Good morning, ladies and gentlemen, and welcome to the Distribution Solutions Group third quarter 2022 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Steven Hooser. Sir, the floor is yours. Good morning, ladies and gentlemen, and welcome to the Distribution Solutions Group third quarter of 2022 earnings call. In conjunction with today's call, we have provided a Q3 earnings presentation that has been posted on the company's IR website at investor.distributionsolutionsgroup.com. Joining me for today's call is Bryan King, DSG's Chief Executive Officer and Chairman, and Ron Knutson, DSG's Executive Vice President and Chief Financial Officer. During the call, they will be providing an update on the business from an operational and financial perspective. Additionally, Brad Wallace, LKCM Headwater Partner and DSG Advisor, as well as the operating company CEOs, Cesar Lanuza, Russ Frazee, and Bob Connors, will be joining for the Q&A session. Please note that statements on this call and in the 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 addition, statements made during this call are based on the company's views of today. The company anticipates that future developments may cause those views to change, and we may elect to update the forward-looking statements made today, but disclaim any obligation to do so. Management will also refer to non-GAAP measures, and reconciliation to the nearest GAAP measures can be found at the end of the earnings release. The earnings press release issued earlier today is posted on the investor relations section of our website. A copy of the release has also been included in a current report on Form 8-K filed with the SEC. This call is being audio webcast on the Internet via a Distribution Solutions Group investor relations page on the company's website. A replay of this teleconference will be available through November 17th, 2022. Now, with that, I'd like to turn the call over to Bryan King. Bryan? Thank you, Steven, and good morning, everyone. We appreciate your interest in Distribution Solutions Group, and we are excited to share the results for our fiscal third quarter. Please refer to our supplemental Q3 earnings presentation that is provided on our website to follow along with our prepared remarks, and we will start on Slide 4. DSG represents a best-in-class specialty distribution solutions company operating in three separately managed high-touch, value-added marketplaces. We offer customers both replenishable industrial parts and products, as well as specialized products. We also provide outsource solutions for companies to help solve their labor shortages and supply chain management challenges. We have a unique offering of products, services, and solutions. Our competitive advantages are compelling to customers and are important to manufacturers, OEMs, and businesses that need specialized products and solutions in their industrial and commercial industries. We are very proud of our leadership teams and their DSG colleagues as they worked collaboratively and executed this third quarter, their second quarter together, consistent with our underwriting objectives in pulling these businesses together. For our combined companies on a comparable basis, sales grew 46% to $347 million, consisting of organic growth of 15% and acquired revenue of 31%. We generated nearly $35 million of adjusted EBITDA for the quarter and achieved our target of 10% of sales for adjusted EBITDA margin. We are encouraged by these results as all three operating companies are performing at or above our expectations. While DSG does not currently provide formal guidance, we are not currently seeing softness in our businesses and the demand environment remains strong as we enter November. We want to remind investors Q4 is seasonally lower, and we have four less operating days this year. That said, all three operating companies reported strong Q3 results with meaningful progress on cross-selling and early wins on new customer business. We have identified hundreds of leads for cross-selling, expanding relationships, and wallet share with many of our largest customers. Leveraging these strong customer relationships set us up for significant organic growth in each of our three businesses. Each of our operating companies are making significant operational progress that gives us further confidence in our overall strategy and our teams. We've also announced today an expansion of our share repurchase plan that was originally authorized under Lawson Products and has now been expanded to DSG's share repurchase program. We will speak to this more when we discuss our capital allocation strategy in a few moments. We are cautious in our outlook for 2023 and our ability to manage this business for value creation across this cycle. Although we are not currently seeing a slowdown, we do understand how to manage through changes in demand environments, especially for working capital-intensive businesses. Our team has successfully operated distribution businesses through down cycles in 2001, 2008, and 2009, and 2020. Also, I have experience with distribution companies as a director that goes back 30 years, where we had underwritten to the benefits of owning distribution businesses during inflationary cycles, one where we had leaned on learnings from the late 1970s and the early 1980s. Where we never experienced the inflation that we are experiencing currently. More broadly, our leadership bench has over 200 years of specialty distribution expertise between the combined LKCM Headwater and DSG CEOs. In today's environment, we understand that macroeconomic headwinds and recession fears are changing how companies think about 2023. DSG's working capital intensity has grown this year, and at the end of the third quarter, our trade working capital is $337 million. I am constructive on the level of working capital investment we've seen in our business. In my opinion, sound incremental working capital investments to grow revenues of distribution companies are one of the best ways to drive cash flow return on invested capital and to internally compound the value of our business. Over the last nine months, the investment in working capital has been driven by tuck-in acquisitions and pushing towards SKU congruence, inflationary pressures of replenishing sold inventory, and the growing top-line revenue. We strongly believe that disciplined investing in working capital provides the highest incremental return on invested capital. We can walk through the math on this, but I've enjoyed ranges of 40%-140% cash flow return on invested capital for our other distribution businesses, supported by strong working capital investment. Returns can often exceed a well-priced acquisition opportunity. We will continue to manage our accounts receivable tightly and monitor inventory investments, especially as we navigate 2023. We expect the 2022 investment we've made in working capital will support growth from these revenue levels, and there also should be some efficiency gains in working capital intensity over the coming year. I also wanna spend a few minutes today discussing our capital allocation strategy. On Slide 