Q3 2023 Cadre Holdings Inc Earnings Call
[music].
Good afternoon, and welcome to cadre Holdings third quarter ended September 30th 2023 Conference call today's call is being recorded.
All lines have been placed on mute.
If you would like to ask a question at the end of the prepared remarks. Please press the Starkey and the number one on your Touchtone phone.
At this time I would like to turn the conference over to Matt Berkowitz of E. I G. B group for introductions and the reading of the Safe Harbor statement. Please go ahead Sir.
Thank you and welcome to cadre Holdings third quarter Conference call.
Before we begin I would like to remind everyone that during today's call we will be making several forward looking statements I mean make these statements under the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
These forward looking statements reflect our best estimates and assumptions based on our understanding of information known to us today.
These forward looking statements are subject to the risks and uncertainties that faith cadre in the industries and markets in which we operate more information on potential factors that could affect cadre of its financial results is included from time to time in contracts public reports.
The Securities and Exchange Commission.
Please also note that we have posted presentation materials on our website at www Dot cadre Dash holdings Dot com, which supplement our comments. This evening and include a reconciliation of certain non-GAAP financial measures.
Like to remind everyone that this call will be available for replay through November 22, 2023, starting at eight P. M Eastern time Tonight.
Cast replay will also be available via the link provided in today's press release as well as on contracts website.
At this time I would like to turn the call over to cadre is chairman and CEO Warren counters.
Good afternoon, and thank you for joining <unk> earnings call to discuss our results for the third quarter of 2023.
I am joined today by our President, Brad Williams, and our Chief Financial Officer Blaine Broward.
Coming off of the third quarter of 2023, I continued to be very proud of the focus and execution of our management team has demonstrated and achieving record results in adjusted EBITDA and adjusted EBITDA margins for the second consecutive quarter.
Brad Blaine and the team's implementation of the cadre operating model is driving these results.
As I said last quarter. This execution creates operating leverage by using superior operating tools and business processes to produce profitability improvements above our natural growth rate.
We've continued rolling the model out across our entire portfolio and we are gaining momentum as we do.
Brad in Blaine will go into more detail later, but the results here speak for themselves.
For the third quarter, while revenues were up 12, 1% gross profit increased 22, 7%.
We achieved record adjusted EBITDA margins of 19%.
Quarterly adjusted EBITDA of $23 7 million.
Adjusted EBITDA grew 14, 4%.
And fully diluted net income per share for the quarter increased 123%.
Looking at the nine month year to date results underscores the performance outside the lenses of a single quarter.
Revenue is up seven 1%.
Most profit up 18, 7%.
Adjusted EBITDA up 22, 1%.
And adjusted EBITDA margin up to 18, 2%.
From 16%.
We as a team are exceptionally proud of how we have been able to deliver for our shareholders.
Before moving to M&A.
I would like to comment again on the macros driving our business.
We are in an environment, where geopolitical conditions seem to get worse by the day.
And the level of internal conflict inside most countries is on the rise.
Domestically the levels of danger facing first responders first responders have not abated.
Any appreciable degree if at all.
Our role is to provide mission critical life saving equipment to the professionals around the world who work to keep us safe.
We have the distribution and manufacturing capabilities to cover a substantial part of the world.
And we see no sign that the secular trends driving demand for our products are going anywhere but.
As our business has grown we have experienced increasing capacity requirements.
And have reacted accordingly.
Our ability to do this as a testament to our management team and our many dedicated employees suppliers distribution partners and other stakeholders.
It also speaks to the quality of our products.
The strength of our brands.
Execution of deliberate deliveries.
The trust, our customers and end users place and cadre is equipment.
Having said that to be clear the <unk>.
Ongoing conflicts in Ukraine, and the middle East have not impacted our businesses in any material way.
As we have mentioned previously we do not expect as these events eventually we do expect as these.
These events.
Actually abate there may be an opportunity for cadre to play a larger role through a number of our products.
Most of them know, most notably through our various EOD offerings.
Lastly, an update on our M&A program.
I am pleased to report that we signed a letter of intent approximately three weeks ago with a business that we have been in discussions with for a number of months.
The business in its most.
Recent fiscal year ended during the summer achieved approximately $19 million of revenues with gross margins in excess of 50%.
