Cadre Holdings Reports First Quarter 2023 Financial Results

Achieved Revenue, Net Income and Adjusted EBITDA Growth; Expanded Gross and Adjusted EBITDA Margins

Reaffirms 2023 Full-Year Guidance

Cadre Holdings, Inc. (NYSE: CDRE) ("Cadre" or "the Company"), a global leader in the manufacturing and distribution of safety and survivability equipment for first responders, announced today its consolidated operating results for the three months ended March 31, 2023.

  • Net sales of $111.7 million for the first quarter
  • Gross profit margin of 41.7% for the first quarter
  • Net income of $7.0 million, or $0.19 per diluted share, for the first quarter
  • Adjusted EBITDA of $18.6 million for the first quarter
  • Adjusted EBITDA margin of 16.6% for the first quarter
  • Declared quarterly cash dividend of $0.08 per share in April 2023

“Following a record year of net sales and adjusted EBITDA, our strong first quarter results reflect continued strategic execution and sustained demand for our mission-critical safety and survivability equipment,” said Warren Kanders, CEO and Chairman. “Driven by our entrenched positions in law enforcement, first responder and military markets, as well as our commitment to innovation, we have exceeded our pricing growth target every quarter since going public. In addition to generating year-over-year adjusted EBITDA growth of 31% in the first quarter, we have maintained a focus on margin expansion, as we further implemented our resilient and proven operating model. Notably, gross profit and adjusted EBITDA margins increased 320 and 300 basis points, respectively.”

Mr. Kanders added, “Supported by macro tailwinds related to increasing public safety budgets and favorable industry dynamics, we have reaffirmed our guidance and believe we are ideally positioned to execute strategic objectives focused on accelerating growth and further enhancing our market leadership over the long-term. While the current M&A environment has not allowed for deal making thus far in 2023, we remain confident that attractive opportunities in line with our key criteria will materialize this year. We have a decades-long track record taking a patient and disciplined approach to M&A and will continue to actively evaluate potential transactions, complementing our core organic growth initiatives.”

First Quarter 2023 Operating Results

For the quarter ended March 31, 2023, Cadre generated net sales of $111.7 million, as compared to $104.4 million for the quarter ended March 31, 2022. The increase was mainly driven by recent acquisitions, armor and duty gear products demand, and agency demand for hard goods through our Distribution segment, partially offset by shipment timing for our EOD products.

For the quarter ended March 31, 2023, Cadre generated gross profit of $46.6 million, as compared to $40.2 million for the quarter ended March 31, 2022.

Gross profit margin was 41.7% for the quarter ended March 31, 2023, as compared to 38.5% for the quarter ended March 31, 2022, mainly driven by favorable pricing above material inflation, productivity and product mix.

Net income was $7.0 million for the quarter ended March 31, 2023, as compared to a net loss of $10.2 million for the quarter ended March 31, 2022. The increase resulted primarily from the change in year over year revenue and a decrease in stock-based compensation expense.

Cadre generated $18.6 million of Adjusted EBITDA for the quarter ended March 31, 2023, as compared to $14.2 million for the quarter ended March 31, 2022. Adjusted EBITDA margin was 16.6% for the quarter ended March 31, 2023, as compared to 13.6% for the prior year period.

Product segment gross profit margin was 43.6% for the first quarter compared to 40.1% for the prior year period.

Distribution segment gross profit margin was 24.2% for the first quarter compared to 24.6% for the prior year period.

Liquidity, Cash Flows and Capital Allocation

  • Cash and cash equivalents increased by $3.0 million from $45.3 million as of December 31, 2022 to $48.3 million as of March 31, 2023.
  • Total debt decreased by $3.5 million from $149.7 million as of December 31, 2022, to $146.2 million as of March 31, 2023.
  • Net debt (total debt net of cash and cash equivalents) decreased by $6.5 million from $104.4 million as of December 31, 2022 to $97.9 million as of March 31, 2023.
  • Capital expenditures totaled $1.0 million for the three months ended March 31, 2023 compared with $1.1 million for the three months ended March 31, 2022.

Dividend

On April 25, 2023, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.08 per share, or $0.32 per share on an annualized basis. Cadre's dividend payment will be made on May 19, 2023, to shareholders of record as of the close of business on the record date of May 5, 2023. The declaration of any future dividend is subject to the discretion of the Company's Board of Directors.