5, we've laid out our view of the world related to prudent capital deployment. The entire DSG management team operates under this capital allocation framework, and we continuously rank and recalibrate investment decisions to seek the highest returns. In a way, projects compete for capital when we consider core growth versus M&A. Hurdle rates are always changing to reflect economic changes that affect risks and valuations. As of the end of the third quarter, our net debt leverage was 3.4x. We expect to enjoy significant free cash flow after the recent investment in working capital for growth and SKU alignment over the coming 12 months. We also understand how much free cash flow we will generate out of working capital should we see softer economic environments in our combined end markets. We can take cash out of working capital to accelerate deleveraging further, as we have consistently experienced in distribution businesses in previous soft economic cycles. We will continue to operate in a disciplined and prudent manner as we decide on the highest ROIC capital deployment opportunities. Today, we reported that in Q3, we were in the market buying back shares, and we also announced that the Board had expanded our share repurchase program. Since DSG is already over 65% owned by LKCM Headwater, we appreciate that our float can be a concern. However, we want to have a share repurchase in our capital allocation framework so that we can return capital to shareholders when appropriate. With regard to how we think about our capital allocation, our internal hurdle rates and IRR criteria tempered with our focus on long-term strategic value enhancement. Our lens has evolved to date, much like the macro environment and our platforms are continuing to evolve. We want to maintain flexibility and plan to remain resilient as this economy evolves for our business and for our customers. Our goal at DSG is to continue to build and scale our specialty distribution network to drive significant free cash flow with an enhanced return profile. Remember that since we merged these companies earlier this year, we have not had the benefit of a full cycle or year of working capital flowing through the P&L to capture and measure annual returns on invested capital, which we see is currently understated relative to where we will see them in arrears a year from now. We appreciate we are still in the early days at DSG and are putting solid objectives where we are, which are embraced by our leadership team members and are all eager to show significant progress. With our capital allocation framework as the foundation, we have a robust acquisition pipeline for each of the businesses, and our corporate development team is busy evaluating timing, valuations, and fit for tuck-in acquisitions. Over the past three months alone, we've reviewed numerous new opportunities. Multiples appear to be in flux currently, in some cases softening and in other cases, trophy assets are being discussed for the first time in decades as operators are enjoying robust demand and improved profitability, but recognize inflation and interest rates are creating a moving target on daily confidence levels of some owners, like some shareholders. The current environment should make transactions more compelling for us as we move forward. Before Ron covers the consolidated and operating company's financial results, please turn to Slide 6, and I will comment on a few areas of focus within each of our three companies. Lawson Products, a leader in the MRO distribution of C-parts offering vendor-managed inventory services, has realized significant growth in our largest strategic accounts and the Kent Automotive division. In this challenging labor and market, Lawson has successfully brought customers incremental support through outsourcing services using their intensive vendor-managed inventory solutions on C-parts. Cesar and the team at Lawson are also carefully evaluating new channels to market for premier level services, depending on the specific needs of the customer. We have seen not only strong growth helped by pricing, but also a nice return to core growth from SKU and customer level activity, as well as new customers embracing Lawson's solutions. Gexpro Services is a leader in the supply chain solutions of largely C-parts, specializing in developing and implementing VMI and kitting programs to high specification OEM customers. In a challenging inflationary market, customers continue to turn to Gexpro Services to help improve their total cost of ownership through VMI, complex kitting programs, and aftermarket services. Bob and the team are having success by vertically integrating manufacturing and light assembly solutions for their customers via their acquisition partners, Frontier Technologies, Resolux, State Industrial Solutions, and Omni Fasteners. Gexpro Services has successfully passed on material and freight pricing and continues to focus on supplier and commodity re-rationalization, as well as synergies on acquisitions. Gexpro Services has been a strong leader in driving the culture of cross-selling the benefits and products from each of the three legs of DSG with established customers, as well as prospective key target accounts. TestEquity is a leading industrial technologies distributor of specialized test and measurement equipment and solutions, electronic production supplies, and customized toolkits from leading manufacturing partners. Pass-through pricing continues to work to our advantage as customers are accelerating orders to capture near-term pricing versus risking further price escalations in 2023. Our leadership team at TestEquity is accelerating their digital migration, and an estimated 40% is now transacted online since the acquisition of TEquipment. This percentage continues to accelerate with the release of our first e-commerce platform in Europe this quarter. We are realizing synergies between TEquipment and TestEquity in the product and digital sales categories and believe this will deliver further margin enhancements in operating leverage and continues to show a strong acceleration in driving ROIC metrics to best-in-class levels for peer industrial distributors. Now, I would like to turn the call over to Ron to walk through the financials. Ron? Thank you, Bryan, and good morning, everyone. Turning to Slide 7, we're excited this morning to share with you the third quarter results of Distribution Solutions Group. Briefly, let me comment on the required GAAP accounting presentation before we discuss our results. Also, as Bryan mentioned, we posted our Q3 2022 financial results presentation on the IR website for DSG. As a quick reminder, the combination of the three operating companies is required to be treated under GAAP as a reverse merger. From an accounting perspective, Gexpro Services and TestEquity acquired the stock of Lawson Products as of the April 1, 2022 merger date. A few items to keep in mind as we review the Q3 results. The third quarter 2022 results include all three operating companies for the full quarter. The year-to-date GAAP information for 2022 includes Gexpro Services and TestEquity for the first six months, and