Distribution Solutions Group (DSG) has reported a significant increase in sales for the first quarter of 2024, announcing consolidated revenue of $416.1 million, a 19.5% rise from the previous year. Despite the impressive headline figure, the company's organic growth rate of 4.7% fell short of expectations, attributed to softness in certain end markets.
CEO Bryan King emphasized the company's long-term goals, aiming to raise total sales to over $3.3 billion in the next five years through a combination of organic and inorganic growth. The company, trading under the ticker symbol DSGX, also discussed its recent acquisitions and strategies for improving profitability and customer engagement.
Key Takeaways
- DSG reported a 19.5% increase in Q1 2024 sales year-over-year, with a revenue of $416.1 million.
- Organic growth was 4.7%, below expectations due to underperformance in certain markets.
- The company aims for over $3.3 billion in sales and $450 million in adjusted EBITDA over five years.
- Acquisitions of Emergent Safety Supply and S&S Automotive are expected to expand product offerings and customer value.
- Sales force transformations and process optimizations are underway to enhance profitability.
- Challenges persist in the technology end market, but the company is optimistic about future growth.
Company Outlook
- DSG anticipates flat to low single-digit organic sales growth in Q2 but expects positive growth in the latter half of the year.
- Focus on improving margin profiles and capital allocation, including debt reduction and share repurchases.
- The company is recruiting sales representatives to increase sales force productivity.
Bearish Highlights
- The organic growth rate did not meet expectations due to softness in specific end markets.
- TestEquity Group faced challenges in the test and measurement market with sales headwinds and inventory issues.
- Government orders in the Lawson segment experienced delays.
Bullish Highlights
- The Gexpro Services division saw double-digit sequential sales improvements in the aerospace and defense vertical.
- The company expects sequential improvement in all end markets throughout 2024.
- The acquisition of Hisco has improved profitability and scale in the industrial technologies business unit.
Misses
- Organic sales declined by 8.6% on a comparable day basis.
- The Lawson Products (NASDAQ:DSGR) segment's sales decreased by 4.2% year-over-year.
Q&A Highlights
- CEO Bryan King discussed the importance of cash flow reinvestment and growth through acquisitions.
- The company is actively recruiting to build out its sales force.
- CFO Ron Knutson provided a positive outlook on sequential margin improvement across all verticals.
DSG remains committed to its growth strategy despite facing some headwinds in the first quarter of 2024. The company's leadership has conveyed confidence in their long-term plans and the measures being taken to address current challenges. The next quarterly results are expected to be reported in early August, where the company will likely provide further updates on its progress.
InvestingPro Insights
Distribution Solutions Group (DSG) has shown a notable performance in the market, with recent data reflecting a mix of challenges and potential for investors. Here are some insights based on the latest information from InvestingPro:
- InvestingPro Tips suggest that DSG is expected to see net income growth this year, indicating a potential turnaround from previous performance. This aligns with the company's positive outlook and strategies outlined in their recent earnings call. Additionally, analysts predict that DSG will become profitable this year, which may provide a boost to investor confidence.
- From a financial standpoint, DSG's market capitalization stands at $1.61 billion, showcasing its mid-cap status in the market. The company's revenue growth over the last twelve months, as of Q1 2024, is an impressive 21.75%, which supports the strong sales figures reported in the first quarter.
- The stock has experienced a significant price uptick of 44.01% over the last six months, reflecting investor optimism about the company's future prospects. However, the company's current P/E ratio is -78.95, indicating that it is trading at a high valuation relative to its earnings. This could be a point of caution for value-focused investors.
For those interested in a deeper dive into DSG's financials and future projections, InvestingPro offers additional insights and metrics. There are 6 more InvestingPro Tips available that can help investors make more informed decisions. To access these insights and benefit from the full range of features, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Distribution Solutions Group (DSGR) Q1 2024:
Operator: Good day, and welcome to the Distribution Solutions Group First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Steven Hooser, with Three Part Advisors. Sir, you may begin.
Steven Hooser: Good morning, everyone, and welcome to the Distribution Solutions Group First Quarter 2024 Earnings Call. Joining me on today's call are DSG's Chairman and Chief Executive Officer, Bryan 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 that is posted on the company's website at investor.distributionsolutionsgroup.com. Please note that statements made 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 that are subject to risks and uncertainties that could cause actual results to differ materially from those described. In addition, statements made during this call are based on the company's views 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, but disclaim no obligation to do so. Management will also refer to non-GAAP measures, and reconciliations to the nearest GAAP measures can be found at the end of our earnings release. The earnings release issued earlier today was posted on the Investor Relations section of our website. A copy of the release has also been included in a current report on 8-K filed with the SEC. Lastly, this call is being webcast on the Internet via the Distribution Solutions Group Investor Relations page on our website. A replay of the teleconference will be made available through May 16, 2024. With that, I'd now like to turn the call over to Bryan King. Bryan?
