Good morning, and welcome to the Distribution Solutions Group's fourth quarter and full year 2025 earnings call. Joining me on today's call are DSG's Chairman and Chief Executive Officer Brian King, and Executive Vice President and Chief Financial Officer Ron Knutson.

In conjunction with today's call, we have provided a financial results slide deck posted on the company's IR website at investor.distributionsolutionsgroup.com. Please note that statements on this call and in today's press release contain forward-looking statements concerning goals, beliefs, expectations, strategies, plans, future operating results, and underlying assumptions 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 as of today. The company anticipates that future developments may cause those views to change, and we may elect to update the forward-looking statements made today, but we disclaim any obligation to do so.

Management will also refer to certain non-GAAP measures, and the reconciliation to the nearest GAAP measures are available at the end of our earnings release. The earnings release issued earlier today was posted on our Investor Relations website.

A copy of the release has also been included in a current report on Form 8-K filed with the SEC. Lastly, this call is being webcast live on DSG's Investor Relations website, and a replay will be available through March 19th.

I will now turn the call over to Brian King. Brian?

Thanks, Sandy. Good morning, everyone, and thank you for joining us.

As events unfold in the Middle East, we are actively assessing any potential implications for our business, our customers, and impact on the broader supply chain. Our thoughts and prayers are with the military personnel and civilians who are in harm's way, and with their families.

We will continue to monitor the potential implications for global markets, and are committed to operating with resilience, discipline, and care during this period of elevated uncertainty. We are not where we want to be at the end of the quarter, but our confidence and vision for the future remain strong.

2025 was a critical internally focused reinvestment, retooling, and digesting year for DSG, as well as one where we managed through some dynamic pricing and supply chain and numerous one-time cost curveballs. While it was at times a dizzingly dynamic year, through our daily North Star of commitment to staying focused on investing in the business with a lens on long-term value creation, our urgency to offset shifting rules in the marketplace sharpened our focus on core fundamentals of building a better DSG, enhanced focus on execution, tools, and talent, on timely accountability across the organization, and made us prioritize not delaying targeted significant investments in capabilities and talent to position the company for long-term success.

As a result, we go into 2026 with an enhanced perspective on our competitive positioning and long-term levers to drive performance across our North American and global platforms. As I reflected, we navigated challenging headwinds in 2025, including a government shutdown, shifting demand environment, and macroeconomic pressures and emotions, including those driven by fluid tariffs, where our diligent and largely effective efforts to recapture margin still left us short.

Our financial results fell short of our expectations in the fourth quarter and for the year, and we own that. However, besides progress in our transformative investments, we enjoyed consistent operational affirmations in the marketplace around our value-added lines of business.

Our teams delivered important new business and wallet share wins in each vertical, held on to business on the back of service and capabilities, and made meaningful progress in our customer-facing capabilities and partnerships in 2025. We leaned in on improved discipline, heightened institutional adaptability, and enhanced DSG's more broadly presented and refined value-added solutions, as confirmed by the marketplace, all of which add up to real 2025 successes and maturity of the business that will make us stronger in the longer term.

Turning to slide 4, for the full year, we delivered total revenue growth of 9.8% on one less selling day, resulting in $1.98 billion in annual revenue. Organic average daily sales grew by 3.6%, reflecting solid underlying execution.

Cash flows in 2025 were strong. We generated $84 million of cash from operations on top of $56 million in 2024.

Adjusted EBITDA finished at $175 million, short of our expectations. These results demonstrate our continued focus on cash generation, working capital efficiency, and profitability.

Throughout the year, demand remained healthy across aerospace and defense, semiconductor-related technology, renewables, and as the year progressed, industrial power. During the fourth quarter, we began to see demand soften in renewables in North America, which we are actively managing by pivoting growth initiatives in that sector towards the strong renewables demand growth for DSG's improved presentation of capabilities in the global marketplace, and expanding our efforts on other end markets where we enjoy exceptional customer partnerships and strong secular and strengthening cyclical momentum, such as in industrial power, technology, and aerospace and defense.

Our expanded platform capabilities and ability to support our historic customers and similarly discerning customers on a more global stage are supporting an expanding and accelerating set of dialogues. As we've discussed on previous calls, our financial results will not be linear.

The fourth quarter is a good example of that. However, these results are certainly not indicative of our long-term plans or confidence in the future.

While we anticipate some quarter-to-quarter challenges to balance earnings with our recent commitment to accelerate our talent recruitment, transitions, and accelerated investments, we are committed to making decisions that prioritize driving a stronger and more profitable DSG in the longer term for all of our committed stakeholders, but recognize, like in this quarter, that the timing of some of those decisions unintentionally lined up with some margin near-term pressure and taxed near-term earnings more than leadership expected. While we didn't want to delay investments in talent decisions to unnaturally smooth earnings at the expense of building a better company, our leadership team still expects much better profitability performance from our DSG platform of capabilities.

Let's turn to slide 5 to discuss our business initiatives. Gexpro Services delivered outstanding operating results in 2025, driven by the strength of the aerospace and defense, technology, and renewables end markets we serve.

Despite some fourth-quarter sales softness, full-year organic average daily sales increased 12.3%, with full-year ADS up 13%. We continued to invest in the technology and industrial power end markets, driven by expanding infrastructure needs and increasing AI-driven demand.

Our order backlog and new business pipeline remained strong in both segments. While renewables slowed in North America in the second half of 2025, we shifted our investment focus towards global strategies, with encouragement of exceptional partners across technology, industrial power, aerospace and defense, and the power generation cycle.

We are seeing a meaningful growth opportunity in India, while Southeast Asia is progressing more gradually due to the timing of customer qualifications. Both regions remain relatively small today, but continue to show an excellent acceleration in prospective and current customer engagement across more of our proven value-added capabilities at DSG and Gexpro Services.

Our European business remained strong, with increasing diversification across multiple verticals. Gexpro Services is also expanding its value-added service offerings using robotic automation and AI-enabled tools that enhance customer capabilities across VMI, kitting, manufacturing, and e-commerce solutions.

Since bringing DSG together, Gexpro Services went from approximately $350 million in revenue to just under $500 million, mostly organically. Adjusted EBITDA has expanded from approximately $35 million to $64 million in 2025, with margins expanding nearly 300 basis points to 12.8%.