given the merger date of April 1st, only includes Lawson Products from April 1st to September 30th. The comparative GAAP information for 2021 only includes Gexpro Services and TestEquity as the predecessor company for the accounting acquirer. For ease of comparing these results, the slides that we are using for the conversation this morning are adjusted for the pre-merger activity of Lawson Products. We also heard from many shareholders on the lack of visibility of prior quarters, so we're now presenting trailing five quarters of adjusted sales and adjusted EBITDA on a combined basis. Let me summarize the third quarter results. On a combined basis, we reported strong top line and bottom line results across the three principal operating companies. As Bryan mentioned, we reported total sales growth of 46%, with organic sales growing 15.4% through both price and volume. To date, in 2022, we have closed on four acquisitions for a total of over $180 million of acquired annual revenues. Broadly, product demand remains strong. However, we are cautious going into 2023, given some of the macroeconomic indicators. We've also made good progress on realizing cross-selling opportunities among the three operating companies with early wins on new customer business and cost synergies. Finally, our performance in all three operating companies was in line or above expected levels. Now, let's walk through some of the numbers on a combined basis. First, consolidated sales were $347.2 million. Although not necessarily meaningful, this represents an increase of 163% on a GAAP basis, driven by the inclusion of Lawson Products commencing on April 1st, organic growth of business and acquisitions made by Gexpro Services and TestEquity in both 2021 and 2022. With the inclusion of Lawson from a comparative basis, sales increased 46% or $109.5 million over the third quarter of 2021, with $68 million coming from acquisitions and organic growth of slightly over 15%. Second, reported GAAP operating income was $22 million compared to $5.5 million a year-ago quarter. On an adjusted basis, taking into account merger-related costs, stock-based compensation, severance, and other non-recurring items, adjusted EBITDA improved by $13.5 million to $34.7 million or 10% of sales. This also represents a sequential improvement of $3 million of adjusted EBITDA over the second quarter. Third, diluted earnings per share was $0.84 for the third quarter. On an adjusted basis, adjusted diluted EPS was $0.64 for the third quarter of 2022 versus $0.25 for a year ago quarter. Now moving on to Slide 8. While Slide 7 included Lawson for pre-merger activity and other acquisitions since the date of acquisition, Slide 8 includes the full run rate of all completed acquisitions as of September 30th, as if they were owned for each quarter presented. As you can see from this page, our full run rate, inclusive of acquisitions, has seen nice quarter-to-quarter growth reflecting the strong performance of each of the three operating companies. As Bryan mentioned, Q4 is typically our slowest quarter given fewer selling days and lower seasonal customer activity. Turning to Slide 9, let me now comment briefly on each of the three individual operating companies. Within the 10-Q that we have filed, we have broken down our segment reporting based on the three operating companies with a focus on how they go to their end markets. Starting with Lawson. Recall that Lawson is the accounting acquiree and is not in the GAAP reported numbers for Q1 2022 or for the comparative GAAP numbers in 2021. However, for purposes of these slides, we've included the pre-April 1st results. Sales were $109.4 million for the third quarter of 2022. Please note that this does not include Bolt Supply as they are now included in the all other reporting segment. However, Bolt Supply had another great quarter with sales increasing 45% with adjusted EBITDA in excess of 14% of sales. The Lawson segment sales grew 16.8% organically over the third quarter of 2021 on an adjusted basis and 1.9% sequentially over the second quarter of 2022. The increase over a year ago was driven by strong performance within the strategic business up 16%, our Kent Automotive business being up 25%, the core business up 14%, and government up 22%. During the quarter, unit volume increased approximately 5%, with the remainder being driven by price and mix. Lawson's growth during the quarter was achieved through increased share of wallet with existing customers and new customer relationships, in particular within strategic or large accounts. Lawson continues to realize improvement in its gross margin percentage, excluding non-recurring items. While customer mix is putting pressure on the overall gross margin percentage, the business continues to focus on gross margin expansion opportunities, which we envision will continue into 2023. Lawson's reported operating income was $5.4 million for the third quarter, inclusive of the non-recurring items previously mentioned. Excluding these items, as well as for previous quarters, Lawson's adjusted EBITDA improved to $9.7 million compared to adjusted EBITDA of $7.6 million a year ago, primarily driven by the sales and gross margin improvements, partially offset by increased compensation and healthcare costs. Turning to Gexpro Services on Slide 10. Total sales were $103.7 million for the third quarter of 2022, an increase of $39.5 million over Q3 2021, of which $30.8 million was driven by acquisitions and $8.7 million from organic growth. In 2021, Gexpro Services closed on the Omni, NEF, and SIS transactions. In 2022, Gexpro Services has closed on Resolux earlier in the year and on Frontier on March 31st. Excluding the impact of these acquisitions on the third quarter, organic sales grew by nearly 14%, of which approximately 7% came from price. The end markets that Gexpro Services operates in are expanding with the exception of headwinds in renewables. The increase in aggregate sales was primarily driven by new customers and the expansion of existing customer relationships. Reported gross margin was down slightly from a year ago on lower margin profiles of the acquired businesses. Gross margins continue to be managed by the Gexpro Services team through strategic sourcing improvements. New supplier development and the movement toward longer-term supplier agreements. Gexpro Services adjusted EBITDA expanded to $12.5 million or 12% of sales, as compared to $6.3 million or 9.8% for the year ago quarter. Acquisitions drove approximately $5.1 million of the earnings increase. Lastly, I'll turn to TestEquity on Slide 11. Sales for the quarter grew $48.9 million or over 72%. During the second quarter of 2022, TestEquity closed on two acquisitions, TEquipment and National Test Equipment. Of the $48.9 million sales increase for the quarter, approximately $37.6 million was generated from the 2021 and 2022 acquisitions, while organic sales increased 16.9% with approximately 8% coming from price. We anticipate that sales in the test and measurement business will continue to be lumpy for the remainder of 2022 and into the first half of 2023, given some of the continuing semiconductor