DSGR

Distribution Solutions Group, Inc.

NASDAQ · INDUSTRIALS · WHOLESALE-MACHINERY, EQUIPMENT & SUPPLIES

35.06

+0.05 +0.13%

USD · close Oct 27

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MKT CAP $1.6BP/E 175.3DIV YIELD —FCF YIELD 2.30%REV TTM $2.1B +6.4%NET INCOME $9M +110.3%NET DEBT $626.7M52W 19.31 – 35.09SEC XBRL · TTM TO Invalid Date

How DSGR rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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New in FY2025

Disruptions in the operation of information and communication systems can occur due to a variety of factors including power outages, hardware failure, programming faults, cyber incidents and human error.
We are increasingly dependent on digital technology to process and record financial and operating data and communicate with our employees, customers, suppliers and other business partners.
Our technologies, systems, networks and data and information processes (and those of our customers, suppliers and other business partners) have been, and may in the future be, the target of cyber-attacks and/or information security incidents that may have resulted in, or may in the future result in, the unauthorized release, misuse, loss or destruction of proprietary, personal and other information, or other disruption of our business operations, including compromise of our email systems.
For example, from time to time our email systems (and those of our customers, suppliers and other business partners communicating with us) have been subjected to malicious attacks, including phishing attacks.
In addition, we are exposed to growing and evolving risks arising from the use of AI technologies by bad actors to commit fraud, misappropriate funds and facilitate cyberattacks.
The increased use of AI may impact our industry and the markets in which we compete, and the development and use of AI presents potential competitive and other risks.
We have begun incorporating AI capabilities into our business.
We have also increased our investments in developing, managing and implementing AI for our business.
The increased use of AI may have a significant impact on customer demand and market dynamics in our industry and there may be a need to increase the rate of adoption of AI to maintain competitiveness.
AI presents risks, challenges, and unintended consequences that could affect its rate and success of adoption, and therefore our business, and there is no assurance that our use of AI or incorporation of AI capabilities into our business will benefit our business.
If we fail to use AI to improve our operations as anticipated or as well as our competitors, this could have a materially adverse impact on our business strategy, results of operations or financial condition.
In addition, any use of AI by us in a manner that is not in compliance with applicable law or any of our contractual or other obligations could also lead to regulatory or legal action, potential liability, loss of business, and other negative effects that could have a materially adverse impact on our business strategy, results of operations or financial condition.
There may be difficulties in integrating certain operations of businesses we acquire with our other operations, and the failure to successfully combine those operations within our expected timetable could adversely affect our future results and the market price of our common stock.
Many of the businesses we acquire involve the combination of businesses that previously operated as independent businesses.
Management has devoted and will continue to devote significant attention and resources to combine the business operations of acquired businesses with our other business operations.
If we fail to successfully identify the right opportunities and/or to successfully integrate the acquired businesses, operations, technologies, systems and/or personnel with those of DSG, or if any significant business activities are interrupted as a result of this process, this could adversely affect our business, financial condition and results of operations.
Furthermore, it is possible that following an acquisition, the business acquired could lose key employees.
If we are not able to fully realize the anticipated savings and synergies from the acquisitions in a timely manner, or the cost to achieve these synergies is greater than expected, we may not fully realize the anticipated benefits (or any benefits) of the acquisitions, or it may take longer than expected to realize any benefits.
As a result of our acquisitions , we have recorded a significant amount of goodwill and other intangible assets on our consolidated balance sheet as of December 31, 2025.
In addition, geopolitical instability and military hostilities, such as the Russia-Ukraine military conflict and United States military operations in Venezuela, could negatively impact our business.
Although we have not, do not currently and do not plan to conduct business operations in Russia, Belarus, Ukraine or Venezuela, it is not possible to predict the broader consequences of these conflicts, which could include sanctions, embargoes or other geopolitical instability.
Limitations in the acquired businesses’ financial organization, reporting and controls, or an inability to effectively integrate their financial reporting processes with our financial reporting processes, has in the past resulted in, and may in the future lead to, material weaknesses in our internal controls.
These limitations could also lead to a violation of our indebtedness covenants or cause us to miss an SEC reporting deadline or otherwise fail to comply with an applicable law or regulation.
We had $704.4 million of indebtedness as of December 31, 2025, which includes a significant amount of indebtedness under our Amended Credit Agreement (as defined in Note 9 – Debt in Item 8.
Government efforts to combat inflation, or other interest rate pressures, could lead to higher financing costs.
The global macroeconomic environment has experienced challenges in recent years, including high rates of inflation.
In response, government entities have taken various actions to combat inflation, such as raising interest rate benchmarks.
If there is an increase in inflation, government entities may implement efforts to combat such increase in inflation, which could include, among other things, raising interest rate benchmarks, maintaining interest rate benchmarks at elevated levels and/or failing to lower interest rate benchmarks.
Such government efforts, or other interest rate pressures, could lead to higher financing costs and have material adverse effect on our business, financial condition and results of operations.
Based on a Schedule 13D filed with the SEC by LKCM and various other persons and entities (as amended through February 12, 2025 ), entities affiliated with LKCM beneficially owned in the aggregate approximately 36.4 million shares of DSG common stock as of February 12, 2025, representin g approximately 78.7% of the outstanding shares of DSG common stock as of December 31, 2025.
Bradley Wallace, a director of the Company, is a Founding Partner of LKCM Headwater Investments, the private capital investment group of LKCM.
As a result, LKCM has significant influence over the outcome of matters requiring a stockholder vote, including the election of directors and the approval of other significant matters, and LKCM’s interests may not align with the interests of other stockholders.
The OECD reached agreement among over 140 countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two.
Although the U.S. has not yet enacted legislation to adopt Pillar Two, certain countries in which we operate have already adopted, or are in the process of adopting, legislation to implement Pillar Two.
For the year ended December 31, 2025 , the Company determined that there was no material impact on our tax provision as a result of Pillar Two.
The Company continues to monitor U.S. and global legislative action related to Pillar Two for potential impacts.
In addition, changes in applicable tax laws and regulations could affect our ability to realize our deferred tax assets, which could adversely affect our results of operations.
As of December 31, 2025 , we were subject to U.S. federal income tax examinations for the years 2022 through 2024 and income tax examinations from various other jurisdictions for the years 2018 through 2024.
We have business operations and/or sales in a number of foreign countries.
Our ability to use our net operating losses and certain other tax attributes may be subject to limitations.

