The Company recorded stock-based compensation expense of $5.2 million, $7.9 million and $2.4 million for the years ended December 31, 2024, 2023 and 2022, respectively, in Selling, general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss) and recognized a net tax benefit relating to stock-based compensation of $1.1 million, $0.9 million and $2.1 million, respectively. A portion of the Company’s stock-based awards are liability-classified. Accordingly, changes in the market value of DSG common stock may result in stock-based compensation expense or benefit in certain periods. A stock-based compensation liability of $2.0 million as of December 31, 2024 and $5.6 million as of December 31, 2023 was included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.

The equity compensation plans contain anti-dilution provisions whereby in the event of any change in the capitalization of the Company (including in the event of a stock split), the number and type of awards underlying outstanding stock-based compensation awards must be adjusted, as appropriate, in order to prevent dilution or enhancement of rights. The impact of these provisions resulted in a modification of all outstanding stock-based compensation awards upon the Stock Split. As the fair value of the awards immediately after the Stock Split did not change when compared to the fair value of such awards immediately prior to the Stock Split, no incremental compensation costs were recognized as a result of such modifications. In addition, there was no change to the vesting conditions or classification of each of the outstanding stock-based compensation awards.

On October 17, 2022, the Board of Directors approved and adopted the Distribution Solutions Group, Inc. Equity Compensation Plan, as amended and restated, effective October 17, 2022, and as amended November 10, 2022 (the “Amended and Restated Equity Plan”). The Amended and Restated Equity Plan provides for the grant of nonqualified and incentive stock options, stock awards and stock units to officers and employees of the Company. The Amended and Restated Equity Plan also provides for the grant of option rights and restricted stock to non-employee directors. Non-employee directors are limited to grants of no more than 60,000 shares of common stock in any calendar year and other than non-employee directors are limited to grants of no more than 500,000 shares of common stock in any calendar year. The Amended and Restated Equity Plan is administered by the Compensation Committee of the Board of Directors, or its designee, which as administrator of the plan, has the authority to select plan participants, grant awards, and determine the terms and conditions of the awards. As of December 31, 2024, the Company had approximately 694,000 shares of common stock still available under the Amended and Restated Equity Plan.

The Company also has a Stock Performance Rights Plan (“SPR Plan”) that provides for the issuance of Stock Performance Rights (“SPRs”) that allow non-employee directors, officers and key employees to receive cash awards, subject to certain restrictions, equal to the appreciation of DSG common stock. The SPR Plan is administered by the Compensation Committee of the Board of Directors.

SPRs entitle the recipient to receive a cash payment equal to the excess of the market value of DSG common stock over the SPR exercise price when the SPRs are surrendered. Expense, equal to the fair market value of the SPR at the date of grant and remeasured each reporting period, is recorded ratably over the vesting period. Compensation expense is included in Selling, general and administrative expense in the Consolidated Statements of Operations and Comprehensive Income (Loss). The outstanding SPRs were granted with approximately a seven year life and vest over one to three years beginning on the first anniversary of the date of the grant. The SPRs are liability classified and included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.

The fair value of the outstanding SPRs was estimated using a Black-Scholes valuation model. This model requires the input of subjective assumptions that may have a significant impact on the fair value estimate. The weighted-average fair value of SPRs outstanding as of December 31, 2024, 2023 and 2022 was $20.80, $18.37 and $7.65 per SPR, respectively. The weighted average fair value assumptions used in the model were as follows:

December 31,

2024

2023

2022

Expected volatility

36.9% to 38.0%

41.1% to 45.9%

43.4% to 52.2%

Risk-free rate of return

4.2% to 4.2%

4.5% to 5.3%

4.4% to 4.7%

Expected term (in years)

0.5 to 1

0.3 to 1.5

0.5 to 2.0

Expected annual dividend

The expected volatility was based on the historic volatility of the Company’s stock price commensurate with the expected life of the SPR. The risk-free rate of return reflects the interest rate offered for zero coupon treasury bonds over the expected life of the SPR. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using the simplified method allowed by the SEC, which approximates our historical experience. The estimated annual dividend was based on the recent dividend payout trend.

A liability of $2.0 million as of December 31, 2024 and $4.9 million as of December 31, 2023 is included as a component of Accrued expenses and other liabilities in the Consolidated Balance Sheets reflecting the estimated fair value of future pay-outs.


