Right. Okay, thanks for joining us at the 55th Annual Baird Industrial Conference. My name is Dave Matthey. I'm Baird's industrial distribution analyst. And we're happy today to have DSG with us, Brett Scarborough, who's the VP of Strategy and IR, and Ron Knutson, who's the Chief Financial Officer. Ron is going to go through some slides and give us a presentation. At the end, if there's a few minutes left, we'll be happy to take your questions at that time. Ron, go ahead.
Great. Great. Thanks, Dave. Good morning, everybody. As Dave mentioned, I'm going to cover some high-level slides, get you through really what we're doing within DSG and a lot of the internal initiatives within the three verticals. Just to give you a little bit of a backdrop on DSG, we brought three companies together about three years ago. I'm not going to go through the entire history here, but just some high-level stats. We're a specialty distribution company. Really, the way we define that is we're not just distributing product. We surround our product. We love our product, great product, a lot of private label within the mix. We surround a lot of those offerings with, or a lot of that product with a lot of other offerings from a service perspective.
When we dig a little bit deeper within each of the verticals, I'll certainly cover that. Just some high-level stats, financial stats. All in, we're about $2 billion. When we brought the three companies together about three years ago, we were slightly less than $1 billion in sales. Within about three and a half years, we've effectively doubled both the top-line revenues as well as our trailing 12 EBITDA. Look at us, call us about $190 million of EBITDA. When we brought the companies again together, we were sitting at about $90 million. We'll talk about the organic initiatives and then also some of the work that we're doing on the M&A side as well. I'm going to jump into, maybe I'll just give a high-level overview just in terms of each of the three verticals and level set that a little bit.
Lawson Products, a 73-year-old organization, about 1,000 sales reps. Think about Class C, MRO, anything that's kind of a break/fix. We sell 12 product categories, really heavily on the vendor-managed inventory side. We go in and we do all the placement of the inventory and reorder on behalf of our customers and have about 1,000 sales reps that have individual territories that cover an excess of 80,000 customers. Gexpro Service s is a world-class OEM provider, primarily of Class C product as well. About 70% of their product is specced specifically to the customer's needs. We do not manufacture it. We have great relationships with manufacturers. We take over the entire supply chain for our customers.
I like to call them somewhat nuisance parts because they may be 5 or 6% of the aggregate cost that may go into the production line, but they could be 50 or 60% of the unit volume. We take over that entire supply chain and have great insight into our customer's production cycle. We make sure really almost on a just-in-time basis, but provide vendor-managed inventory there as well. TestEquity Group makes up about 40% of our revenue. We acquired Hisco a couple of years ago, basically doubled the size of that business. About 80% of that business is what we call electronic production supplies. Think of tapes, adhesives, solder that we sell, anything into the industrial technology production. They also have about 20% of their revenues achieved out of test and measurement equipment.
Oscilloscopes, those items that are measuring really technical type of equipment that are measuring noise interference, wattage, voltage, and so forth, anything that's being tested. Hopefully that gives you a little bit of an overlay. We'll dig a little bit deeper on each one of those as well. Why invest in DSG? A couple of highlights off of this slide. I mentioned specialty distributor. We have great product. We love our product. Our customers rely upon that product really to keep their operations running as well as to support their manufacturing process. We surround that with a lot of services. In Lawson, that I mentioned, relative to the VMI process, effectively our customers are utilizing a lot of the labor resources that we have.
When you look at Lawson, for example, our gross margins, our product gross margins are near 70%, but also we have 1,000 salespeople that are out servicing those customers. Certainly that 70% is before the cost of those sales individuals. Our customers are willing to pay a bit of a premium for the product because they know that the service comes right along with it. Highly diverse platform. I have a slide on this, so I'm not going to cover this in a ton of detail, but about 200,000 customers, really well-diverse customer base, supported by about 10,000 suppliers. It is really one of the strong suits when you look across the three verticals within DSG. We have great relationships with our suppliers, and we're able to marry up our customers with our suppliers that we have and be able to source product on their behalf.
The power of three. There is a lot of synergies in terms of bringing the three organizations together. Again, I have got a slide on this. I will cover that in a minute here. Let me just comment on maybe the last couple of items here really quick. A disciplined capital structure. What we are really doing is utilizing the entire cash flow across the vertical to be able to support initiatives within DSG, both from an organic perspective and also from an inorganic perspective. A lot of my history is on the Lawson side. Lawson, for many, many years, had basically an underutilized balance sheet. Now a lot of those free cash flows that are being generated by Lawson are now being able to be utilized and put to use through our M&A strategy. We made five acquisitions in 2024.
Just so happens three of those were on the Lawson side. Now we're able to consolidate that free cash flow and invest across the platform where we think it's appropriate. I don't want to miss this one. Best in class alignment. We'll talk about this. LKCM, Luther King Capital Management, owns about 78% of our shares. When we did the combination a few years ago, they went from about 50% up to 78%. Most of their investments are within the distribution side. They've got incredible knowledge within that space. Really well-respected firm that has their ear to the ground on M&A opportunities. DSG utilizes their team pretty heavily from a support perspective. I'm working with their team almost on a daily basis, and they do that at no charge. There's no fee or there's no scrape-off taking place.
It's all when the stock price goes up, everybody wins. When you talk about alignment, it's 100% there. Just a little bit of overview from specialty distributors, and this is why we really like the way that we've put DSG together. It's repeatable business. Across DSG, we have a high revenue retention factor, especially within our Gexpro Services. We win customers. It's rare that we lose customers within Gexpro Services. Same thing on the Lawson side within our strategic account team as well, or our strategic account customers. We have the ability to grow along with our customers, and we've made investments in order to do that. For example, in 2024, late 2024, we acquired a company in Southeast Asia. One of our largest customers was starting to put up some operations there.
Rather than us starting an operation from a greenfield perspective, we went into that market, acquired a smaller company. Now we've got a foothold within that marketplace, not only to support an existing customer, but also to be able to drive sales within that overall market. Highly diversified, as I mentioned, typically within specialty distributors, you'll find that. Really resilient through a lot of business cycles. With having over 200,000 customers, we have various end markets that will cycle up and cycle down, but we've got a little bit of a natural hedge built in there within all the end markets that we service. We're an asset-light model. When you look at our free cash flow generation that we create, our CapEx typically is about 1% of our sales.
We're able to throw off a lot of cash flow, which allows us to invest back into the business. I mentioned this a little bit. This will just give you a little bit of a view in terms of our diversification across our customer base as well as our suppliers. You'll see that really we have very little concentration within the customer base. Over 200,000 customers, as I mentioned. Really, within, call it the top 10 customers, it is less than about 10% of our overall business. On the supplier side, similar type of relationship here. Our top supplier is only 4% of our product purchases. We're constantly adding to the supplier base as well based upon our customer needs. We have the ability to really marry up our customer needs with our suppliers.
I think that puts us in a really strong position to be able to continue to service our customers. We typically talk about the power of three in terms of bringing the organization together. When we think about that, and there are a couple of different slides here I think we'll go through that kind of layer this in. It's really about when we think about kind of the crossover and the ability to service customers. An example here would be an industrial technology manufacturer where TestEquity may be selling some test and measurement equipment. They're also selling the solder or the tools that support that process. Lawson can come in on the MRO supply side. When we think about MRO on the consumable kind of break/fix, there's probably not an end market that you can name that Lawson doesn't have a customer in. Everybody utilizes safety.
Everybody utilizes fasteners. Whether or not it's state and local municipalities, whether or not it's the military, we sell into hospitality, we sell into distribution centers, manufacturing, you name it. Everybody has a need for those break/fix type of items, and we've been able to be really successful, in particular around what I like to call equipment that moves. For example, we've talked about in the past, United Rentals is Lawson's largest customer in its break/fix. As they have equipment that breaks down, we're there. We support all of the fasteners, hydraulic fittings, and so forth in order to repair that equipment. I think this gives you a little bit of a view just in terms of how really all three verticals can be involved in one customer to support that customer.
From an overall end market perspective as well, not only a diversified customer base, but also diversified end markets. There is really no end market for us that makes up more than 20% of our sales. This is across all three verticals. You'll see that we do have aerospace and defense. We have auto and transportation, industrial power, certainly within the Gexpro Services side, technology, government, military. It is a great position to be in. Really sticky relationships with our customers. Typically, if we see customer churn, it is normally on the smaller type of customers. When we are servicing military bases or we are servicing large multi-site locations, we typically have longer-term arrangements with those customers. Generally, we will also set up rebate type of structures to incentivize them to acquire more through us as well.
If for some reason we do not have one of their product categories, we are always looking to gain share of wallet within our existing customer base. We certainly feel that is the fastest and easiest way to grow. We have a lot of those products that can certainly do that. I gave just a high-level view of each of the business units just really quickly on some of the internal initiatives that are taking place within each of the three. On the Lawson side, and again, think of Lawson as about 1,000 sales reps. I think the number is actually about 930, but we are out servicing our customers every single day. A typical day for a sales rep would be that they would make four or five visits during the day. They would walk in.
Keep in mind, we have real estate within our customer's location, what we call bins and cabinets. Our sales rep would walk in, put product away, do an informal inventory, order the product on behalf of the customer. Many times the customer doesn't even know they placed an order until the product shows up or an invoice shows up. That is how well integrated we are within our customer base, where our customers look at it and say, "Look, I could try and do that myself, but somebody's going to drop the ball. When I need that hydraulic fitting, it's not going to be there." Lawson's job is to make sure that when the mechanic or the facilities manager reaches into the bin, that product is there in advance of when they need it. A lot of that is getting to know the customers.
A lot of the internal initiatives, I would say, within Lawson are really geared around how do we help our sales reps become more productive. If they can make six visits a day versus five, 252 selling days a year on 1,000 sales reps, it really drives our overall business. A lot of the investments that we've made over the last 12, 18 months is really built around, for example, a new CRM tool or putting a team together to help identify new business or building out our inside sales team. All of that is really built around how do we drive more productivity, help our sales reps make more money because they're commission-based and quota-based. We want to make sure that they have the ability to make more money and at the same time we're able to grow this vertical as well.
I mentioned we made DSG, we made five acquisitions last year. Three of them were on the Lawson side. Two of those specifically were, I would say, product expansion. One within safety, relatively small acquisition, but we picked up a great team, some safety specialists that allow us to really penetrate that category. On the automotive side as well. What falls under Lawson from an accountability standpoint is the Canadian operations. About a year ago, we purchased an organization, Source Atlantic, which really was a nice asset that we acquired that serves the eastern part of Canada. We are in the process of combining that with our Bolt Supply organization that we acquired back in 2017. On the Gexpro Services side, again, they make up about a $500 million piece of our business, about 25% of our revenues.
Their value creation is really having a great insight into being able to source product for the customers, really taking over the supply chain for those Class C items that find their way into the production cycle. We are investing pretty heavily within that organization. In fact, from a financial perspective, they had a record quarter in the third quarter, which was great. They typically operate in the 13% to 14% margin levels. We are investing in that team to really drive additional top-line growth. They've been on a nice run here over the last 18 months. They operate within six very distinct end markets. They have done a great job in if one end market starts to soften a bit, they were able to shift their resources towards the other end markets and still see some nice growth.
On the TestEquity Group, which I mentioned really makes up what we call legacy TestEquity Plus the Hisco acquisition, makes up about 40% of our revenue. There is a lot on this slide. This is really how we think about the business. First of all, we have a new CEO that came into that vertical about 90 days ago. He has developed and is reworking a new go-to-market strategy. We service about 35,000 customers, and we have a lot of customers that are purchasing one product. We have a tremendous opportunity to expand that and also build around a lot of these services, especially on the test and measurement, on calibration, on chamber business, and others that can help support those manufacturers. Let me touch really quick. I want to make sure I leave time for some questions.
On the M&A strategy, we have a dedicated team. One of the things we did when we put DSG together a few years ago, we did not want to build out a huge infrastructure from a corporate holding perspective. One team that we did build out was our M&A team. We have a team of three there. They work really close with the vertical leads. We have a separate CEO and CFO and management team for each of the three verticals. Our M&A team, consisting of three, heavily supported by the LKCM team, is out combing for opportunities and also supporting, working really close with the management teams of each of those three verticals. You can see here really what we are looking for in terms of opportunities. Since we put DSG together, we have made nine acquisitions.
We've deployed about $550 million of capital, $450 million that is cash flow. We did a rights offering a couple of years ago for about $100 million. From a capital allocation strategy, I think I've hit on a lot of these items. Working capital, we view that as an investment. We want to make sure that we position our verticals that we can service our end customers really, really well. We look at return on net working capital, runs at about 40%. The other piece on the return to shareholders, we've been pretty active in the marketplace this last year. We've repurchased in excess of $20 million and would anticipate that we would probably continue to do that on an opportunistic basis. Our overall leverage is about three and a half. Publicly, we've said we're comfortable in that three to four range.
That tells us we're putting our balance sheet to work. We've got a great relationship with our syndication of banks. Over the last couple of quarters, we've created free cash flow, well, cash flow from operating activities of $38 million in the third quarter and $33 million in the second quarter. Heavy focus internally within the organization. We have all the teams incentivized around sales dollars, EBITDA dollars, and then also working capital as a % to sales. That's driven some nice results here over the last couple of years on working capital. Just really quick, consolidated financial highlights. We had a strong third quarter. We just released a week or so ago. Our overall EBITDA was about $48.5 million, relatively flat with the second quarter. We did have some non-recurring items that hit the quarter, probably worth about 80 basis points.
I mentioned that on the earnings call a week or so ago. I think one of the standouts in the quarter was we had a 6% organic growth when we look at it versus a year ago. You can see that nice growth even from Q2 into Q3. That's really all three verticals saw nice growth organically. We also saw unit volumes increase as well. It's not just price. It's definitely unit volumes that are driving some of those results. Let me touch on this really quick. I commented just really briefly on the overall structure. Again, we have a separate CEO, CFO, management team within each of the three verticals.
Brian King, who is our Chairman and CEO, and then with me, and then along with the LKCM team, Headwater team, we have kind of a Class C suite within the DSG side and then heavily supported. A lot of the accountability, we drive down into the three verticals. Just given they all have their own P&L, they all have their own balance sheet, they all have their own internal initiatives that they're driving. We really drive their incentive and their compensation, not only around performance of that individual vertical, but also the equity value appreciation on DSG on a consolidated basis. Really well aligned. As I mentioned earlier, we help on the capital allocation and the accountability, but we drive the day-to-day operating metrics back into the three verticals. With that, maybe we've got four or five minutes left. Dave, maybe I'll just open it up for any Q and A.
Makes sense. Any questions? I can kick it off here. With the power of three concept, could you talk about the overlap in terms of both suppliers and customers that hit more than one of those three?
Sure. Yeah, sure. Let me start with the customer side. Within DSG, we've set up structure whereby so many of our customers have really strong relationships with our sales team, with our customers. What we've done early on is we set up incentive programs for what we called soft introductions, where Gexpro Services may have a customer that Lawson was not providing services to. We've incentivized our sales team to be able to make those soft introductions. In fact, just within the last week or so, we've not publicly talked about this, but through one of those introductions, Lawson had a really nice win that will start servicing accounts later this year and into next year. We somewhat view it as a little bit of icing on the cake in terms of being able to utilize those relationships and gain business.
Probably where there's the biggest benefit is everybody needs MRO. Not everybody may need OEM production. As I mentioned, on some of the Lawson customers being movable equipment, they may not need OEM so much, but I can guarantee almost all of Gexpro or all of TestEquity's customers may need MRO. It's great because now Lawson can get the introduction and we get the highest operating leverage out of the three verticals that sit within Lawson. We've seen some nice wins there within the first few years. On the supplier side, I would say less overlap there. I mean, we're working on consolidating purchases, zip ties, those types of things that are pretty common across the three. We've realized some savings there from a procurement standpoint.
Given that Gexpro Services, about 70% of their product is manufactured specced to their customer needs, there's not necessarily overlap on that side. More of those common types of products, we've been able to leverage some of that consolidation of the purchases.
Okay. In many companies that have multiple operating companies, you hear sometimes not when it's happening, but when they spin these things off, they'll say, "We were always fighting for capital. We never were able to get the capital we needed to grow." Or, "We were generating the capital and we had to send it to somebody else." You mentioned it as a positive where Lawson's generating this capital and you're able to deploy it in these other categories. Could you talk about that tension between the three?
Yeah. How do I say this? There's almost a little bit of a competitive nature between the three verticals. Even we had a board meeting just earlier this week, and it's kind of like, "All right, well, who's at what return and who's at what EBITDA percentage and so forth?" That natural kind of competition is good. From a capital allocation standpoint, I mean, there's been no shortage of available capital. As I think about it, there's been no product or project that's come to us and we've said, "We don't have the available capital." We don't view capital as any constraint at all. What we're viewing it as is those with the highest returns are going to get the capital. We ended the quarter, we didn't have anything outstanding on our revolver.
We're in a cash accumulation stage right now within the organization. There has been no limitations so far. We view it on those that project, whether or not it's organic or it's an acquisition, that that has the highest return. The other piece I would say is when we make acquisitions, and Hisco is a good example of that because they've got some operations in Mexico, we're trying to strengthen the DSG platform so it's not just within the vertical. We look outside the vertical. That being an example, Lawson now has the ability to rely upon the Hisco infrastructure in Mexico to potentially open up some customers there as well.
Great. Thanks a lot, Ron. Appreciate it. Brett, thank you.
Thank you.
Thanks, guys.