. Knutson: <unk> services has continued to see strong demand in the aerospace and defense vertical being up 24% over a year ago and 15% over Q4.

Ronald J. Knutson: We continue to invest in the business, attracting new customers and new opportunities within existing customers. However, we are cautious about certain weaker markets in those more sensitive to current macroeconomic issues.

Ronald J. Knutson: However, we are cautious about certain weaker markets and those more sensitive to current macroeconomic issues. As expected, through some modest recovery in sales along with a focus on gross margin improvements and cost controls, we returned to double-digit margins for this quarter. Jacksonville Services EBITDA was $10.8 million, or 11% of sales, despite margin pressure of approximately $1.7 million from the technology vertical and the acquired businesses supporting renewables.

Ronald J. Knutson: As expected through some modest recovery in sales along with a focus on gross margin improvements and cost controls, we returned to double digit margins for this quarter.

Ronald J. Knutson: <unk> services, EBITDA was $10 8 million or 11% of sales despite margin pressure of approximately $1 7 million from the technology vertical and the acquired businesses supporting renewables.

Ronald J. Knutson: Lastly, I will turn to Tax Equity Group on slide 9. Q1 sales grew 74.3% to $187.1 million, an increase of $79.8 million driven by the 2023 acquisition of Hisco. However, excluding Hisco, test equity sales were down 14.6% in Q1 and 6.5% on a comparable day basis versus Q4, primarily driven by continued weakness in the test and measurement business.

Ronald J. Knutson: Lastly, I will turn that tax equity group on slide nine.

Ronald J. Knutson: Q1 sales grew 74, 3% to $187 1 million, an increase of $79 8 million driven by the 2023 acquisition of <unk>.

Ronald J. Knutson: Excluding hesco taxed equity sales were down 14, 6% in Q1, and six 5% on a comparable day basis versus Q4, primarily driven by continued weakness in the test and measurement business.

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 associated with continued higher interest rates and an imbalance of demand against the improved supply chain disruptions from a year ago. Excluding the test and measurement market, sales grew nearly 1% over Q4 on three additional selling days. Test equities adjusted EBITDA for the quarter was $11.6 million, or 6.2% of sales.

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 associated with continued higher interest rates and an imbalance of demand against the improved supply chain disruptions from a year ago.

Ronald J. Knutson: Excluding the test and measurement market sales grew nearly 1% over Q4 and three additional selling days.

Ronald J. Knutson: Test equities adjusted EBITA for the quarter was $11 6 million or six 2% of sales.

Ronald J. Knutson: With the expected pressure on sales, the business has stabilized from a margin perspective. We are actively taking actions to protect our margins within the test equity group and also realizing savings from the integration of HSCO. As we think about the remainder of 2024 for test equity, we will continue to focus on the integration of HSCO into test equity.

Ronald J. Knutson: With the expected pressure on sales the business has stabilized from a margin perspective, we are actively taking actions to protect our margins within the test equity group and also realizing savings from the integration of his scope.

Ronald J. Knutson: As we think about the remainder of 2024 for test equity we will continue to focus on the integration of his go in test equity.

Ronald J. Knutson: We remain committed to sequentially improving our margin profile as 2024 develops through higher sales, synergies to be realized on the combined company, and proactively rebalancing our cost structure. Between the merger savings and other cost normalization, we're focused on delivering approximately $15 million of cost savings in 2024. We anticipate a stronger second half of 2024 for the test equity group as we continue to integrate HSCO and some additional pickup of capital project type spending.

Ronald J. Knutson: We remain committed to sequentially improving our margin profile is 'twenty 'twenty four develops through higher sales synergies to be realized on the combined company and proactively re balancing our cost structure.

Ronald J. Knutson: Between the merger savings and other cost normalization, we're focused on delivering approximately $15 million of cost savings in 2024.

Ronald J. Knutson: We anticipate a stronger second half of 'twenty 'twenty four for the test equity group as we continue to integrate hesco and some additional pickup of capital project type spending.

Ronald J. Knutson: Moving on to slide 10, we ended the quarter with approximately $284 million of liquidity, including $85.6 million of cash and $198.3 million under our existing credit facility. A portion of that availability has now been utilized to fund the purchase of S&S Automotive.

Ronald J. Knutson: Moving on to Slide 10, we ended the quarter with approximately $284 million of liquidity, including $85 6 million of cash and $198 3 million under our existing credit facility.

Ronald J. Knutson: A portion of that availability has now been utilized to fund the purchase of SNS automotive.

Ronald J. Knutson: We continue to focus on strengthening our balance sheet and ended the first quarter at a leverage rate of 3.0 times. The acquisition of S&S Automotive subsequent to the quarter does not significantly change our leverage profile given the strong double-digit acquired EBITDA of that business. Although we continue to support a robust working capital investment, we are carefully managing inventories, accounts receivables, and accounts payables. Our cash conversion ratio, defined as adjusted EBITDA less the change in working capital and less CAPEX divided by adjusted EBITDA, was nearly 110% on a trailing 12-month basis and approximately 75% for the first quarter. Net capital expenditures, including rental equipment, were $2.9 million for the first quarter.

Ronald J. Knutson: We continue to focus on strengthening our balance sheet and ended the first quarter at a leverage rate of 3.0 times.

Ronald J. Knutson: The acquisition of SNS automotive subsequent to the quarter does not significantly change our leverage profile given the strong double digit acquired EBITDA of that business.

Ronald J. Knutson: Although we continue to support a robust working capital investment we are carefully managing inventories accounts receivables and accounts payable.

Ronald J. Knutson: Our cash conversion ratio defined as adjusted EBITDA less the change in working capital and less Capex divided by adjusted EBITDA was nearly 110% on a trailing 12 month basis and approximately 75% for the first quarter.

Ronald J. Knutson: Net capital expenditures, including rental equipment were $2 9 million for 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. Before I turn it back to Bryan, I'd like to make some comments on how we see the remainder of 2024 developing. As we've discussed over the past two quarters, we were up against very tough organic sales comps, with Q1 of 2023 having been up nearly 14%. And Q2 2023 organic sales were up nearly 5%.

Ronald J. Knutson: We expect full year capex to be in the range of $16 million to $20 million or approximately 1% of revenue in 2024.

Ronald J. Knutson: Before I turn it back to Brian I'd like to make some comments on how we see the remainder of 2020 for developing.

Ronald J. Knutson: As we've discussed over the past two quarters, we were up against very tough organic sales comps with Q1 of 2023, having been up nearly 14%.

Ronald J. Knutson: Q2, 2023 organic sales were up nearly 5%.

Bryan King: Given some of the sales pressures that we continue to see, in particular in the test and measurement business, offset by some strengthening in other end markets, we expect Q2 organic sales to be flat to down low single digits as compared to a year ago, but up sequentially from Q1 of this year. As we make traction on many of our initiatives in 2024, and as comps against the prior year soften, we would expect organic sales growth to turn positive starting in the second half.

Ronald J. Knutson: Given some of the sales pressures that we continue to see in particular in the test and measurement business offset by some strengthening in other end markets. We expect Q2 organic sales to be flat to down low low single digits as compared to a year ago, However up sequentially from.

