Q1 2025 Cadre Holdings Inc Earnings Call
David
Good morning and welcome to Cadre Holdings' first quarter 2025 conference call. Today's call is being recorded. All lines have been placed on mute.
Speaker Change: Okay, at this time, I would like to turn the conference over to Matt Berkowitz of the I.D.J.P. Group for Introductions and the reading of the Safe Harbor Statement. Please go ahead, sir.
Speaker Change: Thank you, and welcome to today's conference called to discuss Cadre's first quarter results.
Speaker Change: Before we begin, I'd like to remind everyone that during today's call, we'll be making several forward-looking statements and we make these statements under the safe harbor provisions of the Private Security's litigation reform act of 1995.
Speaker Change: These four looking statements reflect their best estimates and assumptions based on our understanding of information known to us today.
Speaker Change: These four-looking statements are subject to the risk and uncertainties that face cadre in the industries and markets in which we operate. More information on potential factors that could affect cadre's financial results is included from time to time. In cadre's public reports, fathers, securities and exchange commission.
Speaker Change: Please also note that we have posted presentation materials on our website at www.contrate-oldings.com What Submin are comments this morning and include a reconciliation of certain non-GAAP financial measures.
Speaker Change: I'd like to remind everyone that this call will be available for replay through May 21. A webcast replay will also be available via the link provided in yesterday's press release, as well as on cadre's website. At this time, I would like to turn the call over to cadre's chairman and CEO Warren Kanders.
Warren Kanders: Good morning, and thank you for joining Cadre's first quarter earnings call.
Speaker Change: I am joined today by our President Brad Williams and Chief Financial Officer Blaine Browers.
Speaker Change: We are pleased to have reported first quarter results above expectations reflective of sustained demand for our best in class mission critical safety products as well as cadres outstanding strategic execution.
Speaker Change: In addition to important operational progress during the first quarter, which Brad and Blaine will outline, we have begun the year with the successfully completed acquisition of the engineering division from cars.
A well-established provider of products focused on our nuclear vertical.
Speaker Change: Since our IPO in 2021, we have consistently discussed our goal for cadre to evolve into a multi-vertical provider of engineered, mission-critical safety products.
Speaker Change: With the acquisition of Alpha Safety last year, we delivered on that promise.
Speaker Change: establishing a platform in the nuclear space with meaningful organic growth potential and a robust M&A pipeline. And the addition of the engineering division represents a critical next step.
Speaker Change: These are the best in class businesses, complimentary to a cadre's current nuclear safety focus, that manufacture highly engineered products, supporting mission critical initiatives within trench customers and compelling growth opportunities.
Speaker Change: We are excited to deepen cadre's exposure to the nuclear market while strengthening relationships with key international customers and providing an entry point to grow in new sub verticals.
Speaker Change: While our nuclear businesses already operate at attractive margins, we believe the Cadre operating model can help unlock further efficiency and profitability moving forward.
Speaker Change: We continue to see additional M&A as a possibility and maintain a robust pipeline of targets across all our current verticals, including the nuclear, law enforcement, first responders and military markets.
Speaker Change: We believe the current environment characterized by sustained interest rates, persistent uncertainty, and the growing backlog of actionable opportunities will continue to play to our strengths.
Speaker Change: We are reviewing a number of opportunities that are at various stages and we have the balance sheet strength to be opportunistic while also being patient and disciplined.
Speaker Change: On a macro level, like all businesses in the current operating environment, we are navigating a great deal of unpredictability and uncertainty.
Speaker Change: The important point to highlight, however, is that even in times of economic turbulence, Padre has delivered consistent and stable growth.
Speaker Change: Our resilience is a key differentiator with distances that are largely unaffected by economic, political, geopolitical, and other cycles.
Speaker Change: Overall, we are confident in Cadre's long-term outlook and remain focused on taking advantage of both organic and inorganic opportunities ahead.
Brad Williams: With that, thank you for being with us today, and I will turn the call over to Brad. Brad over to you.
Brad Williams: Thank you, Warren. On today's call, Blaine and I will provide a Q1 update and business overview including recent trends, financial performance in 2025 guidance followed by the Q&A session.
We'll begin on slide five.
Brad Williams: Find our best quarter as a public company in Q4 of 2024. We were able to achieve Q1 results ahead of expectations.
Brad Williams: as we continue to capitalize on strong and recurring demand for a best-in-class mission-critical safety products.
