Thanks, Steven. I'm going to lead most of the presentation this morning. Brett may jump in on a few items as well and provide you really the purpose this morning, provide you a little bit of overview of the business, and then we'll spend a little bit of time updating you just on overall financial performance. Quite a bit of the conversation will be surrounded around a lot of the initiatives that we're taking on within our three verticals. If you look at DSG on a consolidated basis, all in on a pro forma basis, we're about $2 billion in revenues. Some of you may know the history of DSG. We put three separate companies together back in the first part of 2022: Lawson Products, who is MRO-focused, maintenance, repair, and operations, selling Class C items. We'll get into a little bit more detail there.
Gexpro Services sells Class C items into the OEM space. TestEquity is really an industrial technology provider, both on test and measurement equipment, and also electronic production supplies. If you look at our overall results, again, about a $2 billion organization, about 40% of those sales sit within the TestEquity Group, about 25% within Gexpro Services, and the remaining, call it 35%-40%, sit within Lawson, both the Canadian branch piece of that as well as the historical Lawson VMI piece. Adjusted EBITDA, if you look at over the trailing 12 months, is 9.7%. We have bounced around a little bit between 9% and 10%. I will dig into that here briefly. I will talk separately about some of the other key metrics that we look at, but very diverse organization.
We service over 200,000 customers across the DSG platform in excess of 700,000 SKUs that we offer to our customer base. All three organizations, I would say, or all three verticals, really are what we deem specialty distributors. We are not the typical distributor of, "We're just providing product." That is not DSG. When you look at what we do within all three verticals, we provide a high level of service, a high level of touch, a high level of technical expertise that our customers rely upon us. We operate in a pretty fragmented market. We'll talk a little bit about some of our M&A activities. We've made, inclusive of those that we acquired right at the acquisition, right at the combination date, 11 acquisitions. That's a big piece of our overall growth strategy.
We think that there's plenty of opportunity out there to continue to buy organizations that help support the three verticals. I mentioned we're a very diverse organization. I've got a slide here. We'll go through a lot of end markets. Again, 200,000 customers provides us some nice insulation around certain end markets when they're up or down, provides us a nice diversification there from an overall end market perspective. Maybe to dig a little bit deeper on the value add that we offer within all three of the verticals. On the Lawson side, vendor-managed inventory. Without getting into too much detail, think about 1,000 sales reps out touching customers. Each sales rep will visit 4-5 customers on a daily basis. They'll go in, they'll put product away, they'll order product on behalf of the customer.
A lot of times the customer does not even know the Lawson sales rep is there. They effectively, I say, sell on the concrete. A lot of times they have a contract or badge, they walk in the back door, handle all of the products, the Class C parts, and so forth that the customer is looking for. Lawson's real motto is, "When a mechanic reaches into the bin, the product is there." We are anticipating demand, and we make sure that when that mechanic reaches into the bin for a hydraulic fitting, it is there, they can fix a scissor lift or whatever that might need to be fixed, and then that scissor lift can be rented out that afternoon. It is really about helping keep our customers up and running from a productivity standpoint. I would say very similar type of offering within Gexpro Services.
Services really selling into the OEM space, but they're taking over effectively all the supply chain process for Class C parts as well, but it's all going into OEM. So it's really going into the production environment. That allows our customers basically to come to us and say, "I don't want to deal with all these small bits, all these small pieces and parts that may go into production. It may be 5 % or 6% of the overall cost of production, but it could be 60% of the individual unit pieces that go into the production environment." We sometimes refer to them as nuisance parts where customers just don't want to deal with them.
They come to us and say, "We want you to handle the entire supply chain for those parts." We'll go out, we'll get the spec from the customer, identify the manufacturer to manufacture those, and then effectively provide all of that service and delivery of the product really on a just-in-time basis to make sure that it's there for the production. Very sophisticated buyers on the Gexpro Services side, and Gexpro has great insight into the production schedules within the customer base as well. They know the exact product that needs to be delivered at certain times to be able to fulfill that. All of those we view as really high touch, high value add into our customer base. Tougher for our customers to walk away from that once we have those customers.
