Good morning, everybody. We appreciate everyone's interest in our conference this week here in Nashville. I'm Tommy Moll, Analyst here at Stephens. I'm delighted to be joined on the stage by two members of the management team at Distribution Solutions Group. To my immediate left is CFO Ron Knutson. To Ron's left is Brett Scarbrough, Vice President of Strategy and Investor Relations. Ron, Brett, thanks for your time this week. Thanks for having us. Yeah, thanks, Tommy. Good to be here. We have the next 45 minutes together, and I've got Q&A prepared for the first, call it, half of that time. We'll go through a good 360 overview for those of you who may not know the company well just yet. By all means, if during that time, or certainly in the second half of our session, if you have any questions, just shoot up a hand and ask it directly. Just to start, let's kick it off with the overview of DSGR. Ron, at a high level, you're a specialty distributor that's a tie-up of, I used to say, three different businesses, but that number grows over time. Maybe sketch for us what the different pieces of DSGR are and how it all came together. Sure. Excuse me. I won't go through all the history on the formation of Distribution Solutions Group, but just by way of background, we combined three organizations about three and a half years ago. We really report under three separate verticals. As Tommy mentioned, we are a specialty distribution company, and we surround really all of our product distribution with a lot of services to our end customers. The three verticals that we brought together, the first is Lawson Products, and I'll just give a brief overview of each of the verticals. Lawson Products, a 73-year-old organization headquartered in Chicago. Lawson is a vendor-managed inventory provider for the Class C MRO end market. Everything maintenance, repair, and operations, average piece price of about $1.20 of product. The pieces are relatively—think about 12 product categories: nuts, bolts, fasteners, chemical, those types of items, everything that's out there on a break fix. The real value that Lawson provides to their customers, though, is on the vendor-managed inventory side. Lawson puts bins and cabinets in their customer's location, really goes after and gets the real estate. We have about 1,000 sales reps, and the number is closer to 930, I think, at the end of the third quarter. 1,000 sales reps out spending time with our customers and providing all of the support on putting product away, actually making the order on behalf of the customer. We ship directly to the customer's location. The sales rep shows up the next week, puts the product away. Lawson's product margins, gross margins, if you look at those on the reported basis, are in excess of 60%. Certainly, that's high for a distributor, but our customers pay us for that service rather than them trying to insource it and handle it internally. Lawson's largest customer is a multi-site rental operation. What we do there is we provide all the items that help fix those items that our customers are out renting on a daily basis. For them, it's about how do we keep the product up and running, and Lawson's a big piece of that. Turning to Gexpro Services, the second vertical, it's an OEM provider of Class C parts as well. Gexpro Services was acquired by LKCM. I'm sure we'll talk a little bit about share ownership here in a minute in February of 2020. They are a supply chain solution provider to their end customers, again, Class C items. Think of items that would go into the production cycle that are the smaller cost of a production process but could make up 60% of the actual units. I visited one of their customers, a manufacturer of airline jets, high luxury jets. The location I was at, we were providing all the rivets and screws and so forth in the production and manufacturing of the interior. That customer is really concerned about the cost of leather that goes into that process, but we're there supporting all those items that I typically would refer to almost as nuisance items where the customer doesn't want to worry about buying thousands of rivets and screws. They hand that off to Gexpro Services. We go out, we manufacture, we hire a manufacturer to produce those. About 70% of that product is manufactured to our customer specs. It's a complete outsource. They come to us, we take over the entire process. We meet with those customers. Gexpro makes up about 25% of DSG's revenue, so call it about $500 million. We meet with those customers, about 2,500 customers within Gexpro Services on an annual basis, and basically prove out our return to them in terms of costs that we've taken out of the cycle for them. The third vertical, TestEquity Group, really two pieces of that business: electronic production supplies. There, from a product standpoint, think of solder, adhesives, tapes that go into the industrial technology manufacturing process. It represents about 80% of their business. The other 20%-25% of their business is test and measurement equipment, primarily items that are oscilloscopes and so forth that are testing wattage, voltage, noise interference, really highly technical equipment, again, supporting the industrial technology manufacturing space. TestEquity makes up about 40% of DSG's revenue. Two years ago, we acquired a company, Hisco. It is a combined TestEquity-Hisco. It has basically doubled the size of that piece of the business for us. Ron, you referenced the unique ownership structure, but let's unpack that a little bit. Luther King