And EBITDA margins in excess of 25%.
While we cannot be more specific due to confidentiality obligations.
The business is in a category that we have targeted as a priority for a tuck in type deal.
Confirmatory due diligence is underway.
And we hope to speak more about this soon.
More broadly we continue to work hard on our M&A pipeline and we believe we are starting to get more traction.
As you are all aware the credit markets remained very weak.
They started going south in mid 2022, and this time last year bankers, who are predicting conditions would improve in the first or second quarters of 2023.
That did not happen in the credit markets have only gotten worse.
In the context of our company, we have been patient and disciplined in our approach to M&A, while generating substantial free cash flow to deliver and fortify our balance sheet.
With net debt standing at less than one times net debt to adjusted EBITDA at the end of the quarter.
As we credit conditions, and an anemic M&A market persisted for such a long time and not shown signs of improving.
With many different types, including financial sponsors and founders have decided to engage in discussions to sell and valuations are adjusting to reflect these realities.
In addition to the current letter of intent we have executed we are seeing more actionable opportunities and our balance sheet and financial performance position us well capitalize on these opportunities as they present themselves.
Lastly, we are we are.
We're in constant contact with our banks and they have indicated their support for our approach given the way in which we have delivered on our commitments to them over the years.
In conclusion, I am proud of our results for this quarter and for the first nine months of the year.
We are happy to be able to increase our earnings guidance for the year again based on our performance and is the remainder of the year comes into focus.
As I have said before our businesses are resilient our operating model is showing results and we are excited with how we think this year will play out and how things are setting up for 2024.
With that thank you for being with US today, and I will turn the call over to Brad.
<unk> over to you.
Thank you Warren on today's call Blaine and I will provide a Q3 update and business overview.
<unk> recent trends and financial performance, followed by Q&A session before I dive into our third quarter results I'd like to take a moment to expand on Warren's comments about our operating model and success continuing to fulfill cadre submission of together lives.
We are excited about our progress advancing the cadre operating model is we engage the organization in pursuit of the idea of better every day our team members' fill an extraordinary sense of purpose supporting our special mission, which lives not just in the hearts and minds of our associates, but extends to our channel partners and end customers as.
Many of you know we have what we call the <unk> club, which was set up many years ago to recognize first responders that survive life threatening situations using are wearing our products. This club has grown to 2177 saves we're averaging about 34 sales per year.
So if you think about that a minute that equates to approximately three minutes to get to come home and live their lives with their families and friends everyday.
We're proud of who we are and what we do and look forward to continuing to provide best in class equipment that protects the law enforcement military and security professionals, who keep us all safe.
Turning now to our third quarter, we will begin on slide five during the quarter. We continued to capitalize on cadre is entrenched positions in law enforcement first responder and military markets as the company increased quarterly revenue net income and gross margin sequentially and year over year, our outstanding results reflect.
The team's continued strategic execution combined with strong sustained demand for our mission critical safety and survivability equipment.
We value the strong relationships, we have with customers and we continued to have success in the third quarter, managing our portfolio of premium products in the market.
Combined with favorable Q3 product mix as well as productivity gains driven by the continued implementation of our operating model.
We achieved significant margin expansion.
Third quarter adjusted EBITDA margin of 19% was our highest since going public and gross margins increased by 370 basis points.
Q3 product mix reflected favorable armor product mix in the quarter.
Looking ahead, we maintain a strong orders backlog, which was $126 2 million as of September 30th.
And $8 3 million increase since the start of the year we remained.
And focused on executing M&A and believe our funnel is still healthy and opportunities that we continue to actively evaluate.
As Warren mentioned, we're excited to recently, we have recently signed an LOI to acquire new business and expect to be able to share more soon.
On our low Capex model, we continue to generate strong free cash flow that enables us to take advantage of attractive growth opportunities, while returning capital to shareholders last month, we declared our ninth consecutive quarterly dividend of <unk> <unk>.
On slide six we highlight the macro tailwind supporting a sustainable growth opportunity for cadre foreseeable future. We continue to see a broad push to prioritize public safety in both the U S.
And abroad, and believe cadre is ideally positioned to capitalize on these secular tailwind over the medium and long term.
