管理層發言
Good morning, and welcome to Cadre Holdings Second Quarter 2026 Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Matt Berkowitz of the IGB Group for the 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 second quarter 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 filed with the 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 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 August 20, 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 second quarter of 2026. I am joined today by our President, Brad Williams; and Chief Financial Officer, Blaine Browers. We are pleased to report another quarter of significant financial and operational progress, reflecting the strength of our brands, the resilience of our end markets and the consistent execution across the organization. During the second quarter, we generated year-over-year net sales growth of 32% and adjusted EBITDA growth of 56%, supported by strong and recurring demand for our mission-critical safety products across the law enforcement, first responder, military and nuclear markets. Our performance through the first half of the year, combined with our record orders backlog and continued momentum, reinforces our confidence in Cadre's outlook. As a result, we have raised our 2026 guidance and are on track for full year revenue and adjusted EBITDA to increase well above 20%. M&A remains a critical component of our long-term growth strategy. Since our IPO, we have taken a thoughtful and disciplined approach to building Cadre into a diversified multi-vertical provider of mission-critical safety products. Importantly, as Cadre has grown in scale, the size and breadth of opportunities we can consider has expanded as well. Earlier this year, we acquired TYR Tactical, our largest transaction since going public. With greater scale, stronger cash flow generation, expanded capabilities and operations in more diverse markets, we can weigh a broader range of strategically significant opportunities today than we could several years ago. At the same time, our success is not dependent upon transaction size. The acquisition of Alien Gear, a recognized holster brand during the second quarter, demonstrates the value of smaller, highly complementary bolt-on acquisitions. Whether we are evaluating a larger strategic platform or a smaller add-on, the same principles guide our process. We seek businesses with leading and defensible market positions, strong margins, mission-critical products, recurring revenues and cash flows and clear opportunities to create value with the Cadre operating model. We remain patient, selective and disciplined as we advance our M&A funnel and expect at least one more acquisition in 2026. Cadre enters the second half of the year from a position of strength. We have greater scale, a more diversified portfolio and an expanding set of organic and inorganic growth opportunities. Supported by our strong balance sheet and consistent free cash flow generation, we believe we are well positioned to enhance our market leadership moving forward and deliver sustainable long-term value for our shareholders. 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 Q2 update and business overview, including recent trends and financial performance as well as our increased guidance for the remainder of 2026, followed by a Q&A session. We'll begin on Slide 5 with key takeaways from the second quarter. First and foremost, we've delivered outstanding financial results. Net sales, gross profit and adjusted EBITDA all increased significantly this quarter. Our performance reflects the strong execution and dedication of our talented teams around the world, and I want to thank our employees for their continued commitment to our customers and our mission. We delivered 5% organic top line growth in Q2, and our backlog increased to a new record level for the second consecutive quarter. Putting this backlog growth in context, it represents an important forward indicator and gives us confidence in the upwardly revised 2026 outlook that Blaine will discuss shortly. Turning to the fourth and fifth bullet on the slide, I want to highlight two major wins for Cadre. First, as you will recall, our Med-Eng subsidiary was awarded a 5-year $50 million IDIQ contract last year to deliver and support the Blast Exposure Monitoring, or BEMO, program with the U.S. military. We are pleased to share that we obtained a second purchase order valued at $8.4 million for this program. The second purchase order brings our total to date to $18.4 million received for the BEMO program. Consistent with our commitment to innovation and our mission of Together We Save Lives, this program is a testament to Med-Eng's ability to develop best-in-class products that keep users safe in the line of duty. Med-Eng is the most trusted brand in the industry and at the forefront of efforts to better understand and mitigate blast exposure in this field moving forward. The second major win in the quarter was the selection of Safariland's SXHP ballistic panel introduced in 2025 as the ballistic package for the FBI. Chosen over 11 competing products following a rigorous evaluation