Distribution Solutions Group, Inc. (DSGR): Results of Operations and Financial Condition
Distribution Solutions Group, Inc. (DSGR) filed an SEC Form 8-K — Results of Operations and Financial Condition. Distribution Solutions Group Announces 2026 Second Quarter Results FORT WORTH, TEXAS, August 6, 2026 - Distribution Solutions Group, Inc. (NASDAQ:DSGR) ("DSG" or the "Company") , a premier specialty distribution company, today announced consolidated results for the second quarter
How this was made
The 30-second read
Why it matters
For trading, the key new information is the definitive take-private price ($35.00 per share) and the stated closing conditions (HSR expiration/termination, absence of legal restraints, and disinterested shareholder approval). The Q2 results provide near-term fundamentals but are secondary to the deal terms for valuation.
Market read
This is a combined earnings and definitive M&A disclosure that can drive immediate repricing toward the offer price and increase focus on deal-spread dynamics and approval/HSR timelines.
What to watch
The filing also amends the credit agreement to permit revolving loans for merger financing; traders should monitor any subsequent credit-market or covenant developments that could affect deal certainty.
Distribution Solutions Group Announces 2026 Second Quarter Results
Revenue increased 11.0% year-over-year, organic sales grew 10.2%, adjusted operating income rose 13.4%, and adjusted EBITDA increased 11.1%. Gross margin declined to 32.3%, while liquidity was $420.2 million and net debt leverage was 3.4x.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| RevenueGAAP | $ 557,734 (Dollars in thousands) | 12.4 % | 11.0 % |
| Organic sales growthother | 10.2% | – | 10.2% |
| Organic average daily sales growthother | 8.1% | 8.1% | – |
| Gross marginGAAP | 32.3% | – | – |
| Operating incomeGAAP | $ 27,868 (Dollars in thousands) | 104.5 % | 3.9 % |
| Operating income as a percent of revenueGAAP | 5.0% | 230bps | -30bps |
| Adjusted operating incomenon-GAAP | $ 45,216 (Dollars in thousands) | 55.3 % | 13.4 % |
| Net incomeGAAP | $ 8,494 (Dollars in thousands) | N/M | 69.8 % |
| Diluted net earnings per shareGAAP | $0.18 | – | – |
| Adjusted diluted earnings per sharenon-GAAP | $0.47 | – | – |
| Adjusted EBITDAnon-GAAP | $ 53,933 (Dollars in thousands) | 42.6 % | 11.1 % |
| Adjusted EBITDA as a percent of revenuenon-GAAP | 9.7% | 210bps | 0bps |
| Cash provided by operationsGAAP | $22.0 million | – | – |
| Net capital expendituresother | $7.7 million | – | – |
| Total liquidityother | $420.2 million | – | – |
| Cash (restricted and unrestricted)other | $75.5 million | – | – |
| Availability under credit facilityother | $344.7 million | – | – |
| Net debt leverageother | 3.4x | – | – |
What drove it
- Revenue increased 11.0% year-over-year to $557.7 million, driven by organic sales growth of 10.2% with daily sales improvement across all of the verticals.
- The first quarter acquisition of Eastern Valve contributed approximately $4.1 million of revenue in the second quarter.
- Sequentially, revenue increased 12.4% over the first quarter on two additional selling days.
- Profitability improved sequentially on higher sales.
- Improved profitability and working capital management drove cash flows from operations to $22.0 million for the quarter.
Concerns
- Gross margin decreased from 33.9% to 32.3% primarily due to customer and vertical sales mix shifts and higher tariff rates on inbound shipments, partially offset by pricing benefits realized.
- Operating income was net of $11.1 million of non-cash acquired intangible amortization and $6.2 million of non-recurring severance and acquisition-related retention costs, stock-based compensation, acquisition-related costs and other non-recurring items.
- Net debt leverage was 3.4x.
- The proposed merger remains subject to customary closing conditions, including expiration or termination of the HSR Act waiting period, absence of legal restraints, and stockholder approvals.
What to watch
- Whether organic sales growth and daily sales improvement across all verticals continue.
- Gross-margin effects from customer and vertical sales mix, higher tariff rates on inbound shipments, and pricing benefits.
- Cash conversion and working capital management following the $22.0 million of second-quarter cash provided by operations.
- Progress toward closing the merger under which LKCM Headwater will acquire shares not already owned by it and its affiliates for $35.00 per share in cash.
Balance sheet and cash flow
- Cash provided by operations was $22.0 million for the quarter.
- Uses of cash for the quarter included net capital expenditures of $7.7 million.