Turning to slide seven I'll take a moment to zoom in on current market trends and their impact on our business. We have not seen any signs of police hiring is becoming easier, but healthy police budgets continue to drive increased spending per officer.
Cadre is mission critical protective equipment has consistently prioritize when departments that are determining officer needs no matter the economic environment.
Police protection expenditures have continued to trend upward even during past financial and industrial recessions.
Moving to the next bullet in terms of the current geopolitical landscape and consequences for our core businesses, we continue to engage with partners and customers globally to meet orders that fit our model with that said, we expect there could be movement that creates demand for our products moving forward as the word in Ukraine.
Shifts to its next phase for example, we anticipate active discussions we've been having about providing EOD tools and equipment could lead to opportunities down the road based on the situation on the ground. It will take decades to clear the vast amount of unexploded ordinance in Ukraine, which expands the cycle of opportunity on the EOD.
Side for cadre, but likely will be focused on higher mix of <unk> might be protective where rather than <unk>.
Turning to supply chain and labor trends environment has been stable in recent months. Our team continues to do an outstanding job of proactively addressing supply chain issues.
And the extended lead times that we saw last year appear to be mostly behind us. We continue to be pleased with our progress attracting or retaining labor to meet our needs on.
On the consumer side, we saw 5% growth in our duty gear sales driven by our focus on new products. In this space. One example that has been very successful was the launch of the <unk> X holster, which we launched in partnership with Haley strategic in fact, the ink Cognex holster of one guns and ammo pollster of the.
Year.
<unk> commitment to innovation is a key differentiator and allows us to maintain our premium position in our core law enforcement first responder and military markets.
Following the introduction of our Hyperx tactical armor platform expert fit <unk> body sizing App and Safari ball lineup pollsters.
All launched in the last nine months, we continue to hear positive feedback from customers of note. We've experienced a 47% increase of tactical sarcode soft armor and the first three quarters of 2023 compared to the same period of last year with growth directly related and tied to hyperx.
I'll now turn the call over to our CFO blamed for hours. Thanks.
I'll begin my remarks by discussing our M&A strategy and the general acquisition environment.
<unk> summarized slide summarizes the key criteria that drive cadre is M&A process review potential transactions within three categories. Those that will expand our suite of products those that will enable us to enter new markets and those that will grow our geographic footprint.
We target businesses with high margins, leading market positions and strong recurring cash flows and revenues.
Per Warren's earlier remarks, we cannot be more specific about the recent LOI, we signed due to confidentiality obligations, but I can share that this business fits well within our platform and its profile is very much consistent with our key criteria.
Regarding broader M&A market to continue to be a tough financing market as lenders have significantly tightened our lending standards.
Bloomberg recently reported that the average multiple on new LBO deals is down one four turns from a year ago, reflecting this new environment that shows us that gap between buyers and sellers appears to be closing.
The next two slides are detailed third quarter financial performance as you can see in slide nine we increased net sales gross margin net income adjusted EBITDA and adjusted EBITDA margin in the third quarter, both on a sequential and year over year basis. The increase in net sales reflects our significant orders backlog and was mainly driven by higher domestic did.
And for all of our products and large orders for a crowd control products.
This was partially offset by decreased agency demand for hard goods.
Third quarter net income was $11 1 million or <unk> 29 per share grew nearly 125% compared to last year's Q3.
As we continue to implement our operating model advantage that positioning of our portfolio of premium products. During the third quarter, we achieved significant margin expansion for the second consecutive quarter. Our adjusted EBITDA margin of 19% was our highest since going public and gross margins increased 370 basis points year over year.
Illustrated on slide 10, as net sales and adjusted EBITDA growth year over year as you can see driven by increased revenue and improved gross profit margin cadre of nine months of 2023, adjusted EBITDA was up 2% versus last year.
Based on our third quarter performance and management's outlook for the remainder of the year. We have raised the midpoint of our full year adjusted EBITDA guidance range and increased the midpoint of our 2023 net sales guidance I will discuss our new guidance in a moment.
On slide 11, we present, our capital structure as of September 30, our net debt was $74 million a further reduction of 15% since the end of Q2. This gives us net leverage of <unk> eight times. These levels, we maintained significant financial flexibility to grow both organically and inorganically through acquisitions.
