Cadre (US:CDRE)2022-05-14 22:37Financial Data and Key Metrics Changes - Q1 2022 net sales were $104.5 million, exceeding the high end of guidance, but down from the previous year due to a large federal duty gear shipment in Q1 2021 [32] - Gross profit margin for Q1 was 38.5%, impacted by a less favorable product mix, but expected to expand in the second half of 2022 [33] - The net loss for the quarter was $10.2 million, primarily due to a $23.6 million stock compensation expense, while EBITDA conversion remained strong at 92% [34] Business Line Data and Key Metrics Changes - Volumes in higher-margin duty gear and EOD product categories were down, offset by growth in the Distribution segment [12] - Orders backlog increased by $3.3 million, driven by demand for soft body armor and U.S. domestic duty gear [13] Market Data and Key Metrics Changes - Demand for mission-critical products remains strong within law enforcement, first responder, and military markets, despite ongoing supply chain disruptions and inflationary pressures [10][12] - The company anticipates a more favorable product mix in the second half of the year, with larger duty orders expected to ship [44] Company Strategy and Development Direction - The company has completed two accretive acquisitions since its IPO, enhancing its international presence and growth avenues [7][15] - The M&A strategy focuses on geographic expansion, introducing new products in existing markets, and expanding safety product offerings [25] - The company aims to leverage its strong acquisition track record to expand product and technology offerings and grow its geographic footprint [39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term prospects, supported by a robust pipeline and macro tailwinds driving demand for mission-critical products [41] - The company has increased its 2022 guidance based on strong backlog expectations and progress in executing strategic objectives [14][36] Other Important Information - The acquisition of Cyalume Technologies for $35 million is expected to generate approximately $25 million in pro forma revenues for 2022 [28] - The company maintains a net debt of $147 million, with a net leverage around 2x, providing financial flexibility for growth [36] Q&A Session Summary Question: Revenue outlook and normalization of comparisons - Management indicated that comparisons will normalize in the back half of the year, with larger duty orders expected to ship [42][44] Question: Strategic synergies from the Cyalume acquisition - Management highlighted operational excellence and leveraging customer relationships as key synergies to accelerate growth [45][48] Question: Supply chain and inflationary cost pressures - Management noted ongoing challenges with electronics and raw materials but emphasized strong relationships with suppliers [52][54] Question: Police officer shortage and its impact - Management acknowledged a mixed situation across the U.S. regarding police hiring, with some agencies struggling to fill positions [61][64] Question: European sales opportunities due to geopolitical events - Management reported limited immediate impact from the Ukraine conflict but noted potential long-term opportunities in EOD solutions [68][71] Question: Guidance adjustments and core business performance - Management clarified that guidance adjustments were due to cautious outlooks on larger orders and core business performance [73][74]