Brad Williams: While the uncertainty in many business environments has not abated, we are proud of our team's ability to navigate challenges and leverage the cadre operating model to drive continuous improvement every day.
Brad Williams: A key tenant of the model is leadership in product growth and innovation, and we have built a loyal customer base and strong relationships across our end market.
Speaker Change: and Matthew Berkowitz, Blaine Browers, Warren Kanders, Warren Kanders, Warren Berkowitz,
Brad Williams: And we're back on the live.
Thank you.
All right, sorry about that [inaudible]
Brad Williams: Some reason I lost landline connectivity there. So to pick right back up, a key ten of the model is leadership in product growth and innovation, and we've built a loyal customer base and strong relationships across our end markets, allowing Cadre to continue to deliver premium products at comprehensive price points.
Brad Williams: Turning to our product mix in the first quarter, it was less favorable, as expected, for in the Alpha Safety and EOV volume.
Brad Williams: On a positive note, orders backlog increase 22.4 million during the quarter, primarily driven by EOD and
Brad Williams: Regarding M&A, we maintain a healthy funnel of potential opportunities following the completion of our latest transaction.
Warren Kanders: As you heard from Warren, we were very excited to have acquired the engineering division of the engineering division.
Speaker Change: which accomplishes multiple key objectives for Cadre. These include adding scale to our nuclear vertical, a larger international footprint, and expanding nuclear tam with entry into exciting new areas like Automation, Robotics, and Nuclear Medicine.
Speaker Change: Following the deals close last month, we have begun the initial phases of integration. Our top priorities include working with the teams related to finance, accounting, IT, legal, and compliance. We look forward to implementing core federal operating model tools in the coming months.
Speaker Change: In terms of capital allocation, we continue to generate strong free cash flow enabling the company to score poor organic growth and the M&A objectives.
Speaker Change: While also increasing dividend payments last year, we increased our dividend and followed up with another 9% increase this year, reflecting our confidence in the strength and consistency of our business.
Speaker Change: Our most recent dividend was our 14th consecutive, and we remain committed to delivering meaningful shareholder returns while maintaining the balance sheet strength to execute our growth strategy.
Speaker Change: On slide 6, we lay out a number of long-term industry tailwinds supporting Cadre's growth opportunity across both our core LE and nuclear safety sectors.
Speaker Change: On the law enforcement side, we expect the long history of positive spending related to personal protection equipment to continue supported by bipartisan support for public safety.
Speaker Change: Similarly, we see considerable long-term tailwinds underpinning growth in the nuclear market, which we believe are best understood by highlighting three key nuclear silos, as you've heard me mention before.
Speaker Change: Environmental Safety is one, based on our growing demand related to decades of US nuclear material processing and handling.
Speaker Change: National Security is another, with expanding national defense programs driving consistent and growing demand.
Marshall Nuclear Energy as the Third .
Speaker Change: and we continue to anticipate opportunities for our nuclear safety business in the future as small and modular reactor projects develop and SMRs become operational.
Speaker Change: As we think about more current market trends, we are seeing multi-directional support for nuclear coming in many forms. Supportive nominations and appointments continue to flow with the new administration for key federal positions, and there is a push to reform the Department of Energy's construction permit regulations for U.S. National Labs.
Nuclear Modernization is a strong priority within our administration.
Speaker Change: Turning to slide seven, I'll take a moment to talk about a couple of other developments in our business environment.
Speaker Change: Ben Per officer remains stable in North America, and a critical point to highlight is that when it comes to budget decisions, we have seen repeatedly throughout cadre history, customers prioritize life-saving tools and equipment to protect first responders.
Speaker Change: Zooming in on our consumer channel, which represents approximately 7% of contract sales after the acquisition of the Incendiary Division, we are monitoring broader weakening trends in the market.
Speaker Change: However, Cadre's brands have shown resilience to date based on the strong followership we've established and well received product introduction over the last 24 months.
Speaker Change: Innovation is at the heart of everything we do, and we are proud to have recently announced the next step in our collaboration with Axon on a new suite of holsters and accessories integrating signal technology for law enforcement.
