Cadre Holdings Reports Second Quarter 2022 Financial Results

Rhea-AI Summary

Cadre Holdings, Inc. (NYSE: CDRE) reported second-quarter 2022 net sales of $118.2 million, a slight increase from $114.6 million in Q2 2021. However, net income dropped to $4.4 million ($0.12/share) from $6.8 million y-o-y. Adjusted EBITDA for the quarter was $18.4 million, down from $20.5 million in Q2 2021. Gross profit margin fell to 36.6%, influenced by inventory amortization and a less favorable portfolio mix. Cadre reaffirmed its 2022 guidance, expecting net sales between $444.0 million and $452.0 million. The company remains focused on enhancing its liquidity through strategic acquisitions and operational efficiencies.

Positive

• Achieved net sales of $118.2 million for Q2 2022, up from $114.6 million in Q2 2021.
• Generated Adjusted EBITDA of $18.4 million with a conversion rate of 92%.
• Maintained a strong order backlog, indicating robust demand for products.
• Declared a quarterly cash dividend of $0.08 per share.

Negative

• Net income fell to $4.4 million for Q2 2022, down from $6.8 million in Q2 2021.
• Gross profit margin declined to 36.6% from 42.1% y-o-y due to increased stock-based compensation and amortization expenses.
• Net loss of $5.7 million for the first half of 2022 compared to a net income of $13.7 million for the prior year period.

Exceeds Pricing Growth Target Above Inflation, Generates Strong Adjusted EBITDA Conversion, and Increases Orders Backlog

Further Expands International Presence and Focus on High Margin Businesses with Strong Recurring Revenues and Cash Flows Following Second Accretive Acquisition Since IPO

Reaffirms 2022 Full-Year Guidance

JACKSONVILLE, Fla.--(BUSINESS WIRE)-- 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, 2022.

Second Quarter and June 2022 Year-to-Date Highlights

• Net sales of $118.2 million for the second quarter; net sales of $222.6 million for the six months ended June 30, 2022
• Gross profit margin of 36.6% for the second quarter; gross profit margin of 37.5% for the six months ended June 30, 2022
• Net income of $4.4 million, or $0.12 per diluted share, for the second quarter; net loss of $5.7 million, or $0.16 per diluted share, for the six months ended June 30, 2022
• Adjusted EBITDA of $18.4 million for the second quarter; Adjusted EBITDA of $32.6 million for the six months ended June 30, 2022
• Adjusted EBITDA margin of 15.6% for the second quarter; Adjusted EBITDA margin of 14.6% for the six months ended June 30, 2022
• Adjusted EBITDA conversion of 92% for the second quarter; Adjusted EBITDA conversion of 92% for the six months ended June 30, 2022
• Declared quarterly cash dividend of $0.08 per share in July 2022

“During the quarter, we took important steps to position Cadre to further enhance our leadership in providing mission-critical safety and survivability equipment, as we seek to create long-term shareholder value,” said Warren Kanders, CEO and Chairman. “During the quarter, and against a backdrop of ongoing supply chain disruptions, we exceeded our 1% pricing growth target above inflation, while drawing on our low Cap-Ex model to generate strong Adjusted EBITDA conversion. We also grew our orders backlog, as demand for our trusted products remains strong, and we continue to expect our product portfolio mix to normalize in the second half of 2022. Our entrenched positions in law enforcement, first responder and military markets continue to serve us well, and we remain focused on further implementing our resilient and proven operating model aimed at creating significant value for customers and all Cadre stakeholders, as well as driving margin expansion over the long term.”

Mr. Kanders added, “We continue to draw on our strong cash flow to capitalize on attractive opportunities, and during the second quarter we further enhanced our liquidity position with an oversubscribed secondary offering. Complementing our core organic growth initiatives, we maintain a robust acquisition pipeline and are poised to build on our significant progress to date. We are pleased with the efficient integration of the two acquisitions since our IPO, and we continue to actively evaluate and are excited about additional opportunities, consistent with our focus on high margin companies with leading market positions and strong recurring revenues and cash flows.”

Second Quarter and June 2022 Year-to-Date Operating Results

For the quarter ended June 30, 2022, Cadre generated net sales of $118.2 million, as compared to $114.6 million for the quarter ended June 30, 2021. The increase was primarily the result of recent acquisitions and increased armor demand.

For the six months ended June 30, 2022, Cadre generated net sales of $222.6 million, as compared to $225.1 million for the prior year period mainly driven by prior year US Federal and crowd control shipments.

For the quarter ended June 30, 2022, Cadre generated gross profit of $43.2 million, as compared to $48.2 million for the quarter ended June 30, 2021. For the six months ended June 30, 2022, Cadre generated gross profit of $83.4 million, as compared to $92.2 million for the prior year period.

