My name is Dave Manthey. I'm the Senior Industrial Distribution Analyst for Baird. We're happy to have Distribution Solutions Group here with us today for a presentation of the story. We have Bryan King, Chairman and CEO. We also have Ron Knutson, CFO. And with that, I'll turn it over to the team for the presentation. We'll come back at the end and monitor Q&A.
Thank you. Appreciate it. Appreciate the relationship we have had with Baird over the years, so thanks. I'm Bryan King. I want to introduce you to DSG, if you don't know the story, or answer questions for you. We've got a specialty distribution platform here that has three verticals: an MRO vertical, an OEM vertical, and one that is kind of electronic and specialty production supplies vertical that also has test and measurement equipment in it. The three verticals represent kind of about 38% of our sales come through the MRO channel. About 22% of our revenue comes through the OEM channel. And we actually have quite a bit of OEM exposure and MRO exposure as three-quarters of our third channel TestEquity Group, about 40% of revenue, about three-quarters of it is more on the OEM and MRO spend side.
It's about just right about a $2 billion revenue platform. It's got about $200 million or so of EBITDA. It's fully kind of pro forma with the acquisitions that we've done. We've done 11 acquisitions since we brought the businesses together over the last two and a half years. Five in the first year. One major one about a year or 18 months ago, Hisco, which went into the TestEquity Group platform. And then we've done five once we closed the one that's left to be closed this year that are done this year, assuming we don't get anything else closed this year. It's been about $900 million of revenue that we've acquired. We spent about $600 million or so to buy it since we brought the businesses together. Bringing the businesses together significantly improved the liquidity across the platform. Lawson is a 73-year-old business.
It had been public since the 1970s, and I had been involved in the business for the last decade, chairman for the last six years, seven years before we brought them together, and bringing them together gave us the scale that has allowed us to spend more dollars investing back into our income statement for initiatives that we think are going to accelerate and unlock a lot of EBITDA, returns on invested capital. The assets that we're buying are specific to areas that we think that we can accelerate returns on invested capital and EBITDA and our value proposition to the customer, so it's not kind of just going and grabbing what we can grab. There are businesses that we bought where there's been a lot of cost takeouts, like in Hisco.
I think we've taken out $17 million of operating expenses over the last 18 months as we've folded it into the TestEquity Group. And Ron's going to cover the recent financial information, which is several slides forward. And then we'll come back and I'll talk more broadly about what we're going to try to do from here.
Okay. Apologize for jumping around here a little bit on the slides. But to Bryan's point, really just wanted to spend a couple of minutes talking about our most recent financial results. We had our earnings call a week or so ago. You'll see a nice upward trend here in continuation of margin expansion. The most recent quarter finishing EBITDA as a percent of sales, $49.1 million at about 10.5%. That was compressed by about 20 basis points based upon our most recent acquisition of Source Atlantic up in Eastern Canada. We knew that was the case just given their overall margin profiles, but we have insight into bringing that business together with our bolt supply business, specifically on the Lawson side, and getting the Source Atlantic acquisition to double-digit EBITDA by the time we exit 2025.
So part of the growth strategy here is certainly the acquisitions that we've made. As Bryan mentioned, we have closed three acquisitions, actually closed four acquisitions, with the most recent one not being reflected in these results that just closed here in late October. We have the fifth one that we anticipate will close here within the next couple of weeks, ConRes. We put out a press release on that upon signing the agreement about six weeks ago. From an overall leverage standpoint, we finished the quarter at a leverage point of 3.7 times. We've provided guidance that our comfort zone is really between three and four. When we brought the three verticals together back in April of 2022, we were at 3.6. And I think what's important here is that we've reflected in these results. We have closed on significant acquisitions north of $400 million.
When we did the Hisco deal, we did an equity rights offering for $100 million, so that was part of that purchase price, but on seven most recent deals that we've pulled together, in excess of $400 million of cash, and we've been able to maintain that leverage point basically at the same point where when we brought the three companies together. For us, we want to utilize our balance sheet. We have a strong balance sheet both in terms of net working capital. As part of the acquisition, the Source Atlantic acquisition that we closed down in August, we did upsize our credit facility. All in, we're sitting at about $1.1 billion, although you'll see that we have in excess of $300 million available.