Speaker Change: This involves a sensor turning on the axon body camera when an officer draws their weapon from sparring land holsters and ensures critical incidents are captured without officers having to manually activate their cameras, allowing them to stay focused on the situation
Speaker Change: New products include nearly 30 holster fits with Signal Technology Integrated. These fits include our recently launched Balanced Duty holster, where significant time was spent with axon, optimizing the placement of sensor technology as the holster was designed.
Speaker Change: to optimize signal performance and longevity. For the first time, we're also offering six new signal sensor compatible pouches for non-firearm equipment like OC spray, batons, and handcuffs, helping agencies expand camera activation coverage beyond just firearms.
Speaker Change: Before I turn it over to Blaine, I'd like to provide…
Speaker Change: As you will recall, last quarter I spoke about shifting priorities within the new administration and the potential for delayed transactional processes within certain federal agencies and changes to the rhythm of how these organizations have traditionally operated. We're attracting these developments very closely without any major changes.
Speaker Change: As we look forward, while there is clearly continued uncertainty in our business environment, specifically related to tariffs, which Blaine will discuss more shortly, Cadre has a history of resilience and we are confident in our ability to navigate these challenges.
Speaker Change: and sustained exceptional results. I'll now turn the call over to our CFO Blaine Browers.
Speaker Change: Thanks, Brad. I'll kick off my comments with the review of our recently completed acquisition, as well as our overall M&A strategy. As you heard from Brad and Warren, we finalized the acquisition of the engineering division from CARS Group in April . We've outlined transaction highlights on slide 9, and I'll touch on a few here.
Speaker Change: These are industry leading niche brands providing products and engineered services for our nuclear safety and protection.
Speaker Change: In combination with our current expertise in material handling, manufacturing, and radiation protection.
Speaker Change: We believe the new division's premier technology, particularly in remote handling and robotics, uniquely positions cadre to deliver unparalleled capabilities to a global customer base.
Speaker Change: with a manufacturing footprint in the UK and Germany, as well as the US, the acquisition also accomplishes strategic objectives in terms of expanding cadre's presence in international markets and strengthening relationships with key international customers.
Speaker Change: Overall, we view the addition of these brands as an important next step in scaling on nuclear products category, and we anticipate additional opportunities to augment growth through select acquisitions.
Speaker Change: Across both nuclear and core law enforcement targets, our M&A funnel remains robust, and as always our approach will be patient and disciplined. We continue to evaluate actionable opportunities focused on complementary businesses with strong margins, leading in defense market positions and recurring revenue.
Speaker Change: Turning now to a summary of cadre's financial performance, slide 11 and 12, detail our first quarter results.
Speaker Change: As we've discussed before, certain products in our portfolio of projects that can move our revenue timing around in any given year
Speaker Change: He won net sales of 130.1 million in adjusted EBITDA of 20.5 million, where above our expectations
Speaker Change: Upnote, first quarter gross margin improved 130 basis points year-over-year, driven by prior year inventory step-up memorization, along with favorable Q1 pricing.
Speaker Change: Illustrated in slide 12 as net sales and adjusted EBITDA growth year over year, including our new 2025 guidance which I'll discuss more in a moment.
Speaker Change: After completing CARS acquisition, this outlook implies full-year revenue and adjusted to EBITDA growth of 11.6 and 11.5% respectively at the midpoints.
Speaker Change: On slide 13, we present our capital structure as of March 31, 2025, prior to the completed
Speaker Change: Even after the acquisition, we continue to have significant financial flexibility to pursue organic and organic opportunities with a pro-form and net leverage ratio less than 1.75 times.
We provided update at 2025 guides on slide 14.
Speaker Change: Net sales are expected to be between 618 and 648 million are adjusted EBITDA guidances between 112 and 122 million and applying adjusted EBITDA margins of 18.5%.
Speaker Change: To put these new ranges in the context, we have reaffirmed our previous organic guidance with the higher midpoints reflective of the completed acquisition, assuming the engineering division contributes approximately 46 million in net sales and 6.5 million of EBITDA.
Speaker Change: I noted that our guidance ranges today also reflect the estimated impact of tariffs and assume that mitigating actions help offset future potential impacts.
Speaker Change: Based on understanding of tariffs as of March, when we reported Q4 earnings, our initial assumption had been that on an annualized basis we would see incremental cost to cadre in the range of 18 to 22 million.
Speaker Change: Not building any offsetting mitigation. That original estimate was provided at a time when there were no exemptions for USMCA and the majority of that terror phrase was driven by US tariffs on imports from Canada, Mexico.
