Cadre Holdings, Inc. (CDRE) Earnings Call Transcript & Summary

Our next company at Cadre Holdings. We've got the CFO and President. We have Blaine Browers and Brad Williams, thank you guys for coming.

You're welcome.

Thank you for having us.

An effort to come over here.

Maybe a good place to start because I think to a lot of investors in Europe. Cadre is a new thing. So could you please give a couple of minutes on what the company does, the mission, the vision, that kind of thing. So people can get a better understanding of Cadre.

Absolutely. So fairly new publicly traded company. So we went public via IPO in November 2021. But overall, as a company, we're over 55 years old. So an old company focused on mission-critical products, in other words, a protective equipment for first responders globally is what we do and we specialize in. Our mission is, together, we save lives, which we take very seriously at our company. When you look at the type of products that we manufacture, and we equip first responders with, we directly save their lives and bring home men and women on a daily basis. So in a nutshell, that's who we are.

And maybe if you can walk through some of the product line. That would be great.

Absolutely. So we have a lot of different brands that we have acquired over the years, but we have 3 main categories that make up the majority of the revenue and also the profitability. The first one is bomb suits. So in our EOD space, explosive ordinance disposal, so those are the marshmallow looking, large, astronaut looking suits that we engineer up in our Ottawa facility. And for that category, we're the global leader. So we supply most militaries and law enforcement around the world, and we estimate our shares in that 85% range. So we've amassed a large amount of share in that category over the years. The second category is where the company started over 55 years ago, which is with holsters. So we started as a company innovating, designing and manufacturing holsters that are protective holsters for law enforcement. So if you walk up to a law enforcement officer and you really try to take their weapon from them or military folks that have the type of holsters that we have, you would likely not be able to get the weapon out of the holster. So that's why that's also a product that saves lives. So that's the second category for us. It's a very important category. It's one of the highest -- it's actually the highest profitability category for us in the company. And then the third category is body armor. So everything from hard armor to soft armor, that's helmets, plates, shields, soft body armor worn by like patrol people, for example, out on the streets. What we don't do in the body armor category is typically supply to militaries, okay? So what we found over the years is the product is much different. Law enforcement product is typically a fitted product so that you get the best optimized protection for each officer versus military products are more small, medium, large, extra large, there's a lot of different sizing involved and then the margins are much lower in the military side of things versus law enforcement.

So one of my first questions here is, how do you think about the international business, be it that you're here in the U.K., both from an organic perspective and an M&A perspective.

Yes. So with those 3 main product categories, I mentioned high share and bomb suits globally. Our holster business in the U.S., we estimate 9 out of 10 agencies have our holsters in the U.S. from a law enforcement perspective. And then with body armor in the U.S., our shares in that high 30%, low 40% range in law enforcement. So our growth opportunity is outside the U.S. from an inorganic and organic growth perspective. So our strategy is obviously to protect our core of where we're at today in those end markets, mainly in the U.S. and Canada and then begin to expand over into Europe. Even though we already have a footprint there with manufacturing facilities and our brands are known, we're just working on accelerating our growth in that area. From an M&A perspective, we did an acquisition in January of last year, a holster company in Italy and that was our next step around expanding our share in Europe, even though we have our premier brand in Europe already. This is another brand that's a competitor. Now we have 2 brands to go to the market with. So that was one of our steps to that growth. And then for body armor, that is more of a -- also an M&A play for us because the body armor market in Europe is very fragmented. There's a lot of different players by country, within body armor. So we continue to look for potential acquisitions in that space and want to build out our current footprint there for us to continue to accelerate that one and grow.

And do you think there's more opportunities in armor or duty gear?

It's really both because our share, for example, in Europe is significantly lower than the states in both of those categories. It will just be a different growth path. Now we have the extra -- the Radar, the holster company that we acquired in January. So that gives us the footprint locally that we need to expand and to grow. For Body Armor, we feel like we'll need to do some M&A work before we really get to that growth point that we're looking for.

