Bryan King: Yes, so there are other building blocks. Brad, the way that I kind of have bridged it is that, in my mind, in any way, and that we’ve got very discreet numbers that we’re working through. But there’s about 200 basis points of cost leveraging or spend leveraging on an EBITDA basis, kind of 200 basis points of revenue that we have a line of sight that we’re working through this year, or that we should get the benefit of this year. There’s another equal amount that won’t flow through the P&L until fully flow through it until the 2025, or in some cases, 2026. So there’s kind of a total of 400 basis points that the team has identified in kind of synergistic opportunities there. And then there is in addition to that, and that’s across the total volume of that Industrial Technologies Group, there are additional elements that we are working towards to drive volume, leveraging, profitability that we see in terms of being able to bring the Hisco capabilities to all of DSG.
An example that it lifts margins quite a bit for everybody was one that we will work through in the last day, as we had everybody together, would be the printing and labeling capabilities that are owned by Hisco, taking on volume that is needed from Gexpro for instance. And so you end up with a lift because we’re getting more throughput on a facility that was a very good facility, but not one that was operating at a level of kind of capacity utilization that would pull the gross margins and EBITDA margins of that alliance printing business to where it really drops a lot more dollar. So there’s a number of those things. There’s also things like, there’s other capabilities that are specific kind of value-added capabilities that Gexpro is leaning into Hisco or leaning into TestEquity that expands the structural margins of TestEquity and Hisco in certain categories.
And those are outside of the 400 basis points that I alluded to earlier.
Brad Hathaway: Got it.
Bryan King: There’s no does need to be, there is no doubt about it. To get to the 12%, we’ve got to get back to the normalized top line. So there’s a full 200 basis points. That is leveraging the spend dollars that we expect that we’ll get just from getting through this test and measurement overhang of product and delayed purchasing and then also getting the organic revenue baseline back to where it should be.
Brad Hathaway: Okay, so just to make sure I’m clear, in Q4 2023 is roughly 6%. So to bridge that 600 bps, it’s roughly 400 bps from kind of synergies and 200 bps from volume leverage, is that kind of correct?
Bryan King: That’s about right, yes.
Brad Hathaway: Okay, great. Excellent. That’s all I have right now. Thank you.
Bryan King: Okay, thank you.
Operator: Your next question is from John Krueger with JAG Capital.
John Krueger: Hey, Bryan. Thanks for taking the question. I just want to ask you how you’re thinking about buybacks and keeping that free float available to other investors.
Bryan King: Yes. Look, I think that’s you tell me where the stock price is and I’ll tell you what we’re doing on the buyback. Not really, but I mean we’re that specific in what we’re looking at exactly what the terminal value that we’re trying to build in the business is. And we’ve got a capital allocation model that’s quite specific. It’s taken us longer to get some of our M&A done candidly, during the last half of last year. The disruption in some of these pocketed end markets that we’ve talked about this morning, like renewables or semiconductors specifically, as well as some other noisiness in the channels, have impacted some of the people that we have direct dialogues with that are not in our process, that aren’t necessarily having to sell their business, but want to be a part of DSG.
And so it’s slowed down some of our kind of getting to the goal line on M&A that are specific capabilities or expansions of our reach that we want to have in some of our kind of long-term value proposition that we want to pull together with DSG. So as those things have slowed kind of, now we have good line of sight on some of those right now, but as those have kind of not happened as quickly and we’re generating cash, we want to make sure that we’re mindful of exactly what we’re doing with our shareholders cash while we’re sitting on that additional liquidity. And so if the stock price is where it’s too significant of a discount of what we think the terminal value of the business would be, if we wanted to sell the company, then we’re going to buy back shares.
But we don’t want to buy back shares, so but it’s part of a very disciplined capital allocation. I wanted to make sure that we continued to improve the float. That’s why we did the stock split. That’s why we’re making sure that we try and get out in the marketplace and see shareholders like yourself and go on the road. But that’s to make sure that our shareholders are confident in what we’re trying to execute on and that where we can, we want to improve liquidity for everybody. But we’re not sellers and I’m a net buyer, so and the business itself is doing what we want it to do. At its core, the team is performing really well against a lot of very discrete objectives to drive value longer term for all of us. And so if we think that the right thing to do for all the shareholders is to use liquidity to buy shares, then we’ll do it.
John Krueger: I appreciate it. Thanks.
Bryan King: Sure. Thank you for your support.
Operator: We have reached the end of the question-and-answer session and I will now turn the call over to Bryan for closing remarks.
