Right, okay. Good afternoon, everyone. Next presenting today is going to be Distribution Solutions Group. DSGR is the ticker. With us from the company is Ron Knutson, who's the CFO. Ron is also the CFO of what you probably remember from here in Chicago, especially Lawson Products, which was one of the businesses that was merged into the multiple business here of Gexpro Services, TestEquity Group, and Lawson Products to create Distribution Solutions Group. Some of you may remember Ron, but if not, I'll turn it over to Ron to go from there. Thanks, Ron.
Great, thanks, Steven, and good afternoon, everybody. With me also today is Brett Scarborough. Brett's Vice President of Strategy, Investor Relations on the DSGR side, and Brett works really close. He's actually LKCM , which is our largest shareholder, owning 78%. Brett plays a critical role both on the LKCM side as well as DSGR, so he's here to help us out this afternoon as well. I'm going to give just a high-level overview of DSG and as Steven mentioned, the bringing together of three organizations: Lawson Products on the MRO side, Gexpro Services on the OEM production side, and then TestEquity on the industrial technology side.
What I would say is the common thread amongst all three of these companies, and really DSG's overall value proposition to our customers, is that we are a high-touch, high-value, very well-embedded with our customers and provide them not only the product, but really the additional labor and services that they need. We're not just a straight distribution organization where all we're worried about is distributing product. A big, big piece of our value to our customers is the additional support that we offer through them, through VMI services, through sourcing services, through additional technical support, whether or not it's on the technology side or just on the product side, and really well-embedded within the organization. Just some high-level stats, we're about a $2 billion organization on a combined basis in terms of revenues, earnings, or adjusted EBITDA running right around 10%.
When we brought the organization together three and a half years ago, we were less than a billion dollars in revenue, and we were about $90 million in EBITDA. This year, we're on a run rate of about $195 million if you look at the trailing 12. Effectively, in about three and a half years, we've doubled the size of the business, both through organic improvement of our operations, and we'll talk a little bit about the three individual companies and how they go to market, and then also our acquisition strategy, which is a big, big piece of our overall growth strategy. We service over 200,000 customers, and about 85% of our revenue is in North America, but one of the things that's really nice with DSG is we have really no customer concentration or no end market concentration either.
It's a great position to be in when we see any softening within any of our end markets to be able to leverage our relationships with a lot of other customers. Maybe before we jump into a ton of detail, kind of why invest in DSG ? I've touched on a couple of these points. We're a leading specialty distributor. That's how we describe ourselves. We go to market with really strong product sourcing capabilities. We work with over 10,000 suppliers. We have in excess of 500,000 SKUs that we can get out to our customers. Really, all of our companies have the ability to source products, even though we may not stock them within our distribution centers as well.
Comprehensive, high-touch, high-value distribution services can range anywhere from Lawson Products has about 1,000 sales reps that are going out and visiting 70,000 customers, and effectively, our customers are outsourcing the labor to Lawson to show up for 45 minutes a week. Lawson Products loves their products, but also operates at a gross margin, product margin of around 70%. You don't see that within normal distributors, and the reason we're able to achieve that 70% is because the customers value the service and the offering and the knowledge that our sales reps take to our customers. A couple of areas that, and I'll touch on this later as well, a couple of areas that really place DSG in a really strong position from a macro perspective, I would say labor shortages.
All three of our companies, all three of our verticals offer a lot of labor support to our customers. We don't see that labor shortage getting easier. We, in fact, see it getting tougher. To the extent that we can supplement our customers with onsite labor, we think that that's a really good solution for our customers to outsource that to us. Onshoring, bringing production back to the U.S., again, that places really all three verticals in a really strong position, whether or not it's break-fix on the MRO side, whether or not it's OEM production on the Class C parts, or if it's industrial technology, which is really TestEquity Group, bringing a lot of those facilities and production back to the States places DSG in a really strong position. Lastly, the IoT of everything.
Everything we touch today has some type of technology slant to it. TestEquity Group, which is about an $800 million piece of our business, supports all of that production as well as some test and measurement equipment that places them in a great position to take advantage of that. Proven acquisition platform. Technically, we've made nine acquisitions since we brought DSG together. There's a couple more that closed right about at the same time that we brought DSG together, so you'll see we flip back and forth between nine and 11 sometimes. On the nine, we've deployed about $550 million of capital. About $100 million of that was through a rights offering, and the remainder of that was really through internal cash flow generation and debt on our balance sheet.
Driving mid to long-term EBITDA expansion, all three verticals have expansion opportunities from a margin standpoint and generating consistent, really strong cash flows. If we think about where our free cash flow generation, our CapEx is only about 1% of our revenue. To my point earlier on $195 million of trailing 12 EBITDA, we're only putting back about $20 million back in from a CapEx perspective. We really like the free cash flow generation of DSG. The other piece that kind of comes right along with that is why we like specialty distributors. It's a business model that really differentiates us from many other distributors. We are not out competing on price with Amazon or with anybody else that's solely looking for price as their way to win the customer.