process, our ballistic panel has been integrated into the Predictive Ballistics overt armor kit. Predictive Ballistics was awarded a 5-year $61 million IDIQ contract to supply the kit, which is also available to the U.S. Marshals Service, the DEA and other Department of Justice agencies. This is an important win that expands our presence within a key customer segment and underscores our continued commitment to innovation. The selection also validates the performance of our SXHP panel, which combines a thin, lightweight design with a high level of ballistic protection. We're encouraged by the strong customer feedback and the potential for broader adoption across state, local and federal law enforcement agencies. Next, touching briefly on our nuclear vertical. Our businesses are performing well, and we expect continued strong demand moving forward. Our backlog has increased $13 million since the end of last year, driven by continued multidirectional support across all three nuclear market segments, which I'll address more in a moment. Wrapping up our Q2 key takeaways, I'd like to also emphasize our commitment to further enhancing Cadre's market leadership through disciplined M&A. We maintain a robust pipeline across both public safety and nuclear and look forward to capitalizing on attractive opportunities ahead. Turning now to Slide 6, we lay out industry tailwinds supporting Cadre's long-term growth opportunity across our two verticals. On the law enforcement side, we see rising safety threats globally, coupled with resilient and growing spend on life-saving equipment. In both the U.S. and in Europe, support for public safety is bipartisan. On the next slide, we outline more current dynamics in our core market. Overall, we continue to see favorable near-term trends. Last quarter, we zoomed in on our company-owned distribution segment and noted some softness in demand for discretionary products. During the second quarter, we were pleased to see distribution segment demand normalize, helping drive organic growth toward the high end of our 3% to 5% range. While we continue to monitor municipal budget pressures, public safety spending has historically proven very resilient with mission-critical equipment prioritized. Consistent with that trend, we have not seen any evidence of a meaningful pullback in demand for Cadre products since they are mission critical. Turning to Slide 8, I'd like to spend some time discussing our nuclear vertical and the robust activity we're seeing across the sector. Governments and agencies globally continue to prioritize environmental remediation and nuclear cleanup initiatives. National defense modernization programs support sustained investment in nuclear safety infrastructure and protective solutions. For Cadre Nuclear Group, national security serves as a funded growth engine. The budget request of $32.8 billion from the National Nuclear Security Administration, part of the U.S. Department of Energy, represents a 29% increase year-over-year. Weapons modernization and plutonium pit production form the core of the multibillion-dollar overhaul of the U.S. nuclear arsenal. The U.S. aims to manufacture at least 80 pits per year split between the Los Alamos National Laboratory in New Mexico and the Savannah River site in South Carolina to support new warhead designs. The NNSA budget and pit production mandates support demand for Cadre pod products across containers, ventilation and containment, remote handling and criticality alarm systems. While the downblending executive order that we have spoken about previously caused some margin and mix pressure confined to one subsegment, it impacts less than 8% of our nuclear revenue. It absolutely does not reflect a break in our nuclear safety business demand. Similar to our core business, quarter-to-quarter program timing can affect segment results on a near-term basis. But overall, we continue to see very healthy multi-year demand trends. This is led by national defense priorities and persistent decade-long environmental cleanup work. As you've heard described by us before, the commercial nuclear renaissance is the cherry on top. We're encouraged by the accelerating investment backdrop supported by government and commercial commitments to expand nuclear capacity and rising power demand from AI and data centers. The opportunity for Cadre builds on established products and customer relationships, and we maintain a follow-the-fuel strategy. Current funnel opportunities in this area include nuclear ventilation and containment systems as well as criticality and accident alarm systems. While still early and not yet as material to revenue, we believe the nuclear energy resurgence represents attractive long-term optionality alongside the larger national defense and environmental management demand drivers. Overall, our thesis on the nuclear opportunity is unchanged. We view nuclear safety as a set of durable end markets across three segments with long-term demand tied to policy and commercial tailwinds. With that, I'll now turn the call over to our CFO, Blaine Browers, to speak more about M&A, Cadre's Q2 financial results and the 2026 outlook.
