Form: 8-K

Current report filing

August 8, 2023

Exhibit 99.1

Cadre Holdings Reports Second Quarter 2023 Financial Results

Achieved Revenue, Net Income, Gross Margin and Adjusted EBITDA Growth

Achieves Record Quarterly Adjusted EBITDA of $22.8 Million and Adjusted EBITDA Margin of 18.8%

Expects Full-Year 2023 Net Sales of $427 to $484 Million and Raises 2023 Full-Year Adjusted EBITDA Range to $80 to $84 Million

JACKSONVILLE, Fla., August 8, 2023 – 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 and six months ended June 30, 2023.

Net sales of $121.1 million for the second quarter; net sales of $232.8 million for the six months ended June 30, 2023
Gross profit margin of 41.9% for the second quarter; gross profit margin of 41.8% for the six months ended June 30, 2023
Net income of $11.0 million, or $0.29 per diluted share, for the second quarter; net income of $18.0 million, or $0.48 per diluted share, for the six months ended June 30, 2023
Adjusted EBITDA of $22.8 million for the second quarter; Adjusted EBITDA of $41.4 million for the six months ended June 30, 2023
Adjusted EBITDA margin of 18.8% for the second quarter; Adjusted EBITDA margin of 17.8% for the six months ended June 30, 2023
Declared quarterly cash dividend of $0.08 per share in July 2023

“Our significant momentum continued in the second quarter, as we generated improvements in quarterly net sales, adjusted EBITDA, and net income both sequentially and year-over-year,” said Warren Kanders, CEO and Chairman. “Based on outstanding strategic execution and strong and recurring demand for our best-in-class mission-critical safety and survivability equipment, we are pleased to increase our full year 2023 adjusted EBITDA outlook. We continued to make progress expanding margins in the second quarter, driven by further implementation of our resilient and proven operating model. Our Q2 adjusted EBITDA margin of 18.8% was our highest since going public, with gross margins increasing 530 basis points compared to last year.”

Mr. Kanders added, “The consistency and strength of our financial results are a testament to Cadre’s innovative product offering, premium brands, and superior execution, underpinned by leading positions in law enforcement, first responder and military markets. We remain on track to deliver record full year net sales in 2023 and are ideally positioned to capitalize on organic and inorganic opportunities ahead to further enhance our market leadership over the long-term. As we continue to actively evaluate a robust pipeline of potential M&A transactions, we are steadfast in our patient and disciplined approach and focus on high margin companies with leading market positions and strong recurring revenues and cash flows.”

Second Quarter and Six-Month 2023 Operating Results

For the quarter ended June 30, 2023, Cadre generated net sales of $121.1 million, as compared to $118.2 million for the quarter ended June 30, 2022. The increase was primarily the result of the Cyalume acquisition, armor and holster volume, and agency demand for hard goods, partially offset by timing for our EOD products.

For the six months ended June 30, 2023, Cadre generated net sales of $232.8 million, as compared to $222.6 million for the six months ended June 30, 2022, mainly driven by recent acquisitions, armor and holster volume, and agency demand for hard goods, partially offset by timing for our EOD products.

For the quarter ended June 30, 2023, Cadre generated gross profit of $50.7 million, as compared to $43.2 million for the quarter ended June 30, 2022. For the six months ended June 30, 2023, Cadre generated gross profit of $97.4 million, as compared to $83.4 million for the prior year period.


Gross profit margin was 41.9% for the quarter ended June 30, 2023, as compared to 36.6% for the quarter ended June 30, 2022, mainly driven by favorable pricing, favorable product mix, prior year amortization of inventory step up related to acquisitions and productivity net of inflation. Gross profit margin was 41.8% for the six months ended June 30, 2023, as compared to 37.5% for the prior year period.

Net income was $11.0 million for the quarter ended June 30, 2023, as compared to $4.4 million for the three months ended June 30, 2022. The increase resulted primarily from the change in year-over-year revenue and the increase in gross profit margin.

Net income was $18.0 million for the six months ended June 30, 2023, as compared to a net loss of $5.7 million for the prior year period, primarily due to the change in year-over-year revenue, the increase in gross profit margin, and a decrease in stock-based compensation expense.

