Distribution Solutions Group reported higher third-quarter sales and adjusted profitability, with revenue rising 10.7% from a year earlier to $573.6 million. Organic growth drove most of the increase, while acquisitions added sales; the company also cited improved cash generation from profitability and working-capital management.
Reported operating income and margins tell a more mixed story: operating income increased modestly, but the operating margin slipped. The company attributed pressure on gross margin to shifts in customer mix and higher tariffs on inbound shipments.
Key details
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Sales growth was broad-based. Revenue rose $55.7 million year over year. Organic sales grew 9.2%, with average daily sales improving across all business units. Acquisitions completed in the first nine months of 2026 contributed $7.8 million of incremental revenue; American Fasteners, acquired during the third quarter, contributed about $3.8 million in the quarter.
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Sales also increased sequentially. Revenue was up 2.8% from the second quarter, including 2.2% organic growth. Organic average daily sales rose 2.8% compared with the prior quarter.
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Gross margin narrowed. Gross margin declined to 32.0% from 32.9% a year earlier. Customer mix shifts and higher tariffs on inbound shipments were the primary pressures, partly offset by pricing benefits.
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Adjusted profitability improved. Adjusted operating income rose 19.7% year over year to $47.9 million, compared with $40.1 million a year earlier and $45.2 million in the second quarter. Adjusted EBITDA increased 17.3% to $56.8 million, or 9.9% of revenue, up from 9.4% a year earlier and 9.7% in the second quarter.
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Reported results included substantial amortization and other costs. Operating income was $25.2 million, up from $23.6 million a year earlier. The current quarter’s figure included $11.3 million of non-cash acquired-intangible amortization and $11.4 million of severance, acquisition-related retention, stock-based compensation, acquisition-related and other non-recurring costs. The comparable prior-year quarter included $11.7 million of intangible amortization and $4.8 million of non-recurring items.
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Net income and per-share earnings increased. Net income was $8.9 million, compared with $6.5 million a year earlier. Diluted earnings per share rose to $0.19 from $0.14. Adjusted diluted earnings per share was $0.58, versus $0.40 a year earlier and $0.47 in the second quarter.
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Cash from operations was positive. The company generated $18.7 million in operating cash flow during the quarter and $20.4 million over the first nine months of 2026.
Plain-English implications
The results show continued sales growth and stronger adjusted earnings, but higher tariffs and customer mix weighed on gross margin. Reported operating income also remained well below adjusted operating income because of intangible amortization and other costs.