We feel like our capabilities, our technical knowledge, our ability to really be in front of our customers on multiple levels of platforms, and our ability to source products is a real strength of DSG and really builds a nice competitive landscape for us or a competitive moat that it's hard for others to replicate that. We believe that the consolidation and the acquisition of companies within this market, it's a pretty fragmented market. There are hundreds of acquisition opportunities. I mentioned that we've made nine so far within the first three and a half years. Typically, we will be paying in the high single digit as a multiple of EBITDA. We like to buy really good businesses that we see a path towards margin expansion and a reduction of the turns in terms of where we bought them at.
I touched on this, diversification across a lot of end markets, customers, suppliers, end markets, geographies, and we're resilient through a lot of business cycles. Even if you look at what we've done in the last three and a half years, I would describe the industrial distribution space as relatively flat. I think ISM has been down for 29 out of the last 31 months or something like that. Even within that, we've been able to really execute on a really nice platform that we've put together. I'm not going to touch too much on this. I think I already hit it pretty hard relative to the value-added capabilities.
I'll talk a little bit about this on each of the three businesses, but even as an example, one of the offerings that really, I think, places Gexpro Services apart from other competitors is about 70% of their products that they provide to our customers is specced to the customer's need. What'll happen there is a customer will come to us, they will say, "We want you to handle all of the Class C items," which could be 60% -7 0% of the parts that may go into the production, but it may only be 5%, 6%, 8% of the cost.
Our customers look at that and say, "Look, they would rather focus on the larger dollar items from their own purchasing department, and they provide Gexpro Services the specs." We go out, we find the supplier, we find the manufacturer, we provide all the just-in-time delivery, we've got insight into the customer's production cycle, and we make sure that the product is there when they need it. That's just one example of how in-depth we are within our customers and how well-embedded we are within our customers. The human capital piece of it, I can't emphasize this enough. Our human capital, the sales individuals that we have on board, the thousand sales reps at Lawson or the technical individuals within the TestEquity Group, you would think that selling solder is not a technical sale, but it is.
You have to know all the dynamics of the different types of welding equipment and soldering and all the specifics around tapes and adhesives in terms of what can affix to what different types of products. That's a real skill set that I would say goes across all three of the verticals for DSG . I think I've hit on most of these items. Let me just pull out a couple of items here really quick. Strong, sticky role within the value chain of our customers. We have upwards of 92% revenue retention. Once we are in with a customer, we retain that customer. I would say even on the Gexpro Services side, that number's closer to 98%. Certainly on the Lawson side within our larger accounts, it's a really high retention rate as well.
It's rare that we look at some of our larger customers that we lose the business. I mentioned this, 10 + industries, over 200,000 customers that we service and about 10,000 different suppliers. When we brought the three companies together pre-merger, our EBITDA was running at about 8% south of the $100 million that I mentioned previously. Trailing 12, as we look at it most recently, we're about 9.5%. I always view that really more as about a 10%. A couple of the acquisitions that we've made recently, we knew were going to compress that a bit. In fact, one acquisition we made a year ago, Source Atlantic up in Eastern Canada, has compressed our margins over the last couple of quarters by about 60 basis points. We're not concerned about that.
We're not always going out trying to acquire companies that will be accretive to that percentage, but we certainly have a path where it will be accretive. We're looking for really good assets, and some may perform better than our 10%, and the last couple of larger ones that we've made have been less than 10%. Again, they're really good assets and provide a longer-term value creation for DSG. You know, we'll talk a little bit about our end markets. We have, you know, it's a dual-prong growth strategy. It's both organic and it's acquisitions. Acquisitions play a big, big part of our overall growth strategy. As you look at most of these businesses, you would say historically they've operated at GDP. We would say within our internal initiatives within the organizations within all three verticals, we believe it should be GDP plus a point or two.
We feel like a lot of the underlying macro changes positions us well to be able to achieve that. This slide really just gives you a little bit of an overview of some of the end markets. Again, you can see here no concentration from a customer perspective or from an end market perspective. I think I touched on most of these items. The value creation themes that we really lean into heavily are around the labor piece, the IoT piece, and then certainly the onshoring and nearshoring activities that we believe are positioned for nice improvements as well. Let me spend just a couple of minutes. I know I went through that pretty quickly, but let me spend just a couple of minutes on each of the three verticals as we define them.