Cadre generated $22.8 million of Adjusted EBITDA for the quarter ended June 30, 2023, as compared to $18.4 million for the quarter ended June 30, 2022. Adjusted EBITDA margin was 18.8% for the quarter ended June 30, 2023, as compared to 15.6% for the prior year period.

Cadre generated $41.4 million of Adjusted EBITDA for the six months ended June 30, 2023, as compared to $32.6 million for the prior period. Adjusted EBITDA margin was 17.8% for the six months ended June 30, 2023, as compared to 14.6% for the prior year period.

Product segment gross margin was 43.7% and 43.6% for the second quarter and first half of 2023, respectively, compared to 39.0% and 39.5% for the prior year periods.

Distribution segment gross margin was 23.1% and 23.6% for the second quarter and first half of 2023, respectively, compared to 18.2% and 21.4% for the prior year periods.

Liquidity, Cash Flows and Capital Allocation

Cash and cash equivalents increased by $10.5 million from $45.3 million as of December 31, 2022 to $55.8 million as of June 30, 2023.
Total debt decreased by $7.0 million from $149.7 million as of December 31, 2022, to $142.7 million as of June 30, 2023.
Net Debt (total debt net of cash and cash equivalents) decreased by $17.4 million from $104.4 million as of December 31, 2022, to $87.0 million as of June 30, 2023.
Capital expenditures totaled $1.5 million for the second quarter and $2.5 million for the six months ended June 30, 2023, compared with $1.4 million for the second quarter and $2.5 million for the six months ended June 30, 2022.

Dividend

On July 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 August 18, 2023, to shareholders of record as of the close of business on the record date of August 4, 2023. The declaration of any future dividend is subject to the discretion of the Company's Board of Directors.

2023 Outlook Update

As a result of the Company's second-quarter performance and management's outlook for the remainder of the year, Cadre increased its full-year Adjusted EBITDA guidance. For the full year 2023, Cadre expects to generate net sales in the range of $472 million to $484 million and Adjusted EBITDA in the range of $80 million to $84 million. We expect capital expenditures to be in the range of $8.0 million to $9.0 million.

Conference Call

Cadre management will host a conference call on Tuesday, August 8, 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 August 22, 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.

Contact:

Gray Hudkins

Cadre Holdings, Inc.

203-550-7148

gray.hudkins@cadre-holdings.com

Investor Relations:

The IGB Group

Leon Berman / Matt Berkowitz

212-477-8438 / 212-227-7098

lberman@igbir.com / mberkowitz@igbir.com


Media Contact:

Jonathan Keehner / Andrew Siegel

Joele Frank, Wilkinson Brimmer Katcher

212-355-4449


CADRE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)

June 30, 2023

    

December 31, 2022

Assets

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

55,782

$

45,286

Accounts receivable, net of allowance for doubtful accounts of $800 and $924, respectively

57,361

64,557

Inventories

 

82,777

 

70,273

Prepaid expenses

 

10,009

 

10,091

Other current assets

 

6,406

 

6,811

Total current assets

 

212,335

 

197,018

Property and equipment, net of accumulated depreciation and amortization of $47,046 and $42,694, respectively

 

44,531

 

45,285

Operating lease assets

6,657

8,489

Deferred tax assets, net

 

2,351

 

2,255

Intangible assets, net

 

46,919

 

50,695

Goodwill

 

81,560

 

81,576

Other assets

 

5,566

 

6,634

Total assets

$

399,919

$

391,952

Liabilities, Mezzanine Equity and Shareholders' Equity

 

  

 

  

Current liabilities

 

  

 

  

Accounts payable

$

29,640

$

23,406

Accrued liabilities

 

34,480

 

38,720

Income tax payable

 

4,279

 

4,584

Liabilities held for sale

Current portion of long-term debt

 

10,022

 

12,211

Total current liabilities

 

78,421

 

78,921

Long-term debt

 

132,712

 

137,476

Long-term operating lease liabilities

3,211

4,965

Deferred tax liabilities

 

3,759

 

3,508

Other liabilities

 

1,314

 

1,192

Total liabilities

 

