管理層發言
Good morning, and welcome to Cadre Holdings First Quarter 26 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, on your touch tone phone. At this time, I would like to turn the conference over to Matthew 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 first quarter result. 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 morning 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 May 26, 2026. A webcast replay will also be available via the link provided in yesterday'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 morning. And thank you for joining CADRE's earnings call to discuss our results for the first quarter of 2026. I am joined today by our President, Brad E. Williams and Chief Financial Officer, Blaine Browers. Entering 2026 with greater scale and an expanded set of growth opportunities, we are pleased to have delivered another quarter of financial and operational progress to begin the year. First quarter net sales growth of 19% year over year reflected continued strong and recurring demand for our suite of leading mission critical safety products across our law enforcement, first responder, military, and nuclear categories. We ended the first quarter with record orders backlog of $365 million which included a $108 million organic increase from Q4 to Q1. Brad and Blaine will provide additional details on the backlog but its substantial growth signals strong demand as we progress through the remainder of the year. We are on pace for record net sales and adjusted EBITDA in 2026, with 20-plus percent growth expected based upon the midpoints of our reaffirmed guidance ranges. Today's environment of heightened geopolitical tension and increased defense spending reinforces our belief in CADRE's growth trajectory. M&A has been and will continue to be a critical component of Cadre's long-term value creation strategy. Since our IPO, we have been very clear about our intent to build CADRE into a diversified, multi-vertical provider of mission critical safety products, serving durable end markets. Thus far in 2026, we have completed two acquisitions: TIER Tactical in January and Alien Gear Holsters in April. While the former was a $175 million strategic platform, and the latter, a $10 million bolt-on, the same principles guide our process. Our highly selective key criteria include leading and defensible market positions, strong margins, mission-critical products, as well as recurring revenues and cash flows. Looking ahead, we see attractive opportunities in both the public safety and nuclear markets, and intend to grow our portfolio of mission critical safety businesses through patient and disciplined capital allocation. As we assess the overall operating environment in 2026 and beyond, it is important to highlight CADRE's track record of consistent and stable growth through cycles. This is the defining characteristic of the businesses we own. Based on this resilience, we are confident in Cadre's long-term outlook and remain focused on taking advantage of both organic and inorganic opportunities supported by a strong balance sheet, robust acquisition pipeline, and the continued implementation of the CADRE operating model. In closing, I want to reiterate why this work matters. Our mission together, we save lives, is the foundation of everything we do. We feel an extraordinary sense of purpose fulfilling this mission, and look forward to continuing to provide the best-in-class equipment that protects the law enforcement, military, and security professionals who keep us all safe every day. With that, thank you for being with us today. And I will turn the call over to Brad.
Brad, over to you. Thank you, Warren. On today's call, Blaine and I will provide a Q1 update and business overview, including recent trends and financial performance, as well as our 2026 outlook followed by a Q&A session. We will begin on Slide 5. Following a record-setting 2025, we carried this positive momentum into the new year, driven by ongoing progress embedding the CADRE operating model in everything we do, together with strong and recurring demand for our suite of products across law enforcement, first responder, military, and nuclear markets. We continued to successfully implement our pricing strategy in the first quarter, which is a testament to both the strength of our brands and the value our customers place in our mission-critical equipment. We experienced some headwinds year over year in mix for armor and nuclear, which was partially offset by lower distribution revenue in the quarter. Turning to our orders backlog. It increased to $355 million at quarter end, which represented an all-time high. You will hear more from me in a moment about our record backlog, but in short, it was driven by significant organic backlog growth from the blast attenuation seat contract award announced in March 2026 as well as strong demand in duty gear and armor. The remaining growth came from our acquisition of TIER Tactical. Following our acquisition of TIER, a best-in-class brand delivering must-own tactical defense products, we completed the acquisition of Alien Gear last month. This was a compelling add-on opportunity to acquire a recognized holster brand with an established direct-to-consumer presence. Integration is underway, and we have begun working with the teams to develop strategies and action plans for functional, consumer, professional, and operational integrations. We remain committed to further enhancing CADRE's market leadership through disciplined M&A and a robust pipeline across both public safety and nuclear. As we think about capital allocation moving forward, our strong free cash flow generation enables CADRE to not only execute our M&A strategy, but also invest in organic growth initiatives and provide shareholders with consistent dividends. Our May dividend payment will mark our 17th consecutive since our IPO. Turning to slide 6, we continue to see a highly supportive long-term demand environment across both our public safety and nuclear safety end markets underpinned by durable industry tailwinds. On the public safety