and its affiliates are the majority owners of DSG. Maybe just give folks a quick sketch of which pieces of Luther King are involved here and how the ownership structure came to be what it is. Sure. Let me kick that off and then certainly turn it over to Brett. LKCM, headquartered out of Fort Worth, Texas, has a public side that has invested capital of about $30 billion and then a private equity piece of that representing about $4 billion of invested capital. LKCM started acquiring shares when Lawson was a standalone public company back in 2013 and acquired about 30% of the shares in the open market. When the founding family of Lawson Products decided to exit, LKCM stepped in and acquired the other about 20% of the shares that were still with the original founding family. As part of the merger to bring the companies together a few years ago, Gexpro Services and TestEquity were 100% owned by LKCM. Effectively, we issued more shares in exchange for the equity of those two companies. At this point today, LKCM owns about 78% of the shares of DSG. I would say that we rely heavily upon LKCM. They provide DSG quite a bit of support on the M&A side. Their backdrop, their specialty is really within distribution. I'll turn it over to Brett here in a second. I work with probably 10 - 12 of their individuals within their team, all on a non-compensated basis. They're not scraping anything off from an earnings perspective or from a management fee. Really, when the shareholders win, LKCM wins as well. Brett, I probably missed some pieces in there that you'll fill in. I just think it's a great, it's a really important part of the story to understand that this is not a traditional private equity roll-up. Private equity then sells down. Bryan King has been investing in distribution businesses. He's our Chairman CEO for well over 20 years. What the team has found is that investing in specialty distribution businesses that can't be Amazoned or that are not commoditized, businesses that instead have services or have technical sales or have kitting that do a lot more with sort of commodity-type items is a great place to play because it drives stickiness with the customer. It drives more sustainable cash flows, better margin profiles, etc. We identified Lawson in really 2011 and began buying those shares in 2013 because we felt like Lawson Products really fit all those things we look for in a specialty distribution business. The other thing that we learned over time in private equity is that you buy a business, and then you do all this work with it, and then you have to sell it. You do not get to continue to reap the benefits of all that work you have put into it. We put Gexpro Services and TestEquity into Lawson so that we would have a vehicle that could continue to compound really in perpetuity. There is no end date in sight that, "Hey, we are just going to sell all of this because we are working on this so hard every day as one of our most important investments at the firm," is that we want to be able to look out in the future and this be a much more valuable company. I just wanted to provide that important context here. Yeah. Thank you both. The topic of M&A has come up a few times now, so let's sketch out what the program looks like there. How do you staff this effort, both at the DSG level and Luther King? Ron, you referenced some of those elements already. How would you characterize the pipeline today? Yeah. First, I just want to hit on sort of the LKCM ecosystem. The LP base of LKCM Headwater, which is a private equity effort, is mostly taxable individuals. It's a lot of former CEOs, CFOs, operators of private companies. About half of what we've done is in distribution. As you can imagine, that's a really valuable place to source acquisitions and distribution. That's just a really critical part of the story. A lot of our M&A has not come through banks. It's come through our network. You've got the LKCM Headwater team who's looking for M&A. You've got the management teams of the three verticals looking for M&A. We have a dedicated M&A team at the DSG corporate level that helps us execute on M&A. A couple of years ago, you can correct me, maybe it was three years ago, you had an investor day and you sketched out some five-year goals. And some of those that I noted for today's purposes are just on the revenue side. It was a mid to high single-digit organic compound rate, consistent margin expansion somewhere between 50 basis points and 100 basis points in any given year, 20%+ EBITDA CAGR. So we don't have to go into granular detail on each of those separately, but let's just keep it at a high level. What gives you the confidence in being able to achieve these targets, and what are the key steps ahead? Yeah. Yeah. So in that investor day presentation a couple of years ago, I think it was September of 2023, if I remember right. Okay. Yeah. We did lay out some overall plans as to where we wanted to take the organization. That was about a year or so after we put the company together. We felt it was really important for all the shareholders to see our vision where we were taking the organization. At that time, we laid out a revenue of about $3.3 billion, getting to about 13.5% EBITDA or about $450 million. I would say we've made some nice progress there. When I look at where we were prior to combining the organization, our consolidated revenues were about $900 million. Today, we're on a TTM of about $2 billion, both from an organic standpoint and from an acquisition standpoint. Similar on the EBITDA, we