Cadre Holdings Inc (CDRE) Q4 2024 Earnings Call Highlights: Record Revenue and Strategic ...

• Full Year Revenue Growth: 18% increase.
• Adjusted EBITDA Growth: 22% increase.
• Adjusted EBITDA Margin Improvement: 70 basis points increase year over year.
• Fourth Quarter Net Sales: $176 million.
• Fourth Quarter Net Income: $13 million.
• Fourth Quarter Adjusted EBITDA: $38.5 million.
• Fourth Quarter Gross Margin Improvement: 530 basis points increase.
• Fourth Quarter Adjusted EBITDA Margin Improvement: 400 basis points increase.
• 2025 Revenue Guidance: $572 million to $601 million.
• 2025 Adjusted EBITDA Guidance: $105 million to $115 million.
• Dividend Increase: Raised to $0.38 per share on an annualized basis, a 9% increase.
• Pro Forma Net Leverage: Approximately 1.75 times post-acquisition.

• Warning! GuruFocus has detected 3 Warning Signs with CDRE.

Release Date: March 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cadre Holdings Inc (NYSE:CDRE) reported record quarterly revenue, gross margin, adjusted EBITDA, and adjusted EBITDA margin for Q4 2024.
• Full year revenue grew by 18% and adjusted EBITDA increased by 22%, with a 70 basis point improvement in adjusted EBITDA margin.
• The company successfully executed its strategic plan, including a significant acquisition in the nuclear safety sector, expanding its international footprint.
• Cadre Holdings Inc (NYSE:CDRE) increased its quarterly dividend, reflecting confidence in business fundamentals and commitment to shareholder value.
• The company maintains a strong balance sheet with upsized $590 million credit facilities, providing financial flexibility for future growth opportunities.

Negative Points

• There is uncertainty in 2025 due to potential delays in government transactions and macroeconomic factors.
• The company faces potential impacts from newly announced US tariffs, which could affect financial performance.
• Q1 2025 is expected to be a weaker quarter due to project timing and seasonal factors, with lower revenue and adjusted EBITDA margins.
• The geopolitical landscape adds unpredictability, potentially affecting procurement processes and government spending.
• Cadre Holdings Inc (NYSE:CDRE) has widened its guidance ranges for 2025 due to the uncertain environment, indicating potential variability in financial outcomes.

Q & A Highlights

Q: How does the guidance for 2025 account for potential impacts from government spending uncertainties? A: Blaine Browers, CFO, explained that the high end of the guidance assumes a 5% organic growth, which aligns with their communicated expectations. The impact from government spending uncertainties is more about the rhythm of orders and transaction processes rather than a reduction in demand. The company is monitoring these developments closely.

Q: What is the expected impact of tariffs on Cadre Holdings, and what mitigation strategies are in place? A: Brad Williams, President, stated that the potential impact of tariffs could range from $18 to $22 million annually. The company is prepared to implement mitigation strategies, including realistic pricing opportunities, productivity acceleration, and potential shifts in product lines across their global facilities.

Q: How does the recent acquisition of the engineering division from CAS Group fit into Cadre's strategic plans? A: Brad Williams highlighted that the acquisition expands Cadre's nuclear vertical, increases their international footprint, and opens new areas like automation and robotics. The acquired brands are complementary to Cadre's existing business and are expected to enhance their market leadership.

Q: Can you provide more details on the pricing strategy for 2025? A: Blaine Browers mentioned that pricing varies by product, with increases ranging from 1% to 2.5%. For 2025, excluding tariffs, organic pricing is expected to be in the same range, closer to 0.5%, as there is not much input inflation anticipated.

Q: What are the growth expectations for Cadre's different business segments in 2025? A: Blaine Browers noted that the core business segments, such as Armor and duty gear, are expected to grow by about 3% for the year. The nuclear segment, boosted by the recent acquisition, is anticipated to see double-digit growth due to the additional two months of contributions from the acquired businesses.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.