Okay. We're going to get started. The next company presenting today is Distribution Solutions Group. Distribution Solutions Group is based here in Dallas in Fort Worth, and it's a specialty distribution brand. There are three companies essentially under the parent company of Distribution Solutions Group, which are Lawson Products, Gexpro Services, and TestEquity. And with us today from Distribution Solutions Group, we've got their Vice President of Strategy and Investor Relations, Brett Scarborough. Brett?
Thank you, Steven. Thanks for that introduction. Our Chairman and CEO, Bryan King, and our CFO, Ron Knutson, were at Stephens yesterday, and they're in Chicago today working on the Lawson, meeting with Lawson's sales leadership, so they wish they could be here, but the door is always open to stop by Fort Worth and meet those guys if you're interested.
I'd like to give just a little bit of high-level background to sort of frame the discussion because I think this is a really unique story in the public markets. While I am VP of Strategy and IR, I also work for Luther King Capital Management. I've worked for the firm for about 15 years, and I've helped Bryan in distribution investments, Bryan King.
He has invested in private markets for well over 30 years plus and has built about a $4 billion private equity effort that's really centered around industrial distribution assets. What we're going to talk about today is really sort of the culmination of some of those learnings and best practices that we've put into a public vehicle that we think can compound really in perpetuity. It's got really unique alignment that's really increasingly hard to find in the public markets.
We're really excited to share with you about this platform. At a high level, we're about $1.9 billion in revenue. We've got about 9% EBITDA margins on a trailing basis. We generate really attractive free cash flow, have a lot of great opportunities to redeploy that capital back into the business. We have a lot of diversification in this business.
There's not a lot of cycles that we lose sleep over. We don't have any customer concentration, and we have a lot of supplier diversification. At a high level, we operate in these three verticals. We have Lawson Products, which is our MRO distribution business. We have Gexpro Services, which is an OEM-focused distributor. It's about 22% of sales. Lawson is now about just under 40%. And then we have an industrial technologies-focused division, TestEquity.
They sell electronic production supplies and test and measurement equipment. So we're really building an ecosystem around that. So we'll talk more about these three divisions as we go through the presentation. So I want to talk about the why. Do we have those slides in here? All right. We had some slides more on the why and the investment thesis, so I'll cover those briefly.
But over those 30 years, as Bryan has invested in distribution, what he's found is specialty distribution or value-added distribution is a better place to play. And the reason is you develop really sticky relationships with your customers. You're taking a real commoditized product by itself, a nut-and-bolt, Class C product, real low-priced item, but you're wrapping around services around those.
And those services come in the form of technical expertise, comes in the form of delivery method of the product to the customer, the ordering method of the product. It may be in the form of kitting, labeling, and it may just be the ultimate complexity of the number of these types of SKUs. So this picture above shows kind of where the three divisions will play within. This would be an A&D, an aerospace and defense customer.
Main assembly line, this would be Gexpro Services. So what they're doing is they're providing class C products that go into production. So the customer comes to us, we help them source all those class C products and get it to them when they need it for the production line. The maintenance shop, Lawson Products down here in the corner, they're providing products that keep the machinery up and running, keeps fleets up and running.
And then we have TestEquity Group, which is an electronic production supply. So everything is getting electrified in the industrial landscape. And so we've built a really nice business that can provide adhesives, solders, tapes that help in production of those certain products. But it's important to know that we've put the three together, but we have not combined them completely. They all have their own CEOs, CFOs.
They have their own sales force. We've been really deliberate in protecting the customer experience. So as you can imagine, the buyer of these products is very different within an organization. The salesperson is very different. The technical expertise is very different. But that doesn't mean we can't get the benefits of being together. So we've spent a lot of time on the cost side, things like freight, things like our footprint, insurance contracts, strategic sourcing.
We can get a lot of benefits without much risk by being together in one entity. So some of the investment highlights, again, we've talked about embedded with the customer. Retention rates are really strong. We're certainly well-diversified. Good distribution businesses tend to have a lot of suppliers and a lot of customers, so none of them have power over you necessarily.
The reason we really like distribution is the returns on invested capital and maturity are really attractive. These are really capital-light businesses. Our CapEx is less than 1% of sales. Our real investment is really in working capital, and we get really high returns on our working capital.
It's not in the deck, but if you want to talk, please.
And then we're going to talk a lot more about it, but our M&A strategy is really important to this story. So when you think about LKCM Headwater controls the company. We own 78% of the stock. We have 13 individuals that help with this platform that are working on M&A, working on integrations. And we also have a dedicated M&A team.
So because we generate really attractive free cash flow and we have a really strong M&A team, that's produced really good results on adding capabilities, adding really good businesses to the platform. And we've been able to buy those anywhere between 4.7 and 9.4 times on average, and the average is about 8.8. And then we cheapen that back as we get all the integrations done. We've usually taken two turns or so off. So here's our diversification.