side, rising global security threats and increasingly complex operating environments are among the factors driving long-term resilient spend among law enforcement and military customers worldwide. At the same time, we are benefiting from replacement and mission-critical demand dynamics to support steady recurring revenue streams over the long term. Within nuclear safety, we believe the long-term outlook remains equally compelling. Governments and agencies globally continue to prioritize environmental remediation and nuclear cleanup initiatives while national defense modernization programs support sustained investment in nuclear safety infrastructure and protective solutions. In addition, growing momentum around commercial nuclear power and energy security is creating incremental opportunities as countries increasingly view nuclear energy as a critical component of the long-term global energy mix. Collectively, these trends reinforce our confidence in the durability of demand moving forward. The next two slides outline more current trends. First, on slide 7, we see favorable dynamics supporting demand as we look across our core law enforcement safety end markets, although there are certain near-term developments we are monitoring. As we have discussed previously, CADRE stands to benefit from the current U.S. administration's commitment to public safety reflected in significant investment in federal agencies. Zooming in on our company-owned distribution segment, we have seen signs of softness in demand for discretionary-type items for the first time since COVID and the defund-the-police period. There has been an uptick in publicized budget challenges for various cities that could translate into cuts in state and local law enforcement budgets. With that said, when budget challenges have happened historically, safety equipment spending has always been prioritized. Consistent with the historical trend, we have not seen any indication of a drop in spending for CADRE products given their mission-critical nature. In our consumer channel, the strength of the Safariland brand and new product introductions are driving market share gains despite a challenging overall consumer environment. In fact, this channel is up 6.7% in Q1 year over year. After completing our strategic planning process entering the year, we are excited about the opportunities ahead and confident in our dedicated team's ability to continue fueling growth in our consumer business. We have also taken immediate steps to kick off the Safariland and Alien Gear teams to evaluate how best to optimize the positioning of these two powerful consumer brands in the marketplace. Turning to geopolitics, today's environment of heightened tension, conflict, and increased defense spending reinforces our belief in CADRE's long-term growth trajectory. However, our view of near-term opportunities has not changed. CADRE is well positioned to play a more meaningful role if hostilities end, at which point we would expect to provide various EOD offerings to address unexploded ordnance. Turning next to the latest market trends affecting our nuclear vertical on slide 8. We continue to see multidirectional support across our three market segments: environmental management, national security, and nuclear energy. Development to call out here is the 2027 budget submitted to Congress from the DOE. Overall, the budget was up 10%, which is positive. However, non-NNSA funding, which is mostly inclusive of clean energy spending, was down 11%. This underpins our comments from last earnings related to the administration shifting priorities. The new budget reflects a focus on defense-related applications, which could translate to increased demand for our CAS, ventilation and containment, robotic arms, and container businesses. The budget does not change the view we shared last quarter for NFT; we expect rates to hold at current levels. Before I turn the call over to Blaine, I would like to spend a moment to underscore the significant growth of our orders backlog since the start of the year. As you can see on slide 9, our backlog as of March 31 was at $355 million, a record for CADRE and an increase of $166 million from the prior quarter. This was driven by a few factors. First was organic backlog growth of $108 million. As you will recall from our commentary last year, we saw a higher mix of large opportunities that had been delayed. Following a successful 2025 during which our teams delivered on larger opportunities in South America, Eastern and Western Europe, UAE, and parts of Asia, we made further progress in Q1 2026, evidenced by the organic growth illustrated on the slide. We saw an $87 million increase from the blast attenuation seat contract booked in March. As a reminder, this is a seven-year contract with General Dynamics European Land Systems representing a key milestone and evidence of increased European defense spending. The remaining $22 million of organic backlog growth was driven primarily by strong demand for duty gear and armor products directly related to the work we communicated last year to close out various larger opportunities in our funnel. We continue to have additional larger opportunities that are still in play that we expect continued progress on throughout 2026 across armor, duty gear, EOD, and crowd control. Lastly, the acquisition of TIER drove another $57 million increase in orders backlog. We are excited about the opportunities that the Safariland and TIER teams are currently engaged in evaluating, which range from cross-selling to new products and go-to-market optimizations. The integration work with TIER is going exceptionally well, along with the progress the TIER team is making to achieve their commitments to us pre-acquisition. Taking a step back and putting this substantial backlog growth into context, it represents an important forward indicator and gives us confidence in our outlook as we progress through the remainder of 2026. With that, I will now turn the call over to our CFO, Blaine Browers, to speak more about M&A, CADRE's Q1 financial results and 2026 outlook.