Got it. Got it. When the company went public, I think your initial plans were to double the company over 4 years, right, from '21 to '25. Is that still on the table? Is that what you're thinking? Has anything changed that? And I guess, as investors, how should we think about that?

Yes. Absolutely. So a key part of -- we talked a lot about early pre-IPO and post-IPO, why are you public? And a lot of that is really accelerating that journey. We can certainly say -- one of the really compelling things about Cadre that we didn't get to is the refresh cycle, so the recurring revenue side of the business, but also the low CapEx needs. So we generate a relative large amount of cash on an annual basis because our CapEx needs -- our ongoing CapEx needs is really about 1% of revenue in a given year. Occasionally, it goes up maybe to 2%, but those are one-off, a building expansion, capacity, et cetera. So if you think about that framework of 1% CapEx, good margin, a high margin business, you generate a lot of cash and that gives you the ability to continue to make acquisitions and pay them down. So we kind of have -- we had that discussion of private public, right? And we could have done the -- just generate cash, acquire, lever up, pay down. But really, we thought the unique opportunity and Warren Kanders, our CEO had done this prior as Armor Holdings is larger acquisitions with access to the capital markets to really accelerate that journey. And if you do a little homework, Armor Holdings was a fantastic success story by Warren, of which Cadre is a component of that. That's -- it was acquired back from BAE. So that still exists. We still believe in that heavily that there's M&A opportunities, both within our core markets in law enforcement and military, but also outside. And so when we think about Cadre, we don't think about as a military law enforcement company. We think about it more broadly as a safety company or Radar company that unites and that really opens the aperture on the M&A side. So doubling, I think it's absolutely still out there. The markets have been when I say markets, the M&A market is certainly tougher, right? And I think there's -- we've talked a lot about that disconnect between sellers and buyers. I think we're hearing more instances of sellers being a little more open, but there's also a lot of hesitancy, right? And what we're hearing most often is we're going to wait, right? We'll talk in a few months. Let's see what happens. I think everyone is waiting to see what the Fed does. Certainly, recently with the breaking news in the last couple of weeks in the U.S. with the banks has created a little more turmoil and I think hesitancy around those markets. The good news is we're still generating cash, right? We've closed the year less than 1.5, 1x leverage. We have cash on the balance sheet. We have an undrawn revolver. We have lots of options, we have a supportive bank group, right? So we have bank group that has been with us for a long time, very supportive of acquisitions. And we're still bullish on that. I think the piece we can't control is just that the speed and the amount of acquisitions that happened in the period, right? We're going to still internally run the business, we're going to continue to work the funnel hard on M&A, but those will come, right? And I think looking at Warren's track record and history, the one thing that really sticks out is that discipline around M&A and really what Warren and I think we're all good at is having that discipline that there are deals we've talked about where, hey, you're a turn or 2 off and what do you do? Do you kind of pay more than you're comfortable with to get the deal? Or do you just kind of say, "Hey, we're happy with what we did and we'll stay there." And that's what we do. We stay at that, what we're bid, where we're comfortable, where we know we can generate value and returns for our investors. And the timing will happen, right? And there's been -- since Warren has been in the industry since the early '90s, he's had numerous instances where he's followed businesses, looked at businesses numerous times over the year and the time just hasn't been right, and Warren has that patience to wait until the time is right and the price is right.

Yes, way back when we covered Armor Holdings before it got bought so we know the model well. Maybe reverse the course a little bit. You talked a little bit about Europe. Are there opportunities in Latin America and Asia? And how do you think about those markets?

Yes. We currently have share with most of our product categories, even beyond the 3 large ones that we just talked about within those regions. But our target from a more aggressive growth standpoint and just from that breakthrough for us would be in the European side of things. But when you look at some of the price point levels within certain regions, we're typically priced at that premium price point, high value, highly featured products, some of the best, most comfortable lightest body armor out there and then the same for holsters and bomb suits. So we'll -- we're still in those regions and we'll continue to work those regions. We have excellent, excellent third-party distributors around the world that wake up every day and they work on that share for us. But from our perspective, where we're going to give it the additional juice will be in the European market.

