Cadre Holdings, Inc. Q4 FY2025 earnings call

• Strengthening portfolio: Expanded capabilities with acquisition of Kars Engineering and signing agreement to acquire Tier Tactical. - Integrating businesses: Made solid progress in integrating brought-in businesses, aligning leadership, sharing engineering capabilities, and strengthening go-to-market. - Operational demand: Secured meaningful contract wins in advanced sensor technologies and blast mitigation seating, building backlog. - M&A execution: Completed acquisition of Tier Tactical, integration process underway with over 40 first 100 days functional integration activities, and actively evaluating M&A pipeline. - Market trends: Positive trends in North America law enforcement with federal investment, global conflict underscoring importance of work, consumer channel growth with Safariland brand and new product introductions. Nuclear vertical has multi-directional support with government and commercial programs, but shift in priorities in environmental management affecting some alpha safety products. - Major wins: Med-Ins awarded $86 million in contracts by General Dynamics European Land Systems to provide blast attenuation seats.

Fiscal 2025 was a year of steady progress. In the fourth quarter, favorable mix was driven by higher duty gear volume and lower distribution volume. Orders backlog was up significantly, with a nearly 50% increase versus last year due to 2025 order growth and addition of Kars Engineering division. Full year net sales, net income, and adjusted EBITDA increased significantly year over year. In Q4, duty gear and armor product lines had revenue and margins in line with expectations, but there were revenue timing shifts in nuclear businesses and EOD product lines, distribution softness, and a slight impact in chemical luminescence product due to government shutdown. Public safety products (excluding distribution and nuclear) had full-year gross margins up 188 basis points. For nuclear, there was a shift in prioritization with less focus on plutonium cleanup and more on plutonium build-out, having a near-term financial impact but broader nuclear group outlook remains positive. TIER Tactical's addition to the portfolio advances strategic focus, with its revenue having 66% from international customers and 27% from U.S. Federal and Military, and minimal overlap with Cadre's existing Safariland armor business.

• Full-year 2026 outlook implies year-over-year revenue and adjusted EBITDA growth of 22% and 24% at midpoints. - Net sales expected to be between 736 million and 758 million, adjusted EBITDA between 136 and 141 million, implying adjusted EBITDA margins of 18.5%. - Organic growth for public safety and nuclear businesses expected in 3% to 5% range, with 1% price increase net and material inflation. - Quarterly cadence: Second half of year expected to be heavier with lighter Q1, Q1 expected to be up year over year driven by Zirkle and TIER but organically down due to armor project timing, armor material constraints, lower distribution revenue, and alpha project timing, margins around 39% in Q1 with EBITDA margins in low teens, not including impact of inventory step-up for tier or amortization as part of purchasing accounting.

• Uncertainty with new administration as seen in past with impacts on business, though short-lived. - Shift in priorities at nuclear sites toward plutonium build-out programs reducing focus on waste disposition, affecting demand for some alpha safety products in the near term, though broader nuclear group outlook remains positive. - Various details around larger orders in multiple categories keeping them from getting booked at the moment due to competitive reasons and other factors.

Q: Larry Solo with CJS Securities asked about organic outlook, visibility of pushed-out orders, impact of geopolitical and government shutdown on visibility.

A: Brad said large opportunities have good visibility, some orders kept from booking due to details, international teams closing orders.

Q: Larry Solo asked about nuclear shift in prioritization.

A: Brad said there's a timing lag with existing revenue stream from nuclear down blending and pickup on commercial nuclear side, with twofold impact on margins.

Q: Egan McDermott with Jefferies asked about confidence in remaining contracts not lost.

A: Brad said 100% confidence they're delayed not lost.

Q: Mark McIntyre with TAB asked about capex.

A: Blaine said capex uplift around capacity, especially in nuclear area with site build-outs.

Q: Matt Carondo with Roth Capital asked about tier revenue contribution and Blassie contract ramp up.

A: Brad said tier laid in at about $100 million full year, Blassie contract production planning started in March with revenue tying into 2027 and beyond.

Q: Jeff Van Sinderen with B Reilly Securities asked about down blending and General Dynamics seat attenuation product.

A: Jeff was told about executive order on down blending and General Dynamics seat attenuation product details.

Q: Mark Smith with Lake Street asked about tier synergies and Q1.

A: Brad said zero in guidance for tier synergies, Blaine said Q1 revenue in line with Q3 last year, gross margins around 39%, EBITDA margins in low teens with transaction costs carryover.

Q: Jordan Lioness with Bank of America asked about organic backlog decline and commercial nuclear confidence.

A: Blaine said backlog not alarming, commercial nuclear funnel growing with past track record in related products