Thanks, Brad. Before turning to the quarter, I want to briefly highlight CADRE's M&A track record to date and the strong foundation we have created for continued success in 2026 and beyond. As you can see on slide 10, the acquisition of Alien Gear Holsters completed in April marked our seventh acquisition since going public. Since the start of 2024, CADRE has deployed over $400 million in targeted M&A, reflecting our conviction, financial strength, and valuation discipline. Each of these seven transactions has been consistent with our thoughtful and patient approach. And more importantly, each has met our highly selective key criteria focused on strong margins, leading and defensible market positions, and recurring revenues and cash flows. On slide 11, we provide additional details on our latest Alien Gear Holsters, which we acquired for $10.3 million through a court-supervised bankruptcy auction. A recognized holster brand, Alien Gear is a single-site business located in Idaho with fully integrated injection molding capabilities. Turning to the next slide, we highlight the key criteria that guide our process when evaluating potential transactions. Alien Gear ticks many of the boxes that define our disciplined approach to M&A, outlined on the right side of the slide. Looking ahead, we remain well positioned to capitalize on attractive growth opportunities supported by a robust acquisition pipeline and significant financial flexibility. We anticipate additional M&A in 2026, and we will target deals that broaden our product range and/or increase our customer wallet share. Turning now to a summary of CADRE's financial performance. Slide 14 details our first quarter results. Q1 net sales of $155.4 million increased 19% year over year. Of note, the first quarter 2026 results included $2.6 million of inventory step up amortization and $1 million of depreciation and amortization related to Zircaloy and TIER. Margins were in line with expectations in Q1. We knew coming in the quarter we had some mix headwind in armor and nuclear that was driven by the complexion of our backlog. Right now, we expect margins to improve as we move through the year, which is a function of improving mix and leverage on increasing revenues. Illustrated on slide 15 is net sales and adjusted EBITDA growth year over year, including our 2026 guidance, which I will discuss in more detail in a moment. Our full-year growth implies year over year revenue and adjusted EBITDA growth of 22.4% and 24%, respectively at the midpoints. You can see over the last several years, CADRE has delivered consistent and stable growth. Our resilience is a key differentiator with businesses that are largely unaffected by economic, political, geopolitical, and other cycles. On slide 16, we present our capital structure as of March 31, 2026. Our net leverage is just under 3x and after factoring in a full year of TIER earnings, our leverage is less than 2.5x. We believe CADRE's strong free cash flow generation coupled with the strength of our balance sheet gives us ample financial flexibility to continue to pursue organic and inorganic opportunities. We provide our 2026 outlook on slide 17. Net sales are expected to be between $736 million and $758 million. Our adjusted EBITDA guidance is between $136 million and $141 million implying adjusted EBITDA margins of 18.5%. We still expect organic revenue to be in the 3% to 5% range on a full year basis. As Brad mentioned earlier in the call, our strong backlog exiting Q1 gives us confidence in our full-year guidance. Expect Q2 revenue to be around $178 million with adjusted EBITDA margins around 17.5%, which implies the back half of the year will be about 55% of our full-year revenue. We expect the sequential increase from Q1 to Q2 to be driven by a full quarter of TIER, an uptick in distribution, EOD, and armor. Similarly, we expect adjusted EBITDA margins to increase in line with the volume throughout the rest of the year. Overall, our businesses are performing well, and we expect continued strong demand in 2026 across our core markets in public safety and nuclear safety. I will now turn it back to Brad for concluding comments.
Thank you, Blaine. In closing, we are excited about the opportunities ahead. We continue to execute with discipline against our strategic priorities; our outlook for 2026 reflects confidence in the durability of our business, the resilience of our end markets and the effectiveness of the CADRE operating model. Across varied economic, political, and geopolitical environments, we have consistently demonstrated an ability of CADRE to deliver strong, consistent results supported by our talented teams around the world. We remain focused on driving continuous improvement and building upon our market-leading positions. With that, operator, please open up the lines for Q&A.