Gross profit margin was 36.6% for the quarter ended June 30, 2022, as compared to 42.1% for the quarter ended June 30, 2021, mainly driven by amortization of inventory step-up of 101 basis points and less favorable portfolio mix, partially offset by pricing in excess of material inflation.

Gross profit margin was 37.5% for the six months ended June 30, 2022, as compared to 41.0% for the prior year period, mainly driven by amortization of inventory step-up of 60 basis points and less favorable portfolio mix, partially offset by pricing in excess of material inflation.

Net income was $4.4 million for the quarter ended June 30, 2022, as compared to net income of $6.8 million for the quarter ended June 30, 2021. The decrease resulted primarily from increased stock-based compensation expense, losses on foreign currency transactions and discrete acquisition-related expenses, partially offset by increased revenue.

Net loss was $5.7 million for the six months ended June 30, 2022, as compared to net income of $13.7 million for the prior year period, primarily as a result of increased stock-based compensation expense.

Cadre generated $18.4 million of Adjusted EBITDA for the quarter ended June 30, 2022, as compared to $20.5 million for the quarter ended June 30, 2021. Adjusted EBITDA margin was 15.6% for the quarter ended June 30, 2022, as compared to 17.9% for the prior year period.

Cadre generated $32.6 million of Adjusted EBITDA for the six months ended June 30, 2022, as compared to $40.7 million for the prior year period. Adjusted EBITDA margin was 14.6% for the six months ended June 30, 2022, as compared to 18.1% for the prior year period.

Product segment gross margin was 39.0% and 39.5% for the second quarter and first half of 2022, respectively, compared to 43.5% and 42.1% for the respective prior year periods.

Distribution segment gross margin was 18.2% and 21.4% for the second quarter and first half of 2022, respectively, compared to 25.5% and 25.4% for the respective prior year periods.

Liquidity, Cash Flows and Capital Allocation

• Cash and cash equivalents decreased by $5.0 million from $33.9 million as of December 31, 2021 to $28.9 million as of June 30, 2022.
• Total debt decreased by $7.1 million from $159.7 million as of December 31, 2021, to $152.6 million as of June 30, 2022.
• Net debt (total debt net of cash and cash equivalents) decreased by $2.1 million from $125.8 million as of December 31, 2021, to $123.7 million as of June 30, 2022.
• Capital expenditures totaled $1.4 million for the second quarter and $2.5 million for the six months ended June 30, 2022, compared with $0.7 million for the second quarter and $1.5 million for the six months ended June 30, 2021.

Secondary Offering

On June 9, 2022, Cadre completed a secondary offering in which the Company issued and sold 2,250,000 shares of common stock at a price of $23.50 per share, resulting in net proceeds to the Company of $47.0 million after underwriter discounts and commissions, fees and expenses.

On July 14, 2022, the underwriters exercised a portion of their over-allotment option and purchased an additional 300,000 shares of common stock at a price of $23.50 per share, resulting in net proceeds to the Company of $6.6 million after underwriter discounts and commissions, fees and expenses.

Acquisition of Cyalume Technologies

On May 5, 2022, Cadre announced the completion of its accretive acquisition of Cyalume Technologies, a leading manufacturer of proprietary chemical illumination solutions for military, first responder and other commercial applications. The purchase price for the acquisition was $35.7 million, net of cash acquired, subject to customary adjustments for net working capital, transaction expenses and indebtedness, and was funded through a draw on its existing credit facilities.

Dividend

On July 20, 2022, 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 12, 2022, to shareholders of record as of the close of business on the record date of August 1, 2022. The declaration of any future dividend is subject to the discretion of the Company's Board of Directors.

2022 Outlook

For the full year 2022, Cadre expects to generate net sales in the range of $444.0 million to $452.0 million and Adjusted EBITDA in the range of $72.5 million and $77.5 million. Cadre expects Adjusted EBITDA conversion in the range of 92-95% for the full year.

Conference Call

Cadre management will host a conference call on Thursday, August 11, 2022, 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 25, 2022. 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, (iii) adjusted EBITDA margin, (iv) adjusted EBITDA conversion rate and (v) LTM adjusted EBITDA. 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, including without limitation, changes to global, social and political economic conditions, spending patterns of government agencies, competitive pressures, the impact of acquisitions and related integration activities, logistical challenges related to disruptions and delays, product liability claims, the success of new product introductions, currency exchange rate fluctuations and the risks of doing business in the markets in which we operate, including foreign countries. More information on potential factors that could affect the Company’s financial results are more fully described from time to time in the Company’s public reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and 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.