Speaker Change: With the current exemption, the anticipated impact on Cadre significantly less than we had originally forecasted. We have included the tariff impact for China as of today, along with our countermeasures to offset that tariff pressure.
Speaker Change: Our current view is that we can solely offset any pressure generated by terrorists that are in place today.
Speaker Change: With that said, as we have all seen, Tara Paulson remains uncertain and continues to evolve. Our focus remains on controlling what we can, and we are practically strategizing in terms of which actions and countermeasures are the most viable as the environment changes.
Speaker Change: We have taken steps to mitigate tariffs across our businesses and continue to position our portfolio of brands to be successful in both the short-term and long-term.
Speaker Change: As we think about the remainder of the year, we expect revenue to be up sequentially about 17% with adjusted even margins around 17%
Speaker Change: We are taking a conservative approach as we've owned the nuclear businesses for less than 30 days. We continue to expect the second half to be stronger than the first half driven by armor and EOD project timing.
I'll now turn it back to Brad for concluding comment.
Speaker Change: Thank you, Blaine. As you can see, we're taking a strategic approach during this uncertain time to not only maintain the grow earnings, invest in future opportunities and position cadre for long-term success, regardless of the operating conditions we face.
Speaker Change: Supported by cadres and trance positions in favorable industry trends across our law enforcement first responder military and nuclear in markets, we're excited to continue to build our platform and further enhance our market leadership moving forward.
Speaker Change: Toplimenting our core organic growth initiatives, we are actively evaluating attractive M&A opportunities to add complimentary businesses with strong margins, leading and the principal market positions and recurring revenue profiles.
Speaker Change: Overall, we believe Cadre is well-positioned and navigate in a near-term, off-skills based on our track record of effectively addressing supply chain disruptions in the past and consistent high-level execution in line with our strategic objectives.
Speaker Change: We look forward to continuing to update you on our progress. With that operator, please open up the lines for Q and A.
Speaker Change: Thank you, we will now begin the question and answer the question.
Speaker Change: If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.
Speaker Change: If you would like to withdraw your questions in your press, part one again.
Speaker Change: If you are called up and to ask your question in a listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not a mute when asking your question. Your first question comes from the line of Greg Conrad with Jeffries, please go ahead.
Good morning.
Greg Conrad: Maybe just to start, I was hoping to put a finer point on the pricing commentary given seem to exceed the targeting Q1. How do you think about the contribution in the quarter and maybe just given the timing? How does that contribute to the rest of the year?
Greg Conrad: From the tariff perspective and pricing, we did our normal pricing that we would do every year January 1, we put in some countermeasures as the tariff.
Greg Conrad: Tariff announcing to form up, but that was really Q2-based.
Greg Conrad: So for Q1, there was a significant impact, and then as we look forward, we expect to be able to fully offset the terraces as of today.
Greg Conrad: As I mentioned, as well as Brad Moore and did, this is a evolving environment, so we'll stay close to it, but as of today with what's been announced, we feel comfortable with our ability to offset any any tear of pressure for the remainder of the year.
and then maybe just following up on the engineering acquisition.
Speaker Change: You know, you mentioned the geographical diversity. I mean, how do you think about-
Greg Conrad: The Revenue Synergy Opportunity on the Distribution side, just given kind of the expanding customer base and just any timing in terms of exercising that option.
Greg Conrad: Yeah, so the, when you look at the customer base there, so this gives us a couple, couple things, one geographic expansion. So when we, when we required alpha safety.
Part of that strategy was to grow geographically with…
with them and some of their products. In the customers that...
Greg Conrad: They didn't have tight relationships with within their product categories. For example, we've mentioned in the past, like Celefield, which is in the UK, one of the largest disposal sites in the world.
Greg Conrad: So what this gives us is when you look at the engineering division that we acquired, there are various brands that have very good relationships with Seville Phil already in the UK, and then within some of the brands that we acquired, they also have
Greg Conrad: Relationships and Install Base, for example, in customers like Fukushima in Japan.
Greg Conrad: So part of that strategy was to be able to have those out-of-the-safety products that we could then begin to present to those customers and then in the UK example, you know, manufacturing wise, it gives us that footprint to manufacture locally for the product categories that we have.
Well, I'll leave it at two. Thank you.
Thank you.
Speaker Change: Your next question comes on the line of Mark Smith with Lake Street Capital Markets. Please go ahead.
