Cadre Holdings Inc (CDRE) 2021 Q4 法說會逐字稿

Good afternoon and welcome to the Cadre Holdings fourth-quarter and full year ended December 31, 2021 conference call. Today's call is being recorded. (Operator Instructions). 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 Cadre Holdings' fourth-quarter 2021 conference call. 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 in 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 evening 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 March 16, 2022 starting at 8 PM Eastern time tonight. A webcast replay will also be available via the link provided in today'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.

Thank you very much. Good afternoon and thank you for joining Cadre's earnings call to discuss our fourth quarter and full year ended December 31, 2021 results. I am joined today by our President, Brad Williams and CFO, Blaine Browers.

2021 was a momentous year for Cadre as we successfully completed our IPO, representing an important milestone in our Company's 55-year history. Immediately following our public offering, we are pleased to have capitalized on an attractive opportunity to further expand our international presence and provide Cadre another European foothold to diversify our global footprint and add multiple growth avenues. We are excited about our long-term outlook and continue to actively evaluate additional accretive acquisition opportunities within our robust pipeline while also maintaining a strong position to continue to drive profitable, organic long-term growth.

Before turning the call over to Brad, I would like to mention that all those affected by the violence in Ukraine are in our thoughts today. And we continue to watch the tragedy unfolding there with great concern. Preserving human life is literally in our Company's mission statement and while we are sensitive to discussing business implications during a humanitarian crisis, we at Cadre stand ready to assist however we can as events develop. Brad, over to you.

All right, thanks, Warren. So we are going to start on slide 4. On today's call, we will cover recent highlights, provide a brief review of our business, including an update on our acquisition and M&A strategy and discuss our financial performance and 2022 outlook and then we will wrap things up at the end with a Q&A session.

First, turning to slide 5, I'll discuss our Q4 and full-year highlights. 2021 was a record year for Cadre. We not only hit all-time highs within most of our key metrics, but delivered on our strategic objectives, had a challenging supply chain and inflationary environment. Our teams around the world have done an excellent job tackling the multiple daily challenges with discipline and persistence. We truly do have an amazing team.

Demand for our trusted brands remains strong with our mission-critical first responder markets. We continue to see attractive long-term tailwinds and recurring demand drivers in our entrenched domestic and higher growth international markets. In addition to the long-term resilient demand for protected products within domestic law enforcement, the country is currently experiencing a shortage of officers that will take many years to grow headcount back to acceptable levels.

Our year-over-year financial results demonstrate our entrenched positions within our markets as well as our strong operating cash flow generation and our focus on margin expansion. As you can see, we delivered strong year-over-year results with net sales growing 6%, gross profit margins expanding 210 basis points, adjusted EBITDA growing over 23% and adjusted EBITDA margin improving by 240 basis points. For the fourth quarter the resilience of Cadre's operating model was evident, highlighted by continued gross margin and adjusted EBITDA margin improvements.

Based on our low CapEx model, we continue to generate strong free cash flow that enables us to capitalize on attractive opportunities to create long-term shareholder value. Following our IPO in November and subsequent deleveraging, we took advantage of our strengthened balance sheet and significant financial flexibility to continue to allocate capital in a disciplined manner and trap growth for the benefit of our shareholders.

Later on the call, Blaine will discuss our accretive acquisitions of Radar and Leather Division, a premier family-owned duty gear brand with a history of innovation spanning more than 60 years. Turning to slide 6, we laid out Cadre's strategic objectives focused on accelerated growth both organically and through acquisitions, as well as continuous improving gross and adjusted EBITDA margins. We are pleased to have met and exceeded these objectives in 2021.

In terms of our core revenue growth, we believe that our leading entrenched market positions across three of our lifesaving product categories, body armor, duty gear and EOD, continue to provide global growth opportunities. To drive long-term organic revenue growth, our focus is on launching new innovative products, increasing customer wallet share and expanding our e-commerce and direct-to-consumer capabilities. In particular, international expansion is an especially important part of our organic roadmap. We believe we have a significant long-term opportunity to take market share amid increasing investments in safety and survivability equipment across international markets.

Turning to margins, we continue to achieve cost structure optimization to drive operating leverage as highlighted by margin improvements in Q4, quarter-over-quarter and 2021 year-over-year. We're pleased with Cadre's continued execution, expanding margins and we believe there is room to achieve further expansion going forward. Complementing our organic growth initiatives and focus on margins is Cadre's targeted M&A strategy. We believe our strong acquisition track record and active and robust pipeline focused on smaller add-ons and more transformational accretive opportunities positions us well to expand our product and technology offerings, enter new markets and grow our geographic footprint.