2023 Outlook

For the full year 2023, Cadre expects to generate net sales in the range of $463 million to $493 million and Adjusted EBITDA in the range of $76 million to $82 million. We expect capital expenditures to be in the range of $8.5 million to $9.5 million.

Conference Call

Cadre management will host a conference call on Tuesday, May 9, 2023, at 5:00 PM EST to discuss the latest corporate developments and financial results. The dial-in number for callers in the US is (888)-510-2553 and the dial-in number for international callers is (646)-960-0473. The access code for all callers is 1410384. A live webcast will also be available on the Company’s website at https://www.cadre-holdings.com/.

A replay of the call will be available through May 23, 2023. To access the replay, please dial (800)-770-2030 in the U.S. or +1-647-362-9199 if outside the U.S., and then enter the access code 1410384.

About Cadre

Headquartered in Jacksonville, Florida, Cadre is a global leader in the manufacturing and distribution of safety and survivability products for first responders. Cadre's equipment provides critical protection to allow users to safely and securely perform their duties and protect those around them in hazardous or life-threatening situations. The Company's core products include body armor, explosive ordnance disposal equipment, and duty gear. Our highly engineered products are utilized in over 100 countries by federal, state and local law enforcement, fire and rescue professionals, explosive ordnance disposal teams, and emergency medical technicians. Our key brands include Safariland® and Med-Eng®, amongst others.

Use of Non-GAAP Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). The press release contains the non-GAAP measures: (i) earnings before interest, taxes, other income or expense, depreciation and amortization (“EBITDA”), (ii) adjusted EBITDA and (iii) adjusted EBITDA margin. The Company believes the presentation of these non-GAAP measures provides useful information for the understanding of its ongoing operations and enables investors to focus on period-over-period operating performance, and thereby enhances the user’s overall understanding of the Company’s current financial performance relative to past performance and provides, along with the nearest GAAP measures, a baseline for modeling future earnings expectations. Non-GAAP measures are reconciled to comparable GAAP financial measures within this press release. The Company cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results. Additionally, the Company notes that there can be no assurance that the above referenced non-GAAP financial measures are comparable to similarly titled financial measures used by other publicly traded companies.

Forward-Looking Statements

Except for historical information, certain matters discussed in this press release may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to all projections and anticipated levels of future performance. Forward-looking statements involve risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed herein. Any number of factors could cause actual results to differ materially from projections or forward-looking statements in this press release, including, but not limited to, those risks and uncertainties more fully described from time to time in the Company’s public reports filed with the Securities and Exchange Commission, including under the section titled “Risk Factors” in the Company's Annual Report on Form 10-K, and/or Quarterly Reports on Form 10-Q, as well as in the Company’s Current Reports on Form 8-K. All forward-looking statements included in this press release are based upon information available to the Company as of the date of this press release and speak only as of the date hereof. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release.

CADRE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

March 31, 2023

 

December 31, 2022

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

48,294

 

 

$

45,286

 

Accounts receivable, net of allowance for doubtful accounts of $930 and $924, respectively

 

 

55,704

 

 

 

64,557

 

Inventories

 

 

76,343

 

 

 

70,273

 

Prepaid expenses

 

 

11,782

 

 

 

10,091

 

Other current assets

 

 

6,376

 

 

 

6,811

 

Total current assets

 

 

198,499

 

 

 

197,018

 

Property and equipment, net of accumulated depreciation and amortization of $44,840 and $42,694, respectively

 

 

45,095

 

 

 

45,285

 

Operating lease assets

 

 

7,691

 

 

 

8,489

 

Deferred tax assets, net

 

 

2,289

 

 

 

2,255

 

Intangible assets, net

 

 

48,761

 

 

 

50,695

 

Goodwill

 

 

81,292

 

 

 

81,576

 

Other assets

 

 

5,348

 

 

 

6,634

 

Total assets

 

$

388,975

 

 

$

391,952

 

 

 

 

 

 

 

 

Liabilities, Mezzanine Equity and Shareholders' Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

27,313

 

 

$

23,406

 

Accrued liabilities

 

 

32,899

 

 

 

38,720

 

Income tax payable

 

 

4,086

 

 

 

4,584

 

Liabilities held for sale

 

 

 

 

 

 

Current portion of long-term debt

 

 

11,119

 

 

 

12,211

 

Total current liabilities

 

 

75,417

 

 

 

78,921

 

Long-term debt

 

 

135,098

 

 

 

137,476

 

Long-term operating lease liabilities

 

 

4,204

 

 

 

4,965

 