It'll give you a little bit of an overview in terms of what the business does and some of the value there as well. On the Lawson Products side, you may know Lawson, a Chicago-based business, almost 75-year-old organization, VMI, vendor-managed inventory. About 1,000 sales reps, a little less than that. Today, we're sitting at about 930 sales reps. Our sales reps go into a customer's location. We place real estate within our customer's location, so bins and cabinets. Our sales reps will visit 70,000 customers. They'll make four or five visits a day. They will put product away that was shipped to our customers from last week. They will do an informal inventory and actually place the order on behalf of the customer. In many situations, the customer doesn't even know they placed an order until the product shows up. That's how well-embedded we are within our customers.
It is a high relationship, high trust. Our real motto or what we're delivering on is when the mechanic reaches into the bin, we want to make sure that the part is there. The fastest way for our customers to be frustrated is either, one, we've not anticipated that demand, or, secondly, that we're overstocking the bins. These are consumable Class C parts with an average piece price across Lawson of $1.22. It can be a hydraulic fitting, it can be a drill bit, it can be nuts, washers, electrical components. Lawson has 12 product categories that we sell. The revenue number you see here at the $703 million, that does include the Canadian operations as well, which would include Bolt Supply, which is in the western part of Canada, and then the acquisition of Source Atlantic, which we made a year ago in Eastern Canada.
On Gexpro Services, here, revenues of about 25% of DSG's revenue, about $480 million trailing 12 revenues. I described a little bit about how they go to market. They provide really Class C parts into the manufacturing process, about 1,800 - 2,000 customers, so a much larger customer than what Lawson has, and really well-embedded, really good relationships. We typically will support our customers wherever they go. We are in a position to be able to pick up additional volume through their growth. Our value proposition at Gexpro Services is that we take all of those Class C items that the customer doesn't necessarily want to deal with, and we deal with them.
We go out, we find the manufacturer, we make sure it shows up in time, we've got insight into their production cycle, and we make sure that it's there on a JIT basis, and also offer VMI services to make sure that that product is on hand. Six diverse end markets here: renewables, technology, aerospace and defense, industrial power, consumer-run industrials, and transportation. Gexpro has a great ability to be able to reallocate resources to grow the business depending upon which of those end markets is growing or if any of those are tightening up. I would say if you look at Gexpro , really strong performance over the last year, over the last four to five quarters, they've got really good insight into where these end markets are heading and are positioned very well to take advantage of that in the short and long term.
Gexpro Services continues to invest on the people side. Even though their margins are in the 14% range, they continue to make really, really good, smart investments to be able to expand their base of business on a relatively fixed cost structure, which allows a nice operating leverage on the Gexpro side. The TestEquity Group makes up about 40% of Distribution Solutions Group's revenue, about $800 million in total. That business really was, so the legacy TestEquity business was about a $400 million business. We acquired HISCO, Houston Industrial Supply Company, in June of 2023, basically doubled the size of this vertical within DSG . About 20% of TestEquity 's revenue is on the test and measurement side, and 80% being electronic production supplies that would support the manufacturing, anything industrial technology-wise.
On the test and measurement side, oscilloscopes, so they are either desktop or handheld units that can measure wattage, voltage, noise interference, really anything that needs to be tested in the electronic production environment. The test and measurement equipment can do that, and we both sell that equipment as well as lease it. On the electronic production supplies, those are items that are going into, I mentioned earlier, solder, or tapes, adhesives, specialty tools, anything that really fits into the production environment of anything technology. You can see that there's a nice connection point between those two, very technical type of sales. Really strong sales team there that are able to go into customers and specifically recommend exactly what they need.
From a free cash flow perspective and how we think about cash flow, we continue to reinvest in the business, whether or not it's through internal initiatives such as expanding the Lawson sales force or hiring key individuals into the Gexpro Services team to expand their business. We are continuing to put dollars back in the business, either from an internal organic initiative or through M&A. I commented earlier about what we've done on the M&A side. When it makes sense, we also purchase shares back. In the first couple of quarters of this year, we've bought back about $20 million worth of our shares. We think that's a good return of our capital as well. As we sit today, we've got about a $1.1 billion credit facility.
We ended the second quarter with nothing drawn under our revolver, which is $255 million of the $1.1 billion, and we were sitting with about $60 million of cash. We've got, you know, the balance sheet is really strong, and we continue to throw off positive cash flow. Let me touch base really quick on the M&A side, and then we'll open it up for any questions. As I mentioned, nine acquisitions. What we're not doing is we're not buying turnaround businesses. We like to buy really good assets, those that have typically been around for some period of time. Of the nine acquisitions that we've made, none of those nine have been through a bank process. They've all been identified either through our M&A team, through support of the LKCM team, or individually within each of the verticals.
Each vertical has their own CEO, their own CFO, their own management teams. We run those verticals separately, and what I always describe is we're protecting the commercial side of the business because we go to market differently, and we have different types of buyers that are buying those services. We really like, you know, nice assets that if you look back historically, we've paid kind of in the high single-digit multiples standpoint. We're not overly concerned if they're going to compress our overall margins a bit, as long as we've got a path to identify the synergies and a path for it to be accretive to us. You can see here, I mean, we look at everything from product offerings to geographic coverage, end markets, service capabilities, calibration, for example, on the test and measurement side.
