Cadre Holdings Inc (CDRE) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and ...
Net Sales: First quarter net sales increased by 23% year-over-year.
Adjusted EBITDA: Achieved a 32% increase year-over-year in the first quarter.
Gross Margin: Improved by 190 basis points sequentially from the fourth quarter.
Adjusted EBITDA Margin: Improved by 120 basis points sequentially from the fourth quarter.
Free Cash Flow: Strong generation, supporting acquisitions and shareholder returns.
Dividends: Increased to $0.35 per share on an annualized basis.
Acquisitions: Completed two accretive acquisitions, iCore Technology and Alpha Safety.
Revenue Guidance for 2024: Expected to be between $553 million and $572 million.
Adjusted EBITDA Guidance for 2024: Anticipated to be between $104 million and $108 million.
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Record net sales and adjusted EBITDA in Q1 2024, with increases of 23% and 32% respectively, showcasing strong financial performance.
Successful integration of recent acquisitions iCore Technology and Alpha Safety, enhancing Cadre Holdings Inc's mission-critical safety equipment offerings.
Continued margin expansion with gross margins improving by 190 basis points and adjusted EBITDA margins by 120 basis points sequentially.
Strong free cash flow generation, enabling strategic acquisitions and consistent dividend payments, with a recent increase to $0.35 per share annually.
Robust demand for Cadre Holdings Inc's products driven by geopolitical uncertainties and increasing public safety budgets, supporting long-term growth.
Negative Points
Exposure to geopolitical risks, particularly in regions like Ukraine and the Middle East, which could impact demand unpredictably.
Integration risks associated with ongoing and future acquisitions, which could affect operational efficiency and financial performance.
Potential challenges in scaling operations efficiently as the company continues to grow and diversify into new markets.
Inflationary pressures and supply chain disruptions could impact cost structures and margin improvements.
Dependence on the continuation of strong public and defense spending, which could be subject to budgetary constraints and political changes.
Q & A Highlights
Q: Considering the EBITDA margins running ahead of expectations, what is your latest thinking about the long-term EBITDA margin potential for the company as you scale and leverage? A: (Blaine Browers, CFO) Long term, we see a path to clearly get into the 20s with the core business. As we think about acquisitions and find accretive opportunities, we think we can push into the mid-20s. This is focused on day-to-day execution across the businesses.
Q: Can you speak more about what you're seeing at both of the recent acquisitions, iCore and Alpha, relevant to demand and the outlook for those business lines? A: (Brad Williams, President) For both iCore and Alpha, we are where we would expect to be not only from an integration standpoint but also from a demand standpoint. We're really pleased with where we're tracking based on the funnels that the team has as we look forward at demand.
Q: Last quarter you mentioned targeting one more acquisition this year. Is that still the target? A: (Brad Williams, President) Yes, that is still the target.
Q: Could you clarify what was the organic growth in the first quarter and the contribution from iCore and Alpha? A: (Blaine Browers, CFO) The organic growth in Q1 was fairly significant, higher than expected, primarily driven by some large projects that shipped out. We're pleased with the execution on revenue in Q1 and still tracking to that mid-single digit organic growth for the full year.
Q: How should we think about the drivers of the implied deceleration in growth throughout the rest of the year, given the strong Q1 growth? A: (Blaine Browers, CFO) We expect revenue to increase from Q1 to Q2 and also Q2 to Q3, then level out in Q4. The 23% growth in Q1 is partly due to a low base in the same quarter last year. We expect the business to step up on a revenue dollar basis as we progress through this year.
Q: What does the bridge look like for the rest of the year given the step-up in EBITDA margin and more M&A contribution? A: (Blaine Browers, CFO) The bridge is driven by products and includes a full quarter of Alpha in Q2, sequentially favorable mix driven by duty gear into Q2, and a positive portfolio mix as distribution had a large Q1. Alpha's revenue steps up significantly in the back half of the year, particularly in Q4.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