were sitting at about 8%, about $90 million. Now we're at a run rate of, call it, close to $200 million and kind of bouncing around between 9% and 10%. Over the last three to four quarters, we've seen some really nice organic growth from really across most of the verticals, ranging anywhere from 6% this most recent quarter. I think, if I remember right, the lowest organic growth over the last four quarters was about 2.5%. We feel we have a lot of initiatives taking place within each of the three verticals. I'm sure we'll probably dig into that a little bit deeper. In that plan that we put together a couple of years ago, it was kind of that mid-single-digit organic growth. We've seen that so far here in the last year or so amidst what I would classify as probably sluggish overall industrial space. If I look at ISM, I think it's been below 50, 30 out of the last 33 months. We've still been able to show nice organic growth and have seen some nice positive results in some of the acquisitions that we've made as well. At this point, we've not reissued any five-year targets out there. Certainly, we feel like those are in sight. I would say they're pushed out a little bit just given some of the industrial backdrop. There's no reason. It's not a matter of if we can get there. It's more of a matter of when. Ron, you used the word sluggish to characterize the macro, and I wanted to pivot to a conversation on that topic. A lot of conversations I've had with investors really leading into the most recent earnings season suggested that there was broad hope of a short-cycle recovery. Maybe not to the point of putting a date on it, but the level of chatter there seemed to pick up. I'm just curious. You again use the word sluggish, which is consistent with what you've talked about recently. How would you characterize the demand environment more broadly? For those who are looking for any kind of sign of a recovery, is there one on your radar or not yet? Yeah. I think there's a couple of data points that we look at really almost on a daily basis. We talked a little bit about this on our earnings call a few weeks ago in that unit volumes, for example, on the Lawson piece, were positive this most recent quarter. I think that's a really nice indicator. We've gone out and have actually studied, given Lawson serves about 80,000 customers, as to whether or not we lag the overall industrial environment or whether or not we lead it. Five, six years ago, when we did that study, we came to the conclusion that we lagged it a little bit. More recently, we're more comfortable that we're leading that by a couple of months. We've worked with some economists to get to that conclusion. I think that's a positive trend where we've seen a bit of a flip in unit volumes on the Lawson side, just given the number of customers that we serve. I would say, though, that that's spread across larger customers, smaller customers. That's one data point that I would look to. I think the other piece, when we look at Gexpro Services, they sell into six very distinct markets. We're seeing some nice upward trends there. A couple of those end markets are probably leveling off a little bit. There's other areas like industrial power and so forth that seem to be picking up. We're a bit cautious, I would say, going into 2026. As I mentioned, we have a lot of initiatives taking place within each of the three verticals. Sometimes it's a bit difficult to isolate the upside from those initiatives versus the upside from the macro side. We're seeing some positive trends here most recently. Again, we're a bit cautious jumping into next year. We'll dive into some vertical-specific questions, but I have a couple more I want to keep at the high level here on tariffs. Last year, it probably would have been in the first back and forth that we would have been talking about tariffs. We have now made it 15 minutes in, and this is the first time the word has come up. I just want to ask, does it feel like you've got your arms around it at this point? Obviously, there were challenges getting here. Going forward, does it feel steady? Can you plan? Yes. Yeah. Yes, we can plan around it. We have as well over the last 18 months. You're right, Tommy. It was probably a year ago where it felt like we were pulling out the model almost on a daily basis, trying to keep up with all the changes. When I look across DSG, we direct import about 6% of our overall product. We have great insight there into what's happening from a tariff perspective. Where it becomes a little bit more complicated is where we're sourcing products domestically. They're being impacted by the imports and that indirect piece of it. I would say we've been very transparent with our customers around that. We've gone to them with letters from our manufacturers and from our providers. We provide that to our customers. One of the really strong attributes of DSG is our relationships with our 200,000+ customers. We provide a real value-added service. We love our product. They love our product. When it comes down to it, it's that service and that additional value and everything we're wrapping around the product that helps us really provide a lot of value to our customers. Some of the customers have wanted to see a separate line on the invoice, and we've done that in certain situations. Other customers have said, "We get it. Build it into the price." We understand that there's a bit of a you have to recover with the cost that you're incurring. And so we feel like we've got a really good handle on it in terms of