Got it. Got it. And maybe back to M&A a little bit and the recent turmoil in the particularly regional banking markets. Do you expect that to shake out some stuff, I mean -- and get valuations maybe more in line? I know it's real close and it was just a week ago. But I know in kind of in my broader practice, we've heard some small companies rumbling about things. And I don't know if you're comfortable saying if you expect that to be some sort of a catalyst or not.

We're hopeful that a number of things that could happen would be a catalyst around M&A and ideally, some of this creates maybe possibly a flight to safety, right? So some smaller companies looking for a home, a larger company. The one thing that we're proud of as a company is our reputation, not just with our end users, but also our competitors, our suppliers, et cetera, in the industry. And we do a lot of work -- we call organic deals, meaning they're the cold calls, right? Not a process-driven deal where someone in the organization, whether it's Brad or someone else picks up the phone and starts to develop that relationship. And there's a good mix in Cadre of folks like Brad and myself who are newer to the industry, kind of 5 and 6 years. We also have folks who have spent their whole careers in the industry. So when you start to pair that up, you get a really right Warren, you get a really unique perspective of a lot of relationships, right? We got a compelling company to sell and I think kind of bridge together. So the hope is kind of that or maybe kind of the rate side of it, create some freeing up of that log jam. But yes, I'm sure there's people who know a lot more about what will happen in the future.

Just curious. And then how do you think about if you're dealing with the companies with founders, do you like to keep them around and have some sort of earnout. I mean -- or do you just want to get rid of them? Culturally, how do you think about that?

No. Talent to us is extremely important overall. And one of the criteria we look for #1 or #2 in a given product category or in the marketplace, right? So those companies got to that point for a reason. And typically, it's due to leadership, right, overall. So we actually -- as we're going in and we're doing diligence, and we're talking with companies, maybe it's a -- could be a 6-month buying cycle or could be a 2-year buying cycle, right? We want to take time and make sure we get to know the team really well and understand what they want to do as they go forward. And we're always hopeful and looking for folks that want to be there for the long term, overall and -- if not, then that actually gives us a pause sometimes to kind of step back and try to figure out, well, if that's not the case, what do we do from a succession planning standpoint? I do feel like we've been really, really good at attracting talent here for a small private company before we became public and then actually now beyond that. And we've got a lot of folks on the team that have larger publicly traded company experience and mixed with the existing team, and we're doing just a phenomenal job together.

It kind of bridges a little bit to integration. I think in the approach of what Brad was mentioning, it's not a one-size-fits-all. It's very much a customized approach for every deal. So we've gotten questions of, hey, are you going to integrate the back offices or integrate the commercial teams in every acquisition you do and that's very dependent upon the circumstances, the business and the situation, right? And as Brad mentioned, there's folks that have larger company experiences like myself and Brad and it's that ability to really use the right tools, find the right way to get the value out of the business. And the one thing we don't want to do as we buy these businesses, we don't want to break them, right? So it's really important for us to understand whether that's the owner of the business who maybe is one of the key ingredients of how do you keep them in the business? How do you kind of create succession planning around it? So again, it's really not a one-size-fits-all, which creates some uniqueness, I think, for sellers.

Yes, sure. When we think about the EOD business, it's a higher margin business, but it's also -- tends to be lumpy. How should we think about trends in that business over the long term?