分析師問答
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star then the number 1 on your telephone keypad. To cancel your request, press star 1 again. Your first question comes from Jeff Van Sinderen with B. Riley Securities. Please ask your question.
Good morning, everyone. I just wanted to start with TIER, realize the acquisition only closed in January, but wonder if you could speak a little bit more about some of the opportunities you are seeing there and potential synergies.
Hey, Jeff. It is Brad. As I stated a little bit earlier, the TIER acquisition is definitely meeting and exceeding expectations on many fronts. The commitments that they have made to us on a pre-acquisition basis continue to look really good. We have kicked off various projects I cannot get into details on externally, but those projects range from new products that the teams are working on between TIER and Safariland, and also our EOD business unit, along with other go-to-market strategies that we feel like we can use as we go forward to optimize what both companies are doing.
Okay. Great. And then given that you I think you mentioned you are exceeding internal targets on price, I guess any more you can give us on the latest you are seeing on input costs and supply chain overall?
Yeah. Right now, we are not seeing any significant change on input pricing or material inflation. It is something we are staying close to. Certainly when you think about the sites in Europe, kind of staying close to energy prices; in many cases we have fixed contracts that prevent us from being exposed to short-term higher energy prices. But up to this point, it has not been an impact, but something we will follow closely. And I think, more importantly, reiterating we will be nimble when it comes to pricing. We have had over the last five or six years a couple of examples, whether it was COVID or tariff announcements, where we had to thoughtfully readdress pricing as things change. So the team certainly has the playbook and the capability to pivot if required. But right now, we are not seeing any pressure that would change our current course.
Okay. Good to hear. And then with backlog, up pretty substantially, can you remind us how we should think about conversion to revenues there over the next year or so?
Yeah. I think when we think about it, the easy one is to take out the blast attenuation seats—that $87 million contract that the EOD business won. There could be some small shipments this year, but for the most part that will shift out into 2027. After that, some of the nuclear businesses will carry over backlog. But when you think about the shorter term, the armor, the duty gear, the crowd control, those will ship in the current year. So we look at it and believe the majority of it is shippable in this year. Keep in mind, we have the blast sensor contract that we put in for $10 million last year. That is expected to completely shift this year. So that is part of the reason going back to comments that we feel bullish and confident in the full-year guidance: we are seeing that backlog uptick and not just on blast attenuation seats, but fairly broadly across the portfolio. We have seen that increase in backlog, which is exciting for us and the businesses to see.
Absolutely. Thanks for taking my questions. I will take the rest offline.
Thanks, Jeff.
Thank you. Your next question comes from the line of Larry Solow from CJS Securities. Please go ahead.
Greg. Thanks. Good morning, guys. Just on order and the outlook, it seems like the quarter was pretty much in line. Just a couple of questions. Was the weakness you called out on the hard goods and on the distributor side, is that something new, something that concerns you?
Hey, Larry. It is Brad. Is it new? It is new since COVID and the defund-the-police period. That was going on. So it is the first time we have seen a bit of softness in our company-owned distribution side of things. Keep in mind, within company-owned distribution, a larger portion of that business is actually third-party products that we procure from various companies—anything from boots to uniforms to flashlights, you name it. The smaller part of that business is CADRE products from our product segment. When we look at the data around our distribution segment, we are not seeing any weakness in the CADRE product side of things, which is good. That goes back to what we have talked about in previous years: that is why we like the safety product side of things, because typically, if there is a prioritization going on at budgets, you are going to make sure that you have folks with armor on, you are going to have holsters, and other products of ours. So that is what we are seeing at the moment. We are watching it from that standpoint, but from a product segment perspective, we look good.
Okay. And the organic growth kind of or assumptions you had for the year, I think, were — I do not think you would break out officially, but it was like 3% to 5%. I am just curious has anything changed there? Did the acquisitions, the TIER you know, are they adding more than expected, any less? Does anything really change in terms of kind of organic versus acquired growth this year?
No. Nothing's changed really on the organic growth side. We are reaffirming guidance and still feel good about the organic side. As Brad mentioned, we will watch the distribution segment. The rest of the businesses are really performing well. Zircaloy was largely in line with expectations. And TIER similarly was about the same as expected. But you have to keep in mind TIER has only been with us for a short period. We will continue to monitor progress both in revenue in the quarters as well as backlog in their funnel and adjust. But at this time, as Brad said, they have executed right where we expected them to and we do not expect any downward pressure from them.