In fact, we picked up some of those capabilities through a recent acquisition we made in November of last year. Really quick on the financial highlights, coming off a really strong quarter, you'll see we had total revenue growth of over 14%. About 3.3% of that was organic. The other were the acquisitions that closed in 2024. You'll see a nice jump up in our overall EBITDA from $42.8 million on a sequential basis up to almost $49 million. All of that is organic. That's a really nice movement in the right direction. Typically, our second and third quarters are our strongest quarters. We would expect a lift there generally, and we were able to certainly achieve that in the quarter. You'll see a nice overall revenue growth there as well over the last five quarters. From a capital allocation standpoint, I think I hit on this a little bit.
Our overall leverage right now sits at about three and a half When we brought the three businesses together, we were three and a half as well. We've been able to grow the business, make all the acquisitions, and keep the leverage point at about 3.5 x. Publicly, we've said we're comfortable in that 3x to 4x . If we were to stop making acquisitions, we would delever very quickly, but that's not our intention. Our intention is to use the balance sheet and to reinvest the capital into the M&A process. Just really briefly on the alignment that you would find within DSG , I would describe us as a very highly aligned organization. I mentioned when I introduced Brett, Luther King Capital Headwater, they own about 78% of the shares of DSG.
Most, you know, it happened through not only purchasing shares in the open market on Lawson , but also through the combination of TestEquity and Gexpro Services, which were 100% owned by LKCM Headwater. Effectively, when they contributed the equity, they were awarded more shares in return for that equity of the three companies. Each of the three verticals have separate CEOs, separate management teams. You've got Cesar Lanuza on Lawson Products, Bob Connors on Gexpro Services, and Barry Litwin, who just joined us about six weeks ago on the TestEquity Group. Bryan King, who leads up the LKCM Headwater piece, is the CEO and Chairman, has really been involved on the Lawson side going back to probably 2012 or 2013 when LKCM started purchasing shares in the open market.
He knows distribution extremely well, which is, I would say, an area that LKCM continues to highly invest in on their Headwater operations or LKCM Headwater side. Let me, we've got about five or six minutes left. Why don't I just open it up for questions, and we'll take it from there. Yes.
Will M&A be within those three verticals, or are you open to a fourth vertical then?
Yeah, right now, we believe that there's enough M&A activity. The pipeline is pretty strong right now. We feel like the markets within those three verticals are fragmented enough where most of our acquisition is focused within those three verticals. It's not to say that we'll never add a fourth leg to the stool, but right now, there's plenty of opportunity within those three. On the integration side, it somewhat depends. Of the nine that we've acquired, a few of those we've 100% integrated into our existing just because the businesses are so similar. There are others that we're still operating separately. Source Atlantic, for example, we're integrating that with Bolt Supply, which is in the western part of Canada, but we're not probably going to fully integrate it within the Lawson side.
I mentioned earlier about, you know, we're very protective of how we go to market from a commercial perspective. Certainly, we want to be able to have the right systems and integration process. HISCO, for example, which I mentioned earlier as well, we have fully integrated that into the TestEquity Group. It's a little kind of half and half, I would probably say. Other questions? Yeah, yeah, yeah, yeah.
Does LKCM have any other distribution investments? If so, how is that going to determine the future?
Yeah, so this investment is the most important investment we have at LKCM Headwater. Yes, we have a lot of other distribution investments, but if we come across an asset that fits in DSG it's going to go in DSG because if it's accretive and it creates value, it's worth a lot more to us in DSG.
Yep. How are tariffs complicating your business?
Yeah, so what I would say is we have pretty strong pricing capabilities within DSG. As I think about the amount of product that we're directly importing, it's in the single digits relative to our total cost to get sold and our total purchases. We certainly have domestic suppliers that are importing product that find their way in as well. We've said publicly, and we've been able to work with our customers from a pricing standpoint and also from a sourcing perspective. We don't believe that inflation typically is good for distribution. We've seen that in the past. We saw that in 2022. We don't see tariffs as an issue relative to compressing our margins. In fact, it actually gives us an opportunity to strengthen our relationships with a lot of our customers.
I didn't mention this, but on the Lawson side, 40% of what Lawson sells is private label, highly engineered product. If we're experiencing higher tariff rates that are coming through on import products within Lawson, most of that private label is manufactured here in the States. It's an opportunity for us to go to our customers with a different solution there, which is, and when I say private label, when you think about good, better, or best, it's at the good level. Typically, private label is at the best level from a quality standpoint. Ours are highly engineered products. It actually offers us the ability to go to our customers with a different source. Anything else? It doesn't look like it. Okay, thanks everybody. Appreciate your.