Cadre Holdings, Inc.

Good afternoon and welcome to CADRE Holdings' fourth quarter and full year 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 today's conference call to discuss CADRE's fourth quarter and full year results. Before we begin, I'd 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, Fathers of Securities, and Exchange Commission. Please 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'd like to remind everyone that this call will be available for replay through March 19, 2024, 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'd 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 fourth quarter and full year 2023. I am joined today by our President, Brad Williams, and Chief Financial Officer, Blaine Browers. Finishing up the fourth quarter and closing the year strong in 2023, I continue to be very proud of the focus and execution of our management team, as demonstrated in achieving record results for annual revenue, adjusted EBITDA gross margin, and adjusted EBITDA margin. Our management team's consistent implementation of the CADRE operating model continues to drive this strong performance. The results, in my opinion, are impressive, and we are exceptionally proud of them. Revenues were up 5.4 percent, gross profit increased 14.2 percent, adjusted EBITDA increased 13.3 percent, and our adjusted EBITDA margin grew from 16.5% in 2022 to 17.8% in 2023. We have spoken often about the high free cash flow characteristics of our company and those we look at for M&A, and 2023 bears that out. With net cash from operating activities growing from 46.4 million in 2022 to 73.2 million in 2023, an increase of 57.8%. We as a team are pleased that we have been able to deliver for our shareholders, and we hope to continue doing so. I have commented on prior calls about the macros driving our business, and those remain largely the same today. Looking at the U.S., it tends to be true that public safety becomes top of mind during presidential election years. It is also worth highlighting that crime rates, while down somewhat over the last year or so, remain relatively high compared to where they were pre-pandemic. Internationally, geopolitical conditions continue to be tense, and crime rates and internal friction are also higher in many countries in which we operate. Having said that, the ongoing conflicts in Ukraine and the Middle East have still not impacted our businesses in any material way. We do expect, as these events eventually calm down, there may be an opportunity for CADRE to play a larger role through a number of our products, mostly notably through our EOD offerings. Lastly, I'd like to talk about our M&A program, as I am particularly happy about the recent progress we had made in that effort. We were in a prolonged period characterized by cheap debt financing that contributed to transaction valuations that seemed out of whack. Following that, as interest rates started to go up, we had a period where business owners of all kinds were hesitant to accept that M&A conditions were changing. Now we seem to be settling into a more normal environment where interest rates are high relative to recent history, but only slightly elevated compared to a longer-term look-back. This is important for CADRE because this debt environment causes valuations to moderate, and more importantly, gives CADRE an advantage in pursuing targets, given the strength of our balance sheet and our ability to act quickly. We closed the I-Corps transaction in January, which was the letter of intent I referred to on our last call. In the case of Alpha Safety, from the time we went exclusive with the seller until signing, we were able to complete documentation in roughly four weeks based upon the support of our bank group to provide incremental borrowings and the substantial cash position we had built up over time. In each of these cases, being patient and disciplined about our M&A approach paid off, and we're able to buy in quick succession to margin-accretive businesses with solid growth prospects. A few more words in particular about alpha safety are warranted to highlight our long-term strategy. We have said since our IPO and all along that we would eventually pursue acquisitions of safety-related, highly engineered technical products businesses that diversify our company and give us additional growth avenues. Alpha safety is just that. This acquisition substantially increases our TAM in a market with outstanding macro tailwinds that we believe we can build into a sizable platform on par with some of our bigger product areas like duty gear, armor, or EOD equipment. We are actively looking at a number of tuck-ins for alpha, but it's also worth noting we will continue to look at further diversification plays that are consistent with our strategy and the M&A criteria we have consistently communicated. In conclusion, I am proud of our results for this quarter and the full year. We are happy to be able to provide our initial earnings guidance for 2024, which includes the impact of our recent acquisitions. Looking ahead, we are optimistic about our prospects for 2024, and we expect we will be able to make additional traction on our M&A program this calendar year. With that, thank you for being with us today, and I will turn the call over to Brad. Brad, over to you.