Cadre Holdings, Inc.

Good afternoon and welcome to CADRE Holdings second quarter ended June 30th, 2023 conference call. Today's call is being recorded. All lines have been placed on mute. If you would like to ask a question at the end of the prepared remarks, please press the star key then the number one on your touch tone phone. At this time, I would like to turn the conference over to Matt Berkowitz of the IGV group for introductions and the reading of the safe harbor statement. Please go ahead, sir.

Thank you, and welcome to CADRE Holdings' second quarter conference call. Before we begin, I would like to remind everyone that during today's call we will be making several forward-looking statements, and we make these statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our best estimates and assumptions based on our understanding of information known to us today. These forward-looking statements are subject to the risks and uncertainties that face CADRE and 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 filed with the Securities and Exchange Commission. Please also note that we have posted presentation materials on our website at www.cadre-holdings.com, which supplement our comments this evening and include a reconciliation of certain non-GAAP financial measures. I would like to remind everyone that this call will be available for replay through August 22, 2023, starting at 8 p.m. Eastern time tonight. A webcast replay will also be available via the link provided in today'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.

Good afternoon, and thank you for joining CADRE's earnings call to discuss our results for the second quarter of 2023. I'm joined today by our President, Brad Williams, and our Chief Financial Officer, Blaine Browers. My comments today will largely track the themes I have spoken about before on our earnings calls. Coming off the second quarter of 2023, I continue to be very pleased with the focus and execution our management team has brought to bear on our company, as demonstrated by record EBITDA margins and adjusted EBITDA. I will talk in a moment about the M&A markets and our efforts to capitalize on external growth opportunities, but our performance to date deserves particular focus. Brad, Blaine, and the team continue to demonstrate a relentless focus on the implementation of the CADRE operating model, which is an integral part of our business strategy of continuous improvement and the optimization of results. I talked about this last quarter, but it bears repeating. The CADRE operating model helps build a culture of creating value for customers and stakeholders. Driven by constant leadership, the implementation of enterprise-wise tools and processes, product innovation, and continuous productivity improvement. Here again, the focus comes through in the results. While revenues were up 2.5%, gross margin improved by 530 basis points. And gross profit increased 17.4%. We achieved record adjusted EBITDA margins of 18.8%. Record quarterly adjusted EBITDA of 22.8 million. Adjusted EBITDA margin increased 320 basis points. And adjusted EBITDA grew 23.9%. And fully diluted net income per share for the quarter increased 123%. This execution creates operating leverage by using superior operating tools and business processes to produce profitability improvements above our natural growth rate. Brad and Blaine will cover more of the details momentarily, but the trend you see is that within the realm of things we can't control, our management team does an exceptional job of optimizing the outcomes. The approach always applies to acquired businesses. We acquired Siloam in the second quarter of 2022, and the actions our team has taken there also helped drive overall performance. I would like to reinforce our views on the macros driving our business. As you know, we have distribution and manufacturing capabilities covering a substantial part of the world, and we see no sign of the secular trends driving demand for our mission-critical, lifesaving products, are doing anything but going up. In almost every place we do business, the environment is either getting more difficult and dangerous or even flatlining at a level above what people had become accustomed to. Our ability to perform in this environment is a testament to the quality of our products, the strength of our brands, superior execution and deliveries, and the importance of CADRE's equipment to our customers and end users. Finally, some thoughts on our M&A program. While we would like to have something to announce by this point in the year, we remain confident based on our activity we should be able to announce or close one to two transactions this year. In the past 12 months, we have made formal proposals after completing significant diligence on 10 different businesses with enterprise values ranging in size from $25 million to north of $200 million. And this figure does not include opportunities we reviewed and plan to pursue. Interestingly, of those 10, most of which were proprietary, non-auction processes, none of them have traded away from us, which indicates a few possibilities. One, a valuation disconnect between seller expectations and the price that any buyer is willing to pay. And two, a lack of confidence on the seller's part the business would hold up due diligence scrutiny, or three, some combination of those two. Having said that, we are working our M&A pipeline hard and will remain disciplined in our approach. We continue to see new opportunities in our existing markets, as well as markets that would diversify our company. At the same time, we continue to generate cash and de-lever with net debt to adjusted EBITDA presently at a very conservative level of just above one times, and a bank facility with increasing capacity to pursue more transactions as we lower our leverage profile. In conclusion, I am proud of our results for this quarter and for the first half of the year. We are happy to be able to increase our earnings guidance for the year as our performance exceeds our prior expectations and the remainder of the year comes into better focus. While the overall macro environment that Brad will speak about still poses certain challenges, the businesses we are in are resilient against many of the uncertainties out there, and we are comfortable with how we think the remainder of this year will play out. With that, thank you for being with us today, and I will turn the call over to Brad. Brad, over to you.