Moving now to slide 7, we will discuss macro tailwinds driving demand and visibility for Cadre's mission-critical products both domestically and internationally. Our largest market segment is law enforcement and police protection expenditures have continued to trend upward even during past financial and industrial recessions. This demonstrates the significant demand drivers for our products through economic cycles as we've seen repeatedly that when prioritized spending, customers lean towards safety and survivability equipment to protect first responders.

Despite defund the police protests, we've also seen major US cities continue to increase police budgets. In fact, given increased crime rates today, including the 2021 homicide rate 44% higher than 2019, there is now a push to refund the police. Notably, the American Rescue Plan provides $350 billion to hire more police. We're also seeing positive demand fundamentals abroad. Two-thirds of all NATO countries spend less than 2% of GDP targets on defense and security. Particularly, in this current geopolitical turmoil, European leaders have advocated for significant increases in defense budgets. These developments are not necessarily tailwinds that will impact your business in the near term, but they support a long-term sustainable growth opportunity for Cadre over the next 5 to 10 years. Also note that we do not do business in Russia.

Also supporting our business over the long term is the recurring demand characteristics of our lifesaving products based on frequently recurring demand cycles. A combination of market segment tailwinds and recurring demand characteristics results in a solid foundation for our business with a predictable revenue stream. I will now turn the call over to our CFO, Blaine Browers.

Thank you Brad. So slide 8, building on Brad's comment on M&A, Cadre has a successful history of acquiring, integrating and optimizing asset-light businesses with high free cash flow [models]. We take a very targeted approach and think about acquisitions in three buckets. The first bucket is focused on geographic expansion and expanding core products in new markets. The second is related to introducing new products in existing core markets and the final bucket is expanding our portfolio of safety products outside of our current law enforcement and military markets into attractive adjacencies within the safety and survivability landscape. Examples of this include fire, EMS and industrial safety.

We target businesses with a number one or number two market position that have leading and defensible technology and strong brand recognition. From a financial perspective it is important that a potential acquisition has a recurring revenue profile, high cash generation relative to EBITDA, is asset-light and has an attractive return on invested capital. Our strong balance sheet and sizable cash flow enable Cadre to be opportunistic and pursue acquisitions consistent with these criteria. Additionally believe our operating model, customer relationships and expansive channel help maximize the value created from acquisitions once completed. We have a robust pipeline of M&A opportunities that we continue to evaluate.

Following the acquisition of Radar, which I will discuss in a moment, our team is currently in the process of actively evaluating other opportunities that we are excited about and that would enable us to expand the share of our existing customer's wallet. In terms of M&A valuations, we do expect in the current environment we will see multiples compress.

Moving to slide 9, we are excited to have completed the acquisition of Radar. It is a business with leading market shares and a reputation for innovation, safety and quality that specializes in the production of high-quality holsters, belts, duty belts and other accessories. Consistent with the criteria I just outlined, as well as the strategy we laid out with investors both during the IPO process and since, the acquisition enables us to advance the important strategic objectives of furthering the penetration of our European markets, adding to our international footprint in the UK and Lithuania and providing multiple growth avenues.

The integration process is well underway and we're pleased with the progress we've made thus far. We welcome Pietro and Paolo Pellegrini and the rest of the Radar team to the Cadre family. We expect continued growth in the European market, leveraging the strength of Radar's brand, customer relationships and R&D along with Cadre's operating expertise and global resources.

On slide 10 and 11, we detail our full 2021 results as compared with 2019 and 2020, illustrating how our business performed in higher growth and overall scenarios. We continue to stay very focused on price, material inflation, supply chain constraints and are very proud of the team's ability to execute in this environment. First, if you compared 2020 to 2019, we achieved about 1% top-line growth and expanded gross margins approximately 9% on a continued ops basis. EBITDA was up 33% in that period. Turning to 12 months ended December 31, 2021, we achieved stronger growth, expanding sales 6% organically and increasing gross margins 6%, EBITDA expanded 23%. Notably, our 2021 net sales and gross profits were all-time highs.

Looking at slide 11, I'd like to highlight the adjusted EBITDA conversions detailed on the bottom right of the slide. In 2021, EBITDA conversions were 96% versus 92% in the prior year. We are very proud of our successes generating significant free cash flows. We don't have seasonality in our business and more importantly, from a cash generation perspective, we have very low CapEx needs at approximately 1% of revenue annually.