So we think we've got some great firepower here to continue to invest back in on both the organic side as well as acquisitions are available to us. We feel like we've got the right firepower and availability to go out and make those acquisitions and not have to worry about the financing on it. So with that, I'm going to turn it back to Bryan. He's going to jump back into a little bit more around the business and our strategy moving forward to grow the organization.
Yeah, and I want to make sure that I leave plenty of time for questions. I'm notorious for not doing that, so I'll admit that from the beginning. Look, we've been involved with this business for the better part of the last decade. At one point in time, we were the largest customer of Lawson and spent a lot of time, in fact, doing some channel studies and studying the service delivery model and decided that it was a very resilient and very much valued approach to serving customers on the MRO Class C parts model, kind of VMI. Our salespeople at Lawson go out and they do a lot of physical work. It's a hard job.
It's half service and half sales because they're putting and stocking and managing a lot of those small piece good parts in the facilities and bins and shelving and whatnot, cabinets that we have provided those customers. We have found the customer relationships are very resilient, although our biggest challenge is making sure that as we load our salespeople up with more strategic accounts, that they continue to service their smaller accounts with the sort of regularity that doesn't have them buying away from us when we aren't in front of them. But when we do put a new salesperson back in those territories, we get a lot of snapback activity with those customers. We recognized seven years ago that Lawson's thousand salespeople weren't operating with a CRM, that they had a lot of flexibility that goes back to when they were all contractors or 1099, not W-2s.
And we recognized that we needed to do some significant work on the sales force. We started that. We also knew that at the time when Lawson was public, it didn't have the other two assets or verticals with it, that the earnings profile at single-digit EBITDA margins was not really that healthy to be able to tackle the sort of sales force overhaul that we had imagined. We knew that the core of the business could operate at over 20% EBITDA margins at the time, but it was going to require some real work on it.
We brought together a strong OEM channel partner in Gexpro Services and the addition of the TestEquity Group, which we had identified Hisco as an asset that we wanted to add to it at the time that we brought the three verticals together, where it was going to give us the scale to have a lot more liquidity and a lot more earnings power, a lot of opportunity to drive EBITDA margins higher structurally, as well as really invest back in the income statement and inorganic opportunities that were going to also make the business stronger. That's what we've been executing on the last two and a half years. And we've seen a lot of success in the way that we've been able to fill the funnel, both on organic and inorganic opportunities.
We've taken out a significant amount of cost in order to drive a lot of operating leverage for the future for the platform. We've also faced over the last six quarters an ISM number that's below 50, and so it's been a bit challenging to feel like we've got a tailwind behind us on organic revenue growth. But we are seeing strong order backlog, a book-to-bill, and a number of our key areas are very favorable. Test and measurement is the one that a lot of people ask me about because it's been the one that's faced the most headwind. It's had its best billing or booking months in September and October in the history of that business, and we've taken strong market share based on our channel partners, the major manufacturers and test and measurement equipment.
We usually see the OEM, MRO side of the electronic production side lag the test and measurement equipment side by a quarter or two. We expect that based on what we're seeing out of the test and measurement side in the book-to-bill numbers, that we'll start to see some turn there on the revenue front and that that'll lead to also a quarter or two down the road, a turn in the electronic manufacturing side. That's been a tough headwind for the business on the revenue side there. On the MRO, the OEM side, we've got a lot of our industries, in fact, I think pretty much all of them have enjoyed kind of some significant updraft. We've seen book-to-bill numbers there look good.
We've been able to integrate the assets that we bought for Gexpro Services two years ago that were important to driving the structural margins higher and being able to do more for the customers, go move up the food chain, if you will. I use examples like being able to do a lot of the short-run specialty capabilities, like if you're working on a Joint Strike Fighter there in Fort Worth at our old Lockheed Martin facility, or you're working on a titanium washer for an M1 Abrams tank or something like that. And we work in renewables. We work across the power gen set. We work in six or seven major end markets.