219,417

 

226,062

Mezzanine equity

 

 

  

Preferred stock ($0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 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 June 30, 2023 and December 31, 2022, respectively)

 

4

 

4

Additional paid-in capital

 

208,492

 

206,540

Accumulated other comprehensive income

 

2,746

 

2,087

Accumulated deficit

 

(30,740)

 

(42,741)

Total shareholders’ equity

 

180,502

 

165,890

Total liabilities, mezzanine equity and shareholders' equity

$

399,919

$

391,952


CADRE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share amounts)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

    

2023

    

2022

Net sales

$

121,087

$

118,232

$

232,835

$

222,638

Cost of goods sold

 

70,340

 

75,011

 

135,470

 

139,228

Gross profit

 

50,747

 

43,221

 

97,365

 

83,410

Operating expenses

 

  

 

  

 

  

 

  

Selling, general and administrative

 

34,051

 

32,749

 

69,301

 

86,699

Restructuring and transaction costs

 

693

 

1,203

 

693

 

1,802

Related party expense

 

115

 

1,112

 

263

 

1,234

Total operating expenses

 

34,859

 

35,064

 

70,257

 

89,735

Operating income (loss)

 

15,888

 

8,157

 

27,108

 

(6,325)

Other expense

 

  

 

  

 

  

 

  

Interest expense

 

(1,013)

 

(1,439)

 

(2,654)

 

(2,929)

Other income (expense), net

 

346

 

(756)

 

710

 

(961)

Total other expense, net

 

(667)

 

(2,195)

 

(1,944)

 

(3,890)

Income (loss) before provision for income taxes

 

15,221

 

5,962

 

25,164

 

(10,215)

(Provision) benefit for income taxes

 

(4,229)

 

(1,517)

 

(7,170)

 

4,495

Net income (loss)

$

10,992

$

4,445

$

17,994

$

(5,720)

Net income (loss) per share:

 

  

 

  

 

  

 

  

Basic

$

0.29

$

0.13

$

0.48

$

(0.16)

Diluted

$

0.29

$

0.12

$

0.48

$

(0.16)

Weighted average shares outstanding:

 

  

 

  

 

  

 

  

Basic

 

37,586,031

 

35,320,314

 

37,480,367

 

34,888,703

Diluted

 

37,850,708

 

35,688,620

 

37,758,998

 

34,888,703


CADRE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Six Months Ended June 30, 

    

2023

    

2022

Cash Flows From Operating Activities:

 

  

 

  

Net income (loss)

$

17,994

$

(5,720)

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

 

  

 

  

Depreciation and amortization

 

8,220

 

7,380

Amortization of original issue discount and debt issue costs

 

374

 

367

Amortization of inventory step-up

1,344

Deferred income taxes

 

14

 

(4,594)

Stock-based compensation

4,852

26,327

Gain on sale of fixed assets

(108)

(Recoveries from) provision for losses on accounts receivable

 

(21)

 

240

Foreign exchange (gain) loss

 

(776)

 

1,107

Other

(325)

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

 

 

Accounts receivable

 

7,605

 

(3,243)

Inventories

 

(11,986)

 

(1,461)

Prepaid expenses and other assets

 

3,397

 

3,616

Accounts payable and other liabilities

 

(971)

 

(345)

Net cash provided by operating activities

 

28,269

 

25,018

Cash Flows From Investing Activities:

 

  

 

  

Purchase of property and equipment

 

(2,404)

 

(2,473)

Proceeds from disposition of property and equipment

206

Business acquisitions, net of cash acquired

 

 

(55,039)

Net cash used in investing activities

 

(2,198)

 

(57,512)

Cash Flows From Financing Activities:

 

  

 

  

Proceeds from revolving credit facilities

 

 

48,000

Principal payments on revolving credit facilities

 

 

(48,000)

Principal payments on term loans

 

(5,000)

 

(5,009)

Principal payments on insurance premium financing

 

(2,189)

 

(2,853)

Payment of capital leases

 

 

(22)

Taxes paid in connection with employee stock transactions

(2,725)

(6,216)

Proceeds from secondary offering, net of underwriter discounts

49,703

Deferred offering costs

(2,715)