This margin expansion reflects scale, broader geographic reach, enhanced value-added capabilities, and disciplined execution of operational efficiencies that leverage our cost structure. As we confidently lean into further investment at Gexpro Services, we are balancing strong optimism around marketplace pull on us to support growth and opportunities, with an expectation to drive earnings growth while making the important long-term investments in capabilities, geographies, and talent to support performing for our customers at a level that adds to the reasons we are winning wallet share and new mandates.

As a reminder, Gexpro Services launching new customer programs requires upfront investment of significant time and margin, but results in exceptionally sticky customer engagements where we are critical to our customers, and our commitment to doing our job for them thoughtfully and exceptionally reaffirms the partnership between us and our customers. The upfront effort and investment can cause a bit of deleveraging of profits in any given quarter as programs ramp up or mature programs slow, like the shift we felt on the margin in the fourth quarter as new programs in global renewables come on, but domestic programs slow, or as we felt a year or so ago in technology.

The great news is that the new business pipeline continues to expand even as mature programs may fluctuate based on each customer's program momentum. We also continue to win significant wallet share.

We rarely lose programs, and expanding what Gexpro Services does as a part of DSG allows us to expand our engagement with our customers. Gexpro Services continues to be one of the most exciting growth levers for DSG.

Looking ahead, we are excited and focused on investing even more deliberately in additional organic and inorganic initiatives to sustain and extend the strong long-term momentum we see at Gexpro Services. Next, Lawson Products.

Average daily sales increased 2.7% in the fourth quarter, continuing the momentum from the third quarter when average daily sales grew by 3%. Although new VMI installations and wallet share expansions led to organic sales growth throughout the second half of 2025, Lawson's smaller-account local revenue continued to be challenged in the fourth quarter, as some of the sales force and selling tools transformation over the last couple of years have distracted our resources from doing the exceptional job our customers champion from our unique service model and that we expect.

Lots of focus and tools, teamed with additional investment in talent and process improvements, are focused on getting this right for our customers, sales team, and for DSG. EBITDA margins were negatively impacted by a slight customer mix shift, deliberate strategic investments, and an unexpectedly elevated health care benefit costs in the quarter and for the full year, which Ron will discuss in more detail in a moment.

Recently, Lawson has made strategic investments in two leadership roles to strengthen the team through more capabilities and accountability. We brought on Jim Slomka as Chief Revenue Officer and Hillary Bryant as Chief People Officer.

Jim joined Lawson in January 2026 and brings a proven track record of commercial transformation, having led sales and operations for a $1.8 billion omnichannel enterprise, overseeing more than 2,000 sales professionals, delivering a 6-year sales CAGR of 8%, and expanding gross margins by 300 basis points. He brings strong discipline around accountability, urgency, process, and commitments to a team-focused enthusiasm for excellence and winning, all consistent with being a former West Point athlete and officer.

We are thrilled to welcome Jim to Lawson and DSG, and are confident on the immediate impact he will have on the organization. Hillary brings deep global HR leadership experience, most recently managing as a worldwide HR organization for a $1.4 billion industrial technologies company with approximately 4,000 employees.

She offers a great complement to Jim, bringing a renewed discipline and energy to employee engagement and corporate culture, while elevating a clear cadence around growth-focused expectation, urgency, and rewards. These important investments, alongside others that have also been recruited over the last years, put in place critical pieces to now have a stronger ensemble of experienced, been-there-done-that leadership, and collectively add meaningfully to our sales and operating foundation as we pursue improved growth and execution in 2026.

Turning to our 2026 growth priorities. We are focused on continuing to capture market share and expanding wallet share for our national accounts, including Lawson, Kent, and Government, while re-establishing our commitment to offering the highest level of consistent service out of our sales force for our customers, and with that, a return to growth out of our smaller local accounts driven by their efforts and the investment we have made in them.

A key leading indicator of our growth is in new VMI installations, or internally what we refer to as ship-to locations, which we are currently ramping up after a challenging couple of years as we've been working through our sales force transformation. We continue to leverage technology to increase sales effectiveness, and are improving the rigor and consistency of sales rep activity, supported by our CRM tool, enhanced training commitment for new FSRs, and a real focus on our DSMs' consistent cadence with our established FSRs around driving growth and consistency in the customer experience.

We are also in the early stages of rolling out across our field customer-facing team a route optimization tool that we have been developing that will give them back expensive and frustrating transit time, and more of an opportunity to serve and grow our customers. Although smaller piece of our business, our e-commerce channel continues to deliver double-digit growth, and we are encouraged that more than 30% of customers purchasing through the site are new to Lawson.

As we move forward, we remain focused on commercial excellence, the customer experience, and technology to accelerate growth and continuously improve how we serve our customers while also providing flexibility to our customers. Additionally, we are working more closely with our vendor partners to deliver solutions to our customers and to support our commercial team.

At our recent sales leadership meeting in February, approximately 50 vendors presented their products and services to our sales team. We are working with a number of those channel partners to improve our product costs, as we have in turn invested to support them and our customers with our significant recent investments in our selling and servicing capabilities.

We expect some nice progress this year out of our sourcing partnerships. Moving on to the Canadian branch division.

The team made solid operational and synergy progress in the fourth quarter and across the full year, despite macroeconomic headwinds and tariff-related uncertainty that pressured industrial end markets, especially in Canada throughout 2025. As expected, fourth-quarter revenue declined sequentially due to typical holiday season softness and weather, leading to operational deleverage.

In 2025, we completed four facility consolidations, with the final consolidation expected by the end of the first quarter. As we discussed last quarter, because Source Atlantic's purchase price was largely tied to tangible assets, our first full year of transformation has meaningfully derisked this investment for us, and we continue to believe this was a strong strategic acquisition to grow and scale our Canadian operations, although the revenue headwind out of the gate has us a full year behind our ambitious profitability objectives our DSG team embraced when we acquired Source Atlantic in late 2024, and more recently, the recruited Canadian leadership team reaffirmed that underwriting.