Our ability to work on our specialty products that our manufacturers are asking us to engineer or work with their engineering team to source, we've been able to add a lot of capabilities there that drive profitability longer term. We're seeing that out of the Gexpro Services team. We're seeing higher margins there from where we were two years ago. And on the Lawson side, we're finally at a spot where over the last 18 months, we've added a lot of these tools that we knew that we needed to invest in. We've known that for a decade before I was able to pull the three pieces together. We've now are back at a spot where we're able to reorganize a bunch of our sales territories. We've given them a lot of the technology tools that they needed to have.
We've got the insights from those technology tools, and now we're able to really pour a lot of hiring of outside salespeople back into the model. 100 outside salespeople on the model has historically cost us about $5 million of drag in the P&L. But on a $200-plus million EBITDA business, that's a whole different deal than on Lawson when it was a $17 or $13 million EBITDA business when we were first trying to assess this issue. So we feel great about that. We're back in a feet on the street adding. We've done an overhaul to our inside sales effort there. We get a lot more productivity out of it. We didn't have an inside sales effort at Lawson three years ago.
And now we take the smaller customers, and we're actually seeing our ability to serve those customers with a lower cost to serve, consistent gross margins, and actually drive a lot more contribution margin out of those smaller customers than we had before. We are now at a spot where I'm excited. I think about our history of doing 120 specialty distribution transactions for me and my team. I've got 10 of our team working for $0 pay a year on this business, which is important. Collectively, our team owns about 30% of the company. Collectively, I'm sitting at about 22% with my own shares and our family. And so this is an absolute must-win long-term compounder for our crew. And it gets a lot of focus out of our collective resources. We have about 100 former CEOs of our limited partner base.
That base, 60-something of them are former C-suite executives of distribution, industrial distribution businesses. So they are all focused on it. There's no overhang of stock. We are long-term shareholders here. I use a long lens of time to try and figure out how to compound this business and grow a lot of value for all of our shareholders. I made a conscious decision as a guy that's been a long-term participant of this conference as a public investor to keep this thing public and to bring everybody along with us, those that want to participate in building a business together. So, open it up to questions, and I'd love to continue to introduce you to what we're doing here. We've got a lot of end markets that we serve, and we feel really great about the sort of earnings leverage that we've built into the model at this point.
All right. Happy to take any questions at this time.
Pepper me, somebody. I've been on your chair. Somebody, ask me some tough questions.
I'll kick it off. You talked about the sales force, and that for a while was a real rough spot for the company. So are we completely through that transition now? We're in good shape today?
Yeah. Absolutely. The question that, for the last 18 months and really the last seven years, has kept me up the most on Lawson. What we found five, six, seven years ago was that I would meet with, as board member, shareholder, then board member, then chairman, with Ron and Mike at the time, and we were pouring sales resources into a business, and our ability to get those sellers to profitability was taking us over two years, and today, with the tools that we have, with the reorganization of sales territories, we are putting salespeople into less janky territories because if you go back, all these sellers were independent contractors. They kind of owned their customers, but it looked like a spaghetti mess in terms of their routes.
Yes, we think that we're through most all of the reorganizing through the tools that we need to give them. There's still some tools that we have that we're rolling out into the field. We are at a spot where we're now able to hire back into it. It was hard to not do compression and to be able to reorganize territories. You kind of have to accept the fact that you're going to try and compress your sales force as you're reorganizing territories, opening up alliances around the reorganization of those customers, around new territories as well as open territories. We added about 135 new territories, and then we also had all those open territories. Structurally, we think we can carry a lot more salespeople at a much higher level of profitability.
When we looked at this business and knew what we needed to do to get it to the Lawson US operating unit, it is about over 15% EBITDA margin business. To get it to where we wanted to get it, we needed about double productivity. Your team helped me really work on that some six, seven years ago. And so to do that, we were going to have to get these tools in place, and we were going to have to really try and make sure that we had a better organized opportunity for the lower end of the sales force because we were having too much turnover of people that were not very well organized territories. The other thing is that we've done a lot of effort over the last 10 years. Ron's initiated and Mike initiated the strategic accounts initiative. It's now 60% of our revenue.
One of the reasons it's 60% of our revenue is because the sales resources that we had were covering the new strategic accounts better, and they were letting their smaller accounts suffer, if you will, which is kind of a natural trend of salespeople who are having the benefit of getting corporate sending them new revenue, but they were kind of neglecting some of the book of business that they had. Getting the territories better organized allows us to pour those new salespeople in there, have the benefit of the strategic accounts, but also those smaller accounts that need to have more.