Over the long term, the business grows, right? And the number of end users doesn't grow, right? It's a fairly stable number. There's a limited amount of EOD techs in the world. What does happen, though, and this is what the team does a really fantastic job of is staying ahead -- staying on the very edge of the technology curve, right? And what you have if you go back to maybe 2 suits ago is not a -- what you'd call maybe a dumb suit -- it's not a smart suit, right? So today, you have voice-activated controls in the suit, right? 2 suits ago, it wouldn't have been, it would have been buttons, right? It's a continuing evolution, right? And they also have a very close connection with the DoD and they're thought of as the thought leaders in the impact of blasts on people. What that does is we do a lot of funded R&D with the U.S. Department of Defense to stay on that cutting edge and we've won consecutively the next-generation bomb-suit development program. So what you're seeing is more and more of sensorization right? If you're familiar with IVAS, for instance, it's the idea of how you sensorize the foot soldier, soldier on the ground, the same thing is starting to spread. So there's -- that component over the long run, the users may not change, the price tag does change, right? And the recycle or the replacement cycle does not change. In addition, we've talked a bit about sensors and there's this blast sensor, right? And there is this push -- it started in the U.S. and it's starting to kind of feed outside of how do we better understand what we're putting our men and women and armed forces through? What are they being exposed to, whether that be explosives or even concussion from like a 50-caliber machine gun. And how do we measure that? And how do we protect them, keep them safe, and that's becoming an exciting piece. So there's -- you had the EOD, which will continue to grow. I think it will grow like we've talked about the overall business. There will be ups and downs just because of that limited number of users in a given year. So if you have a heavy refresh -- they're not refreshing every year, right, 7 to 10 years, it will take a little bit of time. But that continue to push the envelope of giving the users the best experience, the safest experience and now giving them more visual cues communicating back with the command vehicle, et cetera. So very exciting, but they're going to be years like we talked about in guidance for this year for 2023, where they're going to be down this year, but that doesn't portend anything for the future. The future stays the same.

And what -- just curious what's the life cycle of a suit? Typically, how long do you keep one around?

Generally 7 to 10 years. And majority of the replacement comes down to there's -- the thing about a fleet refresh would be we're moving up to the next generation, right? We're moving up from suit A to suit B. But a lot of what happens in between is not the suits being used in war time but training, there's a lot of wear and tear in training. These guys, these men and women are on their knees, they're crawling, so the suits are getting torn up. So in between those, the fleet refreshes, you have the individual replacements.

And think of it this way, too, where a holster -- there's a big variation in pricing, depending on the rig and the setup. You're talking $150, $200 to outfit a patrolman with all of our products. You're talking $1800 with our -- just our products, a SWAT team member, they need additional gear and protective gear. So you double that one to $3600 and $3800. And then for a bomb suit, you're talking average selling price is about $36,000 right? So this is not an inexpensive buy for these technicians that are out there. And this is a suit that is saving their life. So they definitely invest in it.

So that's an interesting segue to another question that I had. Although police budgets have been going up, numbers of police officers haven't -- how do you guys think about that? And just from a business perspective, how do you think that will resolve itself?

Yes. Yes. It's a good question. That -- so you mentioned budget. So just a couple of things to add there. When you look over the long run over history, police budgets usually 2.5% to 3%, right? Is typically where they're sitting from a growth standpoint when you look at overall growth. And our type of products fall into that protective equipment. So when you prioritize what you're going to spend, if there is some kind of a spending crunch, are you going to buy a uniform for an officer or are you going to buy body armor, right? You're going to buy body armor instead of a uniform. So that's -- our products are really critical to that budget. So typically, we're getting prioritized over top of spending. So as the last few years have happened, we had COVID, we had defund the police that was going on at the same time. There were confidence and it depends on where you're at, had been lost in certain areas, officers jobs became more difficult, right? And so there have been a lot of retirements out there. And with those retirements, it's been difficult for agencies to recruit additional new folks and feet on the street. We're actually seeing it also globally in certain areas in certain regions, being an officer is a very, very tough job. So the way we look at it is it's not affected our business today, all right? Because when you look at all the different product categories we have, you look at the protective nature of them, you look at us on how we are from a global perspective, even though we're -- most of the business weighted to the U.S. and versus outside, we feel like it's a long-term tailwind. So I can't put an exact number on it, probably 3 to 5 years is what we think it will take. There are some limiting factors for them. If you had a lot of recruits today that were raising their hand and signing up and they're making it through recruit classes. Recruit classes will be the bottleneck, okay? Because they can only take on so many recruit classes that are a certain size to get people trained and get them out in the field. It's no different than any other company when they're trying to expand their capacity and manufacturing or customer service or anything else. There's that finite number of people you can add at one time. So that could be an area that becomes a bottleneck as things continue to move up and improve. We have seen some pockets of -- in the U.S. that is of increased hiring, especially in the Southeast. The Southeast has done some different things around recruiting, bonuses and attracting people out of high-cost areas of the U.S. moving into the Southeast. But overall, that doesn't -- that just moves existing officers, right, from other regions of the country into those regions. So it's going to be a long road ahead of us. We think it's a nice tailwind for us as we go forward, and we'll continue to track and monitor it.