what we're seeing coming through and then also what our ability is to change pricing to our customers. So as we all know, I mean, generally, inflation for distributors is positive. And so I'm not sure I would classify this necessarily as inflation, but it certainly is a piece of it. And so we feel like we've been in a pretty good place around the tariff side. One more big-picture topic here before we dive into the segments, artificial intelligence. What's top of mind for you there in terms of deploying it through your organization, and how early are you in that journey? Yeah. I would say we're pretty early on the journey side of it. We have some initiatives happening internally within each of the three verticals. One example of that is within our TestEquity Group. We're using AI on the AR collection side. Tim Hoff, who is our Chief Technology Officer on the Lawson side, but he helps really coordinate overall efforts across DSG as well, is introducing it in bits and pieces across the organization. I'd say we're pretty early in the process. Yeah. Let's start to tick through some of the segments, beginning with Lawson. There are a couple of initiatives in flight today, those being the sales rep hiring process and then deploying some sales-enabling technology. Let's start on the first with the sales reps. You said you've got about 930 today. Just give us some context on how those numbers have ebbed and flowed over time and where you want to land. Sure. As I mentioned earlier, I mean, Lawson really provides a lot of labor support through its sales force. About 930 sales reps today. That number will bump around. We've been north of 1,000 historically. In Q2 of 2024, we got down to about 850 sales reps. Some of the guidance that we've put out there is we're really marching our way back towards 1,000. We have very specific end markets today that we know that we can put a sales rep into, and they can become successful. For us, the number's important because if we don't have enough coverage in some of the end markets, certainly that impacts our overall ability to leverage some of our fixed costs and so forth. The piece I'd say is really more important is how productive are the sales reps in any given day. The way that the sales reps are out servicing the customers today, they'll make four, five, six visits in any given day. I would say probably 80% of resources around the organization is spent around how do we allow our sales reps to have an additional visit per day? They make more commission dollars as well. How do we pay them more dollars on making some additional visits? When you think about 1,000 sales reps on 250 selling days a year, one additional visit in an average order, that number compounds very, very quickly. We undertook an effort probably about 18 months ago to really optimize our sales reps. I would say it's a multi-year process. Changing some of the culture within a 73-year-old organization is not easy. We've seen some nice early wins. There are areas that we're still working on as well. It never feels like we're going to ultimately hit the finish line there because I think there's always ways for improvements. We have revisited sales rep compensation. We put in a new CRM tool about 18 months ago. We have great visibility now into all of the sales reps in terms of how many orders are they placing, the% of reps placing orders on a daily basis, what's happening from a customer if they miss a purchasing cycle, inappropriate follow-up to that as well. We've invested a lot over the last 18-24 months, ranging anywhere from building out our inside sales rep team that used to be a team of four or five individuals to now that's a team of about 30 individuals. Customers that maybe are in off-cycles or do not necessarily need a sales rep showing up every week, we can get an outreach to them through the ISR team. We have also built out technical sales specialists and business development individuals to allow our sales team to focus, to provide them business and for our sales team to focus on providing the service and getting them some additional business. It has been a multi-year process. I would say probably the area that we are focused on most heavily right now is really around new sales rep productivity in terms of new sales reps coming on and how fast can we get them to be to a productive state. At what point do they become really accretive to the organization from an earnings perspective? Also, how fast can they be making a commission and a wage level where they see the trajectory on a longer-term basis? That right now is probably where we're spending quite a bit of time on and making sure that we've got the right focus there. The other piece I would say is that all around sales rep productivity still is we have a couple of pilots that we're working on that are really looking to better understand what happens if we provide additional service support through what we call on-site service individuals or individuals that can be there to put the product away and allow our sales reps to go out and actually sell versus spending a lot of time putting product away. When our shipment goes to the customer's location, as you can imagine, at an average piece price of about $1.20, the physical labor that's associated with that can take 45 minutes to an hour in terms of putting everything away in the bin. When we see markets that are underdeveloped or we see sales reps that we know can grow, we pair them up with a service rep that does a lot of that labor, and then our sales reps can get onto the