We provided updated 2023 guidance on slide 15, we've tightened our full year net sales range raising the midpoint. We do expect 2023 net sales to be between $477 million and $481 million, our upwardly revised adjusted EBITDA guidance range of between 80% to $85 million and.
<unk>, 10% annual growth on adjusted EBITDA versus our initial forecast of 4% at the end of the year.
Additionally, whereas the mid points of our original guidance implied adjusted EBITDA margin of 16 point to our success in the year to date has been significantly increased our expected expectations for the full year margins based on the updated mid points adjusted EBITA margins rise to 17, 4%.
While the prior year Q4 was our largest revenue quarter of the year. We now expect that Q3 will be the high watermark for revenue one of the large international orders that we expected to ship in Q4 was actually shipped ahead of time in Q3, changing this expectation, we do expect armor volume to be down sequentially and the mixed returned to normal.
Based on these developments along with the mix and EOD shifting in the less profitable products, we expect margins to be lower sequentially. I would also like to reiterate that for the most of our businesses. We only have 45 to 60 days of backlog visibility at any given time.
I'll now turn it over to Brad to concluding comments. Thank.
Thank you Blayne in summary, we are highly pleased with our strategic execution and the year to date, which is reflected in our strong third quarter and nine month financial results. Once again, we generated record EBITDA margins and quarterly adjusted EBITDA as we continue to implement our operating model focused on attaining an <unk>.
<unk> exceptional results, we are pleased to raise the midpoint of both our full year 2023, adjusted EBITDA and revenue outlook M&A continues to be a focus and we recently signed a letter of intent with a business that meets our key criteria, we expect to capitalize on additional attractive growth opportunities and remain confident that we will see more.
<unk> of these opportunities in the months ahead backed.
Backed by macro tailwind related to increasing public safety budgets and favorable industry dynamics. We believe cadre is ideally positioned to further grow our leading platform of premium safety brands moving forward with that operator, please open up the lines for Q&A.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Your first question comes from the line of Daniel <unk> with Stephens. Your line is open.
Yeah, Hey, good evening, everybody. Thanks for taking my questions.
Hey, Denny.
Maybe one on the international market that I think it was encouraging to hear you guys won won a contract there.
Laurent I think your comments kind of thing and it wasn't in the middle East that hasn't really materialized into new business. Yet. So one can you comment on what markets. You won the international contract and then two given what's going on globally, how long would it be before you expect that evolving conflict materialize into into some safety orders for you guys of the products.
Yes, let me I can take the first part and Warren you can jump in.
When I referenced the large international contract in Q3 that was originally planned in Q4 that actually in a.
North America outside the U S order Amish are controlled products, yes, we do have we have had some orders.
For Ukraine.
I think consistent as we've said, it's not been material to this point and really it will be and that the mining side of the world for the EOD suite. So sorry for EOD. So it won't be in the suits. It will really be in that D mining, which is a.
Less protective version of the annuity suite that makes sense Dave.
Okay.
Got it and could you quantify maybe the contract that was pulled from <unk> at all.
We can't disclose the data sensitivity, but.
Sure.
It was it was significant for the business I think as you kind of go through and look at the change in consensus that will give you a feel for the size and scale.
Got it and then maybe taking a step back here foreign cash continues to build on the balance sheet even for this pending deal.
Call. It a few million Bucks of EBITDA, you still should have excess cash assuming that on a normal month.
What do you view, the strategic or best uses of that cash or their capex projects. You can pull forward you guys don't have a ton of that is it a special dividend just how do you foresee deploying that capital back to shareholders.
In the absence of deals yet so.
Well.
The good news is.
We don't have an absence of deals something we're working on a number.
As we speak.
In fact, one.
We thought had gone away I think the last time, we spoke we talked about.
But we had bid on that.
<unk> had been withdrawn.
One of those is back.
So our pipeline right now is quite full.
And.
As the Guy said before.
The multiples are now reflective of the <unk>.
Cost of capital and.
While the overall environment. So we couldnt be more excited so our objective is to use.
To reinvest our cash.
In transactions.
The company that we're buying.
We have an LOI on.
Similar to our existing businesses and that one also has.
Low capex.
<unk> and has margins I think you know from the last couple of transactions. We've done we are we are trying to target.
