Cadre (US:CDRE)2022-11-13 12:00Financial Data and Key Metrics Changes - For Q3 2022, net sales increased to $111.2 million from $98.7 million in the same quarter last year, driven by recent acquisitions and armor volume [23] - Net income for Q3 2022 was $4.9 million, compared to a net loss of $5.3 million in Q3 2021, reflecting a more favorable product mix [25] - Adjusted EBITDA conversion rate was 97%, indicating strong cash flow generation, with adjusted EBITDA expected to grow approximately 5% for the full year [14][26] Business Line Data and Key Metrics Changes - The product segment saw growth primarily due to armor volume and recent acquisitions, while the distribution segment benefited from agency demand for hard goods [23][24] - The backlog as of September 30, 2022, stood at $125.2 million, driven by strong demand for armor and federal government orders [15] Market Data and Key Metrics Changes - North American police budgets remain healthy, with signs of increasing spend per officer, although hiring remains a challenge [18] - The ongoing conflict in Ukraine is expected to provide incremental opportunities in Europe, particularly in EOD [18] Company Strategy and Development Direction - The company is focused on M&A strategies to complement core organic growth initiatives, with a robust pipeline of potential acquisitions [7][15] - The management emphasized the importance of maintaining pricing power amid inflationary pressures and optimizing cost structures for long-term margin expansion [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic challenges, including supply chain disruptions and inflation [13][19] - The company reaffirmed its 2022 guidance and remains optimistic about long-term growth prospects supported by favorable industry trends [28][32] Other Important Information - The company declared its fifth consecutive quarterly dividend of $0.08, reflecting strong cash flow generation [16] - The anticipated top line and adjusted EBITDA growth for the full year 2022 is expected to be around 5% [26] Q&A Session Summary Question: How is the armor market developing competitively? - Management noted that they have seen competitive wins based on their product value proposition and strong brand position [34] Question: What are the trends in police hiring? - Management indicated that while hiring remains a challenge, there are signs of recruitment efforts continuing, albeit at lower levels than desired [52] Question: What is the expected impact of supply chain issues on top line for 2022 and 2023? - Management expects supply chain challenges to persist but believes they have effectively managed through them [47] Question: Can you provide an update on the blast sensor opportunity? - Management confirmed progress in the blast sensor project, with Phase III expected to be completed by March 31, 2023 [42] Question: How does the company view the impact of recession on its business? - Management stated that police funding has remained stable during past recessions, indicating resilience in their revenue streams [58] Question: What is the current status of the M&A pipeline? - Management reported an increase in potential acquisition targets, although timing remains a challenge due to market conditions [59]