Bryan King: Q1 of this year.

Bryan King: As we make traction on many of our initiatives in 2024 and as comps against the prior year soften we would expect organic sales growth to turn positive starting in the second half.

Bryan King: 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 realize Q1 margin expansion over Q4, our focus continues to be on improving margin profiles within all of our segments on a sequential quarterly basis. I'll now turn the call back over to Bryan. Thank you, Ron.

Bryan King: To achieve our internal sales plans, we will need some normalization of various end markets in some recovery of customer capital related project spending.

Bryan King: While we realize Q1 margin expansion over Q4, our focus continues to be on improving margin profiles within all of our segments on a sequential quarterly basis.

Bryan King: I'll now turn the call back over to Brian.

Bryan King: Thank you Ron.

Bryan King: The first quarter met our near-term targets, especially given the continued softness in the several end markets highlighted. And we're pleased to see positive trends in many verticals that have been under pressure for several quarters. Turning to slide 11, DSG's Capital Allocation Framework remains disciplined and flexible.

Bryan King: The first quarter met our near term targets, especially given the continued softness in several end markets highlighted and we're pleased to see positive trends in many verticals that have been under pressure for several quarters.

Bryan King: Turning to slide 11, Dsg's capital allocation framework remains disciplined and flexible.

Bryan King: Encouraging healthy competition for capital across our business In Core, we believe in the compounding effect of cash flow reinvestment in the business on a per share basis. With a focus on bridging to higher structural margins, we believe that inorganic growth provides strategic opportunities for bolt-on acquisitions that provide scale, geographic density, new customer channels, cross-sell opportunities, and product or service level category expansion, all with an objective to enjoy sustained and structurally higher returns on invested capital, more driven by organic growth than inorganic growth as the platform matures. Finally, the capital allocation equation would not be complete without focusing on prudent debt pay-downs and opportunistic share repurchases.

Bryan King: Encouraging healthy competition for capital across our businesses at the core we believe in the compounding effect of cash flow reinvestment in the business on a per share basis with a focus on bridging to higher structural margins. We believe that inorganic growth provides strategic opportunities for bolt on acquisitions that provide a scale.

Bryan King: Geographic density new customer channels cross sell opportunities and product or service level category expansion, all with an objective to enjoy sustained and structurally higher returns on invested capital more driven by organic growth and inorganic growth as the platform matures.

Bryan King: Finally, the capital allocation equation would not be complete without focusing on prudent debt paydowns and opportunistic share repurchases. These allow us to rebalance the company's weighted average cost of capital and return capital to shareholders, especially as the platform matures, combining our asset light model and increasing working.

Bryan King: These allow us to rebalance the company's weighted average cost of capital and return capital to the shareholders, especially as the platform matures. Combining our asset-light model and increasing working capital efficiencies improves our overall liquidity position, allowing us to reduce our net borrowing. Let me wrap up my comments on slide 12. The first quarter showed sequential top line and bottom line progress against challenging prior year sales comparisons and some very real pockets of soft demand.

Bryan King: Capital efficiencies improves our overall liquidity position, allowing us to reduce our net borrowings.

Bryan King: Let me wrap up my comments on slide 12.

Bryan King: The first quarter showed sequential topline and bottomline progress against challenging prior year sales comparisons and some very real pockets of soft demand.

Bryan King: Lawson had solid margins as we continued to dial in a number of the key initiatives and acquisitions for our longer-term opportunity to take this unique VMI offering to structurally higher margins. Check Pro Services returned to double-digit margins as expected and enjoyed seeing its collection of in-market verticals firm up confidence in their OEM schedules for the back half of the year based on communication with us, building backlog, and excitedly, we saw new programs indicate that organic revenue growth based on market share wins is happening.

Bryan King: Lawson had solid margins as we continue to dial in a number of the key initiatives and acquisitions for our longer term opportunity to take this unique via my offering to structurally higher margins.

Bryan King: <unk> Pro services returned to double digit margins as expected and enjoyed seeing its collection of end market verticals firm up confidence in their OEM schedules for the back half of the year based on communication with US building backlog and excitedly, we saw new programs indicate that organic revenue growth based on market share wins as.

Bryan King: Happening.

Bryan King: Enhanced by our DSG platform capabilities and the acquisitions that we have added to the platform to improve our value proposition, and the Test Equity Group's margins stabilized despite continued in-market challenges, while the heavy lifting integration is progressing as scheduled while yielding more synergy cost wins, and the commercial confidence in what HSCO brings to DSG continues to build across all the verticals. All three leadership teams in these verticals have been challenged by the environment we are in and the number of value-unlocking initiatives we are working with them on.

Bryan King: Enhanced by our DSD platform capabilities and the acquisitions that we've added to the platform to improve our value propositions.

Bryan King: And the test equity group's margin stabilized. Despite continued end market challenges, while the heavy lifting integration is progressing as scheduled while yielding more synergy cost wins and the commercial confidence in what <unk> brings to DST continues to build across all the verticals.

Bryan King: All three leadership teams on these verticals have been challenged with the environment, we're in and the number of value unlocking initiatives. We are working with them on I want to personally thank them and their colleagues for the consistent effort and value creating accomplishments they are delivering for us the shareholders and how accountable the collective team is holding each other.

Bryan King: I want to personally thank them and their colleagues for the consistent effort and value-creating accomplishments they are delivering for us, the shareholders, and how accountable the collective team is holding each other accountable. We're very pleased with the hard work and progress coming out of our corporate development team on acquisitions that provide DSG with product and solution expansion and extensions in our business unit. And their collaboration with the business unit leadership teams as they work to facilitate an acquisition all the way through its integration.

Bryan King: They're too.

Bryan King: We're very pleased with the hard work and progress coming out of our corporate development team on acquisitions that provide DSG with product and solution expansion and extensions in our business units and with their collaboration with the business unit leadership teams as they work to facilitate an acquisition.

Bryan King: All the way through its integration.

Bryan King: Our M&A playbook is active, and we are excited about our current pipeline to continue to deliver products largely directly sourced. [inaudible] for our shareholder partners, our customers, and importantly, our DSG colleagues. Additionally, as I highlighted, because of the continued evidence we see and customers acknowledge for expanded opportunities for cross-selling, spanning our premier specialty distribution company, with great enthusiasm, we have expanded and dedicated more resources to a cross-business unit commercial initiative to grow cross-selling revenue and also to leverage value-added capabilities to improve the success of each vertical in their own marketplace. As DSG's Chairman, CEO, and largest affiliate shareholder, we fully align with our public investor partners to drive long-term value creation for our shareholders.

Bryan King: Our M&A playbook is active and we are excited about our current pipeline to continue to deliver largely directly sourced extremely commercially enhancing high return on invested capital accretive acquisitions that fit our objective to build a best in class high value high touch specialty distribution business for our shares.

Bryan King: Holder partners, our customers and importantly, our DSG colleagues.