Gotcha. And then just last one for you, Blaine. Just on the guide. So it kind of implies an EBITDA margin in the back half of the year—I know you are always kind of back end loaded. But this time, it looks like it is going to have to be, like, 22.1%, 22%. I guess you are comfortable with that in the back half?
We are. We always have operating leverage as volume comes through. And then you think about the complexion of TIER, which is more in that area that can contribute to higher margins. So yeah, we are comfortable looking at it. We have, when you think about the blast sensor for example, that is incremental volume at nice margin with no incremental OpEx. That is where we will get a lot of that leverage in the back half as some of these larger orders shift.
Gotcha. Okay. Great. Thanks, guys. I appreciate the call.
Thanks, Larry.
Your next question comes from the line of Matthew Butler Koranda with ROTH Capital. Please go ahead.
Hi. What did TIER and Zircaloy contribute inorganically to sales in the quarter? And then just anything that you can call out that drove the organic headwinds in the first quarter? I guess, was it more on armor or more on the core safety products side of the business?
And we missed, I think, the first part of your question, Matthew.
I think you are asking about TIER contribution and Zircaloy contribution in the quarter? So TIER, if you kind of run it out, their trailing twelve months were about in line in the quarter, and Zircaloy was similarly about the same. So kind of fairly level to expectations when you run rate them out. When you kind of unpeel the inorganic, we knew coming in we had a tough comp, in particular armor. Distribution and armor were really the drivers and Brad talked through the distribution challenges there. Armor is really just timing: the complexion or timing of the orders coming through. So no concerns on the armor side. And to reiterate what Brad said on the distribution side, we are not seeing softness on CADRE-made products. It has been much more around the discretionary-type third-party products, which is consistent with what we have seen during defund and COVID.
Okay. And then on the 3% to 5% organic growth for the year, just wondering maybe a little bit more about cadence of that growth for the rest of the year. I guess it implies that you see a pretty decent pickup. Maybe just anything on the seasonality of that organic growth that you expect and how the blast monitoring sensor contributes? Maybe that is back half of the year, but I just want to hear a little bit more about seasonality.
The blast sensor will be a back-half shipment as we expected. Looking across the rest of the portfolio, armor is back-half loaded this year as well, which is right in line with expectations coming into the year. Duty gear looks to be heavy in the last quarter of the year. So it is pretty discrete when we look at where the volume will come. And again, having the backlog uptick in Q1 certainly gives us a lot of confidence in the rest of the year forecast and guidance.
Okay. And then just maybe last one on the distribution segment. Wanted to hear what exactly did the softness that you have observed and called out pretty clearly here show up during the first quarter. And, I guess, what have you observed quarter to date in that business? Is it still kind of running a little softer on a year-over-year basis? To think about some of those third-party products that you are selling and any demand changes that you have seen?
When you look inside Q1, they stair-stepped each month on revenue. January was a low point, picked up in February, and then picked up again in March. So that progression gives us some confidence there was a temporary lull in early-year purchasing. We are paying close attention to it inside the quarter here, but nothing that at this point would give us any reason to doubt the full year. We have seen a recovery to a point where we are in line with guidance if it continues at the rate. So again, it can be a very short cycle on the distribution side, so we will watch it closely. But the progress where we exited Q1 at significantly higher revenue definitely gives us a lot of confidence going into Q2 that this looks to be a temporary lull.
Alright. Helpful. I will leave it there. Thanks.
Your next question comes from the line of Sheila Karin Kahyaoglu with Jefferies. Please go ahead.
Hi. This is Jack on for Sheila. I am just wondering if you could potentially provide an update on the plutonium down-blending suspension and maybe quantify the headwind if possible. Just discuss kind of the path to resumption in that business?
Yeah. Absolutely. So it has not changed since our last earnings update. Tied back to the executive order that went out. So pretty consistent with that. However, when you look at the long-term side of things, even though there is a bit of a lull in demand for that specific product and that application, there is a fundamental timeline mismatch that still exists between what the DOE has obligations to remove surplus plutonium by—around 2037—compared to reactor reuse scaling that is supposed to happen in the 2030-to-2040 range. So there will be some portion of excess plutonium that is going to have to be dealt with. Right now, we are continuing to forecast what we have in the plan for this year and for next year. At this moment, we continue to look at it as being consistent with that plan as we go forward.