supply chain challenges. Customer orders remain strong, and we are able to ship quickly upon the receipt of product. However, delivery has been sporadic due to ongoing supply chain issues. Having a higher level of customer back orders creates positive momentum as we move into 2023. On an adjusted EBITDA basis, the third quarter ended at 8.7% of sales or $10.1 million, representing an increase of $4.6 million over a year-ago quarter, of which approximately $2.5 million came from the 2021 and 2022 acquisitions previously mentioned. Moving on to Slide 12. Bryan previously commented on our approach to capital allocation, so I won't repeat his comments. However, from an access to capital perspective, we have approximately $25.2 million of cash and $75.1 million available under our existing credit facility. As part of our credit facility, we also have an additional $200 million accordion feature. We ended the quarter with a net debt leverage ratio of 3.4x on increased earnings. During the quarter, we continued to invest in the business to support the 15% organic sales growth, while at the same time had approximately $11 million of non-recurring cash items that impacted our cash flow during the quarter. Net capital expenditures for the quarter were $3.2 million and $6.6 million on a year-to-date basis. Before I turn the call to Bryan for some closing remarks, let me just reemphasize the continued strength that we realized in the third quarter on top of our previously reported strong initial second quarter. We are very pleased with the progress on both the financial results as well as the underlying operations of the three operating companies. We firmly believe that we are on a strong path, as exhibited by our adjusted EBITDA of $34.7 million for the quarter, our 15.4% organic sales growth, and the incremental benefit of our acquisitions. We hit our 10% margin target for the quarter and continue to be excited about our future on a combined basis. While the third quarter was strong, we are also paying close attention to the macroeconomic trends in the marketplace. We will prudently manage our financial position, including our financial leverage, as 2023 develops. I'll now turn the call back to Bryan. Thank you, Ron. Turning now to Slide 13. We accomplished what we set out to accomplish since merging the businesses in April. The teams are working well together, and I would say that we have achieved more than we expected by September 30th, with much more expected in front of us. Let me highlight a few of these areas as an acknowledgement of the strong, successful effort and shared accountability by our colleagues throughout DSG. We've enhanced our go-to-market strategy for the three businesses and, importantly, expanded our channels to market. As I mentioned briefly, we've rolled out an incentive program for our sales team to support ambitious cross-selling goals for our largest strategic accounts for DSG, and we have pipeline leads and wins to support our growth initiatives. Also, maybe quite differently than you typically hear on earnings calls like this, we've operationalized LKCM Headwater and our operating partner team, mostly retired C-suite distribution executives at each of our operating companies. There is not a management fee for this work, as is typically done by other groups and consultants, as this support team, in collaboration with the management teams, are fully in line with investors as shareholders to improve financial and operational performance, generate cash flow, and build long, long-term enterprise value through stock price appreciation. Turning to Slide 14, third quarter results demonstrated our ability to report strong growth organically and by acquisition, and to drive substantially adjusted EBITDA with a 10% margin. We believe that DSG has the best operating leaders in the industry, and they are working hard to grow sales, improve margins, and generate cash flow. We remain confident about the opportunities to further scale the business and drive margins structurally higher, leverage the working capital investment, and generate accelerating level of free cash flow off of each dollar of revenue and generate cash. We believe our MRO, OEM and test equipment products, services, and solutions provide customers with a comprehensive set of industrial distribution and supply chain support that are increasingly being reaffirmed by our customers and vendors daily in the marketplace. Thank you for your time today. Now we would like to open up the line for investor questions. Operator? Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Thank you. Our first question is coming from Ken Newman with KeyBanc Capital Markets. Please go ahead. Hey, good morning, guys. Morning, Ken. Morning, Ken. I guess we'll start on the demand side here. Obviously you're saying that you're not seeing any evidence of customers delaying projects or pushing orders out. I know you're not ready to guide to 2023 or you're not guiding at all. I'm curious if you have any color on just how much of your current backlog provides visibility into the following year at this point. On the MRO side, it's more demand driven and, you know, we don't usually keep a backlog, but we are seeing consistent activity levels with what we've seen, you know, throughout this year. I mean, there's, you know, on Gexpro, you know, we're more tightly aligned with the OEMs, and Bob might have more perspective on exactly what he's seeing. Across most all of our verticals, with the exception of renewables, demand has stayed consistent and elevated. Renewables has been impacted throughout the year, and we've been waiting for the, you know, Inflation Reduction Act, the production tax credit extension that should re-accelerate that one vertical from kind of the depressed levels that we've experienced this whole year. End markets, Bob, on your end markets, would you wanna comment on it? I mean, the best way to look at it is five of the six vertical markets are up double- digits going into Q3. We're seeing nice tailwind in aerospace and defense and consumer industrial, getting nice lift in transportation, technology. Where we are seeing headwinds is sustained headwinds in renewables. We anticipated that. As Bryan said, the Inflation Reduction Act has been extended, so we know that the wind and renewables market over the next 10 years is gonna be well positioned for growth. To Bryan's point, you know, we're well versed in operating in tailwind and headwind environments. If, you know, going forward into 2023, we see some cautionary headwinds, we'll adjust accordingly. Okay. Obviously, you know, organic growth would Ken, it may be helpful just 'cause this is so on everybody's mind to probably let Cesar to speak about Lawson and the end market demand that he's seeing. I mean, we're seeing an acceleration in SKU activity, and we've had actually good solid demand increase at Lawson. I think that there's no topic that's on any of our minds more than what end markets are doing right now in demand. Why don't we let Cesar and Russ each answer your question as well, so they can speak about their end markets so that we can kinda get that out