Bryan King: Additionally, as I highlighted because of the continued evidence we see in customers acknowledge for expanded opportunities for cross selling spanning our premier specialty distribution company with great enthusiasm, we've expanded and dedicated more resources to a cross business unit commercial initiative to grow cross selling revenue and also.

Bryan King: To leverage value added capabilities to improve the success of each vertical and their own marketplaces.

Bryan King: As Dst's, chairman and CEO and largest affiliates shareholder we fully align with our public investor partners to drive long term value creation for our shareholders Investor outreach continues to be our focus.

Operator: Investor Outreach continues to be our focus. We will attend the Barrington and KeyBank conferences in May and the East Coast Ideas Conference in New York in June. With that, Operator, we'd like to open the call for questions. Thank you. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question, and you may press star 2 if you would like to remove your question from the queue.

Operator: We will attend the Barrington and Keybanc conferences in May and the East Coast ideas Conference in New York in June.

Operator: With that operator wed like to open the call for questions.

Operator: Thank you at this time, we will be conducting our question and answer session.

Operator: If you would like to ask a question. Please press star one on your telephone keypad.

Operator: Confirmation tone will indicate your line is in the question queue and you.

Operator: You May press Star two if you would like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we poll for questions. Thank you. Our first question is coming from Tommy Moll with Steven. Your line is: Good morning, and thank you for taking my question. Good morning, Tommy.

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

Thomas Allen Moll: One moment, please while we poll for questions.

Thomas Allen Moll: Thank Keith.

Operator: Our first question is coming from Tommy Moll with Stephens, Inc. Your line is life.

Thomas Allen Moll: Good morning, and thank you for taking my questions.

Thomas Allen Moll: Tommy Good morning, Tommy.

Thomas Allen Moll: I wanted to start on S&S. I presume that was a directly sourced deal. So any context you could give us on the relationship there, how the deal came to you, and then also just the go forward on integration. And while I'm at it, Bryan, you said some complimentary things about your development team. You want to put a number on how many more deals you'll get over the finish line this year? It sounds like the pipeline is full. Oh, yeah. Thanks, Tommy.

Thomas Allen Moll: I wanted to start on SNS.

Thomas Allen Moll: That was a directly sourced steel so any context, you could give us on a relationship there how the deal came to you.

Thomas Allen Moll: And then also just the go forward on integration.

Speaker Change: And while I'm at it Brian you said some.

Speaker Change: Complementary things about your.

Thomas Allen Moll: <unk> development team you want to put a bogey on how many more deals youll get over the finish line. This year it sounds like the pipeline is full.

Thomas Allen Moll: Yeah.

Speaker Change: Thanks, Bobby.

Speaker Change: Hi, all.

Bryan King: Yeah. Yeah. I'll start with the S&S, and I'll let Ron add some additional color here.

Thomas Allen Moll: Let's start with the asset out in the outlet Ron add some additional color here, but.

Bryan King: But so the Kent Automotive Division, which was something that was bought, Ron, maybe 20 years ago or so. Yeah, 20, yeah, 20 plus, yeah, over 20 years ago is a kind of a line of business inside of the Lawson Products business model. Very similar, but just a largely discrete set of SKUs for collision and maintenance repair work on cars.

Bryan King: So the Kent Automotive Division, which was something that was bought Ron maybe 20 years ago.

Bryan King: Yes, 20, plus.

Bryan King: Over 20 years ago is kind of a line of business inside out.

Bryan King: The Lawson products business model very similar.

Bryan King: But just.

Bryan King: Largely discrete set of Skus for <unk>.

Bryan King: Collision and maintenance repair work on.

Bryan King: And S&S was the best competitor that was competing with us in the Midwest. And they had built a really strong, dense market share. They started in the 60s, I think, early 1960s.

Bryan King: Automotive.

Bryan King: And after that was the best competitor.

Bryan King: That was competing with us in the Midwest and they had built a really strong market share. They were started in the sixties I think early sixties.

Bryan King: Two families owned them, and the operating family that had kind of taken over from the original founding family had done an extremely good job running the business. And so we started a dialogue with them maybe a couple of years ago, and this has taken quite a long time and a lot of time on both sides to try and work through getting a transaction done. But it was so important to build value in the Kent Automotive Division that our leadership team, our corporate development team, and the sellers stayed committed to the process. So,

Bryan King: Two families that own them.

Bryan King: And the operating family that.

Speaker Change: Got it.

Bryan King: I had kind of taken over from the original founding family have done an extremely good job running the business.

Bryan King: And so we started a dialogue with them maybe a couple of years ago.

Bryan King: And this has taken quite a long time and a lot of time on both sides to try and work through getting a transaction done.

Bryan King: But it was so important to building value in the Kent Automotive Division.

Bryan King: Our leadership team and our corporate development team.

Bryan King: And the sellers stayed committed to the process.

Bryan King: So where we couldnt be more excited about an acquisition.

Bryan King: We couldn't be more excited about an acquisition that we've made over the last several years. This one took a lot of effort from a lot of people, not to take anything away from others that we've done, but yes, it was a direct source, it was direct dialogue, there were lots of nuances to work through, but it provides a tremendous amount of EBITDA margin uplift and strategically an opportunity for complementary product leadership to drive structurally higher organic revenue opportunities for both sides over the coming years.

Bryan King: We've got over the last several years. This one took a lot of effort and a lot of people not to take anything away from others that we've done but yes. It was directs the worse it was direct dialogue.

Bryan King: There were lots of nuances to work through.

Bryan King: But it provides a tremendous amount of EBITDA margin uplift.

Bryan King: And strategically.

Bryan King: An opportunity for complementary product leadership to.

Bryan King: Drive structurally higher.

Bryan King: Organic revenue opportunity for both sides.

Bryan King: Over the coming years.

Bryan King: As we've started to do more work on Lawson products, and I'm going to digress just for a second, I know I'm going to get in trouble for this, but there are lines of businesses inside of Lawson that don't have, structurally today, as high of an EBITDA margin as we are enjoying in our U.S. domestic Lawson business. As we see opportunities to punch higher EBITDA margins and returns on the Lawson core, we're looking at these pockets.

Bryan King: As we've started to do more work on Lawson products I don't digress just for a second.

Bryan King: Trouble for this but.

Bryan King: Theres lines of businesses inside of loss and that are not don't have structurally today is higher EBITDA margin as we are enjoying in our U S domestic.

Bryan King: Lawson business and so as we see opportunities to pledge to higher margin EBITDA margin and return on the Lawson core we're looking at these pockets and so cat has had tremendous.

Bryan King: Kent has had the leadership in the clubhouse around organic growth the last couple of years, and they had strong organic growth even in this first quarter, but we needed more density there in order to pull it over double-digit EBITDA margins from where it was sitting, and this does it in spades. So, not only does it bring it immediately to double-digit EBITDA margins, but it gives us strong visibility to be able to take it to margins that So we're doing some of the same analysis with other lines of business inside of Lawson as we are across our other verticals.

Bryan King: Is it kind of a leadership in the clubhouse around organic growth. The last couple of years had strong organic growth even in this first quarter.

Bryan King: But.