EBITDA margins in excess of 20%.
Got it and then last one from me, Brad you mentioned productivity gains and some self help on the <unk> margin other than the timing of that contract anything.
One time in that leverage or are you're unlocking more savings maybe as you continue to scale the business and just turned over more stones on the productivity side. Thanks.
Okay.
Yes.
No.
Nothing significant one time Daniel was we look at productivity.
This is really that mantra of doing things just a little better each day.
Yes, we kind of look sequentially right, we use that as a good gauge of improving not just on a year over year basis, but where we better this quarter than last quarter. So this will be something we continue to build on and we've certainly seen some very.
Strong gains from the team on a year on year basis.
And sequentially. So we're really pleased with everyone's progress really across the globe. When it comes to the adoption of the operating model and daily management.
Really just pushing that business all the businesses forward.
Understood I appreciate the color and best of luck.
Thanks, David and thank you.
Your next question comes from the line of Jeff Van <unk> with B Riley <unk> co. Your line is open.
Hi, everyone. So just wanted to go back to the <unk> mining.
Suite I guess, you would call it the less productive version of the EOG can you just remind us of the dollar price point there versus a full sir.
When you think about a full Bob suite right you're upwards of $30000.
Right that are right around there this would be.
At <unk> mining silicon very bright in there is there is actually a level of between.
Jeff as we talked about with.
Commonly referred to as a tax six sooner attacked full suite as you move down to the mining.
There are certainly above kind of the body armor level below even the tax six protection.
That can vary depending on there's variation there, but you are you really talking.
Generally sub 5000.
In north of 1000.
Okay.
That is one of the restrictions around Vod sits as we kind of talk about the market. It's a fairly limited market right with about 20000 operators across the globe.
So there's just a limited number there right and we will continue to sell those and we continue to be done to prove and prospecting product of choice for those operators.
As you move down though with the mining allows you as US you don't have to have the same level of training you do with the <unk> you are addressing different levels of threat right and thats the different level of protection. The day mining, though is a much higher volume gain us. The teams are working very diligently with.
With partners and it really kind of working with Ukraine and different embassies across the globe.
Ensure that when the time is right here is the suite of products that we have available to ensure we protect the men and women that are out there, making the country safe again.
Again again.
That won't.
Again, the timing of that will be when the hostilities.
Yes.
Alright, because Brian Brian do that do that kind of work and the same in that same work needs to be done in Gaza as well.
Right that was going to be my next question was just have you had any inquiries around what's happening in the middle East.
So we are I.
I mean, we get inquiries.
Yes.
Israel is that as a customer.
We are.
Doing well.
Well, what we can but obviously the.
The.
Yeah, a lot of the stuff that's going over there right now is.
Emissions.
Weighted to iron development.
Just the bombs in trouble.
Alright, okay.
Okay. That's helpful.
And then just I guess anything just a quick follow up if I could just any update on the glass protection.
I'm sorry, the blast sensor product just wondering.
Kind of where we are with that.
Jeff do you talking about the <unk> sensors.
Yes, yes the sensor.
Yes, Okay, I just want to make sure. So on the blast sensor side of things still the same status as.
Previous quarter.
We expect where we're being told right now is the first quarter of next year is when we will receive that feedback on the current phase of the project that we're in so we're still in wait and see phase in terms of any changes in requirements as we go forward with that project, but.
So far no.
News is good news.
Okay, great. Thanks for taking my questions I'll take the rest offline.
Okay. Thank you, Jeff and talk to you a little bit.
And we will pause for a moment to compile the Q&A roster.
Yes.
And the next question comes from the line of Sheila.
Sheila <unk> with Jefferies. Your line is open.
Hi, guys. This is Sam gets us on here for Sheila Congrats on the quarter just wanted to ask quickly.
Other strong quarter gross gross margins and EBITDA margins.
Continued sequential performance is strong.
I mentioned EOD and armor mix should continue to normalize into Q4 can you just help us frame. Some of these other moving pieces within the implied EBITDA guide that steps down a few points sequentially here in Q4.
Yes.
Two biggest pieces are really.
Armour mix, we do have some larger armour orders in Q4 that we have visibility today on that we know will be.
The lower margins that we experienced in Q3.
It's really more of that normalization.