selling side of the organization. Let's move over to the OEM business you have. You've mentioned Gexpro already. Maybe just a quick reminder for some folks in the audience, the difference there in the Lawson and MRO strategy versus the Gexpro and the OEM strategy. Within that, Ron, you might just remind folks where Gexpro came from at General Electric. Sure. Yep. As I compare Lawson versus Gexpro Services, Lawson is on the MRO side, the maintenance, repair, and operations. Lawson will sell to a facilities manager, somebody who's leading a mechanics team to keep product up and moving. Gexpro Services services the OEM space. It is really more the production environment. Again, it is Class C items that are typically manufactured to our customers' needs. They take over the entire supply chain process. Gexpro Services does. Our customers will come to us and say, "Look, we purchase thousands of these rivets or bolts every single year. We want you to handle the entire supply chain side of that." Almost a just-in-time basis because we have great insight within Gexpro Services to the production environment and the production scheduling. We know what product needs to be there when. We do that through some VMI processes, but we've got really good insight. The other piece I would say that distinguishes those two is who we're selling to. On the Lawson side, it might be to the facilities manager. On the Gexpro Services side, it's somebody who's either an engineer or somebody who's really involved in the production cycle. We can have a common customer and have two very different buyers on the MRO side versus the OEM side. To Tommy's point, I mentioned earlier that LKCM acquired Gexpro Services in early 2020. That was a carve-out coming out of General Electric. It's really General Electric ex-professionals, and they were the sourcing arm for GE on a lot of their products that they would need throughout their portfolio of companies. I'm sorry, came out of Rexel. I'm sorry. Went through, yeah, came out of Rexel. TestEquity, shifting gears a little bit to talk about one of the industrial tech businesses you have, looks a little different than Lawson and Gexpro. Can you just give us the quick sketch of where you play there in industrial technology? Sure. I mentioned earlier about 80% of TestEquity's revenue is really supporting the manufacturing on the industrial technology side. Customers will utilize solder, tools, safety type of items, adhesives, tapes. We are a large distributor of 3M products really to support anything that is being produced on the technology side. I would say it is a little more typical distribution-based on that side of the business. About 20% is really coming from what we call test and measurement. Those are highly sophisticated technical pieces of equipment that measure wattage, voltage, noise interference, instruments that are sold really by engineers and support, again, everything coming off the line from a QA perspective could be tested via one of these oscilloscopes. Some of the changes that we have made within that piece of the business, we announced about three months ago. We brought on a new CEO within that vertical, Barry Litwin. In fact, we just came out of a board meeting last week. He's really, within his first 90 days, built what I would say is a really enhanced go-to-market strategy there surrounding the products, around a lot of the services. We have really good insight into, so TestEquity Group serves about 35,000 customers. One quick example of kind of go-to-market, there are thousands of those customers that buy a single product from us. When we look at that distribution of our customer base, we know we have tremendous share of wallet capabilities or opportunities there within the TestEquity Group. The other couple of pieces I would point to right away is building out an inside sales team there. We've seen certainly some success on that on the Lawson side. Barry's done that within some of his previous organizations. We know that our customers will purchase product through an ISR team. Two other points really quick around TestEquity Group is they have a really nice e-commerce platform, although I would say the conversion rate there, and it's something that Barry's identified as well, is low compared to industry standards. A lot of effort will be made towards getting that conversion rate up. We experienced the same thing on the Lawson side. We dug into that, and now we've seen about a 25% increase in the conversion rate on the Lawson side just by making some relatively easy fixes on the website. We're really excited about having Barry on board. We think he's got a great vision where we can take the TestEquity team, a new level of energy, I would say, and the ability to kind of carve apart their P&L to see where a lot of the profitability sits within the organization. Candidly, a lot of it is around the service piece that we feel like we can add into a lot of our customers. By the way, any questions from the audience? Please shoot up a hand if you have any. We've got maybe 10 minutes left. Seems like you have a pretty diverse set of in-markets. Is there one right now that gets you most excited? Yeah. I mean, you're right. I mean, the Gexpro Services team has six very distinct end markets. On the Lawson side, you probably can't name an end market that we don't sell into with our 80,000 customers. Where we've seen some lift is, I would say, within the industrial power side on the Gexpro Services side. It seems like that's picking up some momentum. We'll probably