Thanks, Brad. Before turning to the quarter, I'll kick off my comments with a review of our M&A strategy. Over the last four years, we have deployed approximately $455 million across seven transactions, including the recent acquisition of Alien Gear Holsters completed in the quarter. This activity reflects the disciplined and patient approach we have consistently applied to M&A. We're not interested in pursuing growth for its own sake, but instead selectively adding businesses that strengthen our portfolio and enhance Cadre's long-term earnings and cash flow profile. For each of these transactions, we have maintained a high bar for strategic and financial fit. Turning to the next slide, we highlight the key criteria that guide our process when evaluating potential acquisitions. We are steadfast in our commitment to businesses with strong margins, leading and defensible market positions, recurring revenue characteristics and durable cash generation. We also look for opportunities where the Cadre operating model can drive value creation. We enter the balance of 2026 with substantial financial flexibility and a robust pipeline of potential acquisitions. We continue to target transactions focused on complementary capabilities, new market access and greater penetration of our existing customer base. Turning now to a summary of Cadre's financial performance, Slide 12 details our second quarter results. Q2 net sales of $207.1 million increased 32% year-over-year and 5% organically with strong growth in armor, duty gear, nuclear and distribution. Gross profit of $87.1 million was up 36% year-over-year, with gross margins expanding 120 basis points year-over-year and 209 basis points when you adjust for inventory step-up amortization. Second quarter adjusted EBITDA increased 56% year-over-year. Of note, second quarter net income includes $2 million of inventory step-up amortization and $5.9 million of contingent consideration expense. Also, FX headwinds of $6.6 million adversely impacted bottom-line earnings in Q2. As we expected, we saw a significant increase in revenue and profitability sequentially from Q1. As Brad indicated earlier, we are proud of the team's ability to execute on their demand. A few of the businesses had the opportunity to ship product earlier than expected, and they were able to take advantage of those opportunities within the quarter. We broadly saw upside in most of the core portfolio, including armor, duty gear, nuclear and crowd control. In addition, we are pleased to see both TYR Tactical and Alien Gear execute above our expectations in the quarter, contributing to outstanding results. Illustrated on Slide 13 is net sales and adjusted EBITDA growth year-over-year, including our upwardly revised 2026 guidance, which I'll discuss more in a moment. Our full-year outlook now implies year-over-year revenue and adjusted EBITDA growth of 24.4% and 26.7%, respectively, at the midpoints. You can see that 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 14, we present our capital structure as of June 30, 2026. Our net leverage was down to 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 increased 2026 outlook on Slide 17. Net sales are now expected to be between $749 million and $769 million, and our adjusted EBITDA guidance is between $139 million and $144 million, implying adjusted EBITDA margins of 18.6%. Our guidance now fully incorporates Alien Gear and reflects our improved view of full-year revenue and profitability. We still expect organic revenue growth to be in the 3% to 5% range on a full-year basis. As Brad mentioned earlier on our call, our strong backlog exiting Q2 and the team's execution into Q2 gives us confidence in our full-year guidance. We expect Q3 revenue to be around $190 million with adjusted EBITDA margins of about 18%, which implies that Q4 will have a very similar profile to Q2. 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'll now turn it back to Brad for concluding comments.
Thank you, Blaine. In closing, as you can see on Slide 16, we executed well across all facets of the business during the second quarter. We exceeded our pricing target, benefited from favorable product mix and increased backlog by $13 million sequentially, supported by strong demand for our EOD products. We also completed the acquisition of Alien Gear Holsters and continue to advance a healthy M&A funnel. Looking forward, we are focused on strengthening our portfolio, further implementing the Cadre operating model throughout the organization and building demand across our core markets in public safety, defense and nuclear safety. Our improved outlook for 2026 reflects our confidence in the opportunities ahead. We look forward to continuing to update you on our progress. With that, operator, please open up the lines for Q&A.
分析師問答
Our first question comes from Tomo Sano of JPMorgan.
Congrats on the quarter. Could you talk about breaking down the $13 million year-to-date increase in nuclear backlog across environmental management, national defense and commercial nuclear? And if you could give us more color, the key drivers in each, please?
Absolutely. Great question, Tomo. The majority of the increase we've seen through this quarter has been in commercial nuclear energy and environmental remediation. We've talked quite a bit previously that we started to see the funnel increase in those areas, in particular commercial nuclear, and that's really what we're seeing as the team's hard work and efforts build that up. We've also seen a nice pickup in Europe, particularly in Northern Europe, around some of the environmental remediation projects they have going there. So that first part of the comment was more U.S.-based around commercial nuclear energy and environmental remediation, but we're also seeing strength in environmental remediation in Europe. I would also point out on the commercial nuclear side, revenue coming out of Europe showed very positive strength and momentum in the quarter; they had the backlog coming into the quarter. So when you think about geographically, both in the U.S. as well as Europe, we are seeing strength on both the commercial nuclear component and the environmental remediation component.
And just one follow-up. Given that mix, how should we think about nuclear margin quality in the back half and beyond? And when should the Cadre operating model benefits begin to show up over the next couple of quarters?
When we think about the margins, there is a pretty large degree of mix within the nuclear platform as we've referenced prior. Looking to the back half, I would say on the U.S. side of the business, we would expect the back half to look very similar to Q2 margin. They had a little bit lower margin in Q1, so the first half to second half will improve between those two. On the more European side of the business, Q2 had favorable margin or favorable mix in the quarter driven by some of the robotic arms. We don't expect that to recur. So, we expect the European side to look more like we saw in Q1, which would be slightly down on a margin basis, essentially returning to a normal mix.