Deferred tax liabilities

 

 

3,606

 

 

 

3,508

 

Other liabilities

 

 

1,200

 

 

 

1,192

 

Total liabilities

 

 

219,525

 

 

 

226,062

 

 

 

 

 

 

 

 

Mezzanine equity

 

 

 

 

 

 

Preferred stock ($0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of March 31, 2023 and December 31, 2022)

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

Common stock ($0.0001 par value, 190,000,000 shares authorized, 37,586,031 and 37,332,271 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

206,451

 

 

 

206,540

 

Accumulated other comprehensive income

 

 

1,720

 

 

 

2,087

 

Accumulated deficit

 

 

(38,725

)

 

 

(42,741

)

Total shareholders’ equity

 

 

169,450

 

 

 

165,890

 

Total liabilities, mezzanine equity and shareholders' equity

 

$

388,975

 

 

$

391,952

 

CADRE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2023

 

2022

Net sales

 

$

111,748

 

 

$

104,406

 

Cost of goods sold

 

 

65,130

 

 

 

64,217

 

Gross profit

 

 

46,618

 

 

 

40,189

 

Operating expenses

 

 

 

 

 

 

Selling, general and administrative

 

 

35,250

 

 

 

53,950

 

Restructuring and transaction costs

 

 

 

 

 

599

 

Related party expense

 

 

148

 

 

 

122

 

Total operating expenses

 

 

35,398

 

 

 

54,671

 

Operating income (loss)

 

 

11,220

 

 

 

(14,482

)

Other expense

 

 

 

 

 

 

Interest expense

 

 

(1,641

)

 

 

(1,490

)

Other expense, net

 

 

364

 

 

 

(205

)

Total other expense, net

 

 

(1,277

)

 

 

(1,695

)

Income (loss) before provision for income taxes

 

 

9,943

 

 

 

(16,177

)

(Provision) benefit for income taxes

 

 

(2,941

)

 

 

6,012

 

Net income (loss)

 

$

7,002

 

 

$

(10,165

)

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

Basic

 

$

0.19

 

 

$

(0.30

)

Diluted

 

$

0.19

 

 

$

(0.30

)

Weighted average shares outstanding:

 

 

 

 

 

 

Basic

 

 

37,373,529

 

 

 

34,446,318

 

Diluted

 

 

37,629,498

 

 

 

34,446,318

 

CADRE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2023

 

2022

Cash Flows From Operating Activities:

 

 

 

 

 

 

Net income (loss)

 

$

7,002

 

 

$

(10,165

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

4,261

 

 

 

3,544

 

Amortization of original issue discount and debt issue costs

 

 

64

 

 

 

111

 

Deferred income taxes

 

 

183

 

 

 

(6,951

)

Stock-based compensation

 

 

2,747

 

 

 

23,588

 

Gain on sale of fixed assets

 

 

(103

)

 

 

 

Provision for losses on accounts receivable

 

 

40

 

 

 

45

 

Foreign exchange (gain) loss

 

 

(213

)

 

 

253

 

Changes in operating assets and liabilities, net of impact of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

9,075

 

 

 

(1,693

)

Inventories

 

 

(5,830

)

 

 

(2,956

)

Prepaid expenses and other assets

 

 

(556

)

 

 

3,158

 

Accounts payable and other liabilities

 

 

(3,948

)

 

 

(18

)

Net cash provided by operating activities

 

 

12,722

 

 

 

8,916

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(781

)

 

 

(950

)

Proceeds from disposition of property and equipment

 

 

201

 

 

 

 

Business acquisitions, net of cash acquired

 

 

 

 

 

(19,787

)

Net cash used in investing activities

 

 

(580

)

 

 

(20,737

)

Cash Flows From Financing Activities:

 

 

 

 

 

 

Principal payments on term loans

 

 

(2,500

)

 

 

(2,506

)

Principal payments on insurance premium financing

 

 

(1,092

)

 

 

(1,474

)

Payment of capital leases

 

 

 

 

 

(11

)

Taxes paid in connection with employee stock transactions

 

 

(2,725

)

 

 

(6,216

)

Dividends distributed

 

 

(2,986

)

 

 

(2,750

)

Net cash used in financing activities

 

 

(9,303

)

 

 

(12,957

)

Effect of foreign exchange rates on cash and cash equivalents

 

 

169

 

 

 

798

 

Change in cash and cash equivalents

 

 

3,008

 

 

 

(23,980

)

Cash and cash equivalents, beginning of period

 

 

45,286

 

 

 

33,857

 

Cash and cash equivalents, end of period

 

$

48,294

 

 

$

9,877

 

Supplemental Disclosure of Cash Flows Information:

 

 

 

 

 

 

Cash paid (received) for income taxes, net

 

$

3,141

 

 

$

(100

)

Cash paid for interest

 

$

2,359

 

 

$

1,282

 

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

Accruals and accounts payable for capital expenditures

 

$

238

 

 

$

119

 

CADRE HOLDINGS, INC.