and 14 more.

Gone since FY2024

Disruptions in the operation of information and communication systems can occur due to a variety of factors including power outages, hardware failure, programming faults and human error.
We are increasingly dependent on digital technology to process and record financial and operating data and communicate with our employees and business partners.
Our technologies, systems, networks and data and information processes (and those of our business partners) have been, and may in the future be, the target of cyber-attacks and/or information security incidents that may have resulted in, or may in the future result in, the unauthorized release, misuse, loss or destruction of proprietary, personal and other information, or other disruption of our business operations, including compromise of our email systems.
For example, in February 2022, Lawson became aware that its computer network was the subject of a cyber incident potentially involving unlawful access (the “Cyber Incident”).
Because of the nature of the information that may have been potentially compromised, which may have included personal identifiable information and protected health information, we were required to notify the parties whose information was potentially compromised of the incident as well as various governmental agencies and have taken other actions, such as offering credit monitoring services.
After this incident, we also reviewed our overall systems and processes, and implemented certain changes, including employee training, designed to improve our overall cybersecurity program, but we cannot assure you that these changes will be effective to prevent future incidents.
In addition, from time to time our email systems (and those of our business partners communicating with us) have been subjected to malicious attacks, including phishing attacks.
For example, a putative class action lawsuit was filed against DSG in April 2023 asserting a variety of claims seeking monetary damages, injunctive relief and other related relief in connection with the Cyber Incident, which could result in additional legal and other costs.
In addition, we are exposed to growing and evolving risks arising from the use of Artificial Intelligence technologies by bad actors to commit fraud, misappropriate funds and facilitate cyberattacks.
There may be difficulties in integrating certain operations of TestEquity’s and Gexpro Services’ respective businesses with our other operations, and the failure to successfully combine those operations within our expected timetable could adversely affect our future results and the market price of our common stock.
The Mergers involve the combination of businesses that previously operated as independent businesses.
Management has devoted and will continue to devote significant attention and resources to combine certain business operations of TestEquity and Gexpro Services with our other business operations.
If our management is not able to effectively manage the process following the closing of the Mergers, or if any significant business activities are interrupted as a result of this process, our businesses could suffer.
Furthermore, it is possible that the Mergers could result in the loss of key employees.
If we are not able to fully realize the anticipated savings and synergies from the Mergers in a timely manner, or the cost to achieve these synergies is greater than expected, we may not fully realize the anticipated benefits (or any benefits) of the Mergers, or it may take longer than expected to realize any benefits.
Any pursuit or completion by DSG of additional acquisition opportunities would involve risks that could adversely affect our business, financial condition and results of operations.
We may fail to successfully identify the right opportunities and/or to successfully integrate the acquired businesses, operations, technologies, systems and/or personnel with those of DSG, which could adversely affect our business, financial condition and results of operations.
As a result of the closing of the Mergers on April 1, 2022, and other acquisitions completed during 2024, 2023 and 2022 , we have a significant amount of goodwill and other intangible assets on our consolidated balance sheet as of December 31, 2024.
In addition, geopolitical instability and military hostilities, such as the Hamas-Israel military conflict and the Russia-Ukraine military conflict, could negatively impact our business Although we have not, do not currently and do not plan to conduct business operations in Gaza, Israel, Russia, Belarus, or Ukraine, it is not possible to predict the broader consequences of these conflicts, which could include sanctions, embargoes or other geopolitical instability.