While there is still significant profitability tuning work ahead, we are encouraged by our framework and expanding profitability, insights, and discipline that we are building, the team we put in place, and the path and significant progress they are demonstrating to us and the marketplace as the first year of ownership has now closed. At the TestEquity Group, we are investing at a renewed feverish pace in the long-term platform we can better see now in this vertical.

A massive investment in additional leadership capabilities and tools were made in the business, especially during the last part of 2025. A shift was made concurrently with these investments around dialing up a more intense focus and intentional allocation of resources towards driving a structurally higher margin shift, discipline out of a daily cadence around the vertical's growth priorities, and each team member owns specific accountability on discrete levers to impact that outcome.

When we committed to these investments, we fully expected a J-curve recovery, with near-term transitions impacting performance, followed by improved revenue growth and profitability as our strategic initiatives take hold. For the full year, average daily sales increased 2%, and organic daily sales grew 1%, driven primarily by test and measurement, rentals, and chambers.

In the fourth quarter, revenue grew 0.9% on one additional selling day, supported by continued momentum in rental and refurb, chambers, and TEqip. While test and measurement end markets were under pressure in the fourth quarter, we remained focused on disciplined execution of our growth and profitability prioritization initiatives, and are beginning to see the tighter strategic lens and accelerated pacing around cadence and accountability at work.

The result is we are seeing the engagement deep into the organization take place, and the firming pipeline activity evolving towards our areas of most differentiated capabilities, teamed with our higher margins and return on invested capital opportunities, including value-added solutions used in rental, test and measurement solutions, chambers, and accelerating the growth and mix around our most value-added elements of our electronic production supply offering, to strengthen our margins and earnings. We are currently seeing some accelerating customer engagement building around our core test and measurement expertise, where we have reinforced with a renewed and discrete effort around rededicating resources focused on T&M customer solutions, selling, improve our competitive moat at a time when we believe the marketplace is past the trough and we are seeing acceleration.

We also have major initiatives underway to simplify and unify the digital ecosystem. Enhancing the customer experience through ERP consolidation, customer service, and e-commerce platform integration is foundational to our strategy, and we are actively leveraging AI applications to accelerate execution.

At the same time, we are strengthening performance management, incentives, and accountability as we established new key leadership roles. We're excited about the progress Barry is making to drive a much more disciplined approach to the portfolio of value-added capabilities and products offered across the TestEquity Group vertical.

For the employees, we appreciate their support of his accelerated operational pace and accountability, including the shifting of time and resources towards more differentiated growth areas to drive his objectives around mix shift, rather than only adding incremental costs in elevated areas of focus. Looking ahead, we are actively increasing our account base and deepening penetration among our existing customers, while using new product introductions and private-label offerings to expand customer choice and enhance margins.

Encouragingly, a growing backlog in January and February of 2026 signals momentum to come in 2026. We recognize that the full impact of these initiatives typically takes several quarters, but we are confident they will result in a structurally stronger, more competitive, materially higher-margin TestEquity business over time.

With that, I'll turn it over to Ron for details on our fourth-quarter and full-year financials. Ron?

Thank you, Brian, and good morning, everyone. Turning to slide 6 and starting with our full-year results for 2025.

As Brian mentioned, consolidated revenues for the year were $1.98 billion, up 9.8% compared to 2024. Incremental revenue from our 2024 acquisitions was $121.5 million, and our organic average daily sales growth for the fiscal year was up 3.6% over 2024.

For the year, adjusted EBITDA was $175.2 million, or 8.9% of sales. GAAP net income per diluted share was 18 cents for the year, versus a GAAP net loss per diluted share of 16 cents a year ago.

Non-GAAP adjusted EPS was $1.24 for the year, compared to $1.44 per share a year ago. Full-year margins in 2025 were 80 bps lower than in 2024, primarily due to sales mix shifts, employee-related costs, and other investments.

Fourth-quarter revenues were $482 million, up 0.2% versus a year ago, which translated into flat organic sales compared to the fourth quarter of 2024. For the quarter, we generated adjusted EBITDA of $35.4 million, or 7.4% of sales.

Each of our businesses experienced lower year-over-year EBITDA margins, primarily due to sales mix shifts, incremental bad debt expense, and higher employee-related costs, namely health care benefits. Cash flow from operations was strong, with $16.9 million for the quarter and $84 million for the full year on top of strong results in 2024.

Before I move on to the individual verticals, I wanted to comment briefly on the DSG consolidated margin for the full year and for the quarter. For the full year, adjusted EBITDA was 8.9%, compared to 9.7% for the full year 2024.

I would break the 80-bp compression into two buckets. The first is primarily longer-term people investments of approximately 20 bps.

The remaining 70 bps was driven by timing items and non-recurring items such as health care costs, specific customer bad debt reserves, and some lower margin to win specific customers. From a timing perspective, many of these items hit in the fourth quarter, resulting in a larger impact on our fourth-quarter margins of 7.4%.

Longer-term people investments impacted the quarter by approximately 25 bps. Other items impacting the quarter that we would classify as timing or non-recurring include health care, approximately 40 bps; customer-specific bad debt, approximately 20 bps; recruiting and leadership start-up, approximately 25 bps; mix shifts within Gexpro Services, approximately 25 bps; and timing benefits realized in the fourth quarter of 2024, which was about 40 bps.

Now moving on to slide 7 and starting with Lawson. With Lawson, full-year revenue increased $12 million.

Average daily sales grew by 2.6%, and organic average daily sales declined by 1.2%, primarily due to lower military customer sales. Adjusted EBITDA for the year was $51.6 million, or 10.7% of revenues for the full year.

For the quarter, Lawson's average daily sales were up 2.7%, and its adjusted EBITDA was $7.7 million, or 6.7% of sales. In the Lawson-based business, the margin compression from the prior year was primarily due to sales mix of about 60 bps, higher employee-related benefit costs of approximately 100 bps, and employee costs and timing of incentive accruals of approximately 110 bps.

As Brian mentioned, Lawson's most significant sales initiatives focus on new VMI installations and increased share of wallet, which are leading indicators of revenue growth. We are continuing to accelerate the adoption of our CRM platform to improve sales rep productivity, grow the core business, and are currently in the early stages of route optimization planning.

We are also expanding our e-commerce platform. This is a cost-effective way to do business, and 1/3 of our customers on the site are new.

