Distribution Solutions Group Inc (NASDAQ:DSGR) stock rose 6.81% (As on March 8, 12:39:32 AM UTC-4, Source: Google Finance) after the company reported mixed result for the fourth quarter of FY 23. Adjusted operating income, excluding these non-cash and non-recurring items, grew 27.0% to $93.4 million compared to $73.6 million in 2022. Non-GAAP adjusted EBITDA grew to $157.0 million in 2023, or 10.0% of revenue, compared to $123.0 million or 9.7% of comparable pro forma revenue in the prior year. As expected, Hisco’s operations pressured the 2023 adjusted EBITDA margins by approximately 50bps. The Company ended 2023 with total liquidity of $298 million, consisting of $99.6 million of cash (restricted and unrestricted) and $198.3 million of availability under its credit facility with net debt leverage of 2.9x. Uses of cash for 2023 included net capital expenditures of $18.7 million and share repurchases of $3.6 million at an average price of $26.09.
DSGR in the fourth quarter of FY 23 has reported the adjusted earnings per share of 22 cents, beating the analysts’ estimates for the adjusted earnings per share of 13 cents. The company had reported the adjusted revenue growth of 23.2 percent to $405.24 million in the fourth quarter of FY 23, missing the analysts’ estimates for revenue of $419 million. This growth was primarily attributed to the acquired revenue from Hisco, although the company experienced a 6% contraction in organic revenue. Despite this contraction, the two-year stacked organic revenue grew by 10%. The current quarter decline was primarily due to continued softness in the technology end-market, delayed maintenance spend most notable in the renewable end-market, and delayed capital spending in the current interest-rate sensitive environment.
Additionally, the Board of Directors announced an increase of $25.0 million to the existing share repurchase program, expanding the Company’s availability to $29.0 million at December 31, 2023.
Looking ahead, Distribution Solutions Group did not provide specific financial guidance for the upcoming quarters or fiscal year. The company’s strategic initiatives, including accretive acquisitions and organic growth, are expected to continue driving long-term shareholder value. This strategy included the acquisition of Hisco and the related $100 million rights offering, the return of capital to shareholders through an expanded share repurchase plan and the continuous focus of managing working capital to generate significant operating cash flows. King expressed confidence in the company’s asset-light model and its ability to generate meaningful cash flow for reinvestment into high ROI initiatives.