For example, management’s report on our internal controls over financial reporting contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, identified a material weakness and concluded that we did not maintain effective internal controls over financial reporting as of December 31, 2022.
If there are limitations in the acquired businesses’ financial organization, reporting and controls, or if we are unable to effectively integrate their financial reporting processes with our financial reporting processes, we could, among other things, have material weaknesses in our internal controls, violate our indebtedness covenants, miss an SEC reporting deadline or otherwise fail to comply with an applicable law or regulation.
The changes made in the third quarter of 2024 to our segment reporting structure could be confusing to investors and may not have the desired effects.
In the third quarter of 2024 we introduced a fourth reporting segment, Canada Branch Division, which includes the results of Bolt Supply House (“Bolt”) and Source Atlantic.
Prior to this change, we had three reportable segments: Lawson, TestEquity and Gexpro Services.
We also had an “All Other” category which included unallocated DSG holding company costs and the results of Bolt, which was previously a non-reportable segment.
Managing this change has required, and may continue to require, significant expenditures and allocation of valuable management resources.
We have provided disclosures about our new segment reporting structure, but there is no guarantee that investors or the market will understand this change to our financial reporting.
There is also no guarantee that this change will have the desired effect.
Failure of investors or analysts to understand our revised segment reporting structure may negatively affect their ability to understand our business and operating results which could adversely affect our stock price.
We have $739.9 million of indebtedness as of December 31, 2024, which includes a significant amount of indebtedness under our Amended Credit Agreement (as defined in Note 9 – Debt in Item 8.
Government efforts to combat inflation, along with other interest rate pressures, could lead to higher financing costs.
Inflation has risen on a global basis, the United States has been experiencing relatively high levels of inflation, and government entities have taken various actions to combat inflation, such as raising interest rate benchmarks.
Government entities may continue their efforts, or implement additional efforts, to combat inflation, which could include among other things raising interest rate benchmarks, maintaining interest rate benchmarks at elevated levels and/or failing to lower interest rate benchmarks.
Such government efforts, along with other interest rate pressures, could lead to higher financing costs and have material adverse effect on our business, financial condition and results of operations.
Based on a Schedule 13D filed with the SEC by LKCM and various other persons and entities (as amended through December 27, 2023 ), entities affiliated with LKCM beneficially owned in the aggregate approximately 36.4 million shares of DSG common stock as of December 26, 2023, representin g approximately 77.6% of the outstanding shares of DSG common stock as of December 31, 2024.
Bradley Wallace, who became a director of the Company upon his election at the Company’s 2023 annual stockholders meeting on May 19, 2023, is a Founding Partner of LKCM Headwater Investments, the private capital investment group of LKCM As a result, LKCM has significant influence over the outcome of matters requiring a stockholder vote, including the election of directors and the approval of other significant matters, and LKCM’s interests may not align with the interests of other stockholders.
Additionally, a facility we own in Decatur, Alabama, was found to contain hazardous substances in the soil and groundwater as a result of historical operations prior to our ownership.
We retained an environmental consulting firm to further investigate the contamination, including measurement and monitoring of the site.
The Company concluded that further remediation was required, and accordingly, has made an accrual for the estimated cost of this environmental matter.
A remediation plan was approved by the Alabama Department of Environmental Management and the remediation of the affected area is ongoing.

and 21 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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