Although sales are still small on e-commerce, we experienced about an 18% revenue growth in the fourth quarter. Turning to slide 8, full-year sales for the Canadian segment were $221.4 million in USD, up $96.3 million, primarily due to the Source Atlantic acquisition included for a partial year in 2024.

Fourth-quarter sales for the Canadian segment in USD were $55.1 million, reflecting some seasonal softness. Market softness for projects in manufacturing end markets persisted, mostly in Eastern Canada.

However, current backlogs have increased meaningfully. Full-year adjusted EBITDA was $15.6 million, or 7.1% of sales, while fourth-quarter margins were 6.6%.

Margins were compressed slightly due to items such as first-year Sarbanes-Oxley compliance work. The Bolt Supply standalone business drove sales by 7.8% in local currency, and generated a 14% margin for the full year.

We continue to make progress on planned synergies around gross margins and branch consolidations between Bolt and Source Atlantic. Turning to Gexpro Services on slide 9.

Full-year revenue was $496.7 million, representing organic average daily sales growth of 12.3% and total ADS growth of over 13%, driven primarily by end market strength in aerospace and defense, technology, and renewables for most of the year. Recall that we highlighted tougher sales comps in the fourth quarter, which declined 1% on an average daily sales basis, generating $119.4 million.

Full-year adjusted EBITDA was $63.7 million, or 12.8% of sales. For the quarter, margins pulled back to 11.7% from 13.3% a year ago, on a lower Q4 sales base, a sales mix on lower renewables, and some strategic employee investments.

Value creation initiatives for Gexpro Services continue to include DSG cross-selling, acquisition synergies, and expanded VMI, kitting, manufacturing, and e-commerce offerings. Lastly, I'll turn to TestEquity Group on slide 10.

Full-year sales were $783.2 million, with average daily sales growth of 2%, driven primarily by test and measurement, rentals, and our chambers business. Organic average daily sales for the year were up 1%.

Fourth-quarter sales were $192.9 million, with average daily sales up 0.9% versus a year ago. TestEquity's adjusted EBITDA for the year was $51 million, with adjusted EBITDA margins of 6.5%, versus 7.3% for all of 2024.

Margins were pressured by a sales mix shift, higher bad debt expense, and higher employee-related expenses, including the build-out of the leadership team, and non-recurring favorable items from a year ago. Fourth-quarter EBITDA margins were similar as full-year margins at 6.4% of sales.

The new leadership team has aligned priorities through performance management, incentives, and accountability. Moving to page 11, we ended the year with total available liquidity of $469 million.

For 2025, our free cash flow conversion, defined as adjusted EBITDA less working capital investment, less capex, was approximately 85%. In December 2025, we expanded our senior secured credit facility through 2030.

The new facility includes $700 million of term debt and a $400 million revolving credit arrangement, an increase over the previous $255 million revolver. This puts us in a strong liquidity position to best drive shareholder returns through our capital allocation playbook.

We ended the year with unrestricted and restricted cash totaling $75.3 million and net debt leverage of 3.5 times. We continued to prioritize growth initiatives that enable cross-channel and collaborative selling across our customer base, expand our digital capabilities across our platform, and drive growth through an asset-light model.

We invested $26.8 million in net capex, including rental equipment, and we plan to invest a similar amount of $25 to $30 million in 2026. As we've highlighted in the past, we have invested nearly $450 million in M&A by acquiring nine highly complementary businesses to expand our portfolio, leverage scale, and grow through product adjacency and services.

We closely manage working capital across our businesses, and net working capital was $473.5 million. As we mentioned, DSG generated $84 million of cash from operations for the year, similar to 2024 before retention payments, and a testament to management's close monitoring of our working capital.

Our strong cash generation in 2025 positioned us to be more active in share repurchases. In November 2025, the board authorized an increase to our existing stock repurchase program for an additional $30 million in shares of DSG's common stock, taking the total aggregate authorization amount to $67.5 million.

In 2025, we returned $23.5 million to our shareholders through opportunistic share repurchases, and have approximately $33 million remaining in the authorized pool. I'll now turn the call back over to Brian.

Thank you, Ron. Despite external headwinds and periods of demand volatility in 2025, we have a clear line of sight on initiatives well underway to drive sales growth and structurally higher margins.

We delivered total revenue growth of almost 10%, reaching just under $2 billion, supported by mid-single-digit organic growth, despite the burden on profitability of macroeconomic and policy challenges and an ISM remaining below 50 for all of 2025, and our deliberate investments into the business in 2025. As we enter 2026, our focus is firmly on execution and demonstrating a return to improved profitability with our expected growth, while balancing critical long-term value-unlocking investments.

Our revenue growth strategy prioritize high-margin businesses, strong and sustainable cash flow generation, disciplined capital allocation, and operational excellence. We are investing to be a company that is easy to work with and for, leveraging digital and AI-enabled capabilities to respond faster to customer needs, improve operational efficiency, strengthen sales rigor, and capture margin opportunities.

These efforts are supported by an accelerating level of data-driven insights that guide in improved decision-making, and enable us to deliver our differentiated products and solutions while enhancing our customer experience. Operating across more than 50 countries, serving over 220,000 customers with approximately 760,000 unique products requires agility and focus.

We remain nimble, ready to pivot when needed to sustain growth while focusing on delivering on improved profitability. Our leadership teams are renewing our confidence to shareholders and our colleagues that we are driving and expect growth with enhanced profitability, and with a commitment to further tune capabilities and consistent service and culture that emphasizes from our field team around volume and revenue growth from both existing and new customers.

I am confident in our enhanced leadership teams and our recent investments in them across all of our verticals, and their ability to execute on their re-underwritten priorities and value creation initiatives as they enjoy line of sight on building structurally higher margin and more defensible and growing businesses, with a commitment to generate strong free cash flow and an aligned incentive structure around driving accelerating long-term value for our shareholders. Our teams remain highly aligned with the shareholders and each other, collaborating and competing together to continue to win more often.

Each is accountable and appropriately incentivized to deliver results for our shareholders and for DSG and all of our colleagues. We will continue to evaluate acquisitions that strategically fit and enhance our long-term competitive position to win in our current focus areas, end markets, or that complement them, as well as opportunities that can accelerate our growth and profitability objectives to enhance and accelerate driving long-term shareholder value.