Bryan King: Thanks, Steven, and thank you all for joining us to review first quarter 2024. I'll be starting on Slide 4 to review overall financial results. Our 2024 first quarter sales totaled $416 million, up 19.5% on strategic inorganic growth compared to the first quarter a year ago. As we signaled on our Q4 2023 call, DSG was up against double-digit comps in the first quarter of 2023 of nearly 14% and faced continued softness in certain end markets, which we will highlight later in the call. Despite those continued pockets of softness, we maintained a positive organic trajectory on a 2-year organic basis of 4.7%, which we acknowledge is below our expectation for organic growth that we require from our investment initiatives into the business when we use a longer time horizon lens. Consolidated EBITDA margins enjoyed a sequential improvement from 8.4% in the fourth quarter of 2023 to an adjusted EBITDA margin of 8.7% in the first quarter of 2024, but we are below where we expect them to be, partially because of the pockets of end market softness, but also significantly influenced by the internal initiatives that we are executing, where there are near-term costs, but where real expense optimization and profitability and efficiency is getting unlocked. We continue to enjoy strong visibility into how those initiatives are reworking significant elements of our cost structure while visibly improving our value-added offering for our customers and customer-facing colleagues and refining the profitability discipline on that revenue across each of our three DSG verticals. Today, I will reemphasize DSG's overarching goals and longer-term performance milestone objectives, reinforcing our confidence in the huge opportunity in front of us and the material progress we're making, even in the face of some marketplace softness and the accountability and engagement our collective team embraces. During our 2023 Investor Day last September, we shared that DSG's long-term value creation plans and programs were based on specific commercial growth initiatives and process and structural optimization work streams. These initiatives were and continue to be a bridge for us to grow into structurally higher margins while enjoying stronger organic growth and accelerating returns on invested capital over the next several years. As stated, our 5-year goal is to increase total sales to over $3.3 billion, which our plan indicates will be driven about equally from organic and inorganic growth initiatives. And we expect that level of revenue will generate adjusted EBITDA in excess of $450 million and will significantly drive the returns on invested capital profile and earnings per share and free cash flow per share profile of this highly value-added specialty distribution business. All three of our verticals have a clear path with the assets we own today to deliver EBITDA margins consistent with our corporate objective. Although we acknowledge that each of the three verticals currently enjoy a very different fully optimized structural EBITDA margin opportunity, we believe that the two acquisitions we have closed this year to consolidate with Lawson improves EBITDA margins and our return on invested capital. As we shared our detailed initiatives with investors last fall, I think it is important to hold ourselves accountable with our shareholder partners on our progression, acknowledging the pockets of end-market headwinds we have faced, while offering discrete data points on the numerous initiatives that are confirming the foundation today for the exciting progression we expect will continue to unfold as we move DSG towards our defined future state. In January, we acquired Emergent Safety Supply, or ESS, under the Lawson Products banner. ESS is an example consistent with our inorganic investment objective of adding a commercial growth initiative, in this case, bolstering our safety offering to our MRO and OEM customers and expanding our existing VMI capabilities inside their facilities to offer a logical product category expansion requested by our customers and sales force. We believe it is one that is ubiquitous across our customer base, allowing for an increase in wallet share of existing customers, and more earning opportunity and productivity for our sales force, allowing us to add some upgrades and talent depth in key areas of growth, while augmenting and driving more opportunities for cross-selling, not only across our MRO offering, but for our OEM relationships, where we recognized it would enhance our proposed MRO solution when introducing our MRO capabilities in categories to our OEM customer relationships. Safety is a key category where our leadership team strongly believes that investing in an improved offering was an important organic growth accelerating opportunity through our existing relationships and service delivery models. We also announced S&S Automotive acquisition yesterday, which I will discuss in a moment. These two highly deliberate inorganic growth acquisitions highlight how we have identified opportunities within our DSG and specialty distribution relationships to engage businesses with product and service capabilities and deep customer relationships and marketplace presence. When combined with our existing network of offerings, this creates an enhanced DSG specialty offering, improving and deepening our value proposition to our customers and allowing for improved sales optimization and cross-sell expansions focusing on our committed lens to driving higher structural returns across DSG, the vertical the acquisition is being acquired into and higher structural returns on the acquisition itself. Reflecting on our capital allocation around acquisitions over the last 24 months, we are excited about how they significantly enhance each of our verticals' ability to accomplish our profitability objectives and customer engagement vision, as well as drawing together the three verticals into a solutions focused DSG value proposition. Looking across each of our specialty distribution verticals, we continue to progress dialogues with targeted acquisitions that add product or value added capabilities, driving more scale to transform certain categories or lines of business to accelerate our efforts towards improved marketplace leadership and to generate meaningfully higher levels of free cash flow and returns on invested capital. ESS and S&S Automotive are great examples of strategic acquisitions that benefits our customers, sales teams and shareholders. The downstream impact of both acquisitions creates more customer engagement, more expertise in targeted product categories and more solutions and services catered to our combined customers throughout expanded cross-selling opportunities and better sales density. The outcome is positive with higher productivity and compensation opportunity across each sales force, while driving structurally higher EBITDA margins and returns on our invested capital. These downstream effects can be large and wide, and we believe they work toward creating durable and repeatable results and accelerate the organic growth rate of DSG. Turning to Slide 5, let's walk through key initiatives and end-market trends in each of our business verticals. Our MRO focused business, Lawson Products, launched an important sales force transformation in 2023 with a foundation built on a structure of approximately 900 high producing and highly motivated field sales reps. We also expanded our inside sales team last fall to approximately 40 individuals from only a few and added 14 technical product specialists. We are in the early innings of this sales optimization program, which includes fine tuning our investments in working capital and technology tools to help our sales force's effectiveness and productivity, as well as deliberate lens around designing and optimizing new sales territories as we refocus our attention around driving opportunity for existing field sales reps and recruiting additional reps into a role with enhanced tools and opportunity. We are very pleased with early results as our productivity measured as sales reps per day increased 8% in quarter one over a year ago on top of 18% and 15% improvements in the last two quarters