Cadre Holdings, Inc.

Good afternoon and welcome to CADRE Holdings' third quarter ended September 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 touchtone phone. At this time, I would like to turn the conference over to Matt Berkowitz of the IGB Group for introductions and the reading of the Safe Harbor Statement. Please go ahead, sir.

Thank you, and welcome to CADRE Holdings' third 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 the 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 November 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 third quarter of 2023. am joined today by our president brad williams and our chief financial officer blaine browers coming off of the third quarter of 2023 i continue to be very proud of the focus and execution our management team has demonstrated in achieving record results in adjusted ebitda and adjusted ebitda margins for the second consecutive quarter brad blaine and the team's implementation of the CADRE operating model is driving these results. As I said last quarter, this execution creates operating leverage by using superior operating tools and business processes to produce profitability improvements above our natural growth rate. We've continued rolling the model out across our entire portfolio, and we are gaining momentum as we do. Brad and Blayne will go into more detail later but the results here speak for themselves. For the third quarter, while revenues were up 12.1%, gross profit increased 22.7%. We achieved record adjusted EBITDA margins of 19%, record quarterly adjusted EBITDA of 23.7 million, adjusted EBITDA grew 14.4%. and fully diluted net income per share for the quarter increased 123%. Looking at the nine-month year-to-date results underscores the performance outside the lenses of a single quarter. Revenues up 7.1%, gross profit up 18.7%, adjusted EBITDA up 22.1%, and adjusted EBITDA margin up to 18.2% from 16%. We as a team are exceptionally proud of how we have been able to deliver for our shareholders. Before moving to M&A, I would like to comment again on the macros driving our business. We are in an environment where geopolitical conditions seem to get worse by the day, and the level of internal conflict inside most countries is on the rise. Domestically, the levels of danger facing first responders have not abated to any appreciable degree, if at all. Our role is to provide mission-critical, life-saving equipment to the professionals around the world who work to keep us safe. We have the distribution and manufacturing capabilities to cover a substantial part of the world, and we see no sign that the secular trends driving demand for our products are going anywhere but up. As our business has grown, we have experienced increasing capacity requirements and have reacted accordingly. Our ability to do this is a testament to our management team and our many dedicated employees, suppliers, distribution partners, and other stakeholders. It also speaks to the quality of our products, the strength of our brands, superior execution and deliveries, and the trust our customers and end users place in CADRE's equipment. Having said that, to be clear, the ongoing conflicts in Ukraine and the Middle East have not impacted our businesses in any material way. As we have mentioned previously, we do not expect, as these events eventually abate, there may be an opportunity for CADRE to play a larger role through a number of our products, most notably through our various EOD offerings. Lastly, an update on our M&A program. I am pleased to report that we signed a letter of intent approximately three weeks ago with a business that we have been in discussions with for a number of months. The business in its most recent fiscal year ended during the summer, achieved approximately 19 million of revenues with gross margins in excess of 50% and EBITDA margins in excess of 25%. While we cannot be more specific due to confidentiality obligations, the business is in a category that we have targeted as a priority for a tuck-in type deal. Confirmatory due diligence is underway, and we hope to speak more about this soon. More broadly, we continue to work hard on our M&A pipeline, and we believe we are starting to get more traction. As you are all aware, the credit markets remain very weak. They started going south in mid-2022, and this time last year, bankers were predicting conditions would improve in the first or second quarters of 2023. That did not happen, and the credit markets have only gotten worse. In the context of our company, we have been patient and disciplined in our approach to M&A while generating substantial free cash flow to deliver and fortify our balance sheet, with net debt standing at less than one times net debt to adjusted EBITDA at the end of the quarter. As weak credit conditions and an anemic M&A market have persisted for such a long time and not shown signs of improving, sellers of many different types, including financial sponsors and founders, have decided to engage in discussions to sell, and valuations are adjusting to reflect these realities. In addition to the current letter of intent we have executed, we are seeing more actionable opportunities and our balance sheet and financial performance position as well capitalize on these opportunities as they present themselves. Lastly, we are in constant contact with our banks and they have indicated their support for our approach given the way in which we have delivered on our commitments to them over the years. In conclusion, I am proud of our results for this quarter and for the first nine months of the year. We are happy to be able to increase our earnings guidance for the year again based on our performance and as the remainder of the year comes into focus. As I have said before, our businesses are resilient, our operating model is showing results, and we are excited with how we think this year will play out and how things are setting up for 2024. With that, thank you for being with us today. and I will turn the call over to Brad. Brad, over to you.