Cadre Holdings, Inc. 2026 Q2 Earnings Call

Please go ahead, sir. Thank you, 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, 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 in financial performance, as well as our increased guidance for the remainder of 2026, followed by a Q&A session. We'll begin on slide five 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 into 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 bullets on the slide, I want to highlight two major wins for Cadre. First, as you will recall, our Med-Eng subsidiary was awarded a five-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 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 the field moving forward. The second major win in the quarter was the selection of Safariland's SX HP 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 Predictive Ballistics' OVERT armor kit. Predictive Ballistics was awarded a five-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 SX HP 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 six, 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 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%-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 eight, 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, while 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.