Bryan King: We needed more density there in order to pull it over double digit EBITDA margins from where it was sitting in this does it in spades and so that was.

Bryan King: So not only does it bring it immediately the double digit EBITDA margins, but it gives us strong visibility to be able to take it to margins that are in.

Bryan King: Consistent with what we would expect we can do over time with Watson.

Bryan King: So are.

Bryan King: We're doing some of the same analysis with otherwise the business since at a loss as we are across our other verticals, that's where the corporate development team is spending a lot of their time.

Bryan King: That's where the corporate development team is spending a lot of their time. You know, we've identified across each of our leadership teams areas that we can fill in to try and bring the whole to a higher value-added proposition with, you know, trying to drive performance out of different verticals that we've got even inside of each of the three business units, if you will, more broadly. And they do have a lot on their plate.

Bryan King: We've identified across each of our leadership teams areas that we can fill add to try and bring the whole to a higher value added proposition with trying to drive performance out of different verticals that we've got even inside of each of the three business units. If you will more broadly and I do have a lot on there.

Bryan King: Flight.

Bryan King: There are other opportunities that we're pushing forward on.

Bryan King: There are other opportunities that we're pushing forward on that we think are key to our objectives of meeting our longer-term defined goals. So there's, I don't want to get too deep into the pipeline. There was a funnel that we have, and I don't know, Ron, if you want to offer more discreteness on it.

Ron: That we think are key to our objectives to meeting our longer term.

Bryan King: <unk> goal. So there's I don't want to get too deep into the pipeline. There there was a funnel.

Ron: That we have and I don't know Rod if you want to offer more discrete and it's on it but.

Bryan King: Most of it, Tommy, is a direct source, and that takes a lot of a lot of effort. And so you start conversations like we did with S&S. And you know, on some of the others that we've done, some of the others that we're working on, and you, they, it's hard to anticipate how long it's going to take to get them to the closing line. Hisco was another one that, you know, was really a direct source.

Ron: Most debit Tommy is direct sourced and that takes a lot of a lot of effort and so you.

Bryan King: Start conversations like we did with <unk>.

N: Yes N S.

Bryan King: And.

Bryan King: On some of the others that we've done and some.

Bryan King: Some of the others that we're working on and you got it.

Bryan King: It's hard to anticipate how long, it's going to take to get them to closing lot Heska was another one.

Ronald J. Knutson: We spent years talking to them, and then you kind of try and progress with that. And we didn't have a lot of conviction or confidence about what the timeline was going to look like to get to the closing table. We just had a lot of confidence that there was a tremendous amount of value if we could land it. And on the other side, you know, the counterparty was committed in that case, in both of these cases, to being partners with DSG.

Ronald J. Knutson: Really direct source, we spent years talking to them.

Ronald J. Knutson: And then you kind of triad progressed that and.

Ronald J. Knutson: And we didn't have a lot of.

Ronald J. Knutson: <unk>.

Ronald J. Knutson: Conviction or confidence on what the timeline was going to look like to get to a closing table. We just had a lot of confidence that there was a tremendous amount of value. If we can land it and the other side the counterparty with committed in that case both of these cases to big partners with DSG.

Ronald J. Knutson: Yeah, the only thing I would add to that, Bryan, is a lot of Kent Automotive growth over the past few years has been building relationships with auto dealerships, but also heavier in collision repair shops, and S&S Automotive is heavily focused on auto dealerships. And so, typically, the auto dealership spend is typically greater than a collision repair shop.

Speaker Change: Thank you Rod.

Speaker Change: Yes, the only thing I would add to that Brian is a lot of the a lot of the Kent automotive growth over and over the many over the past few years.

Ronald J. Knutson: He has been <unk>.

Ronald J. Knutson: Certainly building relationships with auto dealerships, but also heavier.

Ronald J. Knutson: <unk> in the collision repair shops.

Ronald J. Knutson: <unk> and SNS automotive.

Ronald J. Knutson: Heavily focused on auto dealerships.

Ronald J. Knutson: And so typically they're the auto dealership spend is is typically greater than a collision repair shops. So to Brian's point I think it puts us in a great position there is.

Ronald J. Knutson: <unk> expand SKU availability within <unk>.

Ronald J. Knutson: All of the end customers very really little to no end customer overlap.

Ronald J. Knutson: So, to Bryan's point, I think it puts us in a great position to expand SKU availability within all of the end customers. There is very, really little to no end customer overlap, and very little SKU overlap as well. So, great opportunity on both ends to be able to leverage both product availability and then also really having a foothold in servicing the auto dealership market. Thank you both.

Ronald J. Knutson: And very little SKU overlap as well.

Ronald J. Knutson: So great opportunity on both ends to be able to leverage both product availability and that also are really having now a foothold into servicing the auto dealership.

Ronald J. Knutson: <unk>.

Thomas Allen Moll: I wanted to follow up on the outlook you provided. Ron, I appreciate the context on the second quarter from a revenue standpoint. I wanted to ask about margin, just to make sure I heard you correctly. Did I hear you say for each segment, and then obviously for the consolidated results, you're looking for margins to be up sequentially in 2Q? And if I did hear that correctly, any noteworthy callouts on that trajectory would be appreciated. Sure. Yep, Tommy.

Speaker Change: Thank you both I wanted to follow up on the outlook you provided Ron appreciate the context on <unk>.

Thomas Allen Moll: With me on the second quarter from a revenue standpoint, I wanted to ask on margin just to make sure I heard you correctly.

Ron: Did I hear you say for each segment.

Speaker Change: And then obviously for the consolidated results you're looking for margins to be up sequentially in <unk> and if I did hear that correctly any noteworthy callouts on that trajectory would be appreciated sure. Yes, Tommy So so yes, you did hear that correctly from a from a organic sales.

Ronald J. Knutson: So, yes, you did hear that correctly from an organic sales perspective. We've certainly got visibility into the first month of the quarter here. Again, we'll be up against some sales pressure against the call at 5% organic growth that we realized in the second quarter of 23. And then just I would say probably some continued pressure that sits out on test and measurement that seems to be kind of prolonging longer than what we initially anticipated from probably as we were looking at this late last year. From a margin perspective, yes, you heard that correctly as well.

Ronald J. Knutson: Perspective, we've got certainly visibility into end of the first month of the quarter here.

Ronald J. Knutson: We'll be up against some sales pressure against the call it 5% organic growth that we realized in the second quarter of 'twenty three and then just I would say probably some continued pressure that sits out on test and measurement.

Ronald J. Knutson: Seems to be kind of prolonged <unk> longer than what we initially anticipated from probably we're looking at this.

Ronald J. Knutson: Late last year.

Ronald J. Knutson: Our expectation going into the end of the second quarter is that we would realize incremental margin improvements sequentially within all three of the verticals. Individually, there are initiatives taking place within Lawson, Checks Pro Services, and Test Equity Group for us to be able to make that comment. And we feel like we're on a nice path as 2024 develops to be able to sequentially see some improvement there. As you know, we don't provide formal guidance, so we can't really give you a number around that.