In addition to strengthening leadership within our verticals, after a thorough evaluation on ways to improve and enhance our corporate strategy and M&A capabilities, we recruited Sean Dwyer to lead DSG's efforts and dedicated team, while working closely with the vertical leadership and our LKCM Headwater teams. Sean comes to us with a background in investment banking and experience leading similar efforts at large public companies.

Through his public company roles, he has led over $30 billion in 36 transactions. It's great to have Sean on board to add structure, perspective, and to collaboratively lead this critical component of DSG's growth strategy.

As we look ahead in 2026, we're excited about the added capabilities, discipline, and prioritization we have invested in across all our verticals. While most of this comes at a cost, we're confident in these investments and in the improved performance returns the investments will deliver.

While the first couple of months of 2026 have seen sales growth, we expect the first quarter to remain under margin pressure as we continue to digest initiatives, and then we expect to see an improved margin expansion trajectory consistent with our longer-term objectives as we move into the middle of the year. I'm proud of the heavy lifting from our colleagues and what it accomplished in 2025.

As I reflect on where we are versus the much smaller and less evolved DSG that we pulled together 4 years ago, we remain focused building a better DSG on its many commercial growth initiatives and ongoing process and structure optimization, and we celebrate working together to build a more valuable enterprise, one that consistently generates cash flow and long-term shareholder value. Finally, I want to thank our employees for their dedication and hard work throughout the year.

Your commitment and the strength of our culture have enabled meaningful progress across our strategic priorities. We will continue to push, test, and adapt as we improve long-term performance.

Also want to thank DSG's board, our shareholders, our shareholder partners, and the LKCM Headwater team as we continue advancing our specialty distribution model together. With that, operator, will you please open the line for questions?

Morning, Aymen.

Yeah. Good morning Brian, how are you?

Morning Tommy, how are you?

Thanks for the time. Brian, I want to start on the comment you just made regarding the sales pacing year-to-date.

I think I heard you say sales are up year-over-year in Jan and Feb, maybe just can you confirm that, and if you're able to give us the daily sales pacing and the number of selling days for the quarter, that'd be appreciated as well.

Yeah.

I'm going to let Ron do it, he's got them in front of him.

Good morning Tommy. This is Ron Knutson,

so-- It's Aymen, Ron. It's Aymen that's on.

Just to add some commentary around Brian's notes relative to the first couple of months of the year. We have seen growth, really I'd put it in the low single digits if we look at January, February versus a year ago.

ADS so far for the first couple of months, kind of flattish versus Q4, but up against a year ago. We're seeing a little bit of pressure continue within our Canadian branch business that I think both Brian and I commented on in our prepared remarks, but the other verticals or the other three pieces of the business are seeing some growth here in the first couple of months.

I think the second part of your question was relative to number of days and so forth as 26 develops. On a quarter-over-quarter basis, it shifts a little bit just because of the kind of the weighting, and we've got Gexpro Services on a 4-4-5, but essentially it's relatively consistent.

First quarter of 26 has 63 selling days versus the first quarter of 25 having 63 as well.

Aymen, I would just add-- Oh, is it Tommy? I thought you said it was Aymen.

I was like, wait a second. Tommy, one of the things I was referencing when I said that was that it was on the TestEquity vertical, and that was that we were seeing some backlog build there in orders and our kind of RFPs.

It's really around the test and measurement side, as we've seen some messaging from the manufacturers about a little bit of accelerated activity in that space. January, quite transparently, I wasn't happy with the flow-through on profitability relative to how we budgeted or what I expected, and so as the fourth quarter came together in the first month of the year, although we saw some revenue lift, we still suffered some of the same challenges of adding expenses around leadership and otherwise in the first month.

We're seeing improvement on that we believe in February, and expect that again in March, so that the releveraging of our cost structure with the pick up in revenue. There's just been some changeover expenses and some one-times and some things that created noises in the fourth quarter and in January.

Brian, you anticipated my follow-up, which was on margin, and you clarified your comment, but maybe I could put a finer point on it here.

If I go back

to

the numbers that Ron gave us in the prepared remarks, there were a series of one-timers in Q4. I just added up all those basis points, and it was about 150 basis points.

My starting point on bridging was I just took the 7.4 you reported in Q4 plus 150 gets you 8.9% as an implied baseline to start to think about the first quarter. That would be up a little bit year-over-year, though.

Based on what you just said, that makes me think perhaps that's a bit too aggressive of a baseline. Maybe we'd be, I don't know, it depends on the monthly assumptions, but anything you can do to tie them together would help.

That number would be consistent with how margins flowed through for the year last year. When I look at it, the first quarter is still going to have a little bit more margin degradation from our average last year, I think, whereas the second and third quarters, we would expect that the EBITDA margin will be back above what last year's average was, if that's helpful.

Is that right, Ron? I'm looking at you, Ron.

Yeah. That is right.

If I go back, Q1 of 2025, we were sitting at about 9%. Tommy, we typically do get burdened with some other items that we didn't call out specifically in our comments around some payroll taxes start over on us.

That typically drags our margins a little bit, even going from Q4 into Q1. The other area that I would point to is we do have some resetting of some incentive accruals and so forth, as you can imagine, lower dollars in 25 based upon performance.

We certainly budget to hit higher goals going into the next year. We'll have to re-establish some of those accruals as we work throughout the year as well, and those typically get spread pretty evenly throughout the year until we start to re-forecast to a greater degree later in the year.

We do have some what I would call kind of offsets or negative items that'll probably push their way through here yet in the first quarter.

I would say, Tommy, the exercise you did, which is the same one I did yesterday when I was preparing my remarks, by adding up Ron's remarks, which were prepared ahead of mine, and I did the same bridge you did, and then kind of tried to double-check it against looking at where we were for the quarter so far, and directionally, you're right on. I think it's just going to be not quite.

January's not indicating to me that we're going to get to the level you said.

Understood. Shifting to some more strategic questions here on TestEquity.

You have new leadership there, and you've talked before and again today about refining the customer value prop, the go-to-market, centralizing some functions, etc. What can you share there about the progress to date and what's ahead in 2026?