It's been a good part of the story because we're not worried about oil and gas rolling over. We don't have much construction exposure. It really is highly diversified. So let's dive a little bit deeper into the three segments. So Lawson's value-add is that the Lawson salesperson goes on site. They go to the customer. They look at the bins and cabinets, see what they need. They place the order for the customer. And then the product arrives a week later.
The salesperson comes back, unpacks the product, and puts it on the bins and shelves for the customer. The customer never has to deal with the ordering process whatsoever. And our customers, it's not a core competency for them to deal with their inventory. And by the way, so Lawson's product is all an expense item.
And so that means the fleet mechanic can reach into the bin and get the product and never have to worry about it. The gross margin on that product is 70% because they're paying for that service that we're providing to them. So we're providing fasteners, cutting tools, chemicals, hydraulics. We're growing our safety products, product lines. And we've got about 860 sales reps across the country. We have a nice Canada business, and we've made several acquisitions in this division as well. It's about 38% of revenue.
This was the legacy business that was public that we started buying shares in in 2013. And Bryan King went on the board in 2017. And in 2019, we took control, bought out the rest of the family. And then in 2022, we merged Gexpro Services and TestEquity into the business. So Gexpro Services is on the OEM side.
We bought this business at LKCM Headwater in 2020. It was a business that we identified well over a decade ago as a really, as a best-in-class OEM distribution business that we wanted to get a hold of. Rexel bought Gexpro, and then we carved Gexpro Services out at the beginning of 2020. So again, what they do is they're going out and finding suppliers for all the different Class C parts that go into a really complex, industrial, durable piece of equipment.
So you can think of locomotive, industrial gas power. There's a lot of little tiny parts that are really low cost that drive all the complexity and the sourcing of that. And so they offload all of that to us. And we have all the relationships with the suppliers of those Class C parts. So again, it's not a core competency for these customers.
They want to work on R&D. They want to work on assembly, and they want to work on selling. They don't want to deal with tiny nuts and washers and all the various Class C parts that are out there. This is a much more global business. OEM manufacturers are global than the other two businesses. So TestEquity Group, LKCM Headwater acquired in 2017. These guys have about 70% of the business is electronic production supplies.
That's the adhesives, the solders, tapes, and tools that go into making things that are electrical. And they also have a test and measurement business. That's about 30% of the business. Test and measurement equipment, like an oscilloscope, could be a really high-dollar item. It goes into an R&D lab. It helps test equipment on the front end and also helps test product after it's been produced. So we do calibration.
We sell that equipment, and we rent that equipment. We bought Hisco a little over a year ago, and that provided a lot more of that consumable electronic production supplies. Okay. So our cash flow conversion, well over 100% of net income, we've said is a % of EBITDA, north of 80%. And what we do with that cash is we redeploy it into acquisitions. We're looking for value-added capabilities that we can bring into the platform that fit one of the three verticals.
And again, we've got a dedicated team that works on that. We've looked at over 800 acquisitions to start the year. Well, through the year today, we've looked at 800 companies. And when we're not doing M&A, we'll pay down debt, and then we'll use if the stock gets volatile, we'll compare what the stock price is to what else we can buy.
So we have done stock buybacks as well. We do not pay a dividend. So brief overview of year-to-date, Q3 results. We did $468 million in revenue in the quarter. Our organic revenue declined 2%, which we feel like is fairly in line with the peer group. We did get 50 basis points of margin expansion, and that's come from taking a lot of cost out of the businesses that we've acquired.
Would have been more margin expansion, but we just acquired Source Atlantic that had lower margins. The drag was Lawson Products. We're going through a pretty interesting high grading of our salesforce processes and our efforts there. And so we pulled back our salesforce growth. And we're at the point now where we're starting to regrow our salesforce there.
Gexpro put up 12% organic growth, and TestEquity has seen a 6% organic decline that we've talked about from test and measurement. Saw a lot of channel inventory. Post-COVID, there was a chip shortage, and so the inventory got bloated. We think we're towards the end of that. On the leverage front, we have $328 million of liquidity. Our current leverage sits at 3.7 times.
We've said that we are ideally going to have leverage at three to four times. We would go a little bit above that for the right acquisition. But that's really where we want to play as a public company. If these were private assets, you could certainly run higher leverage on them, but three to four is where we're at. We don't view capital as a constraint.
We feel like if the right acquisition comes along and it's a strategic fit, we'll find a way to finance it if it increases the value of the company. We are an ROIC-focused business. Our current trailing 12-month ROIC of 10%. We've talked about how these businesses at maturity can be closer to 20%. We are very acquisitive, and we've made some larger acquisitions, and so it takes time to take those costs out and integrate those,
so we're constantly sort of resetting at a lower level with a new acquisition and then getting it back up, but in time and maturity, we think 20% is probably a good metric for us. Everything we do has got a return on invested capital component. Every investment we make, every discussion at the board level, it's very ROIC-intensive, so I'm going to leave it there and open up for questions.