there for everybody, to understand what we're seeing. Cesar, why don't you say something about Lawson's end markets, as well? Thanks, Bryan. Like you heard from Bryan earlier, our MRO market, we continue to see the demand flowing through our different end markets that we serve, which is very diverse industries. We're serving a lot of industrial, waste management companies, utilities, fleet, automotive, you name it. We continue to be very sticky with our customers and play a significant role when it comes to labor shortages. As we've been growing our business, the piece that we continue to feel strong about it is our approach for new customer acquisition and increasing the share of wallet across the board. When it comes to seeing any type of softness across the different end markets, we're not seeing any significant or major signal right now. As you heard from everybody, we're very cautious coming into 2023. I think that your end markets are all performing, but everybody is looking at the end markets and kinda wondering what we might see, but we aren't seeing it. Russ, you've got the business with the strongest backlog indications. Why don't you speak about your end markets? Yeah. Our end markets have remained steady throughout the year, steady to growing. We've seen a little softness in the beginning of the year in aerospace and defense, but that seems to have stabilized a bit. Technology can be lumpy, and we're seeing that as it's going forward, and that's mainly due to supply chain. But we're not seeing any indications from our customer base right now on anything significant softening in the market. We continue to build a significant backlog due to the lumpiness in the technology sector as well. That's all really great color, and I appreciate all that. You know, my follow-up here is really on the price side. Obviously, organic growth was strong across all the three segments. I'm curious if you just kinda help us understand how much price was taken in the quarter, any color on what price cost was across the three segments. Then, you know, maybe also how much do you expect from a carryover benefit from pricing actions that you've taken so far this year into 2023? Yeah. Ken, this is Yeah. I was gonna say, I was gonna send it to you, Ron, but I just would say that one of the things, Ken, that we've really prided ourselves now for really 30 years in distribution investing is staying really nimble on pricing, particularly when you get an opportunity to raise prices due to inflationary pressures. We had spent a lot of time studying in the 1970s and the 1980s, which I alluded to earlier, how inflation can be, you know, can work to the advantage of cash flow on a normalized working capital cycle for distributors. That led us in our desire to compound money in distribution businesses, it kinda led us to distribution over our long-standing investments in banks and financial institutions. We just had a higher return on invested capital profile, especially on incremental dollars, and particularly in inflationary cycles, when normalized for the increase in working capital that you have to step into, as you're replacing inventory with higher dollar cost inventory and receivables that are. I think that Ron and his team was set up well for it, as were each of our companies, going into it. We talked about whether or not we were gonna roll into an inflationary cycle. We started taking some price actions pretty early, and we've continued to take them. We've had to, you know, work where we have contract pricing to make sure that we're getting, you know, that we're working collaboratively with our customers that are, you know, longer standing, larger customers where we have some contracting elements with them. That's more probably over at Gexpro with Bob's business than it is in others. Even there, we've been able to be very constructive in being able to lift our pricing consistent with, on a percentage basis, with our cost of goods sold. We're getting more flow through, or we expect to continue to get more flow through on that, and we've got some more pricing actions that we've got prospectively in front of us. We've taken a little bit this year or this quarter. Ron, why don't you speak to where specifically you've taken it or you've seen the other verticals take it? Sure. Yeah. Thanks, Brian. In terms of how large the price increase was for each of the businesses, Ken, you know, within the deck, we laid out the organic sales. To Brian's comments, really all three companies took price increases and realized benefits throughout the quarter. For Gexpro Services, you know, organic sales were up about 14%, about half of that, about 7% of that was price. TestEquity, organic was up about 17%, and about, again, about half of that 8% was price. On the Lawson side, we were up about 17% organically, and our volume was up about 5%. You know, that's, you know, call it 12% on price and mix. To Bryan's comment, I think that, you know, particularly within the Lawson business, we've been, you know, throughout 2022, I would say catching up a bit, versus 2021. So I think that's why a larger portion of our increase is price related than the other three operating companies. We have continued, I think all three organizations have continued to see, cost increases come through from our supplier base. I will say, what we saw on the Lawson side in October, tempered itself a little bit, so maybe that's a good sign, moving forward. But, you know, at this point, you know, all three companies, and you can see this in the margin, gross margin percentages are staying ahead of those, vendor cost increases. Certainly there is some of that that's going to spill into 2023 in terms of price. Certainly any actions taken throughout the year will get the full- year effect for next year. Right now we're anticipating that, you know, even though October was maybe a little bit softer from a vendor cost increase. That, you know, those will continue to move into 2023 as well. Got it. You know, just one more here. You know, could just talk a little bit about how you think about the M&A strategy. You know, obviously, correct me if I'm wrong, but it sounds like, Bryan, that you are, you know, you're cognizant of the macro uncertainty. We've seen you kind of shift some capital back towards share repurchases, and then back towards internal growth initiatives. But you also talked pretty positively about, you know, the pipeline being full. Just to clarify, I mean, with interest rates rising and just with the leverage profile where it is today, should we assume that it's not the top priority for capital deployment in the near- term, or is that an unfair statement? Well, I'd say that you know, I don't wanna say that it's an unfair statement, but I also don't wanna anchor expectations around us being aggressive around acquisitions such that we'd be in any way reckless with the business that we believe longer- term we're gonna continue to compound a lot of value as partners with the public shareholders. There are very attractive tuck-in acquisitions that are in our queue right now that we're working on actively, and that we think will be revenue accelerating