Ronald J. Knutson: From a margin perspective, yes, you heard that correctly as well our expectation going into the end of the second quarter is that is that we would realize margin incremental margin improvement sequentially within all three of the verticals.

Ronald J. Knutson: Individually, there's initiatives taking place within loss in <unk> services and test equity grew.

Ronald J. Knutson: To be able to for us to be able to make that comment.

Ronald J. Knutson: And we feel like we are.

Ronald J. Knutson: We're on a nice path is 2024 develops to be able to sequentially see some improvement there. We as you know we don't we don't provide formal guidance. So.

Ronald J. Knutson: But we do expect sequential improvement from where we ended the first quarter. Thank you. I appreciate it. And I'll turn it back on Ron on the, you know, one of the things that we did get with the close of April was, and again, two months is not a trend, is that we're saying we've seen now two months of a very slight pickup relative to what we saw in the fourth quarter. The first couple months of the First Quarter on the Test and Measurement side.

Ron: Can't really give you a number around that but but but we do expect.

Ronald J. Knutson: Sequential improvement from where we ended the first quarter.

Ron: Thank you I appreciate it and I'll turn it back on the Rod.

Ron: Just to add.

Ronald J. Knutson: One of the things that we did get with the close of April was.

Ron: Again, two months does not a trend is that we're seeing we've seen now two months, a very slight tick up relative to what we saw in the fourth quarter and the first couple of months.

Ronald J. Knutson: <unk>.

Ronald J. Knutson: Of the first quarter on the test and measurement side.

Ronald J. Knutson: So we're hoping that what that is indicating is a more clean channel in terms of inventory and overhang. And we are, you know, feeling like there's money out there to spend on testing and measurement equipment. It's just a matter of the confidence that the customer has in letting that spending on more of a capital asset lose. Thank you. Bye. Thank you both.

Ronald J. Knutson: So.

Ron: We're hoping that what that is indicating its more clean.

Ronald J. Knutson: Channel in terms of inventory.

Ronald J. Knutson: <unk> and.

Speaker Change: We are.

Ronald J. Knutson: Like that there is money out there to spend on test and measurement equipment. Its just a matter of the confidence that the customer has and letting that spending on a more of a capital asset loose.

Ronald J. Knutson: Yeah.

Ronald J. Knutson: So.

Ronald J. Knutson: <unk>.

Speaker Change: Thank you both I will turn it back thanks.

Speaker Change: Thanks Tommy.

Ronald J. Knutson: Yes.

Thomas Allen Moll: I'll turn it back. Thanks, Tommy. Thank you. Our next question is coming from Kevin Steinke with Barrington Research. Your line is, Hi, thanks for taking the question. So I just wanted to ask about the Lawson sales representative headcount, about 860. It seems to be down a bit from where it was historically, but you also mentioned that you had open positions that you're recruiting for, and you want to build that out in certain territories.

Ronald J. Knutson: Yeah.

Ronald J. Knutson: Thank you. Our next question is coming from Kevin Spanky with Barrington Research Your line is life.

Thomas Allen Moll: Yes.

Thomas Allen Moll: Hi.

Kevin Mark Steinke: Thanks for taking the question.

Kevin Mark Steinke: So I just wanted to ask about the <unk>.

Thomas Allen Moll: Loss in.

Thomas Allen Moll: Sales representative head count about 860.

Thomas Allen Moll: It seems to be down a bit from where it was historically, but you also mentioned.

Kevin Mark Steinke: Open positions that you are recruiting for and you want to build that out in certain territories. So maybe just talk about the.

Thomas Allen Moll: So maybe just talk about the trends in the Lawson sales rep headcount, both kind of from an attrition standpoint and where, you know, you like to grow it, how do you like to grow it going forward? Sure, Kevin. I'll take that.

Kevin Mark Steinke: Trend and the loss in sales Rep head count both kind of from <unk>.

Kevin Mark Steinke: And attrition standpoint, and where.

Speaker Change: I would like to grow it how would you like to grow it going forward.

Kevin Mark Steinke: So, yes, as you commented in our prepared remarks, we are down slightly from an overall headcount perspective. And I would say that it's not, you know, it's not overly unexpected given some of the changes that we put in place through 2023 to help our sales reps become more productive, along with some of the shifts that we've talked about in terms of building out our inside sales team and so forth.

Thomas Allen Moll: Sure, it's Kevin I'll take that so.

Kevin Mark Steinke: Yes.

Kevin Mark Steinke: As we commented in our in our prepared remarks, we.

Kevin Mark Steinke: We are down slightly from an overall head count perspective, and I would say that it's not.

Kevin Mark Steinke: It's not overly unexpected through some of the changes that we put in place through 2023 to <unk> to help our sales reps become more productive along with some of the shifts that we've talked about in terms of building out our inside sales team and so forth.

Kevin Mark Steinke: We did expect that we would, you know, take incrementally, you know, a few steps down just in terms of the total count. We are actively in the marketplace recruiting for additional sales reps, and I would say probably better defining the territories that we believe can drive our sales on a go-forward basis.

Kevin Mark Steinke: We did expect that we would.

Kevin Mark Steinke: Take incrementally a few steps down just in terms of in terms of the total count.

Kevin Mark Steinke: We are actively in the marketplace recruiting for.

Kevin Mark Steinke: Additional sales reps and I would say probably better defining the territories that we.

Kevin Mark Steinke: Believe that.

Kevin Mark Steinke: Can drive our sales on a go forward basis we've.

Ronald J. Knutson: We've, you know, are now looking at more of a combination of really, very specific market data in terms of those end markets that we believe can really provide an opportunity for us, not only for where some of our existing sales reps are, but also new territories that we can enter into. So, you know, we've, so again, I wouldn't say that it's overly surprising that we're down from a rep count perspective.

Ronald J. Knutson: Now looking at more of a combination of.

Ronald J. Knutson: Really very specific market data in terms of those end markets that we believe can can really provide an opportunity for us not only for where some of our existing sales reps are at but also new new territories that we can that we can enter into so we.

Ronald J. Knutson: We've.

Ronald J. Knutson: So again I wouldnt say that its overly surprising that were down from a rep count perspective, we will say that.

Ronald J. Knutson: We'll say that, you know, for us, feet on the ground and the number of inside sales reps can put some pressure on our average daily sales just in terms of the number of sales reps on a combined basis that are out actively selling. But we believe that that's part of the growth as we move throughout the rest of 2024. I'm just going to touch on that, you know, Kevin.

Ronald J. Knutson: For us feet on the ground in number of inside sales reps can put some pressure on our average daily sales just in terms of the number of sales reps on a combined basis that are that are out actively selling but.

Ronald J. Knutson: But we believe that thats part of the growth as we move throughout the rest of 2024.

Kevin: I'll just touch on that.

Ronald J. Knutson: Kevin.

Ronald J. Knutson: Part of Cesar and the analysis that we did, we intuitively, Ron and I have known this now, probably for the last couple of years; it was refreshing for Cesar and bringing in an outside consulting firm to really look at what we needed to do in order to make sure that our reps were making structurally more money while, at the same time, our cost to serve was also heading in the right direction. We had at one point Ron, 1,050, almost 1,100 reps, and we had a few different territories at that time.