- The Company ended the quarter with total liquidity of $420.2 million, consisting of $75.5 million of cash (restricted and unrestricted) and $344.7 million available under its credit facility with net debt leverage of 3.4x.
- In connection with the Merger Agreement, the Company amended its existing credit agreement to permit, subject to its terms and conditions, revolving loans to be used to finance the Merger and related amounts.
Analysis
DSG reported an 11.0% year-over-year increase in second-quarter revenue to $557.7 million. Management attributed the increase principally to organic sales growth of 10.2%, with daily sales improvement across all verticals, plus approximately $4.1 million of revenue from the Eastern Valve acquisition closed in the first quarter. Revenue also increased 12.4% sequentially, aided by two additional selling days, while organic average daily sales grew 8.1% over the first quarter of 2026.
Profitability improved materially from the first quarter as sales increased. Operating income was $27.9 million, compared with $13.6 million in the first quarter, and adjusted operating income was $45.2 million versus $29.1 million. Adjusted EBITDA rose to $53.9 million from $37.8 million sequentially, and adjusted EBITDA margin improved to 9.7% from 7.6%. Adjusted diluted earnings per share increased to $0.47 from $0.24 in the first quarter and from $0.35 in the prior-year quarter.
The principal operating pressure was gross margin, which declined from 33.9% to 32.3%. The company cited customer and vertical sales mix shifts and higher tariff rates on inbound shipments, partly offset by pricing benefits. GAAP operating income included $11.1 million of non-cash acquired intangible amortization and $6.2 million of non-recurring severance and acquisition-related retention costs, stock-based compensation, acquisition-related costs and other non-recurring items. This makes the difference between GAAP operating income and adjusted operating income an important measure of underlying profitability.
Cash flow reversed from cash flows used in operations of $20.4 million in the first quarter to $22.0 million of cash provided by operations, which management attributed to improved profitability and working capital management. The company used $7.7 million for net capital expenditures and ended the quarter with $420.2 million of total liquidity, including $75.5 million of cash and $344.7 million of credit-facility availability, with net debt leverage of 3.4x.
The earnings release also centers on the pending take-private transaction. On July 15, 2026, DSG entered into a definitive merger agreement under which entities controlled by LKCM Headwater, already owner of approximately 79% of outstanding common shares, will acquire the remaining shares for $35.00 per share in cash. The transaction is not subject to a financing condition, but remains subject to regulatory, legal and stockholder approval conditions. The release provided no forward financial guidance.
Not in the filing
stated, not guessed- Segment revenue, segment growth rates, and segment profitability metrics
- Forward revenue, gross margin, operating expense, tax rate, EPS, EBITDA, capital expenditure, or other financial guidance
- Prior-guidance comparison
- Gross profit
- Operating expenses
- Income tax expense and tax rate
- GAAP EBITDA
- Basic earnings per share and weighted-average share counts
- Free cash flow
- Prior-year cash flow from operations and capital expenditures
- Total debt and net debt amounts
- Share repurchases, dividends, and other capital-return amounts
- Named executive commentary or attributable executive quotes
- Complete GAAP-to-non-GAAP reconciliation tables referenced in the release
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
DSGR filed an 8-K with Q2 2026 operating results and disclosed a July 15, 2026 definitive merger agreement with LKCM Headwater, which already owns about 79% of shares.
Ticker impact
DSGR reported Q2 results and disclosed a definitive merger agreement where LKCM Headwater will buy the remaining shares for $35.00 cash per share.
Near-term upside bias versus pre-deal levels is likely, but volatility can rise around deal-approval milestones, HSR timing, and any financing or regulatory friction.
The article states a definitive merger agreement at a specified $35.00 per share price, plus shareholder approval requirements and HSR waiting-period expiration as closing conditions, which are direct drivers of deal spread and risk premium.
Market effects
Specialty distribution peers may see read-through on deal activity and valuation for similar mid-cap distributors, but no direct peer-specific catalyst is provided here.
Limited direct regional impact; the disclosure is company-specific with national regulatory steps (HSR).
Low global relevance; the transaction is domestic and tied to US antitrust review and shareholder approvals.
Counterpoint
The $35.00 offer can still face execution risk, including HSR timing and the required vote of disinterested shareholders, which can widen the spread if uncertainty increases.
Key entities
- issuerDistribution Solutions Group, Inc.
NASDAQ-listed specialty distribution company reporting Q2 2026 results and announcing a definitive take-private merger agreement.
- acquirerLKCM Headwater Investments, LLC
Majority owner (about 79%) that will acquire the remaining DSG shares for $35.00 per share in cash.
- lenderJPMorgan Chase Bank, N.A.
Administrative agent under DSG’s credit agreement, with an amendment allowing revolving loans to finance the merger.