In terms of the Cadre operating model portion of the question, on the nuclear side, whether it was the acquisition we made from Carsury plc in the U.K. or the Alpha Safety acquisition, they're all in the early stages of the operating model. Most of the focus is on delivery, quality, safety and inventory. So from a cost perspective, showing up at the top level from a Cadre view, I don't expect to see significant impact this year as they continue to progress through the model.
Our next question comes from the line of Larry Solow from CJS Securities.
Congrats, guys, on a really nice quarter. Just curious on what the upside in the quarter and I guess on the outlook, maybe combine that with just the bookings question in the backlog. It seems like a lot of it is coming from EOD, sensors and robots. But just curious what's driving the upside this quarter, this year, and how your general law enforcement base business is doing?
Yes. On the Q2 performance, I'd split it in two components. First, our core public safety businesses that have been part of Cadre since the beginning — crowd control, duty gear and armor — all had very strong quarters. Some of that was unexpected demand within the quarter, but a big portion was shipments earlier than expected, where customers requested earlier delivery and the teams were able to execute. The team performed very well on that. The second component is acquisitions: both Alien Gear and TYR had a phenomenal quarter and contributed to the results. Regarding backlog complexion, it is somewhat outsized on the EOD side due to significant demand there, but even when you peel that back and remove that outsized impact, we're still seeing significant growth compared to year-end — 10% to 15% growth in the armor backlog, a very sizable increase in duty gear backlog larger than that, and an increase in nuclear of almost $13 million. So across the board, everyone is ahead of where we would have expected them through the year, which gives us a lot of confidence for the back half.
And I guess, Blaine, while I got you here, a question for you. The gross margins, 42.6% in the quarter, and I guess 43.8% if you add back the step-up, which is a really nice year-over-year improvement. Your revenue grew a lot, but a lot of that was inorganic. Maybe a little bit unusual, you said some pull forward. So maybe that helped the margins a little bit? How should we think about the strength in this quarter and margins going forward?
Thanks, Larry. A few components inside the quarter on margin. One, we had significant favorable mix in the zirconium-related side of the business, particularly robotic arms, and those margins were up pretty significantly; we expect that to normalize in the back half. There was a lot of volume leverage — as volume increases, both gross margin and EBITDA benefit from leverage. So as you think about the back half, Q3 could be slightly down on margin given a little lower revenue and mix returning to normal, and Q4 could have a profile similar to Q2 assuming similar volumes. But overall, some reversion to the mean is expected as those one-time favorable mix items normalize.
Our next question is from the line of Sheila Kahyaoglu from Jefferies.
This is Adam Samuelson on for Sheila. So I guess the first question is just thinking about the organic growth outlook. You highlighted about 5% organic in Q2 alongside the normalization in distribution demand. Can you help us think about the underlying demand trends you're seeing across public safety and nuclear end markets and how sustainable that organic growth rate is into early 2027?
Thanks for the question. The outlook is positive across the macros, whether it's the nuclear dynamics I discussed earlier or the public safety environment. All indications show continued focus on products that support safety. Demand seems strong and continues to be strong looking forward in both nuclear and public safety. We've shown that through the recent wins — the FBI selection, the BEMO sensor order and the earlier large ballistic seat win with GDLS — and we have more opportunities queued up. So we're positive on the outlook.
That's helpful. And then as we think about the revenue outlook for the balance of the year, with the backlog you have and momentum coming out of Q2, what occurs to get you to the high end versus the low end of the revenue guidance range at this point?
To get to the high end, it often involves a number of larger orders or projects that are binary in nature — you either win them or you don't. When we build our range, we risk-rate those opportunities. It's not just one macro driver or one business; most of our businesses have the potential to contribute to the high end. We have positive momentum and backlog growth, but government procurement can be timing-sensitive and occasionally delayed by weeks. We're taking a cautious approach to ensure reliable execution and to mitigate out-of-control risks.
Next question will be from Jeff Van Sinderen from B. Riley Securities.
Realize it's relatively small revenue, but it sounds like Alien Gear is running strong right out of the gate for you. Can you speak about what's driving that business? And then what contribution should we be thinking about going forward from Alien Gear?
Great question, Jeff. We were cautious given Alien Gear was coming out of bankruptcy, which can send mixed signals to customers. The Alien Gear and Safariland Duty Gear teams have done a very good job communicating that it's business as usual while we work on integration. Our plan is not to eliminate the Alien Gear brand — we acquired it because it's a strong consumer and professional brand. The Alien Gear consumer team has been integrated with the Safariland consumer team and is executing on its strategy. We have announced the planned closure of the Alien Gear manufacturing facility in Idaho and will take the next 12 to 18 months to move that manufacturing into Safariland's manufacturing infrastructure where we have global scale. The professional side will take longer as we work through strategy and integration. Things are going well, and you should expect Alien Gear margins to move toward Cadre-type margins as integration and synergy activities proceed.