We're very embedded within our customers, really strong relationships, know the customer's demand patterns really well, and typically high retention rates from customers. The other piece I would say is the product side. Certainly, I just mentioned on the Gexpro Services side, we're out identifying and manufacturing. We're not doing the manufacturing. We outsource the manufacturing to the customer's need. On the Lawson side, about 40% of the products that Lawson sells are private label. When you think about the good, better, best hierarchy, these are at the best level. They're higher engineered types of products. The mechanics, the facilities managers, those that are keeping production lines up and running love the fact that the products perform really, really well.
There are hundreds of examples of that that I could go through, all the way from more Teflon within a product called Open & Shut than what's within WD-40. Those provide for more lubricant or hacksaw blades that when they break, they only break into two pieces versus 1,000 pieces. It is a real advantage from a safety perspective. Washers that are slightly thicker, so when you really crank down on that nut to tighten it to the bolt, the washer will not cup. It will stay exactly flat. The users of those products, typically, certainly the margins are high, the price is higher, but they get longer use out of those products. I would say all three of the organizations offer not only the labor piece of it and the expertise, the technical expertise, but also the product availability as well.
We talk about DSG in terms of the power of three in that we can provide not only the MRO solutions on the Lawson side, we can provide the production support on the Gexpro or on the TestEquity side. We can also provide, this is an example of an R&D lab where we may be selling or providing test and measurement equipment into an electronic production environment. We have the ability to complement each other. One of the areas that we have been focusing on is really within those 200,000 customers, what cross-selling opportunities do we have in terms of being able to sell MRO into a Gexpro Services customer or into a TestEquity customer or potentially vice versa. One of the areas that is really why we like the specialty distribution platform, a couple of things to highlight here.
One is strong, sticky value chain to our end customers. As I mentioned, our revenue retention rates all in are in the low 90%. Gexpro Services, for example, has customer retention rates in the high 90%. Really tremendous relationships there. I mentioned we have over 200,000 customers, in excess of 10,000 suppliers that we work with across the platform. When we think about the overall, and I'll talk about this in a minute, some of the end markets and some of the tailwinds and kind of what's happening from a macroeconomic standpoint, I think it places DSG in a really strong position. I'll touch briefly on our strategic acquisitions that we've made over the first three years here in a minute as well.
You'll see there that we've deployed almost $600 million, a little over $600 million of capital, and our average purchase price is about 8.5. We're out making acquisitions. In fact, we completed five acquisitions in 2024. I won't spend a lot of time on this slide. I think I've already hit this, but you'll get a view here in terms of our overall end markets that we service within the 200,000 customers. Aerospace and defense, most of that is within Gexpro Services. Electronic assembly, most of that is within the TestEquity Group. We really service many other end markets. On the Lawson side, with the 80,000 customers that Lawson services, you'd probably be hard-pressed to name an end market that Lawson doesn't sell into, given the number of customers and given their presence within all the end markets.
Anywhere from hospitals to military to manufacturing to distribution centers to government, state and local, pretty well spread across all end markets. From an overall, I would say, macro standpoint, the reason why we think we're positioned really well, and I'd probably boil it down to three. One is what DSG offers through all of its verticals is really labor support. In a really tight labor market that we've experienced over many years, and we anticipate that that'll be out there for many years to come, us being able to provide that labor, even though it might be deemed kind of on a part-time basis, our ability for our sales teams to be able to provide that labor really provides a tremendous amount of value to our customers. They don't have to worry about going out and hiring somebody to take care of filling the bins and cabinets.
We show up on the Lawson side, for example, for 45 minutes a week. We do that on their behalf. We're in and out of there, and they don't have to worry about a mechanic or somebody else within their shop trying to do that effort. So labor, I think, positions DSG incredibly in a really strong position. The other piece I would say is onshoring. A lot of the manufacturing coming back to the U.S., both what we support not only within Gexpro Services but also within TestEquity. I think that positions us in a really strong position as well. About 85% of DSG's revenues are within North America. Again, I think that positions us really well. And then really everything technology. It's hard. You're hard-pressed anymore to find anything that doesn't have any electronic components somehow attached to it.