for our core. You know, doing something for financial engineering purposes alone is absolutely not our objective. This is not a roll-up. I cringe at the roll-up term. I always have, even going back into the 90s. If there's not a deliberate reason to make an acquisition where you think it makes the financial and the long-term sustainability of your core better, then there's not a real reason to go out, you know, lay out that capital because like I tried to talk about it in the prepared remarks, the incremental returns on invested capital, on invested capital and working capital, are so high in distribution businesses that you can compound your business very attractively, most attractively through capital invested in working capital or in internal initiatives. We have no shortage of those opportunities right now on the platform that we pulled together. There are some key elements that we think are gonna continue to bind some of what we've got together, tighter and also allow for the organic slope of revenue growth, to be accelerated from where it might be otherwise. Sometimes that's acquiring key customers that you think you can, you know, that where the sales cycle is really long. I know in Gexpro business, the Gexpro Services, the lead cycles are long. If you can get deeper into some customers that you know you've got a lot more SKU expertise than the company you're acquiring, if you're being asked to go into a geography like we were with TestEquity in Europe by our key vendors, then you know, you may make a small acquisition that's accretive financially, but more importantly it's gonna allow for a jumping-off spot to be a better partner for your vendors and for key customers that you've already, you know, are working with in North America that have asked you to go to those other geographies. We are really focused on North America, to be clear, but there are some reasons why our customers and vendors are asking us to look in on small acquisitions in some other areas. There are a couple trophy assets that we are in direct dialogue with the owners, that you know that I think are transformational to the whole platform, candidly. As we look at how to bind together the capabilities of TestEquity on their Engineering and Production Supply business and the Gexpro and Lawson OEM, Gexpro Services and Lawson OEM and MRO SKU and technical knowledge, there are some pieces in the marketplace that fit really well that pull. That kind of have long been part of our vision of pulling those elements tighter together as one solution. Those conversations started many kind of years ago and they're still going and sometimes you don't know when those opportunities are gonna land. In terms of pushing leverage in this environment, that's not our objective. Our objective is to build a really good business long term. That's the. I wouldn't wanna overly skew the lens towards not doing anything on M&A because we probably will, but it'll be very careful and judicious. It'll be as we continue to get visibility around what's going on in our end markets, and confidence that we're gonna generate a lot of cash next year, which we have a lot of confidence in that. We invested so significantly in working capital this year as part of pulling the businesses together that, you know, most of our analysis would indicate that we can grow top line quite a bit without investing incrementally in working capital. Now, if inflation continues to push hard forward, then, you know, replacing inventory that you're selling at, you know, at 10% higher than what you Paid for it can put some pressure on the inventory investment side. If you are continuing to realize that through receivables that are growing because your top line's growing. All that would indicate that we ought to also be dropping more dollars than we have dropped in the past. All helpful color. Thanks. Thank you. Our next question is coming from Kevin Steinke with Barrington Research. Please go ahead. Morning, Kevin. Morning. In the prepared comments, you mentioned Lawson Products is exploring some new channels to market. I don't know if you could expand on that at all. Cesar, you're probably best to tackle this. Thanks, Bryan. Hi, Kevin. Morning. Elaborating a little bit more on Bryan's note. When you think about it, we got a 90,000 active customer base, and we go to market one single channel right now with our field reps that, you know, are there every day for our customers. As we think through the future in terms of looking for ways to better serve our specific needs of our customers, with such a diverse customer base that we have within a segment and different end markets, but both size as well, we're very carefully working with the field and our sales team to develop different testing and different ways to continue to become stickier and being able to allow our, you know, more precious time for our sales team to be in front of customers. That's something that you continue to hear us talking more and more about it over the next coming quarters as we continue to develop these different ways or alternative ways of serving different customer size. Okay. Thank you, I would also add, you. Yeah. One of the things that has been most exciting for us has been the ability to look into how, for instance, Gexpro Services' tight relationship with their OEM customers is pulling Lawson's MRO and some of the TestEquity EPS engineering procurement solutions into those engagements. In some ways, that's another channel expansion to market for Lawson because it may require, and it really does require, a different way to service those accounts because Gexpro Services already has people embedded inside of those OEM facilities. The vendor managed piece of it can be picked up by Gexpro Services and their colleagues even though the product and the revenue is gonna be hitting on Lawson's top line. I don't know if that's helpful. Yeah, that is absolutely. Thanks for the color. You know, obviously, you had some nice adjusted EBITDA margin expansion there in the quarter, but you did call out higher compensation and healthcare costs. Can you just maybe elaborate on that a little bit more and how meaningful that was? Yeah, Kevin, this is Ron. Good morning. On the compensation side, you know, that was really more variable, you know, in line with our organic growth in sales. You know, it was a sizable dollar amount just to support the sales team and so forth, to support the high organic growth, 15% that we saw for the quarter. On the healthcare costs across three companies, it was about 60 basis points on our margin. All in, it was about a $2 million increase in our costs just in the third quarter. You know, what we saw, I would say, is across the three companies, probably higher claims coming in in the first quarter. It seemed to settle down a little bit in the second quarter, and then jumped on us a little bit again in the third quarter, in particular within the Lawson business was the biggest driver of that. Yeah, to answer your question, about 60 basis points on our net margin, just on the healthcare alone. Okay. Thanks for the detail. You've talked about in the past the goal of exiting 