Yeah.

Look, the pacing on the team and the depth of our leadership bench is just very different than it has been. Part of that was adding Barry was critical, but it was not just adding Barry.

Barry brought with him an ensemble of other executives, and we were able to really keep so many of the people that we had that had key institutional knowledge and that we had a lot of confidence around. We did double up some of our leadership expense.

When I look at the total burden at the top of that company, it's different than it was 4 or 5 months ago. With that has come a real high level of not only cadence is different and the pacing is different, but there's a high level of drill-down insight, which Russ and Mark had been doing last year, increasingly for us after we made the ConRes acquisition.

We were able to really get a lot more accountability around the efficiency in our rental and used business and our calibration strategy, and our chambers business has been taken off, and so we've been trying to build out our chambers offering and portfolio and our inventory and stock, and then we've been working through kind of a more cohesive strategy around the total test and measurement go-to-market, kind of value proposition to the customers, but not just as isolated the margins on new product. Then on top of that, we have a lot of smaller value-added capabilities that are inside of the TestEquity Group, some of which came with Hisco and some of which were ones that we had acquired.

By breaking them each apart and really drilling accountability and ownership on each of those verticals, we're able to see very different contribution margins amongst different ones. Of our EPS business, we've got parts of it that are more commodity that are volume, but our channel support to that is similar to our more discrete specialty parts of the same EPS business.

The flow-through margin on those look quite a bit different. The team is really re-energizing the sales force on how they're spending their time and how we're delivering our messaging to the marketplace and to our employees around where the levers are to pull a lot more attention and acceleration through the parts of the business that have very different structural contribution margins.

That's just that energy, that focus kind of started 100 days ago, but it's trickling down through the organization more recently. Our Chief Commercial Officer, who's been real important to the business, we made our President in Mexico for all of DSG so that we could start to really bring our cadence together across all three of our verticals in Mexico so that we could have more cross-sell wins and drive total revenue growth.

That's the business that he had built for Hisco, and then we added another Chief Commercial Officer at the senior executive level to really focus on these lines of business efforts. Barry's got a lot of confidence in all the specialty businesses that we have and how it all rolls together, and some of the profitability that is inside of that business has been masked by some of the areas that have been whipping around, or where we've either had too high cost to serve relative to the contribution margin, and not enough focus on the areas with our sales force on the much higher contribution margin opportunities.

We're seeing that shift. So.

Brian, Ron, I'll turn it back and appreciate the insight.

Thank you, Tommy. Appreciate your time.

Thanks, Tommy.

Hi, Ken.

Hey, good morning, guys. Hey, this is Katie on for Ken.

Oh, hey, Katie. Hi, Katie.

I was wondering if we could start on tariffs and if you're anticipating any material impacts from the recent news, and how you're thinking about price/costs as we go into 2026?

Ron,

do you want to start that off,

and-- I'll start it off. I know we've talked about tariffs in the past, relative to the value of the imports that we do and so forth, and our ability to be able to pass along the majority of those, from a customer relationship standpoint.

I think your question is probably more pointed towards the recent news and so forth, and I would say probably too early to tell yet in terms of what direct impact that may or may not have on DSG. Certainly we're evaluating the situation, trying to stay really current with it as others are as well.

At this point, we're moving the business forward, assuming that a lot of these costs that have come through to us, the last, call it 12, 18 months will probably continue to be out there until we get some further direction on where this may end up.

Katie, we've got a consulting firm that we use, and are using across our portfolio companies at LKCM Headwater, and we have some businesses that have been much more significantly impacted than DSG, but it's allowed us to be informed across ways and levers that we should pull, and also how to navigate or engage on the SCOTUS recent ruling. We ended up leaving some dollars on the table last year for sure, but our team did a great job of managing both pricing as well as sourcing costs and where we source things across DSG.

Much of it was mitigated by the end of the year, but we did end up with certainly a drag on earnings, or much of it was mitigated as we looked out prospectively for this year by actions that were taken throughout last year. Now we've got to kind of look and see whether or not there's any additional moves that we need to make or whether or not there's going to be additional shifting in where the tariff burdens are going to be, and whether or not that's going to inform any of our sourcing decisions this year, our pricing decisions this year, or whether or not we're contesting or protesting that we believe that we should get any refund.

Right now it's really early to try and know how that's going to work. That's helpful.

Then just revisiting Tommy's question a little bit on some trends that we've seen year-to-date. Any other color that you're able to provide on the segments, and then maybe for Lawson specifically, how are you thinking about these mix impacts within that segment and should those normalize as we move through the year?

I'll start with Gexpro Services, that one's pretty easy. Gexpro Services has got several key end markets that are spooling up.

The power generation space has obviously gotten a lot of attention, it's a key area for that business and its legacy or its history, coming out of GE. It'll enjoy some leverage there to the positive.

The aerospace and defense vertical is very important to it. We know what's going on around the world, and so we expect a firm year there with growth.

The domestic renewables business, we're about 2/3 domestic, 1/3 international historically. The domestic business is down, we really started to see it tick down in the fourth quarter, kind of mid-fourth quarter, I guess, and that trend is continuing.

At the same time as we're seeing countries like India, where we had $4 million of revenue on renewables, is kind of tracking towards, and that's 2 years ago, kind of 2024 I think we were $4 million is what I remember looking at it, and this year it'll be $14 million. We're backfilling with our capabilities with our manufacturing or vendor partners and some of the renewables developers' programs around the world that are backfilling, but not entirely backfilling.

There's also some different contribution margin dynamics as you spool up new relationships at Gexpro, as I alluded to, relative to the contribution margin on a more mature vertical or customer engagement. As we're taking on more opportunities at Gexpro Services, which is happening more broadly than just renewables, there's some launch costs that are associated with that.

We do believe that Gexpro Services' margins that we've seen throughout last year are consistent with how we think that business is kind of going to continue to operate, we don't expect a significant deterioration in the EBITDA margin at Gexpro Services this year at all. We think it's kind of operating without a lot of headroom up this year, but operating at a level that we think is about consistent with where we expect it'll be this year.

On the TestEquity side, as I alluded to earlier, we're seeing strong interest in the test and measurement equipment. Our EPS business is continuing to see some softness.