And given some of the regional comments you made, does the company have, particularly in the U.S., more concentrated exposures in different regions? Or is it pretty homogeneous across the...

Yes. We don't. And that's from -- I mentioned being around over 55 years. The company has focused on small, medium and large agencies, okay? So it's not like we have a concentration of any of those 3 in any certain region, okay, since we've been around for a long time. So we take pride in that. We've got a, as I mentioned already, an exceptional third-party distribution network that we rely on. And they have feet on the street working every day out there with agencies. We have our own sales team that either works with the distributors or directly within customers because a lot of those are ex-SWAT folks, ex-patrol, FBI, you name it. They speak the language. They understand what the problems are and what we can do with our products to solve those problems and make people feel really confident when they're out in the field and protected. Our premier brands, Safariland has been around for a long time, and they trust that brand, whether it's on their holster or their body armor or other pieces of equipment, and we've amassed that share, and there's no pocket in the U.S. where we're exposed one area versus another.

Okay. That's great. With the additional investment that was made in the Jacksonville facility, this year in 2023. What's the impact on CapEx? And when do you expect that to normalize? And how much additional capacity does that give to the company?

Yes. So a couple of things there. So and Blaine already mentioned it, so from a CapEx perspective, we're typically running about 1% of sales CapEx-wise. And that's for our normal run the business, productivity projects, doing what we do. That does not include any kind of larger CapEx around facility type projects. This year, that's what we have. So we have a larger CapEx for a facility project in 1 of our 3 facilities in Jacksonville, the holster facility. It's one of our host facilities that we have in the company. And that facility, we've seen tremendous growth over the last 3 to 5 years since I've been here -- I've been here 6 years. And it's from various things, just continue to maintain and grow that share of that holster category. One, all the U.S. -- major U.S. military branches, when they did a lot of the gun change outs, they moved to a new holster, which is ours, which is great. So that facility, we've got about more than 3x the number of people in that facility now. So this expansion is not about increasing our capacity. It's doing things that we need to get done for our associates, right? So you can imagine if you got that many more 3x at least folks there, everything from break rooms to conference rooms in the facility to restrooms, you name it, parking. That's really what the focus is. From a capacity standpoint, it's -- that facility, we still have multiple shifts of extra capacity available. So we're fine from that perspective. This is just to make sure we're focused on our associates and doing what's right for the team there so that we can work adequately.

And I mean, that's a nice segue into another question. How have your supply chains been? And how has labor been for the company? Has it been difficult to retain people and is it difficult to attract people?

So we're no different than anyone else that's out there concentrated in the U.S. or globally. We went through that cycle -- it was difficult at times, right, to find certain labor pools and skilled positions that we need overall. So we're past that now, which is good. We've seen a lightening up of that overall. So when we're looking to expand capacity and we're adding direct labor, for example, in our manufacturing facilities, that's become much easier for us, okay, overall. So that's -- we're definitely doing well there. We have one facility in a large facility of ours down in Mexico, where there's been some pretty large statutory inflation increases in labor costs. That facility is probably the one facility where we have the highest turnover, even though we're significantly below the industry in that region in terms of retention and turnover in that area that team has done a phenomenal job with things like productivity projects, automation to offset and work toward eating into that inflation that we've seen. And we've done a great job in engagement in that facility to engage in our associates and different programs we have and things that we do there, so that it's just a great place to work. We have a great team there overall but we'll continue to monitor that one and working on various mitigation activities there so that if we need to continue to mitigate costs, what do we end up doing that we're evaluating right now.