2022 with an adjusted EBITDA margin of greater than 10%. Is that something we should continue to think about? You know, I know the fourth quarter is seasonally slower and generally lower, but I'm just trying to think about how to think about the margin exiting the year. Yeah. Kevin, this is Ron again. You're spot on in terms of seasonality. The fourth quarter is typically a little slower for us, really, across the three companies. You know, generally 3-4 fewer selling days as well. In fact, we have 60 selling days in Q4 of 2022 versus 64 in Q3. It does cause a bit of a kind of a deleveraging effect on us. You know, once we get past the fourth quarter, again, you know. I can't give you a specific number, you know, on the formal guidance for the quarter itself relative to the 10%. You know, as we enter into 2023, certainly, you know, we're looking to expand those margins really based upon the continual, you know, organic growth that we're seeing, the M&A that we've talked about. A lot of the initiatives that are taking place across all three companies in terms of sales expansion as well as some cost opportunities that we're identifying as well, which we feel that more of those will be realized in 2023 than what are currently coming through the P&L in 2022. We feel really good about, you know, the first part of 2023, you know, relative to margin expansion. Again, understanding that Q4 softens up a little bit, not, you know, not dramatically, but just a little bit, and then we're off to the races again in the first quarter. Okay, great. Thanks for all the color. Appreciate it. I've gotta jump on another call here, but I'll catch up with you some more tomorrow. Thanks. Sounds good. Thanks, Kevin. Thank you, Kevin. Once again, if there would be any remaining questions or comments, please press Star one on your phone at this time. Our next question is coming from Brad Hathaway with Fairview Capital. Please go ahead. Morning, Brad. Hi, everyone. Hi. Morning. Thank you so much for the incremental financial disclosure and for the capital allocation discussion. That was really helpful. Appreciate that. With regards to, I guess, you know, obviously potential recessions are top of mind for everyone right now. As we're all getting to know better the businesses that are included in the new DSGR, I would love to just maybe if we could discuss qualitatively, kind of how Lawson but especially TestEquity and Gexpro kind of respond in a recessionary environment in terms of new kind of in factors that impact demand volatility, decremental margins and things like working capital. Just obviously not necessarily numbers, but just maybe help us better understand some of the factors that influence how each of the three businesses behave in a downside scenario. Sure. I'm gonna start on it, and then I may ask others to participate. Brad, the You know, one of the things that, kind of big picture, we've invested so much money in working capital this year, mostly as we were bringing the companies together at the tuck-ins and trying to get SKU congruence, as I alluded to, that I would say that we have the working capital in place, notwithstanding inflationary pressures on it going forward, to be able to either manage a larger revenue base and watching our working capital intensity come back down several percent, hundred percentage points, several hundred basis points, or being able to pull significant cash out of working capital, which is what we've been able to do historically, in these businesses, even and across our distribution companies during softer periods. These businesses, we were associated with them all during the COVID cycle, and so, there was, you know, a bit of a good lens into the question you're asking in terms of how they responded. You know how Lawson responded, so I'll speak to Gexpro. Surprisingly for us, Gexpro, during the COVID cycle, actually, grew the top line activity outside of project revenue, which is non-contractual revenue, was stable and grew through COVID, during 2020. Profitability actually improved as we were able to, you know, as a key supplier, we got some pricing on the gross margin side, and it flowed through the P&L as we continued to tighten up our growth initiatives during COVID. We ran our P&L at Gexpro Services tighter, or Bob did. It threw off more cash, or it threw off more EBITDA. Not to mention the fact that, you know, the cash conversion then was very attractive. We've invested a lot of capital in Gexpro Services since then as a key vendor to a lot of our OEMs during the supply chain disruptions that kind of were a fallout of COVID. It did require us to take some inventory positions. Obviously with inflationary pressures and with contracted revenue there, we elected to take some inventory positions there as well at pre-repricing with suppliers, you know, that we would expect that some of that'll abate during a recessionary cycle if there is one next year on our top line. On TestEquity, you know, our biggest challenge there during COVID was actually as much our vendors, and that issue's still facing us. Some of our key large vendors like Keysight and Tektronix had supply chain issues of their own, and that caused us to have less sell through on our equipment side, even though there was still constructive demand in the channel. It was softer at TestEquity, more akin to the MRO activity that we saw softening over at Lawson. You know, our biggest challenge there was making sure that we had supply to meet demand from customers much more so than in-market softness. The decremental margins, you know, that's an art, sometimes in trying to figure out, as much as it is a science. Oftentimes I try and think about, on these businesses, you know, kind of like the operating leverage that you and I might think about in terms of incremental drop from an incremental revenue dollar off of each of the businesses, they're different. So therefore, I kind of reverse the same, when I think about, operating leverage, although, I mean negative operating leverage or decremental margins in a contraction. We also have been investing in growth and we've made acquisitions, and we're still early in realizing, some of the benefits of pulling the businesses together on a cost basis. While we've itemized and are working through some purchasing and benefits of consolidated purchasing, and we've dollarized some of those, and we've dollarized some cost savings in back office, we've worked through some consolidated healthcare purchasing benefits. Those have not yet flowed through the P&L. Then there are some benefits to just general support of three G&As that if we ended up in an environment where the top line was softer, you know, we're just like we took cost actions at Lawson during the COVID recession and like we took them in businesses in 2008 and 2009. We've got a pretty solid vision or perspective on things that we can take out of the business that are current costs that we're enjoying in a organic growth environment that we've been investing in, both in terms of people and in just costs that we've been comfortable bearing. Guys, is there anything else there that you think that we ought to