Yeah. And, Dave, the other piece I'd add on to Bryan's comments. So if I look back over the last 18 months, we've made on the Lawson side significant investments, whether or not it's core business development reps to go out and find new customers on the core side of our business, field technical sales specialists to help within specific product categories, inside sales reps that Bryan had mentioned, a CRM tool that went live in April or May of this year. So we've really taken a hard look at that support that is needed for our sales team and have really invested a lot of dollars in that support mechanism over the last 18 months.
I mean, we're changing the way that our DSMs are working with our sales force, both because they've got a lot better tools, a lot better insights. They can see what their field sales reps are doing. We also, with that inside sales rep effort, we've got about half the number. We started with none three years ago, I guess, or five or six. We went to 45 or 46. We're down to 26, and the 26 are doing more revenue than the 46 we're doing. So we had to kind of do the same exercise over the last three years of staff it up big, compress it down with those that are actually driving productivity. And we now are growing the average daily sales from the peak levels higher with less resources there because we've got better tools.
We're able to do the same or some of the same example with our sales force. The reality of it is, though, what has been an insight to us on our sellers is that our sellers, who are mature sellers, they've got good books of business. They have a very comfortable lifestyle. It's a hard physical job. It's different than kind of being a high-level seller who's kind of not having to handle products. We have rolled out a service capability in one of our markets, and we're testing that. We've got a handful of people that are just going into our bigger customers and managing the resets, which is freeing up the salesperson to cover more accounts, which we think is going to be a real winner for us.
But now we've at least got an ability to have our starting up new sales reps, field sales reps, having a lens towards that $180,000 and $190,000 of revenue that they need to get to to be profitable for the business. Used to take us two and a half years to get there. We think we can significantly do that faster. And that's what has historically cost us about $5 million a year in our P&L for every 100 that we net out a year. And we expect that that's a different metric now.
Also on $200-plus million of EBITDA, it's just a lot smarter investment decision with a lot less consequences to driving the trajectory of where we want to be with our EBITDA margins on the whole platform versus when we were Lawson standalone with 5% EBITDA margins and $17 million of EBITDA. We thought at that time that the cost of our churn on our sales force was costing the business. Our analysis on our teams was about $20 million of EBITDA a year, so we have broken down. I mean, we represented a little over a year ago what we wanted to do in terms of driving EBITDA margins higher and gross margins higher on the platform.
We broke apart the business, and a lot of the acquisitions that we've done this year have been specific acquisitions to address profitability laggards that we have in each of the verticals. So if you think about that, Lawson has 13 and a half or 13, wherever it is, 13% EBITDA margins now. The U.S. business has the high is above that, as I referenced earlier. The Canadian business was under 10% EBITDA margins for our Lawson sellers in Canada. And then our Kent Automotive business, which has had a really attractive long-term organic growth trajectory to it and is back growing again. It had a little flattening out this year, but is back in the positive growth trajectory again. But it's stayed growing at really high organic growth rates for the period of time that I've been involved in the business.
But it was operating at under 9% EBITDA margins, right? Because the sellers weren't as effective or efficient. We weren't getting as much volume through those sellers. And so by adding S&S, which was operating at 20% or better EBITDA margin, was infill density, added some real strong product capabilities where they were leaders, and they also were touching the maintenance side of these auto dealerships. Whereas we were focused more on collision centers, it addressed being able to structurally drive that Kent business to a better, more healthy spot longer term. Same thing is what we're doing in Canada. With Source Atlantic and Bolt, we bought it when it was a high single-digit EBITDA margin business. We took it to about 14% or so EBITDA margins. We bring in Source Atlantic. It's operating at 6% EBITDA margins.
One of the biggest issues it had was it was losing money on the Western half of Canada where they had a bunch of locations. They were losing $5-$6 million over there. We're able to address that immediately with our Bolt footprint. So we are able to kind of do what I'd call a pick six. It's a pick six at the goal line. They're about to score on you. You're losing $6 million a year. You're able to actually flip it because you're able to consolidate that Western Canadian footprint and all of a sudden turn it into a profitable $6 million EBITDA contributor for the Source side. So when we look at buying that business at nine or 10 times EBITDA on an integrated basis, it's much cheaper than that. We didn't pay a big premium to net working capital and real estate for it.
