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SEC filingQ1 revenue grew 3.8% to $496.0M amid sales to strategic customers, but profitability eroded sharply with gross margin contracting to 32.9% from sales mix shifts to lower-margin customers, higher vendor costs, and tariff impacts, driving net income down 88.3% to $382K.
Distribution Solutions Group delivered modest revenue growth of 3.8% to $496.0 million in Q1 FY2026, reflecting resilience in core operations despite macroeconomic headwinds. This uptick stems primarily from increased sales to Lawson's strategic and government customers, which offset declines in core customer volumes, while Lawson continues expanding products to existing customers and adding new ship-to locations. Gexpro Services' performance remains tied to OEM production schedules, new product launches, and service project timing as a global supply chain solutions provider for mission-critical programs.
Cash generation weakened, with net cash from operating activities at -$20.4 million versus -$4.8 million prior year, driven by working capital investments to fuel growth. After $3.4 million in capital expenditures—down from $5.6 million—free cash flow reached -$23.7 million. This outflow aligns with the company's strategy to fund operating expenses, working capital, capex, potential acquisitions, and strategic initiatives. Liquidity remains focused on these priorities, positioning DSGR to pursue sales team productivity at Lawson and other growth levers amid volatile end-market demand.