The refrigerator that you buy has a circuit board in it that needs to be manufactured, that they're utilizing either tapes, adhesives, solder that TestEquity sells into those manufacturers, or they're testing those circuit boards through the test and measurement through the oscilloscopes that TestEquity sells. We think a lot of these areas from a macro perspective really puts DSG in a really good position going forward. I already touched on each of the three verticals briefly, but let me just make a couple of additional comments here on each of the three. Lawson Products, MRO-focused, 73-year-old organization, about 1,000 sales reps, not quite, call it 925 sales reps. Combined revenue trailing 12. This includes the Canadian branch business as well, a little bit over $700 million.
Lawson was the legacy standalone public company that you may be aware of prior to bringing it together with the other two companies that were 100% owned by LKCM. 100% VMI, so all vendor-managed inventory, average piece price of $1.22. We are selling a lot of volume into our customers. The buyers typically within the customer base may be a facilities manager, maybe somebody who is looking to keep a line up and running, somebody who is repairing all the equipment that might be sitting at a local IDOT facility within a state and local environment. As I mentioned, many end markets, but think of this as real high touch, high value, product gross margins of about 70%. You typically do not find that within most distributors, and I think that is evidence of our customers paying us for the labor that comes along with the product.
On the Gexpro Services side, really world-class leading supply chain provider of Class C parts. Tremendous historical business here. Services, really six end markets: renewables, industrial power, technology, consumer industrial, aerospace, and defense, and also transportation. This business was acquired in 2020 by LKCM through a carve-out from Rexel. Formerly, it was under the GE umbrella as the GE professional. So again, really sticky business here. 70% of the products that Gexpro provides to their customer base are manufactured to the customer spec. That is one of the value pieces that this organization provides is we take all that off the hands of our customers and generally show an excess of a 20% return to our customers by them outsourcing it to us versus them trying to handle it internally. When we think about the TestEquity Group, again, about 40% of the overall revenue.
This is a combination of both what we call legacy TestEquity as well as Hisco, which was an acquisition that we made in mid-2023. Hisco was about a little north of $400 million in revenue, an ESOP organization, but we brought these two organizations together and now consolidated revenues between the two of about $800 million. About 20% of this business is within test and measurement. Those are generally the oscilloscopes that are testing everything from noise interference to voltage to wattage. Everything that's being produced from an electronic perspective needs to be tested, and these pieces of equipment will test those items coming off the production line. About 80% of their business is electronic production supplies. Think of solder, tapes, adhesives, specialty tools, safety type of items, anything to support the electronic production environment.
I failed to mention on the T&M side of the business, that's a very vendor brand-specific type of business, or I call it a vendor relationship business. Keysight and Tektronix are two of our top vendors there that we work with. Our customers, typically, when they go with a certain brand, they like to stay with that brand really from a training and education for their employees. We have great relationships with key vendors within that market space. Really quickly on cash flow and how we think about compounding our cash flow on a longer-term basis. I mentioned M&A is a big piece of our overall strategy. Again, 11 acquisitions. We've acquired about $800 million in revenue in the last three years and about $70 million of overall EBITDA. From a debt leverage standpoint, when we brought the three companies together, we were at 3.6.
Even though we've deployed about $650 million, $620 million of capital, our leverage point at the end of last quarter was about 3.5-3.6. We are reinvesting our cash flow back into the organization. We could delever very quickly if we chose to. We create a lot of free cash flow, but really we are taking that cash flow, putting it back into organic initiatives, and then also to support the M&A strategy. On our last earnings call, we did talk about the fact that we are in the market repurchasing shares. We think that it is a good use of capital at this point. The other way I would probably describe how we manage the capital within the organization is that there is a little bit of competitive nature around who gets the capital in terms of the three verticals.
We do operate the commercial side of the verticals on a standalone basis. What we're not doing is trying to bring all that together. We believe that we're best suited to service our customers by keeping the commercial side of it separately. Each of the three verticals has their own, certainly P&L, has their own balance sheet, has their own working capital. All three of the management teams are incentivized around sales dollars, EBITDA dollars, and working capital efficiency. Part of that comes down to then where do we want to deploy our capital in terms of where we get the highest return. There's a bit of a competition, not only from a performance standpoint.