	Number of SPRs	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding on December 31, 2023	259,018	$	18.37

Granted	—	—
Exercised	(166,478)	33.78
Cancelled	—	—
Outstanding on December 31, 2024	92,540	20.80		1.4	$	1,921
Exercisable on December 31, 2024	92,540	$	20.80	1.4	$	1,921

The intrinsic value of SPRs exercised was $3.5 million for 2024, $1.7 million for 2023 and $5.2 million for 2022. All SPRs for plan participants were fully vested prior to 2022, as such, there is no unrecognized compensation associated with any SPRs.

Restricted stock awards (“RSAs”) generally vest over a one to five year period beginning on the first anniversary of the date of the grant. Upon vesting, the vested RSAs are exchanged for an equal number of shares of DSG common stock. The participants have no voting or dividend rights with the RSAs. The RSAs are valued at the closing price of DSG common stock on the date of grant and the expense is recorded ratably over the vesting period.


	Restricted Stock Awards	Weighted Average Grant Date Fair Value
Outstanding on December 31, 2023	98,216	$	23.57

Granted	141,325	32.16
Cancelled	(1,560)	25.28
Exchanged for common shares	(75,832)	24.09
Outstanding on December 31, 2024	162,149	$	31.68

As of December 31, 2024, there was $3.7 million of total unrecognized compensation cost related to RSAs that will be recognized over a weighted average period of 2.5 years. The weighted average grant date fair value per share of awards granted during the year was $32.16 in 2024, $21.86 in 2023 and $18.75 in 2022. The fair value of RSAs exchanged for shares of DSG common stock was $1.4 million during 2024, $1.5 million during 2023, and $0.5 million during 2022.

Market Stock Units (“MSUs”) are exchangeable for between 0% to 150% of the DSG common shares at the end of the vesting period based on the trailing 60-day average closing price of DSG common stock. The value of the MSUs was determined using a geometric brownian motion model that, based on certain variables, generates a large number of random trials simulating the price of the DSG common stock over the measurement period. As of December 31, 2024 all MSUs are fully vested. The fair value of MSUs exchanged for shares of DSG common stock was $0.7 million during 2024, $0.6 million during 2023 and $0.9 million during 2022.


	Number of Market Stock Units	Maximum Shares Potentially Issuable	Weighted Average Grant Date Fair Value
Outstanding on December 31, 2023	116,107	163,555	$	17.25

Granted	—	—	—
Cancelled	—	—	—
Exchanged for common shares	(12,841)	(18,464)	15.69
Outstanding on December 31, 2024	103,266	145,091	$	17.45

Stock options vest through the fifth anniversary from the grant date. Each stock option can be exchanged for one share of DSG common stock at the stated exercise price. Upon vesting, stock options are recognized as a component of equity. Activity related to the Company’s stock options during the year ended December 31, 2024 was as follows:


	Number of Stock Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding on December 31, 2023	1,880,067	$	37.53

Granted	442,242	45.79
Exercised	(80,000)	13.50
Cancelled	(113,834)	32.41
Outstanding on December 31, 2024	2,128,475	40.43		8.6	$	3,252
Exercisable on December 31, 2024	707,407	$	38.62	7.9	$	2,267

The weighted average exercise price per stock option granted was $45.79 for 2024, $37.03 for 2023 and $42.88 for 2022. Unrecognized compensation cost related to stock options as of December 31, 2024 was $12.3 million, which is expected to be recognized over a weighted-average period of 2.3 years. There were 1,421,068 unvested and 707,407 fully vested stock options outstanding on December 31, 2024 with a weighted average exercise price of $38.62. The intrinsic value of stock options exercised was $1.5 million for 2024, $0.0 million for 2023 and $0.6 million for 2022.

The expected volatility was based on the historic volatility of the Company’s stock price commensurate with the expected life of the stock options. The risk-free rate of return reflects the interest rate offered for zero coupon treasury bonds over the expected life of the stock options. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using the simplified method allowed by the SEC, which approximates our historical experience. The estimated annual dividend was based on the recent dividend payout trend.

Performance Awards (“PAs”) are exchangeable for between 0% to 150% of DSG common shares, or the equivalent amount in cash, based upon the achievement of certain financial performance metrics at the end of the vesting period. The PAs are liability classified and included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets. The intrinsic value of PAs exercised was $0.9 million during 2024, $0.2 million during 2023 and $0.1 million during 2022. There was no unrecognized compensation cost related to PAs as of December 31, 2024.


	Number of Performance Awards	Maximum Shares Potentially Issuable	Weighted Average Grant Date Fair Value
Outstanding on December 31, 2023	26,080	39,120	$	25.70

Granted	—	—	—
Exercised	(26,080)	(39,120)	25.70
Cancelled	—	—	—
Outstanding on December 31, 2024	—	—	$	—