CADRE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)
		June 30, 2022				December 31, 2021
Assets
Current assets
Cash and cash equivalents		$	28,862			$	33,857
Accounts receivable, net of allowance for doubtful accounts of $817 and $645, respectively			56,521				48,344
Inventories			76,630				63,978
Prepaid expenses			6,932				10,353
Other current assets			5,956				3,171
Assets held for sale			251				278
Total current assets			175,152				159,981
Property and equipment, net of accumulated depreciation and amortization of $40,111 and $37,171, respectively			46,997				33,053
Deferred tax assets, net			8,133				7,059
Intangible assets, net			55,177				42,415
Goodwill			78,027				66,262
Other assets			5,990				3,026
Total assets		$	369,476			$	311,796
Liabilities, Mezzanine Equity and Shareholders' Equity
Current liabilities
Accounts payable		$	29,145			$	19,328
Accrued liabilities			35,896				40,736
Income tax payable			918				1,255
Liabilities held for sale			106				128
Current portion of long-term debt			10,321				13,174
Total current liabilities			76,386				74,621
Long-term debt			142,244				146,516
Deferred tax liabilities			3,589				1,297
Other liabilities			959				722
Total liabilities			223,178				223,156
Mezzanine equity
Preferred stock ($0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021)			—				—
Shareholders' equity
Common stock ($0.0001 par value, 190,000,000 shares authorized, 37,032,271 and 34,383,350 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively)			4				3
Additional paid-in capital			194,704				127,606
Accumulated other comprehensive loss			(105	)			(1,917	)
Accumulated deficit			(48,305	)			(37,052	)
Total shareholders’ equity			146,298				88,640
Total liabilities, mezzanine equity and shareholders' equity		$	369,476			$	311,796

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,
		2022				2021				2022				2021
Net sales		$	118,232			$	114,561			$	222,638			$	225,097
Cost of goods sold			75,011				66,333				139,228				132,910
Gross profit			43,221				48,228				83,410				92,187
Operating expenses
Selling, general and administrative			32,749				31,444				86,699				59,495
Restructuring and transaction costs			1,203				1,219				1,802				1,540
Related party expense			1,112				142				1,234				295
Total operating expenses			35,064				32,805				89,735				61,330
Operating income (loss)			8,157				15,423				(6,325	)			30,857
Other expense
Interest expense			(1,439	)			(5,621	)			(2,929	)			(10,665	)
Other expense, net			(756	)			(485	)			(961	)			(529	)
Total other expense, net			(2,195	)			(6,106	)			(3,890	)			(11,194	)
Income (loss) before provision for income taxes			5,962				9,317				(10,215	)			19,663
(Provision) benefit for income taxes			(1,517	)			(2,502	)			4,495				(5,984	)
Net income (loss)		$	4,445			$	6,815			$	(5,720	)		$	13,679
Net income (loss) per share:
Basic		$	0.13			$	0.25			$	(0.16	)		$	0.50
Diluted		$	0.12			$	0.25			$	(0.16	)		$	0.50
Weighted average shares outstanding:
Basic			35,320,314				27,483,350				34,888,703				27,483,350
Diluted			35,688,620				27,483,350				34,888,703				27,483,350

CADRE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
		Six Months Ended June 30,
		2022				2021
Cash Flows From Operating Activities:
Net (loss) income		$	(5,720	)		$	13,679
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			7,380				7,020
Amortization of original issue discount and debt issue costs			367				2,029
Amortization of inventory step-up			1,344				—
Deferred income taxes			(4,594	)			4,607
Stock-based compensation			26,327				—
Provision for (recoveries from) losses on accounts receivable			240				(308	)
Foreign exchange loss			1,107				(267	)
Changes in operating assets and liabilities, net of impact of acquisitions:
Accounts receivable			(3,243	)			(2,429	)
Inventories			(1,461	)			(7,124	)
Prepaid expenses and other assets			3,616				2,292
Accounts payable and other liabilities			(345	)			9,208
Net cash provided by operating activities			25,018				28,707
Cash Flows From Investing Activities:
Purchase of property and equipment			(2,473	)			(1,506	)
Business acquisitions, net of cash acquired			(55,039	)			—
Net cash used in investing activities			(57,512	)			(1,506	)
Cash Flows From Financing Activities:
Proceeds from revolving credit facilities			48,000				176,548
Principal payments on revolving credit facilities			(48,000	)			(176,548	)
Principal payments on term loans			(5,009	)			(13,687	)
Principal payments on insurance premium financing			(2,853	)			(1,225	)
Payment of capital leases			(22	)			(21	)
Taxes paid in connection with employee stock transactions			(6,216	)			—
Proceeds from secondary offering, net of underwriter discounts			49,703				—
Deferred offering costs			(2,715	)			—
Dividends distributed			(5,533	)			—
Net cash provided by (used in) financing activities			27,355				(14,933	)
Effect of foreign exchange rates on cash and cash equivalents			144				42
Change in cash and cash equivalents			(4,995	)			12,310
Cash and cash equivalents, beginning of period			33,857				2,873
Cash and cash equivalents, end of period		$	28,862			$	15,183
Supplemental Disclosure of Cash Flows Information:
Cash paid for income taxes, net		$	241			$	473
Cash paid for interest		$	2,330			$	8,524
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Accruals and accounts payable for capital expenditures		$	17			$	—