carry us into 2026. Aerospace and defense has been strong on the Gexpro Services side. Renewables for us, which has primarily been wind, that's really been on a nice upward trend over the last 18 - 24 months. Our sense is that's probably going to settle down here in 2026 a bit and probably be replaced by some of these other end markets. Semiconductor manufacturing, Gexpro Services has got good exposure there. We're building out our presence in Southeast Asia, which is the global hub of semiconductor manufacturing. We have a really nice brand there. I would back up and say that we are so broadly diversified. If we get PMIs to recover above 50 and we get just broad industrial improvement, that is going to start to show, I think, a lot of the fruits of our labor of the self-help story here. All the initiatives we have put into each of the three verticals, the investments we have made, they are not shining through as much as they normally would if we had better underlying industrial growth. Yeah. One of the areas that we're making very specific investments in is on the Gexpro Services side. If you look at their—we were talking to Tommy a little bit before—I mean, they've been on fire for the last couple of years. Really nice organic top-line growth, EBITDA performance in the 13%-14% range. They've done a really nice job growing that business under. We really haven't talked about the structure on how we manage the three verticals, but that's an area that we're continuing to invest in. We're bringing on individuals that are outsourcing and building a backlog for us there, not only in the Southeast Asia market, but also here in North America. We've got nice backlog building there that we've not yet seen come through. We are specifically out hiring individuals that we feel have those capabilities to build our book of business. Just really quickly, each of the three verticals does have their own CEO, their own management team. Certainly, we incentivize those individuals around sales growth, EBITDA dollar growth, as well as working capital as a percent of sales. Even though we operate on a vertical basis, we have also taken advantage of synergies across the platform. When you think about health insurance or you think about freight contracts or common vendors where we are outsourcing products, we have realized savings over the last three years by bringing those together. We do have three CEOs in place within each of the three verticals, and we really drive accountability into each of those teams. Any other question from the audience? Yeah, please go ahead. Maybe just pretty new to the story here, but it looks like a lot of the M&A in the past has been funded with equity and debt. Leverage is probably around four times now. Is that directionally correct? How do you just think about it? You've done such a good job with M&A. Do you continue down that path? How much do you have to delever first? How do you just think about it? Sure. Yep. Yeah. Over the first 3+ years of DSG, we've made nine acquisitions. We've deployed about $550 million of capital. $100 million of that was through a rights offering, and the other $450 million has really been through cash flow created from operations as well as our credit facility. Our leverage at the end of Q3 was about 3.5 x. Publicly, we've stated that we're comfortable in that 3x-4x r ange. We can delever very quickly if we slow down the M&A side. That is certainly not our intent. M&A is a big, big piece of the overall growth strategy here. We are very comfortable in that range. We have about a $1.1 billion credit facility in place. As we sit today, we're accumulating cash. We ended the third quarter with over $80 million of cash and nothing drawn on our revolver, which was about $250 million. We feel like we're in a really good position to be able to redeploy that cash from an M&A side without going out and either issuing more equity or taking on a lot more debt. Ron, maybe while we're on the topic of capital allocation, you recently announced an upsized repurchase authorization. Any context there would be helpful. Yes. Just last week, and we just announced it Monday of this week, the board authorized $30 million of additional share repurchases. We've been pretty active in the market during 2025. We view share repurchases as a return to our shareholders. In particular, it gives us a lot of flexibility when we think that we're not getting credit in the marketplace for everything we're doing or where we're taking the organization. It is nice to have that. Certainly, it is a flexibility instrument for us, and we'll jump in and jump out of the market or even do some private transactions when we feel appropriate. Any other questions from the audience? Just building on his question, roughly on an overall basis, what percentage of revenue would be for the energy sector, towards power plants or just? Yeah. I'm going to get to a slide here that we've typically have provided to everybody. I would say if we had to look across kind of the top 10 from an end market perspective, industrial is about 15%. Auto and transportation is about 13%. Aerospace and defense is about 10%. Renewable energy is about 8%. Government and military is about 4%. Electronic assembly is about 20%. You can see pretty quickly that no real end market concentration. Certainly, from a customer perspective, it follows that same path. I want to thank everyone for their interest in DSGR. Again, I want to thank Ron and Brett for their time today. Gentlemen, we appreciate your time and insight. Thank you.