It's a great business. The Irving family didn't want to sell it. They came down. It's been on all of us who play in specialty distribution. We've been targeting that business for years. It has not been available or for sale. We got lucky that they liked it going into a public specialty distribution business that would have a real marrying up with Bolt Canadian footprint. It protected their core 600 employee base, and so the Irvings, it was kind of a decision that they made. They came down and interviewed me. John Irving did, and it was a really interesting and healthy engagement. That business was started in 1867. That family has owned it kind of below the line. It's such a wealthy family. It's like the Koch brothers, but they've had it since 1943, and they've been great stewards of it, so we're excited to add it.
So when you were talking before about you made some reference to 20% EBITDA margin.
That's on Lawson. Yeah.
Just Lawson. So the overall company is 10 and change.
Yeah. It's 10.6 or 10.5.
10.5. Yeah. 10.5.
That's getting dragged some by our acquisitions that we've made that we're working through cost structure synergies. He mentioned that Source Atlantic was 20 basis points just in the quarter, and we only owned it for a month or so, six weeks. We're working on trying to get it unlocked. We told the market that we'll get Source Atlantic to over 10% EBITDA margins by the end of next year. We would say that the whole business should be a low teens EBITDA margin business the way it's currently constructed. Our objective is to try and figure out ways to add to that, which will bring that number higher. There's a lot of work to get to. We were trying to get 50 basis points or so a year. It's kind of the core now.
If you take out the Source Atlantic and you take out the more kind of the projects that we're working on right now, you get some restabilization of the end markets that we've had. And we'll see a lot of earnings leverage off of what we've owned for a year or so. And then it's time to address. ConRes addresses the same thing that we were struggling with on our used and our rental and our calibration side of the business. We saw it for TestEquity Hisco as a really important part of our value engagement with our customers on the test and measurement side, but it was not performing at the levels that we wanted to see out of it. So we went and bought what we needed to have.
It was basically an asset purchase of used equipment, but it brought a lot of sales capabilities as well as a bunch of core customers that we serve in other parts of the U.S., and so that gives us an ability to unlock an acceleration in our EBITDA margin and ROIC in that line of business inside of TestEquity Hisco.
Dave, a year ago, we had an investor day. A year ago in September, we had an investor day, and we put out some five-year targets on the revenue side and on the earnings side. And at that time, we had looked out taking the $2 billion-$3.3 billion top-line revenues and then also on the EBITDA margin, about 13.5%, which would take EBITDA at $200 million up to about $450 million. And that's a combination of both organic and inorganic.
We would say that there's been in-market kind of headwinds in some of our in-markets on the organic side. But in terms of building the operating leverage into the platform and the initiatives we have there, we're at or ahead of that five-year plan. And so we feel like we are still very much on track to get to those numbers on or before where we lay them out.
Okay. So you have about a little over a minute left.
Anybody?
Anybody.
Somebody pick on me besides this guy. Well, we appreciate that it's a privilege to be able to be engaged with public shareholders and to have an opportunity to run a compounded business like this. We look for high compounding, free cash flow businesses. Industrial distribution. I started covering it in the early 1990s when Fastenal was going public. I've been involved in the space now for the better part of 34 or 35 years, been chairing these businesses since 2003, and it's a passion for me. I've got a great set of former executives and major distributors and also specialty distributors where they own their businesses that have come along with me and coached our team and me up, and at this point in time, I'm as much as someone who's passionate about the operating side of the businesses as I am about the financial metrics.
But it's because I really do believe that these are strong compounders. And if I look at the portfolio of specialty distributors that this guy's covered for the last 15 or 20 years, I mean, they've been awesome places to invest. And we just wanted to make sure that we had enough capital in one of them that we could kind of direct that to kind of keep compounding. So don't hate selling your best compounders.
All right. Well, thank you very much, guys. Appreciate the time.
Thank you all. Appreciate it. Thank you for you.