Mark Smith: Hi, guys. First question for me is just as we think about kind of timing and kind of flow of business here through the rest of the year, any lumpiness or timing of shipments, maybe that you have visibility on now that we should be aware of.
Mark Smith: Yeah, thanks for the question. And as we've talked about before, we do have somewhat limited backlog visibility, so the quarters do tend to move around a bit.
Mark Smith: So if everything I say, I just want to caveat it that, you know, it's moved forward to the year and we get a little more clarity, it will provide updates. But, you know, right now we do expect Q2 to be, you know, up from Q1, and then we look across the quarters for the remainder of the year. Right now, Q4 seems to be shaping up to a. Okay.
The biggest quarter of the year.
Mark Smith: and honestly not much different than Q4 of last year. Down slightly, obviously, as we had.
Mark Smith: You know, the bump is we ship that incremental backlog in Q4 last year, but some of those projects in particular on EOD and armor are looking more, are looking heavier in Q4.
before.
Mark Smith: Perfect. And then just as we think about tariff medication outside of pricing, there are other steps and things that you guys are doing.
Mark Smith: You know, that you can give us insights into as far as moving any production or adding capacity domestically and anything that we should be aware of.
Mark Smith: Yeah, Mark, there's, you know, like we talked about last time, the same items are still on the list that we're working through. So, first was working through any kind of mitigating, you know, price increases. So we feel like we've
done that piece the second.
Mark Smith: Side of things on the list was looking at what I called product line shifts, not moves necessarily. For those of us who have been in this for a long time, we all know that product moves or factory moves can be take a lot of time and a bit challenging. So for us, we've got various options to shift some product categories around between facilities. I think we use the example of our bomb suit production we have in.
Mark Smith: Two countries in the US and also in Canada where headquarters that for that part of the business and we frequently on a daily basis, you know, shift production between those two facilities. So it gives us that optionality, we have that within some other product lines without going through all those.
Mark Smith: So that was the other one, and then the team's been working on productivity acceleration.
Mark Smith: So we run on a 12 month rolling funnel within our operating model. It's just a standard part of our monthly business reviews and each of the folks that lead the business units have 12 month rolling productivity funnels and you know what that's the teams to do is to get all your manufacturing engineers together and start talking through you know what additional projects can we do to accelerate productivity and the teams going to be walking me through that here in the next couple weeks and see what what we can do to accelerate those.
Excellent. Thank you.
Speaker Change: Your next question comes from the line of 10-1 Sinderen, with B-Lily securities, please go ahead.
Speaker Change: Hi, good morning everyone and let me say congratulations on the strong Q1 metrics.
Uh, um...
Speaker Change: So, first question, I wanted to see if we could circle back a little bit. I know that...
Speaker Change: Last quarter, we touched on potential procurement delays or maybe disruption, resulting from changes in the broader government agencies. Just wondering if you've seen anything there or if it's been fairly steady.
Speaker Change: and if you're anticipating that it will be steady as far as you can see, I guess.
Yeah, no, thanks. Thanks for the question. So
Speaker Change: You know, it's so far, we can talk about what we've seen. So, you know, we talked about [inaudible]
Speaker Change: Or at least I talked about, you know, last quarter, you know, potentially having a you know, you know, any kind of disruptions due to any those changes in the federal side of things with, you know, any positions being eliminated and more on the transactional side of things. We saw it during COVID. We saw it in the US. We saw it in Canada, where it took folks a bit of time to, you know, get reorganized and together to, you know, get purchase orders cut and things like that. We have not seen that. [inaudible]
Speaker Change: at this point in time, so we've not seen any major changes there. There's been some talk in the news around sanctuary cities, for example, and potential effects there. We have not at this point seen any effects to our business on that side of things either. So we've got our ears to the ground. Don't forget even though we go through third party distributors around the world.
Speaker Change: We also have three of our company own distributors up the East Coast in the US so we rely on ourselves folks there to make sure that we're keeping abreast of everything and then we have our own sales teams internationally and then here domestically so we feel like we've got a good net of context to make sure that we stay on top and continue to see what's going on.
Okay, great.
Speaker Change: and then given the recent closure of the CARS acquisition, I guess just will maybe a little more focus on nuclear. Any more color you can share on what you're seeing in the overall nuclear market demand for your business lines there, and I guess your outlook for that segment for Organic Growth?
