Cadre Holdings, Inc. (NYSE:CDRE) is a global leader in the manufacturing and distribution of critical safety equipment and related products catering to the law enforcement, first responder, military, and nuclear markets. With a steadfast commitment to quality, innovation, and customer-centricity, Cadre has established itself as a trusted partner, safeguarding lives and enabling its customers to carry out their vital missions with confidence.
Business Overview A Storied Legacy of Protecting the Protectors
Cadre Holdings, Inc. began operations in 2012, building upon a rich legacy that dates back to 1964 when the company was founded. Headquartered in Jacksonville, Florida, Cadre has evolved over the past 60+ years to become a global leader in the manufacturing and distribution of safety equipment and other related products for its target markets.
The company's journey has been marked by a dedication to superior quality and innovation, which has propelled it to become a top supplier of mission-critical safety equipment. Cadre's product portfolio has expanded significantly since its inception, now encompassing a wide range of offerings including body armor, explosive ordnance disposal equipment, duty gear, and highly engineered technical products for the nuclear industry.
Throughout its history, Cadre has demonstrated a commitment to growth through both organic initiatives and strategic acquisitions. The company has successfully completed 17 transactions to date, each carefully selected to enhance its capabilities, expand its market reach, or strengthen its product offerings. These acquisitions have played a crucial role in Cadre's evolution, allowing it to enter new markets and broaden its geographic presence.
Cadre's ability to navigate challenges has been a hallmark of its success. Over the years, the company has faced various obstacles, including supply chain disruptions and regulatory changes. Most recently, in 2024, Cadre encountered a cybersecurity incident that temporarily impacted its operations. Despite these challenges, the company has consistently demonstrated its resilience, maintaining its position as a global leader in the safety equipment market.
Key to Cadre's enduring success has been its diversified product portfolio, longstanding customer relationships, and unwavering commitment to innovation. These factors have enabled the company to weather various industry cycles and continue delivering high-quality products to its end users, which include domestic and international first responders, federal agencies, and foreign government agencies in over 100 countries worldwide.
Financials
Resilient Financials Weathering Challenges, Delivering Consistent Growth
Cadre's financial performance has been marked by resilience and consistent growth, even in the face of broader economic and political headwinds. In the fiscal year 2024, the company reported net sales of $567.6 million, reflecting a 17.6% increase from the previous year. This strong top-line growth was driven by robust demand for the company's armor, duty gear, and crowd control products, as well as contributions from its recent acquisitions of ICOR and Alpha Safety.
The company's Product segment, which includes the manufacturing and sale of body armor, explosive ordnance disposal equipment, duty gear, and nuclear safety products, generated $497.6 million in net sales, up 21.1% year-over-year. This growth was primarily driven by recent acquisitions as well as increased demand for duty gear, armor, and crowd control products. The Distribution segment, which serves as a one-stop shop for first responders, reported $105.4 million in net sales, up 3.0% year-over-year, due to increased agency demand for hard goods.
Despite the short-term impact of cybersecurity incidents in 2024, which temporarily disrupted the company's operations, Cadre demonstrated its ability to navigate the challenges and maintain its position as a market leader. The company's adjusted EBITDA for the year reached $104.8 million, representing a 21.9% year-over-year increase and showcasing the inherent profitability of its business model.
In the most recent quarter ended December 31, 2024, Cadre reported revenue of $176.0 million and net income of $32.5 million. The revenue growth in the quarter was driven by higher demand for armor, duty gear and crowd control products, as well as recent acquisitions, partially offset by a decline in accessories. The net income decrease was primarily due to an increase in SG&A expenses from acquisitions, acquisition-related costs, higher interest expense, and lower productivity as a result of the 2024 cybersecurity incidents, partially offset by favorable pricing and volume.
Liquidity
Cadre's solid financial foundation is further bolstered by its strong cash flow generation and healthy balance sheet. In 2024, the company reported operating cash flow of $31.8 million and free cash flow of $26.2 million, underscoring its ability to generate significant liquidity to fund organic growth initiatives and strategic acquisitions.
As of December 31, 2024, Cadre had a debt-to-equity ratio of 0.75. The company had $124.9 million in cash and cash equivalents, and access to a $175 million revolving credit facility, of which $172.8 million was available. Cadre's current ratio was 3.48 and its quick ratio was 2.61, indicating a strong liquidity position.