CADRE HOLDINGS, INC.
SEGMENT INFORMATION
(Unaudited)
(In thousands)
		Six months ended June 30, 2022
								Reconciling
		Products			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
		Six months ended June 30, 2021
								Reconciling
		Products			Distribution			Items(1)				Total
Net sales		$	190,121		$	47,579		$	(12,603	)		$	225,097
Cost of goods sold			110,028			35,476			(12,594	)			132,910
Gross profit		$	80,093		$	12,103		$	(9	)		$	92,187

________________________
(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
		2021				2022				2022				2021				2022				2021				June 30, 2022
Net income (loss)		$	12,661			$	(10,165	)		$	4,445			$	6,815			$	(5,720	)		$	13,679			$	(6,738	)
Add back:
Depreciation and amortization			13,718				3,544				3,836				3,481				7,380				7,020				14,078
Interest expense			16,425				1,490				1,439				5,621				2,929				10,665				8,689
Provision (benefit) for income taxes			6,531				(6,012	)			1,517				2,502				(4,495	)			5,984				(3,948	)
EBITDA		$	49,335			$	(11,143	)		$	11,237			$	18,419			$	94			$	37,348			$	12,081
Add back:
Restructuring and transaction costs(1)			3,430				599				2,203				1,219				2,802				1,540				4,692
Loss on extinguishment of debt(2)			15,155				—				—				—				—				—				15,155
Other expense, net(3)			947				205				756				485				961				529				1,379
Stock-based compensation expense(4)			355				23,723				2,818				—				26,541				—				26,896
Stock-based compensation payroll tax expense(5)			—				298				7				—				305				—				305
LTIP bonus(6)			2,162				384				174				328				558				1,280				1,440
Amortization of inventory step-up(7)			—				153				1,191				—				1,344				—				1,344
Adjusted EBITDA		$	71,384			$	14,219			$	18,386			$	20,451			$	32,605			$	40,697			$	63,292
Less: Capital expenditures			(3,029	)			(1,069	)			(1,421	)			(718	)			(2,490	)			(1,506	)			(4,013	)
Adjusted EBITDA less capital expenditures		$	68,355			$	13,150			$	16,965			$	19,733			$	30,115			$	39,191			$	59,279
Adjusted EBITDA conversion rate(8)			96		%		92		%		92		%		96		%		92		%		96		%		94		%
Adjusted EBITDA margin(9)			16.7		%		13.6		%		15.6		%		17.9		%		14.6		%		18.1		%

________________________
(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 and comprehensive income (loss).
(2)		Reflects losses incurred in connection with the August 2021 debt refinance.
(3)		Reflects the “Other expense, net” line item on our consolidated statement of operations. For the three and six months ended June 30, 2022 and 2021, other expense, net primarily includes 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 part of the recent acquisitions.
(8)		Reflects (Adjusted EBITDA less capital expenditures) / Adjusted EBITDA.
(9)		Reflects Adjusted EBITDA / Net Sales for the relevant periods.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220811005583/en/

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

Source: Cadre Holdings, Inc.

FAQ

What are Cadre Holdings' second quarter 2022 financial results?

Cadre Holdings reported net sales of $118.2 million, with net income of $4.4 million for Q2 2022.

How did Cadre Holdings perform in the first half of 2022?

For the six months ended June 30, 2022, Cadre generated net sales of $222.6 million but reported a net loss of $5.7 million.

What is Cadre Holdings' Adjusted EBITDA for Q2 2022?

Cadre Holdings' Adjusted EBITDA for Q2 2022 was $18.4 million, with an Adjusted EBITDA margin of 15.6%.

What is the guidance for Cadre Holdings' full-year 2022 sales?

Cadre expects full-year 2022 net sales between $444.0 million and $452.0 million.

What dividend did Cadre Holdings declare in July 2022?

Cadre declared a quarterly cash dividend of $0.08 per share, payable on August 12, 2022.