We note that sales were down Q4 over Q4 from high demand in Q4 2020 in duty gear and crowd control products. As we continue to execute on our strategic initiatives and organic growth to new products and geographic expansion and M&A, spikes in demand should become more muted to the overall business due to the size, scale and the types of acquisitions we expect to target.

On slide 12, we present our capital structure as of 12/31. [Along] the closing of the IPO, we used a portion of the proceeds to pay down debt as planned. We paid down $59.4 million of debt outstanding on an existing term loan and revolving loan under the new credit agreement we entered into during the third quarter. Our net leverage was reduced to approximately 2 turns, which provides us significant financial flexibility to grow organically and more importantly inorganically through acquisitions.

Turning to our 2022 outlook on slide 13, Cadre expects to generate net sales in 2022 between $434 million and $441 million and adjusted EBITDA in 2022 of between $70 million and $75.5 million. Additionally, we expect adjusted EBITDA conversion to be between 92% to 95% for the full year 2022.

In terms of our quarterly outlook, we anticipate net sales between $101 million and $103.5 million in Q1. This is driven by project timing, as well as our growth initiatives ramping up later in the year. Please note we do not expect to provide quarterly guidance on a go-forward basis. Now I will turn it back over to Brad for concluding remarks.

Thank you Blaine. Before I open the call to questions, I note coming off a record year where we delivered on our strategic objectives and a challenging supply chain and an inflationary environment, we continue to effectively manage the business against these realities drawing on our industry leadership and a remarkable team of professionals. We are extremely optimistic about our long-range -- long-term prospects underpinned by our rich history dating back to 1964 and the strong macro tailwinds driving demand and visibility for Cadre's mission-critical products both domestically and internationally. Our focus going forward remains on accelerating growth both organically and through acquisitions, as well as continuously improving gross and adjusted EBITDA margins.

Taking advantage of our significant financial flexibility and strong cash flow generation, we are pleased to have completed our first acquisition following our recent IPO. We are currently working through a robust pipeline as we seek to further capitalize on accretive opportunities that meet our stringent criteria and create enduring value for shareholders. With that, operator, please open up the lines for Q&A.

(Operator Instructions). Matt Koranda, Roth Capital.

Hey guys it is Mike [Zimmerman] on for Matt. So regarding the geopolitical tension in Ukraine, any observations you've made in terms of change in quotation behavior for EOD equipment and any insight on your long-term demand that could come from that?

I appreciate the question. On the EOD side, I think it's a little too early to tell. That demand can be driven by deployment of [ogs] in the conflict zone. So it's something we are watching closely. We are staying very close to our customers and ready to serve them when the time comes, but we haven't seen too much on the EOD side.

As we kind of think about the armor side of the business, we have seen requests for defensive armor in that region both from -- really primarily from NATO countries. Now none of this is really boiling to the point where there are strong orders, but it's something we're working again very closely with our end users and distributors being able to satisfy any needs our customers may have.

Got it, okay. Yes, that makes sense. And then could you just speak to margin cadence for 2022? Should we continue to expect some sequential pressure and maybe provide some insight on how inflationary and supply chain headwinds are factored into the guidance?

Sure. So I think as we think about the full year, we'd expect, as we kind of guided on the top line, lower volume in Q1 and then as we move through the election year, we'd expect margins to expand from there. I think on the pressures we're seeing in the market, certainly on the supply chain side, we are seeing more constraints I think like most companies. We haven't faced anything that's been critical or material, but it's something that teams do a really good job of mitigating and really kind of working that angle.

On the price inflation side, that's one thing we are certainly very proud of with the teams' and the Company's ability to execute on that price and I think they did an overall excellent job in 2021 as you can see from the results of staying ahead of that curve. So we are continuing to combat it both in the supply chain but also from the price perspective and comfortable with where we're at. The team has done just a great job of really getting in front of it being proactive.

Got it. Makes sense. Thanks, guys.

Daniel Imbro, Stephens.

Good afternoon, guys. The first question, I want to follow up on that previous answer just around the NATO defense request. I understand those aren't orders yet, so I'm curious around the production side. What's your capacity utilization today and if those requests turned into orders, do you have the ability to turn on production quickly or would you have to maybe produce those instead of other goods so there's less upside to the [guide] as those turn into firm orders?