Resilient End Markets Weathering Cycles, Capitalizing on Tailwinds
Cadre's diversified end markets, predominantly comprising law enforcement, first responder, military, and nuclear applications, have proven to be highly resilient, largely insulated from economic and political cycles. The company's core law enforcement and military business, which accounts for the majority of its revenue, has historically delivered consistent and stable growth, regardless of broader macroeconomic conditions.
Moreover, the company's entry into the nuclear safety market through the acquisition of Alpha Safety has further strengthened its portfolio, providing exposure to a segment with similarly favorable demand characteristics. The nuclear industry's three key missions – environmental safety, national security, and nuclear energy – are driving sustained growth opportunities for Cadre's highly engineered technical products and services.
Looking ahead, Cadre is well-positioned to capitalize on the increasing global focus on public safety and security, as well as the ongoing modernization and replacement cycles for mission-critical equipment. The company's innovative product pipeline, coupled with its strong market positions and customer relationships, positions it to continue delivering value to its shareholders.
Inorganic Growth Strategy Disciplined Expansion through Strategic Acquisitions
Complementing its organic growth initiatives, Cadre's M&A strategy has been a key driver of its long-term expansion. The company has a proven track record of identifying and successfully integrating strategic acquisitions, having completed 17 transactions to date, including the recent additions of ICOR and Alpha Safety.
Cadre's disciplined approach to M&A is guided by a set of well-defined criteria, focusing on targets that can enhance its product and technology offerings, expand its geographic reach, and strengthen its market leadership positions. The company's strong balance sheet and cash flow generation provide it with the financial flexibility to pursue accretive acquisitions that align with its strategic objectives.
Looking ahead, Cadre's robust M&A pipeline remains a source of optimism, with the company aiming to announce at least one additional transaction before the end of 2025. These strategic investments are expected to further diversify Cadre's revenue streams, improve its competitive positioning, and drive long-term shareholder value.
Navigating Challenges, Maintaining Momentum
Cadre's unwavering commitment to operational excellence and its ability to navigate challenging environments have been instrumental in its success. The company's nimble response to the 2024 cybersecurity incidents, which temporarily disrupted its operations, underscores its resilience and the strength of its business model.
Despite the short-term impact on its financial performance, Cadre remains focused on executing its strategic priorities, including continued product innovation, geographic expansion, and disciplined M&A. The company has revised its full-year 2024 guidance due to the impact of the cybersecurity incidents, with net sales now expected to be in the range of $560 million to $570 million and adjusted EBITDA in the range of $101 million to $107 million. Capital expenditures are expected to be in the range of $6 million to $8 million.
The cybersecurity incidents had an estimated 5 percentage point impact on Cadre's gross margins in Q3 2024. Additionally, intangibles amortization and cost of goods sold in Q3 2024 was $900,000, creating a 225 basis point headwind compared to the prior year. Despite these challenges, Cadre's orders backlog stood at $167 million as of September 30, 2024, representing a $21 million increase from Q2 2024, excluding the Alpha Safety and ICOR acquisitions.
Conclusion A Beacon of Safety and Resilience in Uncertain Times
Cadre Holdings has demonstrated its ability to thrive in the face of adversity, delivering consistent growth and value creation for its shareholders. The company's unwavering commitment to quality, innovation, and customer service has positioned it as a trusted partner in the critical safety equipment industry, safeguarding the protectors who keep our communities and nations secure.
As Cadre continues to navigate the evolving landscape, its resilient business model, diversified end markets, and disciplined growth strategy position it for continued success. The company's products are sold worldwide, with international sales accounting for 19.8% of total revenue in 2024, spanning over 100 countries across North America, Europe, and other regions.
The safety equipment industry, which includes Cadre's core markets of law enforcement, first responder, military, and nuclear, has exhibited consistent growth over the past decade, with a CAGR of approximately 4-6% depending on the specific product category. This growth has been driven by factors such as increased focus on public safety, equipment modernization and replacement cycles, and expanded nuclear energy and defense programs.
Cadre's leadership team, led by Warren B. Kanders as Chairman and CEO, has remained stable, with no reported major scandals, short seller reports, or CEO departures. This stability in leadership has contributed to the company's consistent performance and strategic execution.
Investors seeking exposure to a well-managed, market-leading player in the safety and security space would be well-advised to consider Cadre Holdings as a compelling long-term investment opportunity. With its strong market positions, recurring revenue streams, and favorable industry trends, Cadre is well-positioned to continue delivering value to its customers and shareholders in the years to come.