Speaker Change: And then as we think about M&A, and I know this is a tough question because it's sort of opportunistic, but
Speaker Change: At this point are you more focused on nuclear M&A or similarly focused on L.A. M&A?
Speaker Change: So I'll work those backwards and let me know if I miss something there with the multiple parts for the question, but you know our phone is about that.
. . . . . . . . . .
Speaker Change: Our funnel is robust in both sides of things. And when I say both sides, that's the public safety side and also the nuclear side of the equation. We're not putting an emphasis on, you know, we're not waiting either, either funnel. Everyone knows that M&A, when you have those opportunities, you got to take advantage of it. You go after them. Now, as you guys know, we've been using that...
Very, very disciplined approach to that as we go forward.
Speaker Change: But we have opportunities in both sides of it. We're working in a nuclear funnel, which as we've talked about before, you know, a lot of that funnel came with acquisition of Alpha Safety, which has been great. The Alpha Safety folks have, if um,
have been involved.
Speaker Change: and Health Identify Additional Acquisitions. They've got contacts throughout the market. It only continues to help as we now have the engineering group, the amazing grants that we required with Wollish Miller and Bindle's Engineering and NW Total and New Vision. Those are all great brands throughout the nuclear side of things, so we feel good about, you know,
Speaker Change: with the car's engineering division acquisition and next time we'll see.
Speaker Change: and then on the nuclear front, you know, with law enforcement, you know, we've talked about in the past, budgets are typically when you look over the long term anywhere from
Speaker Change: You know, 2.8% and 3% Kager over 10-12 years when you look at those budgets and they remain consistent no matter typically whether it's industrial recession, financial recession, COVID, deep on the police
Speaker Change: That's probably love that part of the business. It's been, you know, very consistent. And then that consistency, what we do with it with our operating model, we feel like is pretty amazing. On the nuclear side, when you look at it, it's we estimated about a four to six percent grower over time.
Speaker Change: You know, in terms of demand, we've not seen changes in demand. Actually, we've seen with the new administration, you know, there's various appointments to continue to flow through on that side of things, which is good. That's a positive indication. And when you look at various countries around the world, you know, the focus on nuclear, for example, just taking one of the three that we always talk about, nuclear power, for example, you know, there is a, you know, phenomenal support for nuclear power as a clean form of energy.
Speaker Change: and Stopperline on various countries for power and other forms and focus on your own destiny which is on the nuclear power side.
Speaker Change: and then the last one is just seeing the support from tech companies on nuclear in terms of power that's needed for them to really support AI work that they're doing.
Speaker Change: So there's multiple commitments from various tech companies on nuclear power plants and on that front so you know it's very positive when we look at what we can do in the nuclear space and how we can begin to pull this all together.
Speaker Change: Okay, good to hear. Thanks for taking my questions. I'll take the rest off one.
Okay, thanks [inaudible]
Speaker Change: Her next question comes from the line of Larry Solow, with Cynthia S. Securities, please go ahead.
Great. Thanks. Good morning, everybody.
Most of my questions have been answered.
First question on that.
Speaker Change: The Q1 Results, obviously somewhat better than the initial expectations of the Q1 God you had given.
Speaker Change: Sale, Still Decline, like 6% and maybe closer to 10% organically. I guess the two questions I have there are sort of the remind us just on the year of a year.
Speaker Change: Drop, I believe was just primarily to a difficult comp, right? You're the I think last year you grew really strong Q1 and then the second part of that question is what was the sort of the Delta, what drove kind of the upside this quarter relative to your sort of expectations initially, then I'll be followed.
Speaker Change: Right. No, thanks Claire for the question. You know, it really was a tough comp in Q1 to 2024. You know, one of the biggest things that was unusual for us was.
Speaker Change: You know, a pretty large Q124 for our armor business in particular with a federal law enforcement agency, you know, typically we would expect Q1 for armor, maybe not the DV.
Speaker Change: You know, lower, lowest quarter of the year, but that's certainly not one of the bigger quarters of the year and, you know, X, give the Q3 event last year it would have been the largest quarter for that business. [inaudible]
Speaker Change: Yeah, the other piece, and we knew this coming into the year, you know, Q1 and the E of D space was going to be light. You know, this is. [inaudible]
Speaker Change: and not a typical layout for the business, but it's just dependent on those large projects, right? There's just a limited number of bomb suit opportunities in the world. And so how the stack up in a given year really has impact on their revenues. So,
Speaker Change: You know, that's really I think the driver on that year over a year if we kind of went back to what we guided to, you know, a couple months ago.