Got it. That makes a ton of sense. And just for the follow-up, M&A has been a big piece of the CADRE story, and I know you guys have talked about it today. I think historically, you would say maybe 100 potential M&A targets in nuclear alone. Just wondering, on that, what specific engineering capabilities or product gaps you would be prioritizing over the medium term in the nuclear field?
Great question. Some of the categories we have talked about are not significantly different from the categories we have today. We would continue to build out those capabilities whether it is geographically or within other customers that we do not reach today with certain product line expansions. I would think of it that way. So it would be continued engineering capabilities. We have talked about critical alarm systems, ventilation and containment type systems. We would like more of those. When you look at the spending that is going on and the budget that was just submitted by the DOE, there is a significant increase in the defense side of things, and a lot of those product categories are related to those applications. It makes a lot of sense.
Thank you. Your next question comes from the line of Mark Eric Smith with Lake Street Capital Markets. Please ask your question.
Hi, guys. I know that it is smaller, but just wanted to dive a little deeper into Alien Gear, this acquisition. Small cost, but can you just walk us through any thoughts around maybe revenue contribution, synergies that you expect with your other holster businesses and even maybe profitability of this business?
Great question. Keep in mind Alien Gear is coming through a bankruptcy process, so when we look backwards I would not think about it as a direct indicator for the current year just based on some of the challenges in that process. When you look at the numbers for last year, they were right around $20 million and about a little north of 10% EBITDA, which is not a bad business, but not at our standards yet. We just closed a few weeks ago so it is not incorporated into the guidance. We want to take our time, get to know the business, understand the implications of the bankruptcy process on the business. What we are excited about is you have the same manufacturing processes, a strong focus on consumer and consumer marketing, and we know a lot about their manufacturing processes. We are excited to take lessons learned and improvements we made in our facilities and introduce those into the Alien Gear production line. We are looking forward to it: great team, very happy with them out of the gates, and excited about what this can mean for the duty gear brands between Safariland and Alien Gear in the year.
Perfect. Then you gave some good info on kind of leverage and your comfort levels there. I am just curious as we think about your debt repayment, how that sits as far as use of cash and maybe outlook of debt reduction over the next 12 months or so?
Our free cash flow will generate over the coming months and year will be directed towards the revolver, excluding any acquisitions. That has been our play: dividend certainly takes a priority, and then the rest of the cash generated is going to be focused around either delevering or acquisitions. We are not at the top end of our leverage, but we have always said we think 2x leverage is about the right long-term number. Right now, when you factor in TIER earnings, we are just a little south of 2.5x, so we are not far off that long-term target. We certainly have some flexibility, but absent deals for the rest of the year, free cash flow would be really focused around paying down the debt and delevering.
Perfect. Thank you.
Thank you. Your next comes from the line of Alex Preston with Bank of America. Please go ahead.
Hey. Good morning. Thank you for taking the question. Just wanted to take a step back to the FY 2027 budget, right? You noted this mix between lower non-NNSA spending and an uplift on the defense side. As you consider both your respective exposures to these line items, and given the budgets are still in flux, do you expect the longer term dynamics to be more of a headwind or favorable? And going off that, to what extent is the shift in administration priorities impacting opportunities you look at within nuclear going forward?
Great question. There is a shift going on. When you look at the 2027 budget the DOE submitted to Congress, they are showing overall up about 10%, but then an 11% decline in non-NNSA funding. The way we look at it: the large increase side of things is for weapons and reactors being up—four of our business units are connected to those applications: our container business (NFT), our robotic arms business (Vollish Miller), our RPS business which is ventilation and containment, and our PSC business which is critical alarm systems. We feel like those four are directly related to the weapons and reactor side of things and we look forward to seeing how that translates if the budget gets approved. On the environmental management side, we feel that area will be roughly flat, which is where we are sitting today as we have dialed in that forecast this year compared to last year where we talked about a decline in some container demand. So we view the overall budget as positive going forward because of that 10% increase on the weapons and reactor side of things.
Got it. Really appreciate the color.
Thank you.
There are no further questions from the line at this time. I will now turn the call back over to Brad E. Williams for any closing remarks.
Thank you, operator. I would like to thank everyone again for joining us on today's call and your continued interest in CADRE Holdings. Thank you. Have a good day.
This concludes today's conference call. Thank you, and have a great day.