And have you had any difficulty getting any raw materials or anything that you need? Or has that been reasonably...

Yes, like everybody else, right? Everybody is probably going through the same thing. Ours has improved significantly. We didn't have as many problems as many companies out there because when you look at our supply chain and our raw materials that we're procuring overall, our supply chain is not elongated for our most important raw materials. They're typically regional, okay? So take ballistic materials from our ballistic suppliers that we have. They're typically in the U.S. and so that's something we're able to reach into and grab fairly quickly versus those that had a lot of issues in various countries trying to get raw materials out of those countries. So we didn't have as many problems, but we had problems. Those have let up. We still have pockets of those that pop up from time to time, whether it's a supplier having an issue with trying to get labor or they also have a sub-supplier with some raw material type issues, things that are more single sourced and more niche and specialty type raw materials than overall, but we're doing well. The team has done a really phenomenal job at managing through those situations.

Got you. The commercial sales saw strong growth in the last year, right? What's behind that? And what's your expectation going forward?

Yes. So the drivers for the commercial growth has really been the new product innovation and silo. And one of the things, as part of the operating model, the duty here the holster team did was a couple of years ago, they divided the engineering group to get a focus on commercial. So traditionally, Cadre has been a duty holster, right, which is very different than the consumer holster or a commercial holster and that's where all the focus was. And we have best in the world on that side. And what would happen is you just didn't get the focus right? So they carved out a brand-new team of the engineering team to get focused on that commercial, make sure we're introducing products that meet those very different set of needs that happen in the industry. So -- and that commercial side is very fragmented, right? There's a number of competitors, I mean, a shocking number of competitors out there, right, which says there's a real opportunity for some consolidation. And that's the reason we're spending more and more time there. And frankly, it's a very profitable channel for us, right? That's a combination of our direct to consumers, our e-com, our safariland.com website as well as working through Amazon and also our big box retailers. So that's exciting for us, right? And that has been and that's been a growth driver since we made the company. Now it's relatively small percentage of the overall business, right, just slightly above 10% of our overall revenue, but it is there and it's growing. The second piece is Cyalume, right? We acquired Cyalume over the May of last year. Cyalume has that same channel, right? They're using not maybe not so much the big box, but e-comm and Amazon for the chemical luminescent sticks. So those 2 both have really kind of driven that. We'd also do hearing protection through our e-comm website as well, but it's really kind of been those, the more of the holster is really driving a lot of that. What do we expect going forward? And I think like a lot -- like everyone out there, we've seen peers in that shooting sports market announced in Q3 of last year as well as Q4. And there's mixed results, right? And we're being a little cautious in that area. We certainly believe we can continue to capture share. That's not the question in our mind. It's what happens with the underlying market, right? And that, I think, could get us -- could offset, right? I think there's plenty of that share out there for us to get. It's just like everyone, we kind of look out there and you have the Fed and it's just not clear where the consumer is going to head this year.

This may sound a little bit of a random question, but is there opportunities in protective electronics, body cameras, that kind of thing, add-ons to what you currently do in the electronics growth?

Yes, there is. So it depends on the product category, right? There's some categories that we would not go into just based on the market dynamics and the share, right? So for example, Axon, right? They're in the body camera business and the taser business. So that's not a category that we would be interested in going into. But there are other things from electronics and software perspective that could be interesting, things that we have in R&D and things that we're looking at overall. We're not scared of electronics and software. When I was at a previous large publicly traded company, I led a software company for 5 years in that company in electronics and high-tech type stuff, and then I've got folks on the team that are here that also have done that, too. So that's there for us. We feel like no different than the bomb suit side of things that Blaine talked about a minute ago. I think you'll see as we go forward, more of the protective products become smarter as we move on.

Yes. It would seem like there's an opportunity for that.