of 2023. We continue to analyze and leverage data to optimize our overall sales force network, including going live with our CRM tool in the first quarter as well as an enhanced order entry tablet for our field sales reps to drive ease and productivity around placing customer orders and offering more insights to our salesperson about additional revenue opportunities to grow that customer. This full implementation of Lawson CRM connects our entire sales force into the order management system, greatly improving our visibility into the sales organization and accelerating the ROI of our sales force transformation, addressing our stated goal to improve both the initial and structural earnings available to our sales force and enhance our service levels with our engaged customers, while additionally driving a productivity lift that should improve our selling expense across our total revenue base and elevate our EBITDA margin structurally higher. As I mentioned, we are in the early stages of our progression with defined milestones that should unfold this year and the next two, and we will continue to hold ourselves accountable, reporting consistently on this key initiative. In addition, Lawson continues to concentrate on product expansion and resources that customers truly value as part of our MRO service delivery intensive VMI offering. We believe this is critical as we refine our product mix and increase our customer density, expertise, value-added tools and capabilities to engage with new and existing customers. Our process and structure optimization efforts are improving how we go to market at Lawson and effectively utilize people, processes and products. Lawson had a good first quarter, especially considering we were up against organic comp growth of over 19% reported in prior year quarter. The 2-year stack organic growth in the first quarter for Lawson Products was nearly 12%, plus we added a few million dollars of acquired sales from ESS for most of the first quarter. The biggest headwind to sustaining organic revenue growth this quarter was overwhelmingly government, where we have seen a delay in purchase orders, although we remain confident the dollars are there to be spent later this year. Yesterday, we announced another acquisition under the Lawson banner, S&S Automotive Group. S&S and our existing Kent Automotive business, which has enjoyed sustained leadership in our organic growth in the last few years, operate in large and growing markets in North America, such as auto collision repair and dealership aftermarket businesses. According to the National Automobile Dealers Association, there are 16,835 light vehicle dealerships in the United States. Those dealers wrote 264 million repair orders in 2023, with total part sales of $142 billion. Additionally, only 34% of dealers have auto body shop capabilities. By adding S&S to the Kent offering, we can improve our customer value proposition with more SKUs and services tailored to this large market. Kent focuses primarily on collision repair centers in the U.S. and Canada, where S&S focuses more on auto dealerships in the Midwest, where they have strong density and market share. These business go-to-market models are similar, with both organizations offering value added high-touch customer engagement. They each have complementary product leadership that allows each company to credibly expand their product offering with their existing customers, significantly enhancing the organic growth opportunity. We believe increasing our market density, especially in the Midwest geographies, and leveraging facilities and exceptional localized human capital will immediately increase our sales force productivity and improve our margin for our total automotive division. We are confident that combining Kent with S&S will allow us to drive our EBITDA margins for this business above our target margins for DSG and to drive our Kent and S&S returns on invested capital to specialty distribution market leadership levels. Our deliberate structural lift in the return profile and market leadership presence with this acquisition of our automotive repair line of business inside of Lawson is an exceptional example of what we have and expect to continue to accomplish with targeted strategic acquisitions at DSG. As expected, the first quarter returned to double-digit EBITDA margins for Gexpro Services. Although the core business was down slightly compared to the prior year on tough comps, sales grew sequentially by 4.2% compared to the fourth quarter on comparable days. We also experienced strong double-digit sequential and quarter-over-quarter improvements in the sales in the aerospace and defense vertical. Also in the A&D end markets, we are excited about the lift in the number of new projects and services, including new kitting awards and VMI plant production services. We are winning and implementing new program awards faster-than-expected, which builds our backlog and positions us well for the remainder of 2024 and onto the future. It also offers us confidence about the enhanced value Gexpro Services brings to its customers as part of DSG and with the value added capabilities we invested in with our last couple of years of tuck-in acquisitions. And no one is more excited about the Hisco acquisition and its expanded capabilities, product lines and strong geographic presence in Mexico than the Gexpro Services team, except perhaps Cesar and the Lawson team. Our technology end markets, which were such a drag during 2023 to profitability in the Gexpro Services division especially in the last half of last year, in the first quarter of 2024, continued to be down compared to a year ago, dragging on EBITDA and EBITDA margin for the division, partly due to the tougher comps in the first part of 2023. However, we are encouraged to see that first quarter sales to our technology customers improve sequentially compared to the third and fourth quarters of 2023, citing an increase in new orders and hopefully, messaging, we are past the trough of the semiconductor cycle. Regarding the semiconductor industry as it was an important element of the profitability that we missed out on for most of last year and some of this first quarter, we hear that most companies are signaling trough level sales in the first quarter with auto chip sales reporting better-than-expected results and core industrial sales improving. It's also worth noting that our renewables business has slowly ramped upward with recent sequential improvements between the fourth quarter of '23 and the first quarter of '24, and our customers are reflecting confidence in the progression. Our overall confidence in the OEM business is supported by an increase in gross margins for year-over-year results and sequential margin improvements. On a sales comparison basis, we are past our toughest quarter comparisons of the year and are excited that our project services backlog is growing. We are also excited to see a ramp in our new VMI program wins, market share growth and wallet share expansion with many long-standing customers. On a sequential basis, all of our end markets are either stabilized or growing, which gives us more confidence year-over-year, and we expect sequential improvement as 2024 develops. Also starting last year, our project-based businesses from the Frontier, Resolux and SIS 2022 acquisitions started positioning us as strategic suppliers instead of competitors with those three now business units of Gexpro Services, which with our expanded capabilities and touch points brought by coming together, especially in a market like renewables, that is seeing activity from customers precedent to a real revenue recovery from a tough year last year is allowing us to expand our market share. Those complementary tuck-in acquisitions enhance the expanded capabilities we now enjoy and will continue to benefit us in 2024 and on. As a refresher, adding those key channel partners offers us a more comprehensive and differentiated solution to a broader customer base, which supports our stated objective around Gexpro Services margin expansion plan by doing more of the value added work around the source product versus leaning more on being the leading OEM partner for specking, sourcing and managing Class C parts already in the form of a finished good product. The Gexpro Services business unit also benefits from an expanded investment in e-commerce capabilities, adding several million dollars of incremental revenue from e-commerce orders from established aerospace and defense accounts. As we mentioned last year, Gexpro Services started the year with a healthy book-to-bill pipeline, growing it as it progressed into 2024. Turning to TestEquity Group. The electronic and specialty production supplies categories remained soft in the first quarter and were impacted by difficult sales comparisons from this time last year, weighing on the OEM as well as the MRO parts of the TestEquity Group. Weakness in sales into wireless communications and semiconductor production also weighed on the OEM and MRO parts of the group. The biggest drag on revenue and profitability, though, for the TestEquity Group continues to be the test and measurement in markets, which became more challenged in late September by what appeared to be an anxiousness around continued spending on capital equipment as the extended interest rate tightening cycle started weighing on business confidence and on capital spending on R&D towards the end of last year. The revenue pressure and marketplace impacts were exacerbated by the product surplus in the channel by some of our suppliers and competitors. After a period of supply chain disruption coming out of COVID, the delayed delivery on customers' orders and perhaps over message to manufacturers and suppliers about where demand was playing out. A shift in customer behavior caught the channel with too much product on hand. As some try to push excess product, profitability for most was doubly impacted by weakness in sales and a natural discounting and temporary pricing activity, which only further stimulates unnatural demand and customer behavior and prolongs the disruptive period in the channel. We thought much of the dynamic was done by the end of the year, but then saw some of this behavior lingering in the first quarter. We certainly believe there was a better backdrop around inventory, pricing and demand by the end of the quarter than existed throughout the fourth quarter. We believe trends will continue to normalize as the year progresses against weaker comparisons and less rebalancing of inventory in the channel, but it's taken longer than expected. While we don't have enough conviction to call an inflection around a reacceleration, there appears to be some stability returning in the customer demand, which with cleaner inventories, we expect will help profitability. Since the fourth quarter of 2023, we've identified more synergy opportunities bringing Hisco into the TestEquity Group as we now believe approximately $15 million of cost synergies will be realized during 2024 as we work through integrating Hisco and TestEquity, up from the $10 million that we indicated was our estimate at the end of 2023. Real progress is being made, although expenses associated with integration efforts are still flowing through, masking some of the underlying progress to structural margins. Hisco Mexico TestEquity Mexico, for instance, have been integrated and four facilities have been closed as well as some duplicative warehouse headcount has been relieved. In the U.S. and Canada, another five consolidations have been completed and two more are in process. This footprint rationalization saves over $1.2 million annually. One of the facilities allows us to exit a less optimized own building that we believe will also release $4.95 million of cash back to the balance sheet as we sell it. Additionally, given the softness of sales in the T&M business, we are actively identifying and accelerating further opportunities for cost rationalization. Adjusted EBITDA for the TestEquity Group improved, but is down versus a year ago. However, gross margins have stabilized despite sales headwinds over the last two quarters, and gross margin initiatives identified during our underwriting across our recent acquisitions are starting to yield a meaningful impact at levels ahead of where we underwrote at this point, masked some by the noisiness of the soft end markets and the continued inventory channel messiness and softness in the test and measurement marketplace. We realize it will take several quarters to see the real run rate benefits of our structural changes to improve overall margins. But as an example, by building the first layer of strategic pricing discipline in the pricing model at Hisco for their small customers, differentiating pricing from their largest customers, we saw gross margins increase by almost 150 basis points across all of Hisco just in the first quarter. TestEquity Group is a big ship to turn, and we are very pleased with the Hisco acquisition, both in how this complementary and strategic acquisition improves the mix shift towards a more reoccurring OEM and MRO offering as well as enhances the profitability and scale of this industrial technologies business unit with more consumables and lower price points that serve the electronics assembly and lab equipment customers. With Hisco's addition, the steep engagement this business unit now has with Gexpro Services and Lawson is remarkably different as they work together with real added benefits on working to expand their collective engagements with their longstanding customers and new ones that have requested us to bid on contracts with a lens towards a broader DSG set of capabilities. With the Hisco addition, there is now a combined revenue growth initiative populated with a very capable team of sales leadership from each of the three verticals and some of the specialty business unit leaders. There's also significant enthusiasm at Lawson an Gexpro Services leadership teams around the added footprint that Hisco brings with significant scale throughout North America, most specifically offering a platform for our customers requesting Gexpro Services in Lawson to expand their engagements into Mexico. Distribution Solutions Group serves a broad diverse set of end markets with over 180,000 customers. We deliver and ship from strategically located distribution and service centers to customers throughout North America and Europe, Asia, South America and the Middle East. Our decentralized operations that maintain brand identity and integrity, coupled with an integrated growth platform, offer DSG's customers access to unique, differentiated, high touch products and solutions, sourcing advantage and expertise through businesses that leverage best practices to deliver world-class service to our customers every day. With that, I'd like to turn the call to Ron to walk through the financials.
Ron Knutson: Thank you, Bryan, and good morning, everyone. Turning to Slide 5, I will first summarize our business, which includes our acquisitions for the trailing 12 months. Lawson represents 31% of total DSG revenue, Gexpro Services 23%, and the TestEquity Group represents 46% of revenues. Our run rate adjusted revenue is now approximately $1.73 billion. And as Bryan mentioned, we serve over 180,000 customers across more than 500,000 SKUs. Now turning to Slide 6, I will summarize the reported results for the first quarter, and then I will break out each reporting segment. Consolidated revenue for the quarter was $416.1 million. This represents an increase of $67.8 million or 19.5%, primarily driven by the 2023 and 2024 acquisitions. Excluding the acquisitions, organic sales declined by 8.6% on a comparable day basis, however, grew 4.7% on a 2-year stacked basis. The organic decline versus a year ago was driven primarily within the Test & Measurement business and very strong comps from a year ago in all verticals. On a sequential basis versus the fourth quarter of 2023, organic sales grew by 2.1% as we saw several end markets such as technology, strengthen sequentially and also realize continued strong sales in aerospace and defense. Q1 of 2024 reflected growth in net margin dollars of $2.2 million versus the fourth quarter of 2023. As indicated on the Q4 2023 earnings call, we expected margin pressure in the first half of 2024. While the quarter ended with softer sales, our margin profile came in line with our near-term expectations. For the quarter, we generated adjusted EBITDA of $36.1 million or 8.7% of sales, a sequential improvement over 8.4% in Q4, and I'll expand further at the segment level here in a minute. We reported operating income of $2.8 million for the quarter, net of $10.7 million of acquisition-related intangible amortization and $16.2 million of aggregate costs from stock-based compensation, acquisition, severance and retention related expenses, merger and acquisition costs and other nonrecurring items. Adjusted operating income was $29.8 million as compared to $32.8 million a year ago quarter and $28 million in the fourth quarter of 2023. We reported GAAP diluted loss per share of $0.11 for the quarter, inclusive of higher depreciation and amortization and a valuation allowance on certain deferred tax assets, compared to earnings per share of $0.14 in the year ago. Adjusted diluted EPS was $0.25 for the quarter on 4.2 million more shares outstanding than a year ago. Turning to Slide 7, let me now comment briefly on each of the segments. Starting with Lawson Products. Sales were $118.2 million, down 4.2% on comparable days, primarily from very strong comps a year ago of nearly 20%. As compared to the fourth quarter, sales increased 7.6% or 4.2% on a same-day basis. This growth was driven by the acquisition of Emergent Safety Supply in January, which contributed approximately $2.3 million in sales in the first quarter, plus organic daily growth of 2.2%. Growth continues both over a year ago and sequentially within our strategic and Kent Automotive customers, offset by softening sales to the Lawson core customers. As Bryan highlighted, Lawson is coming off of a really strong 2023, all while continuing to invest in its business to strategic position itself for long-term success. We are still in the early innings of implementing initiatives to help our sales team become more productive while fine-tuning our sales investments to grow sales. We are very pleased with the initial improvement in our sales rep productivity, resulting in an 8% lift this quarter on top of 18% and 15% realized in the last two quarters of 2023. We have open field sales rep positions that we are actively recruiting for in the right territories that should help drive sequential sales growth in future quarters. For the quarter, Lawson realized adjusted EBITDA of $13.4 million or 11.4% of sales. While this is down versus a year ago quarter on lower sales in our 2023 investments, sequentially, adjusted EBITDA grew by $1 million with a slight margin expansion. Turning to Gexpro Services on Slide 8. Total sales for the quarter decreased 2.3% to $98.7 million, however, increased 4.2% on comparable days from the fourth quarter of 2023. As discussed in the past, comps against the prior year are tough given the flattening of sales in the technology end market in 2023. That vertical was down nearly 26% from a year ago quarter. However, we are seeing signs of improvement as Q1 2024 sales within that end market exceeded sales in both Q3 and Q4 2023 on a standalone basis. 2023 saw global semiconductor spending decline roughly 10% as consumer electronics and automobile production drove softness in supply chains adjusted, which certainly is impacting our year-over-year comparisons. Two acquired businesses, which sell into the renewables space also put pressure on year-over-year comps. Excluding the technology and renewables end markets, sales grew 3% over a year ago quarter and 4.2% over Q4, giving us additional confidence for the remainder of 2024. Gexpro Services has continued to see strong demand in the aerospace and defense vertical being up 24% over a year ago and 15% over Q4. We continue to invest in the business, attracting new customers and new opportunities within existing customers. However, we are cautious about certain weaker markets and those more sensitive to current macroeconomic issues. As expected, through some modest recovery in sales, along with a focus on gross margin improvements and cost controls, we returned to double-digit margins for this quarter. Gexpro Services EBITDA was $10.8 million or 11% of sales despite margin pressure of approximately $1.7 million from the technology vertical and the acquired businesses supporting renewables. Lastly, I will turn to TestEquity Group on Slide 9. Q1 sales grew 74.3% to $187.1 million, an increase of $79.8 million driven by the 2023 acquisition of Hisco. Excluding Hisco, TestEquity sales were down 14.6% in Q1 and 6.5% on a comparable day basis versus Q4, primarily driven by continued weakness in the Test & Measurement business. As we've discussed on previous calls, the decline in this piece of our business is primarily related to delays in customers' capital project spending associated with continued higher interest rates and an imbalance of demand against the improved supply chain disruptions from a year ago. Excluding the Test & Measurement market, sales grew nearly 1% over Q4 on three additional selling days. TestEquity's adjusted EBITDA for the quarter was $11.6 million or 6.2% of sales. With the expected pressure on sales, the business has stabilized from a margin perspective. We are actively taking actions to protect our margins within the TestEquity Group and also realizing savings from the integration of Hisco. As we think about the remainder of 2024 for TestEquity, we will continue to focus on the integration of Hisco in TestEquity. We remain committed to sequentially improving our margin profile as 2024 develops through higher sales, synergies to be realized on the combined company and proactively rebalancing our cost structure. Between the merger savings and other cost normalization, we are focused on delivering approximately $15 million of cost savings in 2024. We anticipate a stronger second half of 2024 for the TestEquity Group as we continue to integrate Hisco and some additional pickup of capital project type spending. Moving on to Slide 10. We ended the quarter with approximately $284 million of liquidity, including $85.6 million of cash and $198.3 million under our existing credit facility. A portion of that availability has now been utilized to fund the purchase of S&S Automotive. We continued to focus on strengthening our balance sheet and ended the first quarter at a leverage rate of 3.0x. The acquisition of S&S Automotive subsequent to the quarter does not significantly change our leverage profile given the strong double-digit acquired EBITDA of that business. Although we continue to support a robust working capital investment, we are carefully managing inventories, accounts receivables and accounts payable. Our cash conversion ratio defined as adjusted EBITDA, less the change in working capital and less CapEx divided by adjusted EBITDA was nearly 110% on a trailing 12-month basis and approximately 75% for the first quarter. Net capital expenditures, including rental equipment, were $2.9 million for the first quarter. We expect full year CapEx to be in the range of $16 million to $20 million or approximately 1% of revenue in 2024. Before I turn it back to Bryan, I'd like to make some comments on how we see the remainder of 2024 developing. As we've discussed over the past two quarters, we were up against very tough organic sales comps with Q1 of 2023 having been up nearly 14%. Q2 2023 organic sales were up nearly 5%. Given some of the sales pressures that we continue to see, in particular in the Test & Measurement business, offset by some strengthening in other end markets, we expect Q2 organic sales to be flat to down low single digits as compared to a year ago, however, up sequentially from Q1 of this year. As we make traction on many of our initiatives in 2024 and as comps against the prior year soften, we would expect organic sales growth to turn positive starting in the second half. To achieve our internal sales plans, we will need some normalization of various end markets and some recovery of customer capital related project spending. While we realized Q1 margin expansion over Q4, our focus continues to be on improving margin profiles within all of our segments on a sequential quarterly basis. I'll now turn the call back over to Bryan.
Bryan King: Thank you, Ron. The first quarter met our near-term targets, especially given the continued softness in the several end markets highlighted, and we are pleased to see positive trends in many verticals that have been under pressure for several quarters. Turning to Slide 11, DSG's capital allocation framework remains disciplined and flexible, encouraging healthy competition for capital across our businesses. At the core, we believe in the compounding effect of cash flow reinvestment in the business on a per share basis. With a focus on bridging to higher structural margins, we believe that inorganic growth provides strategic opportunities for bolt-on acquisitions that provide us scale, geographic density, new customer channels, cross-sell opportunities and product or service level category expansion, all with an objective to enjoy sustained and structurally higher returns on invested capital, more driven by organic growth than inorganic growth as the platform matures. Finally, the capital allocation equation will not be complete without focusing on prudent debt paydowns and opportunistic share repurchases. These allow us to rebalance the company's weighted average cost of capital and return capital to the shareholders, especially as the platform matures. Combining our asset light model and increasing working capital efficiencies improves our overall liquidity position, allowing us to reduce our net borrowings. Let me wrap up my comments on Slide 12. The first quarter showed sequential top line and bottom line progress against challenging prior year sales comparisons and some very real pockets of soft demand. Lawson had solid margins as we continue to dial in a number of the key initiatives and acquisitions for our longer term opportunity to take this unique VMI offering to structurally higher margins. Gexpro Services returned to double-digit margins as expected and enjoyed seeing its collection of end market verticals firm up confidence in their OEM schedules for the back half of the year based on communication with us, building backlog, and excitedly, we saw new programs indicate that organic revenue growth based on market share wins is happening enhanced by our DSG platform capabilities and the acquisitions that we have added to the platform to improve our value propositions. And the TestEquity Group's margin stabilized despite continued end market challenges, while the heavy lifting integration is progressing as scheduled, while yielding more synergy cost wins and the commercial confidence in what Hisco brings to DSG continues to build across all the verticals. All three leadership teams on these verticals have been challenged with the environment we are in and the number of value unlocking initiatives we are working with them on. I want to personally thank them and their colleagues for their consistent effort and value-creating accomplishments they are delivering for us, the shareholders and how accountable the collective team is holding each other too. We are very pleased with the hard work and progress coming out of our corporate development team on acquisitions that provide DSG with product and solution expansion and extensions in our business units and with their collaboration with the business unit leadership teams as they work to facilitate an acquisition all the way through its integration. Our M&A playbook is active, and we are excited about our current pipeline to continue to deliver largely directly sourced, extremely commercially enhancing high return invested capital, accretive acquisitions that fit our objective to build a best-in-class, high value, high touch specialty distribution business for our shareholder partners, our customers and importantly, our DSG colleagues. Additionally, as I highlighted, because of the continued evidence we see and customers acknowledge for expanded opportunities for cross-selling, spanning our premier specialty distribution company, with great enthusiasm, we’ve expanded and dedicated more resources to a cross business unit commercial initiative to grow cross-selling revenue and also to leverage value added capabilities to improve the success of each vertical in their own marketplaces. As DSG's Chairman, CEO and largest affiliate shareholder, we fully align with our public investor partners to drive long-term value creation for our shareholders. Investor outreach continues to be our focus. We will attend the Barrington and KeyBanc conferences in May and the East Coast IDEAS Conference in New York in June. With that, operator, we'd like to open the call for questions.
Operator: [Operator Instructions] Thank you. Our first question is coming from Tommy Moll with Stephens Inc. Your line is live.
Tommy Moll: Good morning, and thank you for taking my questions.
Bryan King: Good morning, Tommy.
Ron Knutson: Good morning, Tommy.
Tommy Moll: I wanted to start on S&S. I presume that was a directly sourced deal. So any context you could give us on a relationship there, how the deal came to you and then also just the go-forward on integration. And while on that, Bryan, you said some complementary things about your development team. You want to put a bogey on how many more deals you'll get over the finish line this year. It sounds like the pipeline is full.
Bryan King: Oh gosh. Thanks, Tommy. Let's start with S&S, and I'll let Ron add some additional color here. But -- so the Kent Automotive division, which was something that was bought, Ron, maybe 20 years ago or so?
Ron Knutson: Yes, 20 plus.
Bryan King: Over 20 years ago, is the kind of a line of business inside of the Lawson Products business model, very similar, but just largely discrete set of SKUs for collision and maintenance repair work on automotive. And S&S was the best competitor that was competing with us in the Midwest. And they had built a really strong, dense market share. They were started in the 60s, I think, early 60s, two families owned them. And the operating family that had kind of taken over from the original founding family had done an extremely good job running the business. And so we started a dialogue with them maybe a couple of years ago. And this has taken quite a long time and a lot of time on both sides to try and work through getting a transaction done. But it was so important to building value in the Kent Automotive division that our leadership team and our corporate development team and the sellers stayed committed to the process. So we are -- we couldn't be more excited about an acquisition that we've done over the last several years. This one took a lot of effort from a lot of people, not to take anything away from others that we've done. But yes, it was direct source, it was direct dialogue. There were lots of nuances to work through, but it provides a tremendous amount of EBITDA margin uplift and strategically an opportunity for complementary product leadership to drive structurally higher organic revenue opportunity for both sides over the coming years. As we've started to do more work on Lawson Products and I'll digress just for a second, I know I'm going to get trouble for this. But there's lines of businesses inside of Lawson that are not -- don't have structurally today as high of EBITDA margin as we are enjoying in our U.S. domestic Lawson business. And so as we see opportunities to punch to higher margin, EBITDA margin and returns on the Lawson core, we are looking at these pockets. And so Kent has had tremendous -- has had kind of a leadership in the clubhouse around organic growth the last couple of years, had strong organic growth even in this first quarter. But we needed more density there in order to pull it over double-digit EBITDA margins from where it was sitting, and this does it in spades. And so that was -- so not only did it bring it immediately to double-digit EBITDA margins, but it gives us strong visibility to be able to take it to margins that are consistent with what we would expect we can do over time with Lawson. So we are doing some of the same analysis with other lines of business inside of Lawson as we are across our other verticals. That's where the corporate development team is spending a lot of their time. We've identified across each of our leadership teams, areas that we can fill in to try and bring the whole to a higher value added proposition with trying to drive performance out of different verticals that we've got even inside of each of the three business units, if you will, more broadly. And they do have a lot on their plate. There are other opportunities that we're pushing forward on that we think are key to our objectives to meeting our longer term defined goal. So there's -- I don't want to get too deep into the pipeline. There was a funnel that we have. And I don't know, Ron, if you want to offer more discreteness on it, but most of it, Tommy, is direct source, and that takes a lot of effort. And so you start conversations like we did with S&S and -- on some of the others that we've done and some of the others that we are working on. And you -- it's hard to anticipate how long it's going to take to get them to closing line. Hisco was another one that was really direct source. We spent years talking to them and then you kind of try and progress that. And we didn't have a lot of conviction or confidence on what the time line was going to look like to get to a closing table. We just had a lot of confidence that there was a tremendous amount of value if we could land it. And the other side, the counterparty was committed in that case -- both of these cases to being partners with DSG. Anything to add, Ron?
Ron Knutson: Yes. The only thing I would add to that, Bryan, is a lot of the Kent Automotive growth over the many -- over the past few years has been certainly building relationships with auto dealerships, but also heavier in the collision repair shops. And S&S Automotive heavily focused on auto dealerships. And so typically, there -- the auto dealership spend is typically greater than a collision repair shop. So to Bryan's point, I think it puts us in a great position, there's -- to expand SKU availability within all of the end customers, very really little to no end customer overlap and very little SKU overlap as well. So great opportunity on both ends to be able to leverage both product availability and then also really having now a foothold into servicing the auto dealership market.
Tommy Moll: Thank you, both. I wanted to follow-up on the outlook you provided. Ron, I appreciate the context on the second quarter from a revenue standpoint. I wanted to ask on margin, just to make sure I heard you correctly. Did I hear you say for each segment and then obviously for the consolidated results, you're looking for margins to be up sequentially in 2Q? And if I did hear that correctly, any noteworthy callouts on that trajectory would be appreciated.
Ron Knutson: Sure. Yes, Tommy. So yes, you did hear that correctly. From an organic sales perspective, we've got certainly visibility into the first month of the quarter here. Again, we'll be up against some sales pressure against the, call it, 5% organic growth that we realized in the second quarter of '23. And then just, I would say, probably some continued pressure that sits out on Test & Measurement that seems to be kind of prolonging longer than what we initially anticipated from probably as we were looking at this late last year. From a margin perspective, yes, you heard that correctly as well. Our expectation going into the second quarter is that we would realize margin -- incremental margin improvement sequentially within all three of the verticals. Individually, there's initiatives taking place within Lawson, Gexpro Services and TestEquity Group to be able to -- for us to be able to make that comment. And we feel like we are on a nice path as 2024 develops to be able to sequentially see some improvement there. We -- as you know, we don't provide formal guidance. So I can't really give you a number around that, but we do expect sequential improvement from where we ended the first quarter.
Tommy Moll: Thank you. I appreciate it, and I will turn it back.
Bryan King: Just on -- on the -- Ron, on the -- just to add that, one of the things that we did get with the close of April was -- and again, 2 months is not a trend is that we are seeing -- we've seen now 2 months of a very slight tick up relative to what we saw in the fourth quarter and the first couple of months of the first quarter on the Test & Measurement side. So we are hoping that what that is indicating is more clean channel in terms of inventory overhang. And we are feeling like that there's money out there to spend on test and measurement equipment. It's just a matter of the confidence that the customer has in letting that spending on more of a capital asset loose.
Tommy Moll: Thank you, both. I will turn it back.
Bryan King: Thanks, Tommy.
Operator: Thank you. Our next question is coming from Kevin Steinke with Barrington Research. Your line is live.
Kevin Steinke: Hi. Thanks for taking my question. So I just wanted to ask about the Lawson sales representative headcount, about 860. It seems to be down a bit from where it was historically, but you also mentioned that you had open positions that you're recruiting for and you want to build that out in certain territories. So maybe just talk about the trend in the Lawson sales rep headcount, both kind of from an attrition standpoint and where you'd like to grow it, how do you like to grow it going forward?
Ron Knutson: Sure. Kevin, I'll take that. So yes, as we commented in our prepared remarks, we are down slightly from an overall headcount perspective. And I would say that it's not overly unexpected through some of the changes that we put in place through 2023 to help our sales reps become more productive, along with some of the shifts that we've talked about in terms of building out our inside sales team and so forth. We did expect that we would take incrementally a few steps down just in terms of the total count. We are actively, in the marketplace, recruiting for additional sales reps, and I would say probably better defining the territories that we believe that can drive our sales on a go-forward basis. We are now looking at more of a combination of really very specific market data in terms of those end markets that we believe can really provide an opportunity for us, not only for where some of our existing sales reps are at, but also new territories that we can enter into. So we -- we've -- so again, I wouldn't say that it's overly surprising that we are down from a rep count perspective. We'll say that for us, feet on the ground and a number of inside sales reps can put some pressure on our average daily sales just in terms of the number of sales reps on a combined basis that are out actively selling. But we believe that, that's part of the growth as we move throughout the rest of 2024.
Bryan King: I'm just going to touch on that. Kevin, the part of Cesar and the analysis that we did, we brought in -- we intuitively -- Ron and I've known this now probably for the last couple of years. It was refreshing for Cesar in bringing in an outside consulting firm to really look at what we needed to do in order to make sure that our reps were making structurally more money, while at the same time as our cost to serve was also heading in the right direction. And so we had, at one point, Ron, 1,050, almost 1,100 reps, and we had [indiscernible] territories at that time. And today, the way we look at the business is more like at this stage, 900 -- they're 900 defined territories. And so that means that we kind of went back and reworked and looked at what a territory needed to look like in order to make sure that we were allowing a sales rep an opportunity, both someone who is a starting rep to get to have a higher likelihood of success and to get to profitability for us faster. We are adding a lot of tools for them, which are also going to help them. But a lot of the insight is taking territories that we had that were maybe too thin or that were -- that needed to be reworked. And it's hard to do that when you've got somebody in those territories. And so part of the process was making sure that we -- as we've had some turnover that we were slow to backfill some of those chairs so that Cesar and his team could really look at how to consolidate and rework and to get some better organization out of how we had our territories and how -- what our route structures look like for our salespeople. And so that all is going to allow both higher level of productivity and compensation for our reps, and it's also going to drive our cost to serve down over time. And so, Ron, several years ago, when we were shareholders and I wasn't in the chair I'm in, was giving metrics around cost to serve. And at one point, it was up in the 30s, I think if I remember, and we were trying to get 1% of selling costs a year out of the business. And we -- we are back in a mode where we can see line of sight to how what used to be 25% might be 15% as it relates to where we want to go in terms of total productivity out of our reps and total volume out of them. And that means that the reps going to make 30% or 40% more than what they did maybe on an average comp basis. I think it's -- where we want to be is probably -- I think it's 30% or 35% more than where they were or 40% more than where they were on an average basis a couple of years ago.
Kevin Steinke: Okay, great. That’s helpful color. I will turn it back over …
Bryan King: There's 70 -- there's 35 new territories and there's 35 backfills that are open efforts right now. Is that too much detail, Ron?
Ron Knutson: No, that's fine, Bryan.
Bryan King: There's 70 chairs that we are chasing right now, Kevin.
Kevin Steinke: That’s great. I appreciate the -- all the detail as usual. I will turn it back over. I have to jump on to another call, but appreciate all the comments as usual.
Bryan King: Thanks, Kevin.
Operator: Thank you. [Operator Instructions] Our next question is coming from Katie Fleischer with KeyBanc Capital. Your line is live.
Katie Fleischer: Hi. Good morning. I'm on for Ken Newman today. Thanks guys.
Bryan King: Good morning, Katie.
Ron Knutson: Good morning.