Speaker Change: Part of of sales are in and the analysis that we did we brought it into.

Ronald J. Knutson: Intuitively, Ron and I have known this now probably for the last couple of years. It was refreshing per se as our.

Ronald J. Knutson: And bringing in an outside consulting firm to really look at what we needed to do in order to make sure that our reps were making structurally more money while at the same time as our costs.

Ronald J. Knutson: To serve was also heading in the right direction and so we had at one point Ron.

Ronald J. Knutson: 1050, almost 11 1100 reps and we had severe territories at that time.

Bryan King: Today, the way we look at the business is more like, at this stage, there are 900 defined territories. That means that we went back and reworked and looked at what a territory needed to look like in order to make sure that we were allowing a sales rep an opportunity, both someone who is a starting rep, to have a higher likelihood of success and to get to profitability for us faster.

Bryan King: And today the way we look at the business is more like at this stage 900, Theyre 900 defined territories and so that means that we kind of went back and reworked and looked at what a territory needed to look like in order to make sure that we were allowing sales rapid opportunity both.

Bryan King: Someone who is starting ramp to get to have a higher likelihood of success and to get to profitability for us faster.

Bryan King: We're adding a lot of tools for them, which are also going to help them. But a lot of the insight is taking, you know, territories that we had that were maybe too thin or that were, you know, that needed to be reworked. And it's hard to do that when you've got somebody in those territories.

Bryan King: Adding a lot of tools for them, which are also going to help them, but a lot of the insight is taking.

Bryan King: The territories that we had that were maybe too thin.

Bryan King: Or.

Bryan King: That were.

Bryan King: It needed to be reworked and it's hard to do that when you've got somebody in those territories and so part of the process was.

Bryan King: And so part of the process was making sure that we, as we had some turnover, were slow to backfill some of those chairs so that Cesar and his team could really look at how to consolidate and rework and get some better organization out of how we had our territories and what our route structures looked like for our salespeople. And so that all is going to allow both higher levels of productivity and compensation for our reps, and it's also going to drive our cost to serve down over time.

Bryan King: Making sure that we are.

Bryan King: As we've had some turnover that we were.

Bryan King: Slow to backfill.

Bryan King: Some of those chairs so that saves our team could really look at how to how to consolidate and rework.

Bryan King: And to get some better organization out of.

Bryan King: Out of how we had our territories and how what our route structures look like for our salespeople and so that all is going to allow both higher level of productivity and compensation for our reps and it's also going to drive.

Bryan King: Our cost to serve down overtime and so Ron several years ago. When we were shareholders. It wasn't in the chair I man with giving metrics around cost to serve and at one point. It was up in the 30% I think if I remember and we were.

Bryan King: And so, you know, Ron, several years ago when we were shareholders and I wasn't in the chair I'm in, he was giving metrics around cost to serve. And at one point, it was up in the 30s, I think, if I remember, and we were, you know, trying to get 1% of selling costs a year out of the business. And we, you know, we're back in a mode where we can see the line of sight to how, you know, what used to be 25% might be 15% as it relates to where we want to go in terms of total productivity out of our reps and total volume out of them.

Bryan King: Trying to get 1% of.

Bryan King: Selling costs a year out of this out of the business.

Bryan King: <unk>.

Bryan King: We're back in a mode, where we can see line of sight to how what used to be 25% might be 15% as it relates to where we want to go in terms of total productivity out of our reps.

Bryan King: And in.

Bryan King: In total volume out of them and that means that the reps can make.

Bryan King: And that means that the reps get to make, you know, 30% or 40% more than what they did. I think it's 30% or 35% more than where they were, or 40% more than where they were on an average basis a couple years ago. Okay, great. That's helpful, Culler. I'll turn it back over. There are 70, there are 70, there are 35 new territories, and there are 35. [inaudible] Is that too much detail, Ron?

Bryan King: 30% or 40% more.

Bryan King: And what they did maybe on an average comp basis.

Speaker Change: Where we want to be is probably.

Bryan King: I think it's 30% or 35% more than where they were 40% more than where they were on an average basis a couple of years ago.

Speaker Change: Okay, Great that's helpful color.

Bryan King: Now I'll turn it back over there 70 over 70 out there's 35, new territories and there's 35.

Bryan King: Sure.

Bryan King: Backfill that are open.

Bryan King: <unk> right now.

Kevin Mark Steinke: No, that's fine, Bryan. There are 70, 70 chairs that we're chasing right now, Kevin. That's great. I appreciate all the detail, as usual. I will turn it back over. I have to jump on to another call, but I appreciate all the comments as usual. Thanks, Kevin. Thank you. Once again, if you have any remaining questions or comments, please press star one on your phone at this time. Our next question is coming from Katie Fleischer with KeyBank Capital. Your line is: Hi, good morning. I'm on for Ken Newman today.

Speaker Change: Is that too much detail Ron.

Kevin Mark Steinke: Yeah.

Katie Fleischer: No that's fine Brian.

Katie Fleischer: There are 70, <unk> chairs that we're chasing right now Kevin.

Katie Fleischer: Uh huh.

Katie Fleischer: Oh, that's great I appreciate all the detail as usual.

Katie Fleischer: I will turn it back over I had to jump on to another call, but appreciate all the comments as usual thanks Kevin.

Kevin Mark Steinke: Yes.

Katie Fleischer: Thank you once again, if you have any remaining questions or comments. Please.

Katie Fleischer: Star one on your phone at this time.

Katie Fleischer: Our next question is coming from Katie <unk> with Keybanc capital Your line is right.

Katie Fleischer: Morning, Katie. Morning. Morning.

Katie Fleischer: Hi, good morning, I'm on for Ken Newman today.

Katie Fleischer: Alright, thanks, guys.

Katie Fleischer: Good morning.

Katie Fleischer: I was wondering if you could give a little bit more color on the commentary from the government orders that drove some of the weakness in Lawson and maybe when you would expect an inflection in that. Yeah, I hit that in my early comments, and Ron can probably give more discreteness to it. There was a change in the way that the government, every five or seven years, I guess, they changed their order entry system, about equal parts between a broad set of customers across our up and down the street, core business at Lawson, and then government.

Katie Fleischer: Good morning.

Katie Fleischer: I was wondering if you could give a little bit more color on the commentary from the <unk>.

Katie Fleischer: Government orders that drove some of the weakness in Lawson and maybe when you would expect an inflection in that.

Ron: Yes, I hope that in my early comments.

Katie Fleischer: And Ron can probably give more discreet newness to it there was a change in the way that the government every five or seven years I guess they change their order entry.

Katie Fleischer: Program, and that's something that can be disruptive for.

Katie Fleischer: All of us selling small piece goods into the <unk>.

Katie Fleischer: Lastly, parts into the government and then there's also a shift kind of a.

Katie Fleischer: A lot of <unk>.

Katie Fleischer: Spending that was.

Katie Fleischer: That news.

Katie Fleischer: It's out there and that we can say that is coming towards us, but it was a pretty significant delay in some spending that took place in the first quarter there was.