add? Bob, you, Russ or Cesar might talk about what, you know, kind of what your experiences are, decremental margins or how you would think about incremental cost to profitability if we've got a headwind next year. Yeah, Bryan, I think, you know, first of all, we're fortunate that we have decent executives leading these businesses. Just our experience with GE and Rexel over the past 30 years, I mean, first thing you do is you look at your customers. In a recessionary environment, customers are asking you to help rationalize their supply chain. They wanna go to fewer and fewer suppliers, so that it becomes a strategic supply chain. They're looking for labor productivity. They're looking for value engineering, everything that we excel at. So to me, when we walk into a situation that's a headwind environment, we just view it as an opportunity. Bryan, I communicated earlier, you can still drive SKU expansion. You can still drive wallet share. You can still drive new business development. You can still drive cross-selling. We've id entified over 120 new opportunities collectively for Gexpro Services, TestEquity, and Lawson Products, just mining the installed base. Our thought process is we'll just reallocate resources and continue to expand to take share in a multi-billion-dollar vertical market. You know, with TestEquity, we've actually changed the structure of the company somewhat since the first recession with COVID. We've added lower end product lines that people, customers still tend to purchase even in a down cycle. Frankly, you know, we're increasing our business digitally, exponentially every year. As we go to market digitally, that makes it much easier to get through the recessionary times. Russ, before Cesar jumps in, you talk about, for Brad, we've added 3,600 SKUs, 3,300 SKUs in the last 90 days, on our digital platform, part of kind of that investment in working capital in the last 6 months, that's taken place in Test and in Gexpro Services, and in Lawson as well. Talk about the SKUs, kind of a little bit of the SKU perspective additions that you've done. Sure. I can start with that one. We basically, through our digital platform, monitor what customers are looking for that we don't currently stock. As we go through that, we expand our product lines, and we expand the stockable product lines as we go forward, adding new products to our digital platform. That automatically increases the sales as customers look for those items, then we have them in stock, and that tends to increase our sales exponentially. Okay. In our case. Cesar, you. Yep. Yeah. Thanks, Bryan. In our case, on the Lawson side, very similar to what Bob described for Gexpro Services. We see these times as opportunities for us to continue to support our customers because they're looking for partners who can help them to reduce their costs, save money, and that's where we chime. That's where our team goes out there and help our customers to really drive through these difficult times. Shuffle our resources from one place to the other and leverage the cross-selling opportunities that we have across the different portfolio companies today. Brad, you're familiar with Lawson's performance, you know, in just a couple years ago in 2020. We, you know, we had the ability, cash flows to Bryan's point, I mean, cash flows remained really strong during that time period, you know, on the working capital side and, you know, from a cost perspective as well. We know what levers to pull. In fact, you know, our EBITDA margins were flat even though our, you know, from the previous year, you know, 2019- 2020, even though, you know, sales fell off quite a bit. We know what levers to pull to make sure that we can still continue to deliver the financial performance. You know, Ron Knutson, I remember the Lawson. Go ahead. I was just gonna say. I remember the. Sorry. No, you go. No, you and I have talked about this before. You know, in these down cycles, our cash conversion off of EBITDA tends to be 100% or larger. Certainly, we in the 2008-2009 down cycle, we bought IDG, took it private in August of 2008, and were faced with a significant decline in revenue right afterwards. Much more of a shock than I think any of us expect here, even in the worst scenarios. That 2008, end of 2008, you know, we were deeply embedded in a lot of companies in their supply rooms, and purchases declined. We threw off a lot of cash at the same time as we were very tight on spending. We held EBITDA flat on significantly lower revenue, and our cash conversion coming out of working capital de-levered the business significantly. We actually had much lower debt to EBITDA ratios during the trough of the recession than we had going into it. I've worked this model a lot of different ways, and all of my efforts on that would indicate that we would de-lever out of working capital should we go into a recession. Our EBITDA may come down or may assuming we aren't taking drastic cost-cutting initiatives at the company levels, but we're holding most of our costs flat. We take advantage of the synergy, cost benefits that are still in front of us, and we have a decline on the top line, cash ought to come out of the business at a level that would be consistent or greater than EBITDA. Great. That's very helpful. Thank you. That was a very useful discussion. It's good to learn more about Gexpro and TestEquity especially, because obviously we have more experience with Lawson historically. Thank you very much. You know, congrats on a great quarter, and looking forward to continue to see what you're building here. Thank you. Thank you, Brad, for your support. Once again, ladies and gentlemen, if there are any remaining questions or comments, please press Star one on your phone at this time. Okay, there appear to be no further questions in queue, so I will hand it back to Bryan King for any closing comments. Okay. Thank you, operator. Thank you for those that participated today. We appreciate your interest in DSG. We're excited about where we are. We certainly are further along in many of our initiatives than we expected to be by September 30 th. The businesses are performing at or above how we imagined they would, and our visibility at this point in time continues to give us a lot of confidence in the near term as well as the intermediate term. Although we appreciate and are respectful of the changing environment with interest rates and inflation. I wanna particularly call out the effort of our management teams and their colleagues over the last six months as we've been working together. There's been a tremendous amount of effort by everybody to get to where we are today. We really appreciate our employees across DSG working as hard as they have to make the business teed up for the prospective year as profitably and successfully pulled together as it is. Thank you for everyone's efforts, and we look forward to talking to you either throughout this quarter. Please reach out to us, or we will hear you or hopefully engage with you at the end of the year. Thank you, everybody. Bye. Thank you, ladies and gentlemen, and this does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation.