Lawson Products Acquires S&S Automotive, Reports Q1 CapEx

Lawson Products, Inc., a premier specialty Distribution, Solutions, Group, First, Quarter, Re company and operating unit of Distribution Solutions Group (DSG), has completed the acquisition of S&S Automotive, Inc., an automotive and industrial parts supplier based in Woodridge, Illinois. The deal is expected to enhance Lawson's Kent Automotive division, which provides automotive and industrial C-class parts to auto dealerships and collision repair centers throughout North America.

The acquisition of S&S Automotive by Lawson Products highlights the growing trend of consolidation in the automotive aftermarket sector, which can have significant implications for the industry's competitive dynamics and customer relationships. As companies like Lawson Products expand their scale and offerings, they may be better positioned to capitalize on emerging trends and opportunities in the sector. As companies like Lawson Products expand their scale and offerings, they may be better positioned to capitalize on emerging trends and opportunities in the sector.

S&S Automotive, with annual revenues of approximately $40 million, is andistribution, solutions, groupindustry-leading distributor in the automotive dealership market. Cesar Lanuza, President and CEO of Lawson Products, expressed enthusiasm about the acquisition, stating, "Similar to Lawson's Kent Automotive business, S&S Automotive is an industry-leading distributor in the automotive dealership market. We're very excited to announce this acquisition that leverages the best of both companies."

The combined entity will enhance Lawson's ability to serve customers with auto-related supplies and tools, plus vendor-managed inventory services to dealerships and collision repair customers in this growing market. S&S Automotive President James Hruska, Jr. said,"We are excited to join Lawson Products and their Kent Automotive business to drive the expansion of their automotive consumable products, solutions and services to dealerships and collision repair facilities."

Lawson Products reported its first quarter 2024 financial results, led by continued considerable year-over-year sales gains driven by acquisitions, while organic sales saw declines. The company posted total sales of $416 million, up 19.5% year-over-year, with $99 million of incremental sales from acquisitions. Organic sales were down 8.6% on a comparable basis.

The company's first quarter gross margin of 34.4% declined 370 basis points year-over-year. Operating profit of $2.8 million was down from $16.7 million a year earlier. DSG's Q1 adjusted EBITDA margin of 8.7% decreased 160 basis points year-over-year but improved 30 basis points compared to Q4 2023. The company reported a first quarter net loss of $5.2 million, following a net profit of $5.9 million a year earlier.

Why this matters: Lawson reported capital expenditures (CapEx) of $2.9 million for the first quarter of 2024 and expects full-year 2024 CapEx to be in the range of $16-20 million. The S&S Automotive acquisition is anticipated to enhance EBITDA margins and provide organic revenue opportunities for Lawson Products.

DSG CEO and Chairman Bryan King commented on the results, stating, "Our first quarter results were in line with near-term expectations. The Lawson MRO vertical had strong performance while continuing to make investments in its sales organization. Our acquisition strategy contributes to DSG's inorganic growth by expanding our scale, customer base, and geographic reach, by enhancing our enterprise-wide product offerings."

Looking ahead, DSG reaffirmed its long-term goals, including increasing total sales to over $3.3 billion and generating adjusted EBITDA in excess of $450 million. The company expects to drive returns on invested capital, earnings per share, and free cash flow per share profiles. With the S&S Automotive acquisition and ongoing initiatives, Lawson Products is distribution, solutions, group well-positioned to capitalize on growth opportunities in the automotive aftermarket sector.

Key Takeaways

• Lawson Products acquires S&S Automotive, enhancing its Kent Automotive division.
• S&S Automotive brings $40 million in annual revenues and industry-leading distribution expertise.
• Lawson Products' Q1 2024 sales rose 19.5% year-over-year to $416 million.
• The acquisition is expected to enhance EBITDA margins and provide organic revenue opportunities.
• Lawson Products reaffirms long-term goals, including $3.3 billion in total sales and $450 million in adjusted EBITDA.