Katie Fleischer: Good morning. I was wondering if you could give a little bit more color on the commentary from the government orders that drove some of the weakness in Lawson and maybe when you would expect an inflection in that.
Bryan King: Yes, I hit that in my early comments and Ron can probably give more discreteness to it. There was a change in the way that the government -- every 5 or 7 years, I guess, they change their order entry program, and that's something that could be disruptive for all of us that sell in -- small piece goods into the Class C parts into the government. And then there's also was just kind of a lot of spending that was -- that we knew -- that we know is out there and that we can see that's coming towards us, but it was a pretty significant delay in some spending that took place in the first quarter. There was about equal parts between a broad set of customers across our up and down the street core business at Lawson and then government. And the two of the -- decrease from prior year first quarter for Lawson was about equally weighted to those two areas or strategic accounts were up in the first quarter versus a year ago, and that's just continuing to grow engagement with the relationships that we've got there. But that was a big detractor to Lawson's organic growth in the first quarter. Ron, do you want to …
Ron Knutson: Yes. Bryan, I would just add to that. You're spot on in terms of the ordering system that we are now and others as well are required to go through. And it's just a longer process, Katie. So it's -- we saw some of that decrease versus a year ago within that end segment for us. The other piece I would say is, I mean, the government, the military business is its great business for Lawson. I mean there is a high demand of the consumable Class C parts that we sell. We've not lost any locations, any large locations that we've historically seen some pretty large volumes in the past. So it's not that we are concerned about any customer attrition around that. It's just -- it's more timing. Our sense is that, that will come back to us for the most part throughout the rest of 2024. Certainly, it's not an all catch up, let's call it, in one quarter. I think it will come back gradually to us as 2024 develops.
Katie Fleischer: Okay. That's helpful. And then just one more on test & measurement. So I know you mentioned that it's difficult to have a really strong sense of when these markets are going to inflect just based on the limited visibility. But what are some signs that you would look for from your end markets or from your customers that would give you confidence that this demand is starting to come back?
Ron Knutson: Yes, Bryan, do you want me to touch on that one?
Bryan King: Yes. Why don't you hit that, Ron, and -- at least start it off? Thank you.
Ron Knutson: Yes. So -- and Katie, Bryan had commented on this a little bit as well. When we look at that test & measurement business, even on a monthly basis as to how the first quarter developed, we -- March was stronger than both January and February on a standalone basis and really was back to levels that we saw kind of in the November and December time frame. So we feel like we've -- that business has kind of leveled off at the bottom right now. What I would say is that in the test & measurement piece for us is really kind of two separate -- I divide it into two separate areas. One, TEquipment, which is one of the acquisitions that was made a year or so ago, they sell what I would say, more handheld units, lower average purchase price. That business was up sequentially Q4 into Q1 of this year. So that's a good sign that we continue to see down a little bit versus a year ago quarter, but sequentially up Q4 versus Q3. So I think that's a good sign that there's some additional demand coming back in the lower price point items. On the larger items, we continue to see some pressure there. But to my point earlier, March was the strongest month of the quarter. So for us, we are staying very connected into our customer base. Again, really no customer attrition there. It's more that -- what we are hearing from our customers is that the capital spend continues to be delayed. And the other piece, and I think we commented on this in the Q4 call, and I described it as almost the perfect storm was that perfect storm going in the wrong direction. But the demand dried up primarily from delay of capital projects on higher interest rates, not shortly thereafter all the supply chain issues surrounding that end market were resolved. So there was a pent-up demand that came through or pent-up supply that came through and kind of mid-2023 -- early to mid 2023, that release of the supply chain kind of hit squarely with the slowdown in the demand. So hopefully, that helps. But Bryan, certainly, any additional thoughts you may have on that.
Bryan King: So look, that is -- I think Ron laid out a nice framework there. Katie, there -- when we are looking at TestEquity and we are looking at Hisco and we are looking across that division, there was a -- we hit the nadir as it turned out from what we've seen so far in January and February. We kind of hit the bottom of the lowest average or kind of lowest volume that we were seeing through Test & Measurement specifically. And that's really, for us, looking at the desktop larger versions as opposed to what we are selling through TEquip or the [indiscernible] type handhelds. And Keysight and Tektronix would be our largest vendors there by far. And there was a nice kind of inflection point, it appears, but 2 months isn't a trend because we still got lots of kind of concern about what's going on, on the true demand side. But some of the messiness in the channel and some of the activity in terms of quoting picked back up, and we saw by March, the revenue levels and then April stepped up again back to kind of where they were at the highest level during the 3 months of the fourth quarter, not yet by any means back to where they were in the first half of last year or even the third quarter. And so that -- the nice thing is that we've kind of -- we saw a sell-off or kind of a decline in activity. One of the things that we are also looking at is when we look at the OEM side of our engagements with Hisco, which are largely with similar type of customers and similar sort of industry verticals, we are seeing -- we are seeing percentage declines in OEM programs that are still active in some of those segment markets. So if you think about wireless and communications or industrial electronics, the Hisco is seeing some -- had some volume in the activity in the programs that were coming through the OEM programs of declines there. And those were reflecting kind of more amplified impact that we were seeing over TestEquity on buying test and measurement equipment. So there's confirmation that it's -- some of what's going on seems to be in those industry verticals and that they're just -- they aren't making as much through their OEM facilities or if they're having some struggles in their own end markets, they're probably not spending as much money on their R&D equipment in their labs. And so at some point in time, we are -- just because the way that we think it's trending, we think that those dollars are going to be coming back. But we don't feel like we've lost customers. We do think we lost orders at times during the fourth quarter and maybe even a little bit in the first quarter where there was a natural pricing activity that we weren't willing to match.
Katie Fleischer: Okay, great. Thanks for all the color.
Operator: Thank you. As we have no further questions on the lines at this time, I will turn the call back over to Mr. Bryan King for any closing remarks.
Bryan King: Well, that's -- I think, we really appreciate everybody's time. Obviously, we've got still a lot of moving parts in the business. We are very encouraged with the work and accountability that our teams have been putting in across each of the three verticals. And we've got a lot of confidence in the business that we are continuing to build and how we can drive returns on invested capital and structural margins over the coming years. Thank you for your time today. We look forward to speaking with you again when we report our second quarter results in early August. And have a great day.
Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time, and we thank you for your participation.
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