Our electronic production supplies, one of the key areas is our electronic manufacturing. Ron, help me with that, is that I'm kind of starting to remember how we call that vertical.

That has been an area that has been really soft for us, and we'd seen some firmness in it last year. I can't remember where our backlog looks right now there.

It's the biggest part of TestEquity Group's EPS business. The chambers business is very strong.

The rental and used market is getting more attention or focus for us because it has a lot higher contribution margin, and it was a source of strength last year and with renewed strength. Some of that's focus, and some of that's the acceleration in demand in markets on the test and measurement side.

What else, Ron? Lawson?

Relative to Lawson, and what I would say around that is we continue to see an increase in our what we call ship-to or VMI installations, in particular in our larger locations, within strategic relationships and within our Kent automotive business. I would say a renewed focus on the core or local business, where historically if you look at the last couple of years, that's where the most pressure has been seen, and we've seen, I would say, kind of flattening out in ship-tos there.

As Brian mentioned, we had our sales leadership meeting in mid-February, and a ton of focus being put on reallocating resources to be able to grow that piece of the business, which makes up that local business, we call it core as well, is about 45% of Lawson's total revenue. Again, Lawson has seen on an overall basis some increase here, moving from January, February, and we've got great insight into number of locations and around specific customer wins, and the accountability that Brian and I have mentioned around making sure that those sites get installed on a monthly basis, with Jim coming on board here in January, a renewed focus around that, making sure that we hit those numbers as well.

Got it. That's it for me.

Thanks.

Thanks, Katie.

Great, thank you, and good morning.

Morning, Kevin.

Hey, Kevin.

I just wanted to follow up on the earlier margin discussion. I believe in response to one of the earlier questions, you mentioned that you thought the second and third quarter adjusted EBITDA margin could be above the full-year 2025 average of 8.9%, you're thinking kind of a 9-ish is appropriate for second, third quarters?

I think we believe that it's going to be relevered up higher than that. Ron,

but

I'm trying to remember where we are on there, but if you look at last year, our second and third quarter EBITDA margins were above that 8.9, and I think we expect that it'll be consistent with that or above. Is that right, Ron?

Yeah. I think where we're going to see probably the the most pressure, as we commented on, is is really here in the first quarter, and then you're correct, Brian, relative to second and third would would be an acceleration, you know north of of what we posted for the full year.

Typically that, that's not that's not unusual. Typically, for us, the second and the third quarters are typically the the strongest quarters, and in fact, even that, that uplift, generally starts in in March.

March can be one, it's a longer it's a longer month in terms of selling days, we get some additional operating leverage there, and then typically, Q3, if you look back historically, Q3 and I'm sorry, Q2 and Q3 are typically the the strongest uplift in in sales, as well as overall margin percentages.

I just looked back at it, and last year's Q2 was 9.7 and Q3 was 9.4. Versus the the 9 last year in the first quarter and the 7.4 that we posted in the fourth quarter.

That's kind of gives you some sense of how the the quarters fit in in together. I think we've got a good number of selling days in the is it in the second quarter, Ron, or is it is it March?

I'm trying to remember. There's yeah, there's 60 yeah,

in March, there's I think it's either 22 or 23 days in the month of March, and then and then Q2 and Q3 both have 64 selling days.

Great. Got it.

That's helpful. Appreciate it.

I wanted to also follow up on Lawson. You mentioned there some continuing challenges just in the small-account side there, maybe some loss of focus as you've gone through this transition period.

I know you've been experimenting with various things there, I think, to serve the small-account customer base with inside sales force or maybe some service reps who do the unpacking. Are those the sort of things you would still want to continue to work on?

I know you also mentioned e-commerce, or is it just more kind of getting the actual sales rep back on site more frequently? Any more thoughts on kind of how you are approaching that area?

You just hit you just you just kind of wandered through all of them, which is great.

Ron and I

Ron and I are laughing or smiling because, you're you're right, yes. [laughter] Um, I would say that the the shift to some tiny customers to the in to that were too small to service with the cost to serve of having a rep go see them because their order dynamic their order flow dynamics and the size of their invoicing was too small to, have somebody there unpacking and and managing stuff.

I think our inside sales group and our our e-commerce efforts have really helped that. I think that our revenue there is not where we've really lost volumes.

We may have lost some ship-to locations, but I think, Ron, if I remember correctly, we've actually seen pretty good traction out of that total effort, even though we may have had some small ship-tos. Those are not the ones that were missing.

We had with the with the compression of our sales force that we did of 2 years ago, as we were getting set for the new sales force initiatives that we were putting in place in the technology tools, and the way that we're trying to drive productivity out of our our teams, we we certainly saw with that, some of our smaller core customers not get the level of service that we would expect. We had less sales people, and as you might imagine, the the sales people that we had covered the bigger customers or the strategic accounts, the national accounts that we were trying to make sure we were doing a great job for across the country, first.

That caused a natural, trend of losing some of our ship-to locations that just had less volume in them, and, a real concern on on our part, at the leadership level, on whether or not our sales people were with that compression and then with the, distraction of a lot more strategic and new national accounts, were spending as much time focused on the smaller street business that they used to, make a lot of their money on. Ron and and Mike DeCata started the national account or strategic account initiative about a decade ago, and it's grown to where it's as large in our as a part of a part of our businesses as our street business is from zero.

We're feeding our sales people, those national accounts, and in some ways, that maybe was creating some behavioral challenges that we didn't appreciate until we got more insights out of the CRM, and and now with, kind of the insights that better data analytics are allowing us to see and how how we're keeping up with some of those smaller accounts. Also, we went out in the market and did a bunch of feedback surveys that we needed to have at my level and our investment team level, to be able to triangulate with our leadership team what we were hearing in the market from a lot of those smaller accounts.

Now we've got a very proactive eff- initiative around it, and we're seeing a a relift back in those base accounts, at least the ship-to number. It's been after several years of of of significant declines in in locations.