And then on the iOS side, as we think about the different products.
This would be moving away from EOD suits.
Doing more volume and some of our other product lines, such as tools and robots, which are just a lower margin lower margin profile in that quarter.
That's really the two drivers along with a little bit of volume leverage obviously with lower topline that's implied in that guidance.
Got it that's helpful. Thanks, and I guess.
Maybe just to step back and talk a little bit more on sort of top line.
<unk>, 12% year over year growth and up 3% sequentially against what's typically a seasonally soft Q3 can you just help us kind of bucket the growth drivers, but they're not in sort of.
You mentioned the large international order, but is there anything like timing of backlog or price or just more volume out the door.
That got pulled forward here in Q3.
Yes.
It's really it's really volume I mean, there is some price price sequentially.
Significant component.
There.
I think as you kind of think about the drivers there is nothing other than a large international order I mentioned in the cross control side Theres, nothing that really sticks out significantly.
Armour team in particular has had some significant volume Brad mentioned, <unk>, which is that soft tactical.
Continuing to deliver some hardware products as well coming off be driven really by the <unk> all day.
School extent last year, which is really going to be place in shields.
And those are really that those kind of drivers there other than that there.
There is nothing that really kind of sticks out that those those are significant numbers, we think that that large international order thats and thats, a very significant number for that business.
And impact in the quarter and again, it kind of imply where we can't really talk about the size of the order, but it certainly implied when you look at the change in guidance and certainly kind of Q3 Q4 change.
Great very helpful. Thank you.
Absolutely.
Your next question comes from the line of Matt Koranda with Roth.
Your line is open.
Hey, guys good evening.
Cover the margin swing for the fourth quarter, but I wanted to maybe get a better understanding of the <unk>.
Swing factors on the top line guide for the fourth quarter I guess implied in the guide you have like a $10 million.
Range.
Maybe just talk about the factors.
Swinging to the high end or the low end of that guidance range and then just are there any large orders and we should be thinking about that could get pulled in or pushed out that kind of factor in there.
Yes.
The push and pull is really.
As implied in that kind of range, Matt and certainly when we get to the end of end of the year.
If time gets critical you had holiday so anything that certainly when you think internationally anything that gets pushed out into kind of maybe decision point in kind of mid December then or even earlier than that tends to have some risk to it. So there is I think as we always get towards the end of the year, we get a little cautious on those orders.
Kind of where we sit today, we feel confident on.
The range on the high side.
There's a couple of significant orders related to armor.
Is it really going to be the kind of make or break.
Mr. Francis thing about the business and that visibility right that really tends to be the armor and duty here that have that shorter visibility, whereas the EOD tends to have that larger visibility. So we need to get all of our duty here is about those orders coming in when you move to the <unk> side, that's typically driven by maybe customer changes on delivery dates right.
We already have this from our in place or it could be driven by payments, where we are.
Prior shipments were waiting on a prepayment or a full payment. Those are those are really the kind of the two components that impact the range. There as we move into Q4, but I would say overall, Matt we effect, we've factored in when we built that that.
The revised range overall for any of those kind of potential situations. If this languishes referencing.
And that arent, great, but so if we kind of think about that too.
Our loss.
No we don't think about it as losing that would just be a push.
Got you. Okay. That's helpful guys and then just on the acquisition I know you probably don't want to say too much on it but just curious the language you used was.
That it's similar to the existing business does that mean, it could be an existing products or maybe just any any flavor for sort of.
But where it might be headed there.
We're not going to go we're not going to go there.
Just say.
It's a very comfortable business, we know the people and.
We're very excited about.
The opportunity obviously, we need to go through all the things that we go through.
Choir businesses.
We're working through the contracts and the diligence and so on but.
Yes.
<unk> by this one and I think.
When we can.
To speak about it specifically.
Yes.
I agree with us that it's.
It's a very strong deal.
Okay, great and to try there werent. Thank you.
Okay.
Yeah.
And the next question comes from Ron Epstein with Bank of America. Your line is open.
Okay.
Hey, good evening guys.
A lot's been asked but let me see.
If I can open the aperture a little bit.
One when you think about <unk>.
Good day.
Security.
As a broad definition right. So there are verticals that you don't currently play in.
Maybe more technically oriented tech electronics that kind of thing.