I'm able to be within a lot of our meetings with our management team and our board, and it's interesting to see a little bit of the competitive nature amongst the three management teams. Certainly we're looking at where's the best place to deploy the capital in terms of acquisitions and what provides us the highest rate of return as well. I'm not going to hit on this on the M&A side. We've got a couple of slides in here, really just identifying where we think some of the opportunities are here. I would say our pipeline continues to be strong. It's probably on a weekly basis. I'm seeing a teaser sheet. I'm seeing a book. We're seeing some level of an opportunity that'll come across our desk. One of the questions that we get asked quite a bit is, how do you go out and source acquisitions?
Really, I would say it's threefold. One is our M&A team is out looking for opportunities all the time. Our management teams are really well embedded into the environments that they compete within, so they're bringing opportunities. Certainly LKCM, really our private equity firm that owns about 78% of our shares, they are known as a preferred buyer in the marketplace. They many times have insight into organizations that are coming to market before we may even see them from a management standpoint. Just overall from a financial perspective, and then we'll certainly open it up for Q&A. As I mentioned, we've been bouncing around between 9%-10% from an EBITDA standpoint. When you look at the three verticals, the TestEquity Group is operating at about 7%. They represent about 40% of our revenues.
The Gexpro Services vertical has been operating anywhere between 12% and 14%. On the Lawson side, Lawson's been operating, we spent many years at Lawson getting Lawson to 10%. Really, when you look at the last few years, every quarter has exceeded this. I think this last year on the Lawson side, we were sitting at about 12%. Strong performance, yeah, I would say within all three of the verticals. Again, we bounce around a little bit. On the M&A that we've made, we talked about this on our first quarter call. The last couple of quarters, Source Atlantic that we acquired, it's really a distribution company covering the eastern part of Canada, a great asset, really long-established organization, an existence of 100 years. We bought them. They were kind of mid-single-digit EBITDA.
We knew that they were going to compress our margins a bit, but we have a path to get them north of 10% that we feel very confident in. When you look at the last couple of quarters, really impacted by 50-60 basis points just from the consolidation of that into our business. We talked quite a bit about this in terms of just where we are from a leverage standpoint. Working capital runs at about $496 million. Again, we have targets within all three of the verticals. Really, our ability to return capital to our shareholders through some of the share buybacks and also through a rights offering that we did as part of one of our acquisitions for Hisco back in 2023.
Just really quickly from a management perspective, I would say we're probably as well aligned as we can be in terms of we're all heavily vested in the overall performance of the organization. We have three separate CEOs within each of the verticals. I mentioned that we run each of the verticals on a standalone basis from a commercial perspective. Then really complemented with the LKCM team, we have probably 10-12 individuals within LKCM led by Bryan King, who's our Chairman and CEO. Then probably another 10-12 individuals supporting DSG. It's a critically important investment that LKCM has. We leverage that relationship all the way from M&A opportunities to deploying of capital and so forth. I should mention certainly on a non-compensated basis.
Bryan's not taking any pay as a CEO or chairman, and there's no scrape-off in terms of fees being paid to LKCM either. When the stock price increases, everybody wins. Let me do this. I know we've got probably seven or eight minutes left. Why don't we just open it up for questions and we can take it from there? Thank you. Yes.
Nice presentation. What's the five-year vision? What do you think the market doesn't appreciate or be best ready for? How many years is left in the distance of the LKCM fund?
Sure. Yep. Okay. On the first one, we had an investor day. Yes. If you don't mind just repeating that.
Oh, sure.
Yep. Yeah. So I think there were three questions there. One is, where do we see this on a longer-term basis? The second piece was, what does not the market understand about DSG? And the third was, what is the vintage on some of the funds that hold? How many years are left? Yeah. So I will take that first one. We had an investor day back in September of 2023. I would not say this was formal guidance, but I would say that we put some targets out there, really getting us from $2 billion to $3.3 billion in revenues. About half of that was M&A, and the other half was organic growth, kind of in the mid-single-digit range. Then from an EBITDA perspective, getting that $200 million up to $450 million or about 13.5%.
Again, today we're operating around 10% if you take into the effect of the dilution effect of the most recent acquisitions. We've not changed those goals at this point. In terms of what—and I'll have Brett maybe jump in on these as well. In terms of what we think the market doesn't understand, there's a lot to understand here, right? We're trying to simplify the story. There are the three verticals that we operate separately. When people dig in, they're trying to dig in and understand the three verticals. I think one of the pieces that is underappreciated is just the amount of cash flow creation that we can make as an organization. As I mentioned, we have the ability to delever very quickly if we're not investing back into acquisitions. I think that's a bit misunderstood as well.