Katie Fleischer: About equal parts between a broad set of.

Katie Fleischer: <unk>.

Katie Fleischer: Of customers across our up and down the street core business at Los <unk>, and then government and the two of the.

Katie Fleischer: And the decrease from the prior year's first quarter for Lawson was about equally weighted to those two areas. Or strategic accounts were up in the first quarter versus a year ago, and that's just continuing to grow engagement with the relationships that we've got there. But that was a big detractor to Lawson's organic growth in the first quarter. Ron, do you want to?

Katie Fleischer: The.

Katie Fleischer: Decrease from prior year first quarter for Lawson was about equally weighted to those two areas.

Katie Fleischer: Or.

Ron: Strategic accounts were up in the first quarter versus a year ago, and that's just continuing to grow engagement.

Ron: Relationships that we've got there.

Ron: But that was a big.

Katie Fleischer: The tractor to lawson's organic growth in the first quarter, Ron you want to.

Bryan King: Yeah, Brian, I would just add to that. Yeah, you're spot on in terms of the ordering system that we are now, and others as well, are required to go through. And it's just a longer process, Katie.

Ron: Yes, Brian I would just add to that youre spot on in terms of the ordering system that.

Ron: That we're now and others as well are required to go through and it's just it's just a longer process. Katy So we saw some of that.

Ronald J. Knutson: So we saw some of that decrease versus a year ago within that end segment for us. The other piece I would say is, I mean, the government and the military business is great business for Lawson. I mean, there is a high demand for the consumable Class C parts that we sell. We've not lost any locations, any large locations that we've historically seen some pretty large volumes in the past. So it's not that we're concerned about any customer attrition around that. It's just, it's more timing.

Ron: Decrease versus a year ago within that within that.

Ronald J. Knutson: Segment for us.

Ronald J. Knutson: The other piece I would say I mean, the government and military business is it's great business for loss and I mean, there is a high demand of the consumable class C parts that we sell we have.

Ronald J. Knutson: Not lost any locations any large locations that we've historically seen some pretty large volumes in the past. So it's not that we're concerned about any customer attrition around that it's just it's more it's more timing our sense is is that.

Ronald J. Knutson: Our sense is that that'll come back to us for the most part throughout the rest of 2024. Certainly, it's not an all-catch up, let's call it, in one quarter. I think it'll come back gradually to us as 2024 develops. Okay, that's helpful. And then just one more on test and measurement.

Ronald J. Knutson: I will come back to us for the most part throughout the rest of 2024, certainly it's not it's not an all catch up let's call. It in one quarter I think it will come back gradually to US as is 2024 develops.

Speaker Change: Okay. That's helpful.

Ronald J. Knutson: And then just one more on test and measurement. So I know you mentioned that it's difficult to have a really strong sense of when these markets are going to end Flack just based on the limited visibility, but what are some sign that you would look for from your end markets or from your customers that would give you confidence.

Katie Fleischer: So I know you mentioned that it's difficult to have a really strong sense of when these markets are going to surge just based on the limited visibility, but what are some signs that you would look for from your end markets or from your customers that would give you confidence that this demand is starting to come back? Yeah, Bryan, do you want me to touch on that one? Yeah, why don't you hit that, Ron, and we'll start off.

Ron: That this demand is starting to come back.

Katie Fleischer: Okay.

Ron: Yes, Brian you want me to.

Ron: To touch on that one.

Ron: Yes that once you hit that ran it.

Speaker Change: Thank you.

Ronald J. Knutson: Thanks. Yeah, so, Katie and Bryan had, you know, commented on this a little bit as well. You know, when we look at that test and measurement business, you know, even on a monthly basis as to how the first quarter developed, you know, March was stronger than both January and February on a standalone basis and really was back to levels that we saw, you know, kind of in the November and December timeframe.

Katie Fleischer: So.

Ronald J. Knutson: K Bryan.

Ronald J. Knutson: Brian.

Ronald J. Knutson: Comment on this a little bit as well when we when we look at that test and measurement business.

Ronald J. Knutson: Even on even on a monthly basis as to how the first quarter develops.

Ronald J. Knutson: We March was stronger than bold.

Ronald J. Knutson: January and February on a standalone basis, and really was back to levels that we saw kind of in the November and December timeframe. So we feel like we've.

Ronald J. Knutson: So, you know, we feel like we've, but that business has kind of leveled off at the bottom right now. What I would say is that the test and measurement piece for us is really kind of two separate, I divided it into two separate areas, one, T equipment, which is one of the acquisitions that were made a year or so ago. They sell, what I would say, more handheld units, you know, lower average purchase price.

Ronald J. Knutson: That business has.

Ronald J. Knutson: Kind of leveled off at that at the bottom right now.

Ronald J. Knutson: What I would say is that in the test and measurement piece for us is really kind of two separate.

Ronald J. Knutson: I would divide it into two separate areas one.

Ronald J. Knutson: Key equipment, which is one of the acquisitions that was made.

Ronald J. Knutson: A year or so ago there they.

Ronald J. Knutson: They sell what I would say more handheld units are lower average purchase price.

Ronald J. Knutson: You know, that business was up sequentially, you know, Q4 into Q1 of this year. So that's a good sign that we continue to see down a little bit versus a year ago quarter, but sequentially up Q4 versus Q3. So I think that's, that's a good sign that there's some additional demand coming back for the lower price point items. You know, on the larger items, we continue to see, you know, some pressure there. But To my point earlier, you know, March was the strongest month of the quarter.

Ronald J. Knutson: That business.

Ronald J. Knutson: <unk> was up sequentially.

Ronald J. Knutson: Q4 into Q1 of this year. So that's a good sign that we continue to see.

Ronald J. Knutson: Down a little bit versus a year ago quarter, but sequentially.

Ronald J. Knutson: Q4 versus Q3, so I think that's a good sign that there's some additional demand coming back in the in the lower price point items.

Ronald J. Knutson: So, you know, for us, we were saying, you know, very connected to our customer base. Again, really no customer attrition there. It's more that, you know, what we're hearing from our customers is that the capital spend, you know, continues to be delayed. In the other piece, and I think we commented on this in the Q4 call, and I, you know, I described it as it was almost the perfect storm was that perfect storm going in the wrong direction.

Ronald J. Knutson: On the on the larger items.

Ronald J. Knutson: We continue to see some pressure there, but but to my point earlier March was the strongest month of the quarter. So.

Ronald J. Knutson: For us we were staying very connected into our customer base again really no customer attrition there.

Ronald J. Knutson: It's more of that what we're hearing from our customers is that the capital spend continues to be delayed.

Ronald J. Knutson: But, you know, the demand dried up, you know, primarily from the delay of capital projects, you know, on higher interest rates. Not shortly thereafter, all the supply chain issues surrounding that end market were resolved. So, you know, there was a pent-up demand that came through, or pent-up supply that came through. And, you know, kind of mid 2023, early to mid 2023. You know, that that that that release of the supply chain kind of hit squarely with the slowdown in demand. So, hopefully, that helps.