You know, expectations.
Speaker Change: You know, actually the armor business was able to generate a little more revenue than we expected in the quarter as well as Eoglu, so we both had really surprises to the to the upside on the team that were just able to execute on.
Speaker Change: Some of those orders a little bit more quickly, both on getting the orders into backlog, but as well as shipping in the quarter. So, you know, teams did a great job navigating that as well as, you know, I would say the general and certainly in the market. So, we're very pleased with the Q1 results.
Speaker Change: Gotcha. And how about on the margin side? Yeah, at least on the growth side, I think it went up 130
Speaker Change: on a lower sales number. They may have been a little bit less adjustments I guess this year too as well but still just from a high level looks you know like a pretty good number considering so drivers there and I guess opportunities going forward to continue in the end of the year.
Expand on the Girl Spartans side
Speaker Change: Yeah, we did have a bit of a helping hand in the sense that we didn't have the repeat of the inventory step up that was associated with, you know, eye core and alpha last year in Q1 and did that account for about 60 bits of the list.
Speaker Change: So, you kind of remove that piece and we still had a really strong execution on price and productivity.
Speaker Change: by the team, you know, which is, you know, to agree what we expect and write really what the teams work on every day, so...
Speaker Change: You're very pleased to see those margins continue to, to end shop.
Speaker Change: I'll say that won't happen every quarter, but over the course of a year, we do expect those margins to improve between pricing and productivity, and it was a relatively flat impact for us in Q1, so this has really resulted just the strong execution of the teams.
and just on the on the cars, the incremental
Thank you.
Speaker Change: for the Outlook. It looks like you're basically keeping numbers similar to the kind of at least around 12 months. Daddy, you're providing, I think, from...
Speaker Change: I think it was August the 24th. So fair to say, maybe you keeping it sort of flat-ish, but as you mentioned, you just acquired it and no reason to be here or was that kind of a way to look at the outlook.
Speaker Change: Yeah, I think very similar to how we approached, you know, Alfa Laster, Alfa had similar timing, right, deal closed and we were out with earnings shortly thereafter, you're much the same with the cars engineering group. So we want to have it's early days, right, we've obviously done a lot of work on diligence.
Speaker Change: Now that they're part of Codre, we'll continue to dig in. And as we move through the year, we will absolutely sharpen the pencil. But at the gates, we want to take a. And we'll continue to dig in.
Speaker Change: A Practical Approach on Guiding. And as you said, we kept the four core guidance, the quarter organic guidance flat, which I think is honestly in this today's environment, a pretty strong indicator of how we feel the years shaping up and in demand continues for us.
Thanks, Blaine. I appreciate it.
Thank you.
Speaker Change: Your last question comes on the line of Matthew Koranda with root capital, please go ahead
Speaker Change: I guess a lot of been asked and answered but I guess just on cars it looks like no surprise it's coming sort of at that mid teens
Speaker Change: Adjusted even a margin that you guys had talked about around the acquisition, but what levers do you have in the near term to bring that up, sort of to the corporate Adjusted even a margin?
Speaker Change: and help us maybe blaine if you could just understand how that spreads into gross margins and the near term is that where we need to dilute in the near term, maybe just a little bit more detail on that.
Speaker Change: Yeah, hey, Matt, it's Brad. I'll start us off on that one. So, you know, when you look at, you know, synergies and, you know, our recipe is...
Speaker Change: As I mentioned, the prepared remarks is to start with
Speaker Change: I.T., Finance Accounting, Legal Compliance, you name it. That's kind of the foundational type stuff. We've got to make sure that we get arms around, make sure we get it integrated or not integrated.
Speaker Change: or just become extremely familiar with it. So that's where we focus the first 120 days. We try not to go in and
Speaker Change: You know, begin to lay in an operating model on top of those priorities within these businesses. So that's what we'll start out doing. And then, you know, we've got a
Tudor Operating Model, Boot Camp, Scheduled
in, I think, in July .
Speaker Change: Time Frame, and we're going to hold it in Europe so that we can have the time.