You don't see it in the top line as much because you're picking up the strategic accounts and you're getting more volume through those bigger relationships, but when you get down at the profitability level on a mix shift basis, especially if your cost to serve from a commission perspective or a cost for your salesperson is the same, you're you know the we we get a more premium pricing out of the smaller accounts than what we do out of the bigger accounts, so that you're giving up some gross or some product margin, and then you're losing some flow-through contribution margin that if you just kind of held pat on that, would have significantly changed the you know the the the total top-line revenue growth and and the profitability of the business. All that was at the same time as we were investing significant amount of dollars into the company and into the sales force.

You you saw, if you look go back 2 years on Lawson, you've seen, we've got less revenue today on our MRO business than we had 2 years ago, we've got more today than we had last year, but that, most of that big decrease really came out of those smaller accounts, and the and and the flow-through on that at the same time as you were investing and paying your sales force more, offering them more tools, and putting dollars back into it, caused a a delevering dynamic at the same time as we were making a deliberate investment. There was a swing in in profitability there that that we felt in the fourth quarter more acutely than we had in the prior fourth quarter.

We knew what we were doing, but we also knew that there was going to be a a J-curve as we were investing back in the sales force after that that compression period, of getting, those sellers back out there into those territories that were either open or had been, consolidated. It's, go ahead, Ron, you you live this very much day daily at Lawson.

Kevin, the only thing I would add to Brian's comments, one is our strategic business, really sticky business. We've got great customer relationships, servicing multi-site locations, drives really solid, sticky gross margin dollars back to us.

We love that part of the business, and we continue to expand it, and continue to make investments there to win new accounts as well. Relative to the core local customers, if we do look at ship-tos over the last year or so, have really been I would say kind of flattish.

Most of that decrease that we experienced within our core local customer count took place prior to the beginning of 2025. Now it's about, as I mentioned, they're about 45% of our total revenue, to Brian's point, it's putting some headwinds against the total sales growth that we see, and now it's a renewed focus on making sure that we can get that 45% of our revenue customer base growing again.

There's change in incentives and focus, and even at the sales leadership meeting that I mentioned a couple weeks ago, a lot of focus around where that business historically had been, where we sit today, and where we need to take it in the future with our sales leaders.

I want to add two things there, because I think the breath and the complexity of the question you asked was great, but I want to make sure I hit these other points. You asked about other support services or capabilities that we put in the field.

We definitely have made a real investment. We're working on it in some key markets, but we're adding some service reps and some focused, new account sellers, if you will, or re-engagement sellers, not the field sales reps that we've got historically, but to support those field sales reps so that they have the time to get back in front of some of these customers that they've not spent as much time in front of by having these service reps support them on some of their higher-volume relationships, so that they aren't having to go by and see the account twice.

If you think about the way that we often serve even our high-volume customers like those national accounts, they're going in and they're scanning the bins, they're putting in an order, and then they're coming back a couple days later and they're breaking open boxes and they're reorganizing and reloading all those cabinets. That labor component that we sell as part of our value-added, our critical part of our value proposition to our customers, by having a service tech do a route and efficiently go by those customers and help take one of those stops out, then we're opening up the opportunity for those sales reps to spend more time back in the field servicing those customers that maybe were either smaller on the street level or some of the national accounts that we're adding that need kind of early touch points high, or making sure that we're getting more wallet share out of them and getting them stood up on their initial kind of building out of their program.

That's a real focus right now the business. It's definitely been a cost center, we've layered that cost in, but it's something that we are seeing strong early indications that that's a model that we want to continue to lean into to support our FSRs.

It allows them to make more money, because it gets their total revenue that they can have flow through them up, and that we think it does a much better job of servicing the customer at a higher level. What our marketplace surveys have told us is that our customers felt like that too often if they were a smaller account, they just weren't getting the attention, or they were being effectively fired by us, not by them.

It was a real message that was consistent that we heard where they were asking for us to come back out and service them again and to give them that consistency of service that they wanted from us, and that maybe over this transition period with our sales force, we haven't as consistently given to the smaller accounts. That's been a drag of several percentage points of growth a year the last several years at least, that we've been making up with our national sales effort, and maybe 2 years ago to last so 2023 to '24, it was a bigger drag because we had that compression with our sales force, and then we probably fought mid single digits drag on our growth last year out of that a little bit as well.

Is that fair, Ron? The numbers.

Maybe not quite that

much.

That and military.

I'll

caveat that. The military was the other area that we saw a real shift in buying behavior that we're trying to work on re-engaging, because they have been historically a really good end market for us, and we're still engaged with them, but their behavior shifted significantly in dollar spend over the last year and a half.

Good. Sounds good.

Thank you for all the color on that, appreciate it. I just wanted lastly ask about the M&A pipeline, given your strong liquidity and the extension and expansion of your credit facility.

Looks like you'd be set up to explore and maybe execute on some M&A opportunities.

We look, we highlighted that Sean joined us, maybe 100 days ago or less. He's been a critical addition to our team.

We spent, the better part of the last year, year and a half really evaluating our our you know business development or M&A and corporate strategy part of our of our effort. Our we had, have a a really strong team colleague that worked used to work at Headwater that's been on the Gexpro Services side and then, helping lead that effort the last several years.

We brought in Sean to, add some additional muscle memory to how to build out an a a team there. He's significantly increased the funnel, in just 100 days.

He's gotten a lot of buy-in from the vertical leaders and from our team about where we want to spend our time and effort. We had a few things last year that were high priorities for us that we had hoped to get done that didn't get done.

I'd say that none of them are off the table, but they're but we just weren't able to get them over the goal line. They've been high priorities for some period of time.

Then we have, some things that that we are focused on right now that are smaller tuck-in acquisitions that significantly bolster some areas of either strength or focus that we've got in in in a few of our vertical or a couple of our verticals. We would expect that there'll be some small tuck-in acquisitions that we'll be able to get over the goal line over the first half of this year.

Sounds good.

Those are important to driving accretive. The ones that I'm thinking of, there's three of them that we have prioritized.

All three of those would add significantly to the margin constructive of those three verticals. They're small, these are tuck-ins.

Got it. Understood.

Thanks again for all the insight. I'll turn it back over.

Thank you for your time and your thoughtful questions.

Thanks, Kevin.

Appreciate everybody's engagement and your time this morning. We look forward to stronger quarters in the future, and I appreciate everybody continuing to be supportive and engage with us.

Have a great next several months.