Ronald J. Knutson: And then the other piece that I think we commented on this in the Q4 call I describe it is it's almost a perfect storm was that the perfect storm going in the wrong direction, but.

Ronald J. Knutson: The demand <unk>.

Ronald J. Knutson: <unk>.

Ronald J. Knutson: Primarily from delay of capital projects and higher interest rates.

Ronald J. Knutson: Not shortly thereafter, all the supply chain issues surrounding that end market.

Ronald J. Knutson: We're resolved so there was a pent up demand.

Ronald J. Knutson: They came through or pent up supply that came through.

Ronald J. Knutson: And kind of mid 2023 early to mid 2023.

Ronald J. Knutson: Net debt that release of the supply chain kind of hit squarely with the slowdown in the demand. So hopefully that helps but Brian certainly any additional thoughts you may have on that.

Ronald J. Knutson: But Brian, certainly any additional thoughts you may have on that. So, look, that is, I think Ron laid out a nice framework there. Katie here, we're looking at test equity, and we're looking at Cisco, and we're looking across that division. You know, there was a, we hit the nadir, as it turned out, from what we've seen so far in January and February; we kind of hit the bottom of the lowest average, or kind of lowest volume that we were seeing through test and measurement specifically.

Ronald J. Knutson: So look.

Ronald J. Knutson: I think Ron laid out a nice framework there Katie there what we're looking at tax equity and we're looking at <unk> and we're looking across that division.

Ronald J. Knutson: We hit the nadir.

Ronald J. Knutson: As it turned out.

Ronald J. Knutson: From what we've seen so far in January and February we kind of hit the bottom.

Ronald J. Knutson: The lowest average kind of lowest volume that we're seeing through test and measurement, specifically and that's really for us looking at it.

Ronald J. Knutson: And that's really for us looking at the desktop, larger versions, as opposed to what we're selling through to equip or the, you know, the flute-type handhelds and key site and tectonics would be our largest vendors there by far. And there was a nice kind of inflection point.

Ronald J. Knutson: The desktop larger versions as opposed to what we're selling through <unk> or the flu.

Ronald J. Knutson: Fluke type handhelds.

Ronald J. Knutson: And <unk> electronics would be our largest vendors there by far and and there was a there was a nice.

Bryan King: It appears, but 2 months isn't a trend because we've still got lots of, you know, kind of concern about the, you know, what's going on on the true demand side. But some of the messiness in the channel and some of the activity in terms of quoting picked back up, and we saw by March, you know, the revenue levels, and then April stepped up again to kind of where they were at the highest level during the. The 3 months of the 4th quarter are not yet, by any means, back to where they were in the first half of last year, or even the 3rd quarter.

Bryan King: Kind of inflection point it appears but two months isn't a tread is we still got lots of kind of concerned about.

Bryan King: What's going on in all the true demand side, but some of the messiness in the channel and some of the activity in terms of quoting picked back up and we saw by March.

Bryan King: Revenue levels, and then aprils stepped up again back to kind of where they were at the highest level during the three months of the fourth quarter.

Bryan King: And so that is the nice thing is that we've kind of seen a sell-off or kind of a decline in activity. The 1 of the things that we are also looking at is when we look at the side of our engagements, which are largely with similar types of customers and similar sort of, you know, industry verticals, you know, we are saying we're saying percentage declines for programs that are still active in some of those same markets.

Bryan King: Yet by any means back to where they were in the.

Bryan King: First half of last year, even in the third quarter and so that.

Bryan King: The nice thing is that we've kind of we saw it.

Bryan King: Sell all our kind of a decline in activity one of the things that we are also looking at is when we look at the OEM side of our engagements with his scout, which are largely with similar type of customers and similar sort of.

Bryan King: Uh huh.

Bryan King: Industry verticals.

Bryan King: You are saying.

Bryan King: We're saying percentage declines in OEM programs that are still active.

Bryan King: Some of those segment market. So if you think about wireless communications or industrial electronics.

Bryan King: If you think about wireless and communications or industrial electronics, Cisco is seeing some, you know, had some volume in the activity of the programs that were coming through the programs of declines there. And those were reflecting, you know, a kind of more amplified impact that we were seeing over test equity on buying test and measurement equipment.

Bryan King: <unk> is seeing some.

Bryan King: <unk> had some volume in there.

Bryan King: Activity in the programs that were coming through the OEM programs.

Bryan King: Declines there and those were reflecting.

Bryan King: So there was confirmation that some of what's going on seems to be in those industry verticals and that they're just, you know, that they aren't making as much through their facilities, or if they're having some struggles in their own markets, they're probably not spending as much money on their R and D equipment in their labs. And so, at some point, you know, we're, you know, we just because of the way that we think it's trending, we think that those dollars are going to be coming back.

Bryan King: Kind of more amplified impact that we're seeing over test equity or bond test and measurement equipment. So there was there is confirmation that it's.

Bryan King: Some of whats going on seems to be in those industry verticals.

Bryan King: And that they are just that.

Bryan King: Aren't making as much through their OEM facilities or if there are having some struggles in their own end markets. They are probably not spending as much money on their R&D equipment.

Bryan King: In their labs, and so at some point in time.

Bryan King: But we don't feel like we've lost customers. We do think we lost orders at times during the 4th quarter and maybe even a little bit during the 1st quarter, where there was a natural pricing activity that we weren't willing to match.

Bryan King: <unk>.

Bryan King: <unk>.

Bryan King: Just because the way that we think if it's trending we think that those dollars are going to be coming back, but we don't feel like we've lost customers. We do think we lost orders at times during the fourth quarter and maybe even a little bit in the first quarter, where there was a natural pricing activity that we werent willing to batch.

Bryan King: Okay, great. Thanks for all the colors. Thank you. As we have no further questions on the line at this time, I will turn the call back over to Mr. Bryan King for any closing remarks. Oh, that's, I think, yeah, we really appreciate everybody's time. Obviously, we've still got a lot of moving parts in the business. We are very encouraged by the work and accountability that our teams have been putting in across each of the three verticals.

Speaker Change: Okay, great. Thanks for all the color.

Bryan King: And we've got a lot of confidence in the business that we're continuing to build and how we can drive returns on invested capital and structural margins over the coming years. Thank you for your time today. We look forward to speaking with you again when we report our second quarter results in early August. And have a great day! Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Bryan King: Banking as we have no further questions in on the lines at this time I will turn the call back over to Mr. Bryan King for any closing remarks.

Speaker Change: I think we really appreciate everybody's time, obviously, we've got still a lot of moving parts in the business.

Bryan King: We are very encouraged with.

Bryan King: The work and accountability that our teams have been.

Bryan King: Putting in across each of the three verticals.

Bryan King: And we've got a lot of confidence in the business that we're continuing to build in.

Bryan King: How we can drive returns on invested capital subtle margins over the coming years.

Speaker Change: Thank you for your time today, we look forward to speaking with you again, when we report our second quarter results in early August.

Bryan King: And have a great day.

Bryan King: Yes.

Bryan King: <unk>.

Speaker Change: This concludes today's conference and you may disconnect your lines at this time and we thank you for your participation.