I appreciate the question. So overall when you look at the type of products we are getting inquiries on, it's really around what we call hard armor, so it'd be things like helmets and plates and then also our soft armor line at this point is where we're seeing most of the activity. Some of the requests have been for inventory that we have in stock because, as you can imagine, from a Ukraine perspective, there is potentially some urgent needs so we've seen some of that activity for some of those products in terms of quoting. And then in other cases, in terms of capacity, in most of the locations, we are running a single shift so we do have the capacity to be able to flex up. We've invested in a lot of capital for us over the last few years to make sure we've got cutting capacity and other capacities overall. So it just depends. If some of these orders end up being -- come to fruition and they are larger MOD type orders with large, large quantities, there's not many companies that would be able to immediately produce products like that. It would also take them over a decent leadtime.

Got it. That's helpful. I want to shift to the acquisition front. Warren, I think in the release or Brad, you mentioned Radar really providing a foothold to grow into Europe. As you envision your European expansion, is that going to be country by country as in the next deal will be something in Italy and you keep building density there or could you immediately use Radar and leverage that asset over across borders into other countries or are they the same category?

That's a great question. On that one, let me just start off just as a reminder of our current footprint that we have over in Europe. We have a facility in the UK from the acquisition that we made -- actually to acquisitions, a hard armor company, that was early 2017 and then a soft armor company in early 2017. Both of those were in the UK. We recently consolidated one of those facilities into the other, so we have a single location now. And then we also have a facility in Lithuania that is an armor facility. So that was our current footprint before we added the Radar business.

So Radar gives us really a stronghold into the European market for our holster category. That's the way you should really think about it and when we look at the holster landscape internationally, we have a good base of the Safariland brand in that marketplace, but then also Radar and another couple competitors make up a good portion of that market along with us. So that acquisition was really around holsters and giving us the ability to be local with local customer service, some more local salespeople to work with distributors. It gives us a manufacturing footprint that we can leverage with our Safariland branded holsters that we currently make here in the US and Mexico that we ship with freight and duties and leadtime. So we feel like it is an absolutely astounding opportunity for us there to expand that holster share within the marketplace, but it's really much different in the armor world, so we don't view that acquisition as something that we would leverage from an armor perspective.

Got it. That's helpful. And then last one from me, I think in the prepared remarks you talked about the American Rescue Plan, what is it, $350 billion for more police funding. I'm curious, one, how long do you think that takes to get spent over how many years and then how much of that is an existing Cadre categories where your TAM is actually going to grow or in categories you plan on growing into so you can actually go after some of that increased spending?

It's hard to tell, but a lot of the -- the largest gap that's out there today, as we had in the remarks, is around headcount. So when you look at US domestic law enforcement as we saw over the last three years, there's been a lot of retirements that have been going on, some early retirements. Retirements have been on schedule. The headcount in some cases we've seen double digits significant, anywhere from 15% to 20% down compared to what they were before in 2019, for example. So we expect a lot of that funding will be not just around hiring new officers, but if you think about new officers coming in, they have to be outfitted with product when they are put on the street. So they need uniforms, they need body armor, they need holsters, they need protective equipment. If they are SWAT team members, they'll need hard armor, which will be helmets, plates, shields, different products like that also.

So we -- based on the protective nature of our product, we see opportunities for us when there's headcount that increases for us to follow that trend, but we do know that, just like a lot of labor markets are right now, especially in this area, it's tough to recruit and have officers come in into that position. So we think it's going to take a significant amount of time for those headcounts to lift.

Got it. Thanks a lot for all the color and best of luck.

Mark Smith, Lake Street Capital Market.

Hi, guys. First one, I just wanted to confirm if I heard right, Blaine, what did you say as far as Q1 revenue expectation?

Between $101 million and $103.5 million.

Perfect, thank you. And then you guys talked about a little bit, but can you give us any updates or changes maybe that you're seeing in the pipeline for acquisitions or maybe any changes that you're seeing in multiples out there?

I think the robustness of the funnel is very similar to how it has been the past 6 to 9 months for us, which is a positive. We feel the funnel is very robust. I think on the multiples, we're starting to see signs of softening. I wouldn't say it's across the board or dramatic but I think those kind of early signs coupled with what we're seeing in the macro environment lead us to believe that we will see some future softness and it's more widespread in the future and for us, with the balance sheet we have and the ability to be opportunistic, leads us to be pretty excited about the future.

