Cadre Holdings, Inc. Q2 FY2025 earnings call

• The company reported strong financial and strategic progress with revenue and gross profit up 9% and 10% year-over-year respectively.
• Acquired Carr's Engineering division in April, strengthening the nuclear safety vertical and expanding the international presence.
• Integration process is underway, prioritizing finance, accounting, IT, legal, and compliance first, with plans to leverage the Cadre operating model.
• Macro trends support demand for mission-critical safety products, with nuclear seeing growth due to energy, defense, and nuclear waste tailwinds.
• Continues to allocate capital to pursue acquisitions and strategic investments while returning capital to shareholders.

Revenue in the second quarter was $157 million, marking a 9% year-over-year increase. Gross profit grew 10% year-over-year. The company's diversified platform of safety businesses, including law enforcement, first responder, military, and nuclear categories, showed strength. The acquisition of Carr's Engineering division in April enhanced the nuclear vertical and expanded the international footprint.

• Full-year outlook implies year-over-year revenue growth of 10.5% and adjusted EBITDA growth of 8.7% at midpoints.
• Revised 2025 guidance: net sales between $624 million and $630 million, adjusted EBITDA between $112 million and $116 million.
• Q3 revenue and adjusted EBITDA are expected to be flat sequentially to Q2, with Q4 anticipated to be slightly higher.
• Timing shifts of large orders are affecting guidance, with some opportunities moving into 2026.

• Uncertain macro environment, including tariff announcements.
• Timing shifts of large public safety and nuclear opportunities introduce uncertainty in revenue timing.
• Integration risks associated with the acquisition of Carr's Engineering division.

Q: Curious on contracts or pushout of orders, any commonality or relation to reduced government spending?

A: Across business units (body armor, duty gear, nuclear, EOD), larger ops in the sales funnel have timing shifts, but no reduced budgets, just timing shifts.

Q: Thoughts on margin outlook?

A: Longer term, there are opportunities to expand gross margins, with Carr's Engineering acquisition's margin profile expected to improve with the Cadre operating model.

Q: Clarification on guidance change, strictly timing?

A: Yes, the majority of large ops in the funnel shifted due to timing, not loss of business.

Q: Pricing across portfolio?

A: Q2 pricing hit the target net 1% net of material inflation, expected to continue in the back half with price increases trickling in Q3 and Q4.

Q: Defense in Europe, EOD business?

A: EOD business is waiting for conflict cleanup phases, but working on demining products and design changes.

Q: Exposure to ICE and border patrol?

A: There are existing relationships with these agencies, and there is an opportunity to outfit with products as they expand.

Q: Tariffs and guidance?

A: Guidance is built on tariffs in place, with limited exposure due to regional supply chains and USMCA protection, but timing is needed for manufacturing shifts.

Q: New products mix and performance?

A: New products launched in the past 24 months are performing well, with strong adoption and positive feedback.

Q: Carr's integration and commercial synergies?

A: Integration is in early stages, focusing on functional areas first, with initial work on business development and manufacturing opportunities.

Q: EBITDA guide midpoint and margins?

A: Lower margins are due to large opportunities shifting into 2026.

Q: Organic backlog growth?

A: Organic backlog was flat sequentially, with an increase from the Carr's Engineering division.