SEGMENT INFORMATION

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2023

 

 

 

 

 

 

Reconciling

 

 

 

 

Product

 

Distribution

 

Items(1)

 

Total

Net sales

 

$

93,194

 

$

24,660

 

$

(6,106

)

 

$

111,748

Cost of goods sold

 

 

52,608

 

$

18,697

 

$

(6,175

)

 

 

65,130

Gross profit

 

$

40,586

 

$

5,963

 

$

69

 

 

$

46,618

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2022

 

 

 

 

Reconciling

 

 

 

 

Product

Distribution

Items(1)

 

Total

Net sales

 

$

85,386

$

24,096

$

(5,076

)

 

$

104,406

Cost of goods sold

 

 

51,120

 

18,172

 

(5,075

)

 

 

64,217

Gross profit

 

$

34,266

$

5,924

$

(1

)

 

$

40,189

_________________

(1)

Reconciling items consist primarily of intercompany eliminations and items not directly attributable to operating segments.

CADRE HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended

 

Three Months Ended

 

Last Twelve

 

 

December 31,

 

March 31,

 

Months

 

 

2022

 

2023

 

2022

 

March 31, 2023

Net income (loss)

 

$

5,820

 

 

$

7,002

 

 

$

(10,165

)

 

$

22,987

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

15,651

 

 

 

4,261

 

 

 

3,544

 

 

 

16,368

 

Interest expense

 

 

6,206

 

 

 

1,641

 

 

 

1,490

 

 

 

6,357

 

Provision (benefit) for income taxes

 

 

3,553

 

 

 

2,941

 

 

 

(6,012

)

 

 

12,506

 

EBITDA

 

$

31,230

 

 

$

15,845

 

 

$

(11,143

)

 

$

58,218

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and transaction costs(1)

 

 

5,355

 

 

 

 

 

 

599

 

 

 

4,756

 

Other general income(2)

 

 

(159

)

 

 

 

 

 

 

 

 

(159

)

Other expense, net(3)

 

 

1,137

 

 

 

(364

)

 

 

205

 

 

 

568

 

Stock-based compensation expense(4)

 

 

32,239

 

 

 

2,747

 

 

 

23,723

 

 

 

11,263

 

Stock-based compensation payroll tax expense(5)

 

 

305

 

 

 

220

 

 

 

298

 

 

 

227

 

LTIP bonus(6)

 

 

1,369

 

 

 

144

 

 

 

384

 

 

 

1,129

 

Amortization of inventory step-up(7)

 

 

4,255

 

 

 

 

 

 

153

 

 

 

4,102

 

Adjusted EBITDA

 

$

75,731

 

 

$

18,592

 

 

$

14,219

 

 

$

80,104

 

Adjusted EBITDA margin(8)

 

 

16.5

 

%

 

16.6

 

%

 

13.6

 

%

 

 

_________________

(1)

Reflects the “Restructuring and transaction costs” line item on our consolidated statement of operations, which primarily includes transaction costs composed of legal and consulting fees, and $1.0 million paid to Kanders & Company, Inc., a company controlled by our Chief Executive Officer, for services related to the acquisition of Cyalume, which is included in related party expense in the Company’s consolidated statements of operations for the year ended December 31, 2022.

(2)

Reflects the “Other general income” line item on our consolidated statement of operations and includes a gain from a long-lived asset sale.

(3)

Reflects the “Other expense, net” line item on our consolidated statement of operations and primarily includes gains and losses on foreign currency transactions.

(4)

Reflects compensation expense related to equity and liability classified stock-based compensation plans.

(5)

Reflects payroll taxes associated with vested stock-based compensation awards.

(6)

Reflects the cost of a cash-based long-term incentive plan awarded to employees that vests over three years.

(7)

Reflects amortization expense related to the step-up inventory adjustment recorded as a result of our recent acquisitions.

(8)

Reflects Adjusted EBITDA / Net Sales for the relevant periods.

 

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