Perfect. And then as we look at just inflationary pressures and supply chain issues that persist out there, just walk us through your ability to take price and if you have taken any pricing here recently.

Yes, so we are again very proud of the team's ability to execute. Even going back to last year, the Company and the team has been able to stay ahead of inflation and that means stay ahead via price. So we've been able to not only maintain but expand margins through 2021. Certainly what we've seen in the last 5 to 6 months inflation ticking up even more than what we saw in the first nine months of the year, but again that's been talked about and we are out trying to stay ahead of that with incremental price increases.

Again, one of the really helpful things for us as a company is the positioning and brand of our products. So we can -- we have the ability and opportunity to maintain that premium in this environment because of how our products perform, ingenuity that goes into them and the strong brand name. So we are trying to stay ahead of it and we are doing our best job on the pricing to set up well for this year.

On the supply chain constraints, it's a bit of a newer story for us here in the last 6 to 7 months similar to inflation. We didn't see a lot of supply chain constraints in the first 6 to 9 months of the year. As we got into Q4, we had seen more pinch points and it hasn't been any one large supplier or one critical product. It's really managing the 20s in our supply chain that's become the challenge. So the teams have done a good job up to this point of mitigating that where it needs to be taken, inventory positions to help smooth out some of that, some of those challenges, but it's something we watch closely. Like everyone, it's on everyone's radar, so we're trying to stay on top of it stay in front of it and regularly communicate internally on the challenges and how we overcome.

Excellent. Thank you, guys.

Bert Subin, Stifel.

Yes, thank you and good afternoon, guys. So you've added Radar as of January, plus it seems like demand from Europe is generally getting better. Can you walk through what the revenue headwinds are just relative to 2021? I assume they are primarily commercial and if that is the case, what are your expectations for that business as we go through 2022?

Great question, Bert and I think you nailed the first part of it. Commercial the first half of last year was very strong for us. We saw that drop down in the back half and still above historical levels, but certainly down from the first half and that's creating some of the tough comp here as we move into the first half. The team is working on some growth opportunities to help offset that as we move into the back half. So I think that is kind of the first component.

The second component that makes it a bit of a tougher comp this year for the full year is really the crowd control. Demand coming out of 2020 was very strong and it continued really into the first half of 2021 and we're seeing that to really get to a normal level. Still I would say kind of like commercial still above historical levels. I think the law enforcement indices are a little more attuned to what could happen and to be, I would say, have more stock on the shelves. I think previous to that, the stock probably wasn't as high as what they needed entering into that summer of 2020. Those are really kind of the big components there. We always have large projects as far as we've talked about that come and go in any given year, but those are the two biggest pieces for us.

That's helpful, Blaine and just as a follow-up I think to the earlier question about the American Rescue Plan, what is your view on officer headcount whereas it sounds like you think it is going to stay down for a period of time? If that shortage does remain intact, does that make you incrementally more interested in increasing your military exposure?

Incrementally interested in -- only if the margins match like we've talked about. One of the things we talked about in the past is just our business so far from a military perspective is really around our [boss] suits (inaudible) globally with military and then also our US military branches with our holsters. So those are our two biggest areas that we supply the military. Those are the two areas we would continue to stay focused on. If there's an opportunity outside of that in the military, we'd have to just really look at it closely and evaluate especially if it is body armor.

Okay, thanks, Brad. And just I guess a clarification question on the supply chain comments from earlier. Is there a particular region where you're seeing worse impact or more impact than others? It sounds like you're not at least experiencing some of the supply chain challenges that others are. Just curious if geographically you are seeing any impact.

No, not necessarily geographically, but I want to make sure we are clear just to underscore something Blaine just answered a minute ago just around last year, we did not see as many issues on the supply chain side, but this year we have seen those crop up. So it's not necessarily from any one given region. It's in those areas Blaine mentioned the 20s, which would be categories of suppliers that are smaller suppliers for us that can be as critical as a more expensive component or our finished goods. So that's the area we're trying to manage by various suppliers and various products.

Jeff Van Sinderen, B. Riley.

Just wanted to clarify a couple things. In terms of pricing, are there any areas where you have commitments where prices are set where you might have margin pressure?