Jeff, to give you expectations for the year, Alien Gear did about $4.8 million in the quarter. We haven't baked in a full-year contribution of more than roughly $11 million into the guide. It's been a great start out of the gates, but we're being cautious to ensure there is no overhang coming out of bankruptcy.
And then can you remind us on the FBI panels? When should we expect the first panels to get delivered to the FBI? And are the DEA or some of these other agencies aware of that product?
Yes. That IDIQ covers multiple agencies, so other agencies are aware and can buy off the program. We have already received demand on the program and shipments have begun. We're not in a stabilized demand environment yet; the Safariland team is working with Predictive Ballistics, which won the contract, to confirm demand with the FBI for the coming months. Keep in mind the $60-plus million IDIQ is over a 5.5-year period, so demand will be distributed over that term.
Our next question comes from the line of Andrew from Bank of America.
Given the higher margin expectations in the second half, near those 20% levels, what products are driving that expansion? Is it armor, duty gear or something else in particular?
I would say there's nothing singular driving the improvement. The back half will have gross margin and EBITDA rates consistent with what we saw in Q2. The pressure we saw was really in Q1 and primarily related to volumes. As volumes have ticked up to normal rates, margins have normalized. We expect gross margins and EBITDA margins to be slightly down in Q3 and then for Q4 to resemble Q2, assuming similar volumes. Overall, Q1 was the outlier; the back half looks relatively normalized.
And if I could sneak in a second one. The M&A pipeline is strong and the company is positioned financially to capitalize. What specific add-on capabilities or market access interest you most? Is there a certain region or type of product?
We are focused on the two end markets we operate in today: public safety and nuclear. We look for the same criteria we've discussed before: replacement-cycle revenue, recurring revenue, high margins that meet our thresholds and businesses where the Cadre operating model can drive clear margin improvement. We're not averse to 'fix-it' opportunities, but only if we have a clear path to Cadre-level margins. High cash flow is important so we can fund additional M&A and delever quickly. The criteria apply whether on the nuclear side or public safety. We're excited about the funnel, and bolt-on tuck-ins like Alien Gear are attractive because they allow us to leverage our existing scale and capabilities.
And our last question is from Matt Koranda from ROTH Capital Markets.
The 5% organic growth in the second quarter — can you parse out organic growth between nuclear and the public safety side of the business? Also, you were talking last quarter about some headwinds in containers and some Alpha products. It doesn't sound like that's the case anymore. Can you talk about what changed in that end market in the last couple months that's driving improvement?
On organic growth, public safety was just under 5% and nuclear was high single digits to low double digits. For nuclear, we had essentially two months in the quarter where zirconium-related sales contributed, and distribution had a good quarter at mid-single digits. So strength was broad-based across public safety, nuclear and distribution. Regarding the earlier headwinds, the downblending executive order affected less than 8% of our nuclear revenue and mainly impacted mix from a margin perspective rather than overall demand. We're seeing offsets in other nuclear applications, such as strong demand for manual manipulators in Germany for hot cell applications. And when you consider the multi-decade cleanup work still required, the long-term demand remains intact.
To add, the portion of the Alpha Safety business affected by the downblending executive order reduced some container volume, but it is a small part of the overall nuclear portfolio. We're seeing demand elsewhere in nuclear that offsets that effect.
Shifting to TYR, are you finding any new or interesting commercial synergies now that you've been integrating that business for a bit? Any color on growth trajectory and successful rotation activities?
Yes, we've been having productive work with TYR and Safariland teams. There are four or five projects kicked off where product and channel synergies are being explored. Some TYR products can be sold through Safariland channels to fill gaps, and TYR's manufacturing capabilities may be used in new product development with Med-Eng, for example. We have several active projects and as they become visible externally we'll share more detail.
One last question: does the current level of net leverage constrain you to tuck-ins, or could you do larger deals this year?
We've said the upper end of our target leverage is about 3.5x, so we have dry powder for acquisitions. To get into that 3x-plus area we'd want to be comfortable with a quick paydown. We're opportunistic: the right tuck-in is compelling and easier to execute with high confidence, but we also have the capability to pursue larger deals in the back half of the year if the right opportunity appears.
I will now hand the call over to Mr. Brad Williams for closing remarks.
Thank you, operator. I'd like to thank everyone again for joining us on today's call and for your continued interest in Cadre.
Thank you for joining the call today. You may now disconnect.