Let me—anything, Brett, you want to add to either the vintage or maybe the market side?
I got to speak to the mic here. Yeah. Bryan King has been investing in private businesses for many decades and formalized that effort into the LKCM Headwater. We're on Fund IV right now. One of the challenges with private equity is that if you buy an asset, you have to do work on it and then sell it. The beauty of this platform is that we can really own it in perpetuity. That's the idea. We've put all this work into this, and we want to be able to benefit from that in perpetuity versus having to sell it. To answer your question specifically, we actually own it in several vehicles inside the firm. It's probably about five or six vehicles. It's not like you're going to see a lot of stock come to market anytime soon.
How many percent are you purchasing it in perpetuity units? Are you putting it in an evaluation fund that's a professional capital vehicle?
Some of the vehicles that own it right now are evergreen funds. They do not have an end of life. There are some funds that do have an end of life. You could see the ownership ebb and flow a little bit, but you are not going to see 78% of the stock come to market.
What percent of that 78% are evergreen funds?
I don't have that number off the top of my head, but I mean, Fund II is probably the one that comes to market or has an end of life that's probably two years out with ability to extend that. The other thing to know about our LPs is that we work for mostly high-net-worth, non-institutional, taxable clients. They have a long runway as well, and they want to invest alongside us in this project. Again, if the question is more around, are we going to see a lot of stock come to market? Probably not.
I mean, it's that and how long is longer committed to business? Is it another five years? Is it a 10-year project? Now that you're saying evergreen funds, like you guys.
The way that.
10X the business, right?
That is the goal, right? Bryan King has stated that he would like to be able to pay a dividend at some point that is greater than our cost basis in the company. That kind of gives you a sense for the longevity, how we are thinking about this.
Can I ask you a balance sheet question? Three and a half times, you got these on the high end, certainly for small caps, and you see stock reaction to delivery companies like that. You guys have been planning cash flow businesses raising. You could, you have more flexibility to bring that down.
We do. Yeah.
At 0% raise, $3.50 is the right number for a timeframe of $55 million-$60 million a year.
Yeah.
Yep.
Just any thoughts on flexing that, maybe getting lower three times and then maybe you got that?
Yeah. Yeah. We've publicly said that we're comfortable in that 3x-4x range. We saw that get down to, I think the low point, it was either 3x or 3.1x within the last, call it, 12 months or so. We made five acquisitions in 2024, so it found its way back up to the mid-threes, let's call it. You're right. We're paying about $60 million in interest right now. M&A is a big piece of our growth strategy, right? I mean, we think that there's a lot of companies out there that can really add value into the DSG platform. If we were to get down in the mid to low twos, let's call it, it probably means the M&A side of it has slowed down.
We're still in that growth mode right now from an M&A perspective where we don't feel like we've hit overall capacity where we can just solely focus on the organic side of the business. I would envision that we'll be in that 3-4 range in the immediate future, just thinking about all of our M&A activities.
Can I ask a follow-up?
Yeah.
Again, growth piece. You get to the beginning, you get to 1,000 customers.
Yeah. Yeah.
I know you don't support Salesforce, but I would say companies you own do, so to speak, expand the share of walls, that's a huge opportunity.
It is. Yeah.
You need to speak to that.
Yeah. I know we're starting to run out of time here, but yeah, we are on the Lawson side, you're exactly right. A ton of effort going into expanding share of wallet within our existing customers. Lawson, for example, we have 12 product categories, and our average customer buys less than three of those product categories. To your point, there's a lot of opportunity there. Now, every customer is not going to buy all 12, but there's certainly opportunities to expand that. We're working on pricing and commission and so forth in order to make that more attractive for our customers and for our sales reps to push those other categories.
Basic visibility on what the value for the customer is.
We do. Yeah. We know exactly. We know by customer what SKUs they're buying, what product category. More importantly, what holes are open, what customers are not buying safety, what customers are not buying nuts and bolts, the fastener category, etc. We've got that visibility. Yep. Thanks, everybody. Appreciate the interest.