So we do, Jeff -- hi, Jeff. Thanks for the question. I appreciate you on the call. We do have some fixed price contracts. In a lot of cases, if we're trying to think about it, there's a couple buckets inside there. On the EOD side, longer leadtime products typically have the products ordered -- we order from the supply chain at the time we get the order. So fairly protected there. It becomes more of the ongoing and multiple shipments, but it's not terribly significant there. In the US, we do not own a lot of contracts direct with agencies. In most cases, we go through distributors. So we do have a bit of insulation there, but we also work with our distributors to pass along and I think the one thing we've observed -- it's never easy to have the price discussion, but this is an environment where, as a consumer, we are all paying more for standard things, but I won't say it's easy and expected but certainly people understand the way you think there.

Europe, you do -- on the -- not Radar, but the UK business and the Lithuanian business, they do have some contracts direct and we've mitigated some of the pressure through fixed supply contracts or (inaudible) contracts, but there's nothing out there that worries us greatly and the discussions we've had both last year and this year on price gives us some optimism we can continue to stay in front of it. Now it's a tough slog. I think it's going to be a day-to-day battle on that on getting price, but again the teams have just done a fantastic job of doing it.

Okay. And then just as you're thinking about overall supply chain, it doesn't sound like it's impacting your ability to fill orders. Am I getting that right?

There's been some orders. I would just say it's not broad-based. This isn't a case where we have $5 million or $10 million worth of shipments moving out among the supply chain now. The teams are really the end-to-end (inaudible) on this right? So as you get an order pushout for supply chain constraints, they're looking at order (inaudible) and they've done really, really well in that area. But it's something to watch closely and certainly a little different or a lot different than what we saw in the first 6 to 9 months of last year.

Okay and then just any update on the blast sensor program you're working on?

I would say no major updates since the last discussion. There has continued to be delays in the sensor project, not from our perspective but overall from the military on that one, but we continue to work through the R&D list of additional testing and changes and things like that that they have requested.

Okay, fair enough. Thanks for taking my questions and best of luck.

Brian Gesuale, Raymond James.

Hey, good evening. Just a couple towards the end here. You've had Radar under your belt for a couple of months now. Can you talk maybe a little bit about the integration and synergies maybe both on the sales and cost side you're seeing?

Like you said, we are in the early phases from an acquisition standpoint, so really where we're at from a synergy standpoint is we've put together some functional teams that are working on what we call the first 100 day type basic. These are more functional type teams like IT and tax and accounting, finance, that side of things. So those teams are together and fully executing on their 100 day plan.

The second area is manufacturing. We've put together a small team from Cadre plus also the folks from a Radar perspective that are now teamed up together. We have a trip on the calendar now for a couple of our manufacturing posts to go over and visit Radar and spend time learning how they manufacture and digging into their processes. So that piece is well underway. They have identified various areas of products from the Safariland perspective that we are targeting to take a look at for localization, which will continue to help us from a freight and duty standpoint when you look at the supply chain today. And then we've got a small supply chain team that's been put together that are diving into any of the leverage points in the commodities or the type of products and components that Radar uses in raw materials versus our Safariland brand of holster so that we can look at leveraging those.

And then lastly, from a product management perspective, we have both teams joined together handling various positioning activities as we see tenders and quotes come up internationally so that we make sure we are positioning the Safariland brand and the Radar brands appropriately on those tenders. Our objective overall for this is to make sure we win, whether we win with Safariland with the position of that product or we win with Radar with the position of that product. Either way it goes, we are happy for the win.

Great, thanks for the color. Maybe just one more; I know you've answered a bunch on M&A, but can you just talk a little bit about what phase of maturity some of your discussions might be and also if there are any type of manpower constraints on your end with integrations. In other words, if multiples came in pretty attractively and there were a bunch of opportunities, is there any bandwidth constraint you have?

You always get a -- we are fortunate enough, you know how M&A goes, it kind of cycles through depending on what opportunities are out there whether they are things that we are cultivating or come through a process to us. If we had three or four all at one time, yes, we would have some bandwidth challenges and a lot of companies would no matter what size you are when you look at the lean nature of companies that are out there doing what we do and the type of operating models that we have. So I think it just depends on the number.

In terms of maturity as Blaine talked about a little bit earlier, we are excited about the funnel that we have today. We also have had some good opportunities to take a look at some assets over the last three or four months. We continue to operate with some great discipline in that process with our team making sure that we are evaluating opportunities extremely closely and I would just say we will continue to work the funnel hard.

Great, thanks for taking my questions.

There are no additional questions at this time. I will pass it back to Brad Williams for any further remarks.

Thank you, operator, I would like to thank everyone again for joining us on today's call and your continued interest in Cadre. Operator?

That concludes today's conference call. Thank you and have a great day.