Dividends distributed

 

(5,993)

 

(5,533)

Net cash (used in) provided by financing activities

 

(15,907)

 

27,355

Effect of foreign exchange rates on cash and cash equivalents

 

332

 

144

Change in cash and cash equivalents

 

10,496

 

(4,995)

Cash and cash equivalents, beginning of period

 

45,286

 

33,857

Cash and cash equivalents, end of period

$

55,782

$

28,862

Supplemental Disclosure of Cash Flows Information:

Cash paid for income taxes, net

$

7,288

$

241

Cash paid for interest

$

4,859

$

2,330

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

Accruals and accounts payable for capital expenditures

$

129

$

17


CADRE HOLDINGS, INC.

SEGMENT INFORMATION

(Unaudited)

(In thousands)

    

Three Months Ended June 30, 2023

Reconciling

    

Product

Distribution

 Items(1)

    

Total

Net sales

    

$

103,368

    

$

25,726

    

$

(8,007)

    

$

121,087

Cost of goods sold

58,216

19,779

(7,655)

70,340

Gross profit

$

45,152

$

5,947

$

(352)

$

50,747

    

Three Months Ended June 30, 2022

Reconciling

    

Product

    

Distribution

    

 Items(1)

    

Total

Net sales

    

$

99,837

    

$

23,728

    

$

(5,333)

    

$

118,232

Cost of goods sold

60,947

19,406

(5,342)

75,011

Gross profit

$

38,890

$

4,322

$

9

$

43,221

    

Six Months Ended June 30, 2023

Reconciling

    

    Product    

    

Distribution

    

 Items(1)

    

      Total      

Net sales

    

$

196,562

    

$

50,386

    

$

(14,113)

    

$

232,835

Cost of goods sold

110,824

38,476

(13,830)

135,470

Gross profit

$

85,738

$

11,910

$

(283)

$

97,365

    

Six Months Ended June 30, 2022

Reconciling

    

    Product    

    

Distribution

    

 Items(1)

    

      Total      

Net sales

    

$

185,223

    

$

47,824

    

$

(10,409)

    

$

222,638

Cost of goods sold

112,067

37,578

(10,417)

139,228

Gross profit

$

73,156

$

10,246

$

8

$

83,410


(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

Three Months Ended

Six Months Ended

Last Twelve

December 31, 

Ended March 31,

June 30, 

June 30, 

Months

2022

2023

2023

2022

2023

2022

June 30, 2023

Net income (loss)

$

5,820

$

7,002

$

10,992

$

4,445

$

17,994

$

(5,720)

$

29,534

Add back:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Depreciation and amortization

 

15,651

 

4,261

 

3,959

 

3,836

 

8,220

 

7,380

 

16,491

Interest expense

 

6,206

 

1,641

 

1,013

 

1,439

 

2,654

 

2,929

 

5,931

Provision (benefit) for income taxes

 

3,553

 

2,941

 

4,229

 

1,517

 

7,170

 

(4,495)

 

15,218

EBITDA

$

31,230

$

15,845

$

20,193

$

11,237

$

36,038

$

94

$

67,174

Add back:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Restructuring and transaction costs(1)

 

5,355

 

 

693

 

2,203

 

693

 

2,802

 

3,246

Other general income(2)

(159)

(159)

Other expense (income), net(3)

 

1,137

 

(364)

 

(346)

 

756

 

(710)

 

961

 

(534)

Stock-based compensation expense(4)

32,239

2,747

2,105

2,818

4,852

26,541

10,550

Stock-based compensation payroll tax expense(5)

305

220

7

220

305

220

LTIP bonus(6)

 

1,369

 

144

 

160

 

174

 

304

 

558

 

1,115

Amortization of inventory step-up(7)

4,255

1,191

1,344

2,911

Adjusted EBITDA

$

75,731

$

18,592

$

22,805

$

18,386

$

41,397

$

32,605

$

84,523

Adjusted EBITDA margin(8)

 

16.5

%

 

16.6

%

 

18.8

%

 

15.6

%

 

17.8

%

 

14.6

%

 


(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 (income) 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.