Cadre (CDRE) - 2024 Q1 - Quarterly Results

Financial & Operational Highlights This section summarizes Cadre Holdings' record Q1 2024 performance, driven by strong sales growth, improved profitability, and strategic acquisitions Q1 2024 Performance Summary Cadre Holdings reported record first-quarter net sales of $137.9 million, a 23% year-over-year increase, and a gross profit of $57.6 million, with Adjusted EBITDA growing to $24.5 million and an improved margin of 17.8% Q1 2024 Financial Metrics | Financial Metric | Q1 2024 | Change (YoY) | | :--- | :--- | :--- | | Net Sales | $137.9 million | +23.5% | | Gross Profit | $57.6 million | +23.6% | | Gross Profit Margin | 41.8% | +10 bps | | Net Income | $6.9 million | -1.0% | | Adjusted EBITDA | $24.5 million | +31.7% | | Adjusted EBITDA Margin | 17.8% | +120 bps | - CEO Warren Kanders highlighted the effectiveness of the operating model, citing the 23% net sales growth and 120 basis point improvement in Adjusted EBITDA margin year-over-year[7] - The company completed the strategic acquisitions of ICOR Technology and Alpha Safety, expanding its platform into EOD robots and nuclear safety solutions[12][16][33] - Cadre reaffirmed its full-year 2024 guidance, signaling confidence in continued demand for its mission-critical safety equipment[15][19] Detailed Financial Analysis This section provides an in-depth review of Q1 2024 financial performance, segment results, and changes in financial position and cash flow Q1 2024 Financial Performance In Q1 2024, net sales rose 23.5% to $137.9 million, driven by acquisitions and organic demand, while net income slightly declined to $6.9 million due to higher SG&A expenses Revenue and Profitability Net sales growth was primarily attributed to recent acquisitions and increased demand, with gross profit margin remaining steady at 41.8% and Adjusted EBITDA margin improving to 17.8% Q1 2024 vs Q1 2023 Key Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $137.9M | $111.7M | | Gross Profit | $57.6M | $46.6M | | Net Income | $6.9M | $7.0M | | Adjusted EBITDA | $24.5M | $18.6M | - The primary drivers for the increase in net sales were recent acquisitions, higher demand for armor and EOD products, and increased agency demand for hard goods through the Distribution segment[30] - Net income decreased slightly due to a rise in SG&A expenses resulting from acquisitions and transaction expenses, which offset the increase in gross profit[31] - The gross profit margin of 41.8% was mainly driven by favorable pricing and mix, offset by the amortization of inventory step-up adjustments from acquisitions and inflation[9] Segment Performance The Product segment achieved a gross profit margin of 43.0% in Q1 2024, a slight decrease from 43.6% in the prior year, while the Distribution segment's gross profit margin was 23.5% Q1 2024 Segment Performance | Segment | Q1 2024 Net Sales | Q1 2024 Gross Profit | Q1 2024 Gross Margin | | :--- | :--- | :--- | :--- | | Product | $118.8M | $51.0M | 43.0% | | Distribution | $28.2M | $6.6M | 23.5% | - The Product segment's gross margin decreased to 43.0% from 43.6% in the prior year period[10] - The Distribution segment's gross margin decreased to 23.5% from 24.2% in the prior year period[32] Financial Position & Cash Flow As of March 31, 2024, total debt increased to $215.8 million and net debt rose to $128.8 million, primarily due to acquisitions, while operating cash flow significantly decreased Balance Sheet Highlights | Balance Sheet Item | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $87.1M | $87.7M | | Total debt | $215.8M | $140.1M | | Net debt | $128.8M | $52.4M | Q1 2024 Cash Flow Activities | Cash Flow Activity (Q1 2024) | Amount | | :--- | :--- | | Net cash provided by operating activities | $2.1M | | Net cash used in investing activities | ($142.6M) | | Net cash provided by financing activities | $139.8M | - The significant increase in debt was primarily to fund business acquisitions, which totaled $141.3 million (net of cash acquired) during the quarter[11][25] Strategic Developments & Outlook This section covers Cadre Holdings' recent M&A activities, capital allocation decisions, and the company's reaffirmed full-year 2024 financial guidance Mergers & Acquisitions (M&A) During Q1 2024, Cadre completed two key acquisitions, ICOR Technology and Alpha Safety, expanding its platform into EOD robots and nuclear safety solutions, while continuing to seek attractive M&A opportunities - Completed the acquisition of ICOR Technology, a leading manufacturer of EOD and tactical robots, on January 9, 2024[16][33] - Completed the accretive acquisition of Alpha Safety, a leading nuclear safety solutions company, on March 1, 2024[12][16] - The M&A strategy remains focused on current verticals, including law enforcement, military, and nuclear markets, with a disciplined approach targeting companies with strong margins and market positions[16] Capital Allocation and 2024 Outlook Cadre remains committed to shareholder returns, declaring a quarterly cash dividend of $0.0875 per share, and reaffirmed its full-year 2024 outlook for net sales and Adjusted EBITDA - The Board of Directors declared a quarterly cash dividend of $0.0875 per share, payable on May 17, 2024[15][18] 2024 Full-Year Guidance | 2024 Full-Year Guidance | Range | | :--- | :--- | | Net Sales | $553M - $572M | | Adjusted EBITDA | $104M - $108M | | Capital Expenditures | $8M - $10M | Financial Statements & Reconciliations This section presents Cadre Holdings' unaudited consolidated financial statements and a detailed reconciliation of GAAP to non-GAAP financial measures Condensed Consolidated Financial Statements This section includes the unaudited Condensed Consolidated Balance Sheets, Statements of Operations, Statements of Cash Flows, and Segment Information for Q1 2024 and prior periods - Presents the Condensed Consolidated Balance Sheets[23][38] - Presents the Condensed Consolidated Statements of Operations[24][39] - Presents the Condensed Consolidated Statements of Cash Flows[25][47] - Presents Segment Information for Product and Distribution[26][40] Reconciliation of GAAP to Non-GAAP Financial Measures The company provides a detailed reconciliation from GAAP Net Income to non-GAAP Adjusted EBITDA, adjusting for items such as depreciation, amortization, restructuring, and transaction costs Q1 2024 Reconciliation to Adjusted EBITDA | Reconciliation Item (Q1 2024) | Amount (in thousands) | | :--- | :--- | | Net Income (GAAP) | $6,928 | | Depreciation and amortization | $3,942 | | Interest expense | $1,637 | | Provision for income taxes | $1,970 | | EBITDA | $14,477 | | Restructuring and transaction costs | $4,837 | | Other (income) expense, net | $1,444 | | Stock-based compensation expense | $2,067 | | Other Adjustments | $1,663 | | Adjusted EBITDA (Non-GAAP) | $24,488 | - Key adjustments to reconcile Net Income to Adjusted EBITDA include transaction costs related to acquisitions, stock-based compensation, and amortization of inventory step-up[4][28][44]