In terms of margin profile here, as the business evolves, has it gotten less cyclical in terms of adding OEM management, or are we just in end markets that are doing well, and then lastly, in terms of rebuilding revenue, can you rebuild revenue without compromising some margins? It seems like you're getting some margin today from lower cost or being the sales staff, you have to be more competitive going forward on pricing?
Yeah. So I'll take the portfolio question first. We are very diversified. And with the three businesses, I mean, that has really taken some cyclicality, not cyclicality, but it's taken some volatility out. I mean, we certainly look at the last few years. Lawson Products was doing extremely well from a top-line standpoint. TestEquity started off well, and then it kind of pulled back. And then Gexpro was weaker last year.
Now Gexpro is really strong, and Lawson's really weak, and TestEquity's coming back. So we've got really nice diversification as a bigger platform. I think certainly that's a huge benefit of this. On the margin front, we've taken so much cost out of the business that with any organic growth, we're going to see nice margin expansion. I mean, Lawson is going to invest in its salesforce moving forward more than it has over the last year.
But the incremental margins are so high at Lawson that we should be able to offset that investment. And we've done a lot to improve the salesforce experience. So when we bring someone on, they get up to speed a lot faster. I mean, that's what we're shooting for. We're giving them a better book of business. We're giving them a better territory. We're giving them a CRM tool so they know where to go. So I mean, that's a pretty exciting part of the story over the next two years.
I appreciate the margin.
Yep. Yeah. So that's specifically at Lawson Products' growth or product margins. We think that the value we're providing that customer around the service, such that that customer never has to worry about that SKU being on the bin, is well worth that. We've not had pushback necessarily on pricing. In fact, a lot of companies have seen some deflationary pressures. Lawson's pricing has been really steady. Yep.
In terms of the acquisition environment, does it feel like it's more competitive today than 18 years ago?
Yeah. So we've actually closed now 11 acquisitions so far. We haven't really gone through bankers. We haven't participated in auctions. Again, we've got a really robust M&A strategy where we feel like we have become really a buyer of choice. We've got great references of all the companies we've bought. So we see a lot of opportunities out there still.
I don't think it's really changed much from our standpoint. We've certainly seen on the private equity side, on the sell side, we've seen more deals not go through auctions over the last year. So more broadly, it does feel like the market's maybe opening up, but it hasn't impacted DSG's strategy. And we would participate in auctions, but we just haven't needed to so far. We've found really good assets. I would say valuation has followed really the size of the business more.
It's more correlated to that than it has been necessarily the segment. Certainly, the higher margin businesses have gone for higher multiples. I mean, if you found a business that was fastener-only like Lawson or fastener-intensive, it would go for a higher multiple probably than an OEM distributor, but there's a lot more variables that go into it. Yeah. So the common ground among the three is they're all value-added distributors, and we can run our distribution playbook on all three.
The benefits you get from being together. So we have a holding company structure. That holding company has Bryan King, Chairman, CEO in it. I would be a part of that. We have an M&A team in that, and Ron Knutson, our CFO. Bryan doesn't take any payout of the business at all. There's no payments that go to LKCM Headwater.
We win when the stock price goes up because we own 77% of the stock. The amount of cost you can take out from shared services, from sourcing, I mean, freight cost is a massive cost in distribution businesses that you're able to get out of those businesses, out of being together as one is really attractive, and when you do get cross-selling, and we are working on cross-selling, there are plenty of opportunities out there, and we have a formalized strategy now with a dedicated team that is working on all the cross-selling opportunities that are out there.
Lawson tends to be the beneficiary of that cross-sell because almost everybody's got a need for maintenance product, and that's really high incremental margin. The other really attractive attribute by putting the three together is you're creating competition for the cash flow. And so you're constantly redeploying that capital in the highest and best use.
Guys, I've been working to expand the shareholder base. After the last transaction, I think your ownership percentage went up. So like you said, you're at 77%. How should we think about the longer term? What do you want to do with that? What's the longer plan ahead? Those implications in terms of capacity.
Yeah. Yeah. I mean, our focus every day is to drive the earnings power of the business higher. We think the liquidity will take care of itself if we continue to do that. There are some implications in terms of private equity funds being involved here that do have some sort of end of life, but there's a lot of different options out there.
Also to note, at LKCM Headwater, our investor base is all high net worth, long, kind of focused investors. It's not institutional capital, and they may want to continue to invest alongside us, so our focus is running the business and trying to create value for the business and let the rest of the liquidity take care of itself.