When we think about potential deals you could do.
How are you thinking about adjacencies and other verticals that arent, where youre playing currently yes.
That's great.
That's a great question so.
We have we have an extraordinary management team.
Led by Brad and Blaine.
Thanks.
They all have.
And operating model background, and so whatever we look at.
Those opportunities will need to benefit from.
The operating models, which we have been developing.
For our own business here over the last number of years and where you are seeing.
We're all seeing the benefit of that.
Right now so.
The transaction that we talked about earlier.
Yes, that's right on top of everything that we do.
Today, we would be looking at Adjacencies.
And.
And areas that couldnt qualify.
Tronox.
Have some capabilities.
In house on that Brad in particular has had personal experience.
And those.
Those types of things industrial safety.
And so on but again.
We are looking for those businesses that can benefit from the operating model and discipline that we have and I think also we spoke previously.
About.
The types of.
Margins that we would want to experience in those businesses. So.
We are looking only at opportunities where EBITDA margins are in excess of 20%.
There is not a lot of capex.
Required to.
To maintain and grow those.
Those businesses, but there seem to be more today available than there have been.
I think we're going to see.
Ron you probably know this from talking to a lot of your company.
Companies you cover there is going to be more.
Internal thinking about.
What.
Some of these larger companies about what they have what the mix is.
On divesting certain things that don't fit in and so.
It's pretty good.
Pretty ripe for us.
I'll also private equity.
As you.
You probably have read.
It's very difficult.
For new funds to be raised.
Even for the largest.
Firms.
And there are a lot of firms out there today that are that are orphans and.
With higher interest rates.
And so that it's forcing a lot of private equity firms to reevaluate.
What they have.
How long they can keep it.
They need to do with those assets.
Whereas encouraged as we could be.
Right now about.
Who we are what we do.
Our balance sheet as you know.
We're very careful.
About that.
Hopefully, it's very focused every day not just on the operating aspects of the business, but also on our balance sheet.
As well and so.
The disciplines.
Take forward with us as we're looking to buy.
Yes.
Super Thanks.
Your next question comes from the line of Mark Smith with Lake Street Capital markets. Your line is open.
Hi, guys, sorry, if I missed this earlier in the call, but can you discuss kind of new products. How those are performing especially a lot of those that we saw kind of introduced early in calendar 'twenty three.
Yeah, No hey, Mark this is Brad.
So new product lines.
Talked about a little bit earlier.
Really proud of the progress we've made and I know you've seen some of those hyper X product.
Experts at <unk> sizing the Safari volt line and then we have a whole host of consumer holster is that we've launched in.
Most notably our in Cognex holster, just one guns and ammo holster of the year. So we're really really proud about what we're doing from a new product perspective, when you look at the growth overall for the consumer side of things.
In our remarks showed a 5% increase on duty gear on the consumer side for Us and then <unk>.
Reported 40, 45 plus percent growth.
On the <unk> side of things so.
We love Engineers.
Where it would be a better place with more engineers quite frankly and.
Our teams have been fund with innovation and quite frankly spending a lot of time with customers and just understanding pain points and where we can continue to improve things.
It makes their lives better and continue to uphold our mission around saving lives.
Really proud of the results received.
Okay.
You bring up the kind of consumer side of the business doing well.
Any commentary we've seen higher demand in October following the events in the middle East.
Even domestically for some of those products any.
Any insights you can give us and maybe October what those trends look like on the consumer side of the business.
I think October has been a consistent with our expectations.
Which.
Yes, I think it was kind of the framework we've seen all year now our expectations are probably a little bit different than what you would expect in the market. That's really driven by the new product set as Brad mentioned and with great success.
Yes, I think when you look at the statistics, the consumer markets generally kind of certainly in this kind of space.
Down to nearly flat flattish to down, whereas with those new products, we're able to continue to expand our share and grow in those markets.
What we're seeing kind of early part.
The Q4 as well.
Perfect. Thank you.
Thanks Mark.
And there are no further questions at this time, Robert Williams, I will turn the call back over to you.
Thank you operator, I'd like to thank everyone again for joining us on today's call and you.
<unk> interest in country. Thank you.
This concludes today's conference call. Thank you and have a great day.
Okay.
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Yes.
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