Speaker Change: Engineering Division folks, the leaders and their leadership teams there attend and then we'll be bringing some of the other facilities we have with the public safety side some of their leadership folks into it and we'll hold the boot camp and that's where it all gets started. So.
Speaker Change: At that point, we'll begin to work through and typically begin to identify what are those other opportunities that we'll see within the business to improve any margins, talent, retention, engagement, all the elements within the operating model.
Speaker Change: And then on the, the margins on that for your question, on an adjusted basis, non-GAAP , excluding, you know, DNA, we expect them to be around 40%. So you're slightly dilutive out of the gates.
Speaker Change: of Noto, that would exclude stuff up as well as intangible amortization that would fall in the gross margin.
Speaker Change: You know, it's it's early obviously as we work through the opening balance sheet, but if we kind of look back to what we saw for for alpha and I core, you know, same 10 million between the amersation and step up, maybe kind of split 50, 50 down the middle is. [inaudible] you know, you know,
Probably a good place to start on me, the modeling side.
Speaker Change: and then as we move forward, as Brad talked about the opportunity, as it relates to the operating model, we'd expect that improvement to be mostly in the gross margin line, we don't see this acquisition as an opportunity to...
Speaker Change: The strip out, you know, SGNA, this is, you know, well-run businesses provide unique opportunities for us to continue to expand internationally on that nuclear platform and honestly bring some of the international products in the US markets. So this.
Speaker Change: This will be, you know, on the gross side, but really more focused on the gross margin side. And moving those margins up to Yolkhajra level and then leveraging the volume growth to get the e-button margin up.
Speaker Change: Okay, that makes sense because I appreciate it. And then maybe just a broader question noted that there's no real tariff impact anymore, just given that a lot of what she sources Canada and Mexico, so we're exempt now.
Speaker Change: from the Terrafersium. Any reconsideration, I guess, of the production footprint and light?
Speaker Change: of the changes that we've gotten here to date from the administration. Just wanted to hear your thoughts on how we're thinking about our posture and production mice.
Speaker Change: and I'll let Brad answer the production location side of it, just
Speaker Change: No Declarity on Tariffs, that 18 to 22 million was primarily driven by that Canada and Mexico Tariffs.
Speaker Change: We still have exposure on China while it's not material and we have actions in place to offset so there still is some impact in there that we've baked into the guidance along with our countermeasures around price and productivity.
Brad Williams: But, and I'll turn over, Brad, he can talk about the geographic footprint manufacturer.
Yeah, on the footprint side of that word.
Brad Williams: You know, overall, I'll say we're happy with our footprint and we're at we've done a lot of facility type footprint work in the early days. [inaudible]
Brad Williams: You know, and make quite a few changes from that aspect. At this point, you talked about, you know, over the last.
Brad Williams: 12, 14 months, you know, mitigating some, you know, risk on our two on a Mexico location. You know, as we've seen, you know, statutory increases in, you know, labor calls.
Brad Williams: Go up in that region. So we've done work there. We've not talked about what what country that we've we've worked within, but you know, we've we've definitely um you know.
Brad Williams: I've done a lot of work around mitigating some of the calls on that front and it's gone extremely well and we continue to look at ways to increase production in that area. So that's one mitigation that we worked on and did that well before any of the tariffs, type stuff come up.
Brad Williams: In terms of other location footprint, when you look at the nuclear side of things in the facilities that we have, the nuclear facilities internationally are all.
very strategically placed. You know, there's a facility in the UK that's...
Brad Williams: near about a couple hours from London that's positioned closer to Celefield that's...
who supports the Selefield folks there with some products.
Brad Williams: We've got NW total that's positioned closer to a couple larger customers and the nuclear sub side of things be a systems and rolls Royce, for example.
Brad Williams: Bendel's engineering is positioned well in the UK, so geographically we like where those locations are at.
Brad Williams: Volish Miller is in Germany and they're supplying globally around the world, including the US, so, you know, you never know as we go forward as we continue to build things out but at this point, you know, we're pretty happy with where we're sitting for print wise.
Okay. Appreciate it, guys.
Speaker Change: That concludes our question and answer session. I will now turn the conference back over to Brad Williams for closing remarks.
Brad Williams: Okay, thank you. Thank you operator. I'd like to thank everyone again for joining us on today's call and for your continued interest in Cadre Holdings. Thanks a lot. Have a great day.
Speaker Change: This concludes today's conference call. Thank you and have a great day.