Yes. But I will say that even if you brought something out tomorrow, right, this just like a lot of industries, our end customers are -- they don't like change, right? And especially when you're messing with the products that are protective products. So it will take time as we work through those type of products and bring them out to the market for the adoption rate, it will be a long one.

Yes. You addressed this a little bit, but with the increasing wages in Mexico, does that mean bringing people back onshore?

No. So I spoke about that a few minutes ago about Mexico and inflation and things like that we've seen, that's not a sign of -- we've -- somebody else asked us that question too. Does that mean the work you're doing at the Jacksonville facility for holster, does that mean you're going to move some stuff from Mexico into that facility. That's not the intent of that change, as I talk through, right. The intent is to make changes for the associates in that facility, but we are looking at all options. We do -- we've been in that Mexico, our Mexico facility in Tijuana for over 25 years, okay? So we've got a really, really great team there. We've got a concentration of folks that have been there for quite a long time that understand the products, understand the processes, love the industry, love our mission, we enjoy being there. But as we continue to move forward, we've got to find ways to work on that inflationary cost that's being handed down to us from the Mexican government.

Got it. Got it. And how much of that can you pass through to...

The inflation.

We're pretty good at passing through, but Blaine can talk about it.

Yes. And we'll kind of broaden the question a little bit. Not just talk labor inflation, but material inflation, which is on as consumers or a business, it's a real thing that's happened in the last...

10.5% in the U.K. today, right?

It's real. Yes. So we really -- we kind of have 2 buckets we're really focused on, right? And what we said is, on the price side, because of the -- where we sit from a performance standpoint and presence and brand name of the product, we're able to get price offset the material inflation, but also get net a point of price above material inflation. That's our goal. That's what we've been able to achieve. When you think about the labor and utility inflation, so labor and overhead inflation. We're really focused on there is productivity, right? And use that those productivity projects, Brad mentioned before, to really offset that labor and overhead pressure. And one of the things we spent a lot of time over the past couple of years and it's picking up steam is really focused around automation, right? A lot of our operations are cut and sew, which has traditionally been not -- really very limited automation and really spend a lot of time internally thinking about how do we start to take those steps to more fully automate the process, right, and get away from kind of user. And there are lots of benefits there. In a lot of cases, we're not talking about eliminating operators, right? You still have operators there to ensure quality, right? We're making a very important product. Quality is most important, but you can have the best of both world. So you can have the human there to make sure things happen properly. You have a machine that has repeatability, right? And between the 2, I think you have a really great marriage for the business and the products.

Got it. And how should we think about kind of the core business growth over, say, the next year or 2 and then what could be potential positive catalysts and maybe negative ones?

There's a few. And I think the -- we talked about the core growth, that's generally going to be GDP like, and that's really driven by the municipal budgets, right, police budgets. I'd say the good news on that front is we're increasingly seeing an appetite regardless of political party to fund the police, which is -- has not been true recently. So that's a very positive backdrop for us. But Brad mentioned the counter of that is how do you get enough officers through the academies, which tend to be the bottleneck. So there's that side of things. If they're able to solve that, I think that prevents something unique. We've talked a lot about the blast sensor, right? And that's -- I don't think of that as a 2023 or 2024. I think about it as a longer-term opportunity driver in the company because it is a new technology, right? There's -- it's a new adoption. And as Brad mentioned before, whether it's a law enforcement or military, slow to adopt. And part of that's a good reason, right? We're cautious about making sure we're having the right equipment and with the right operators and the right performance. The other thing out there that we talk a lot about and spend a lot of time is just we would consider non-U.S. large opportunities. So you see a lot of that now. Sometimes in Central and South America, in Europe as well. The challenge with those larger opportunities is they're government funded, so you tend to see more pushing and pulling. And it's kind of a unique difference between the U.S. market for us and international markets. When we think about law enforcement, we're based in Jacksville, Florida, I'm sure there are 15 police departments within a 30-minute drive, maybe 40-minute drive. There's just a lot of different departments, all making independent decisions. As you kind of move outside the U.S., whether that's Canada or south of the U.S. or in Europe, you tend to have larger national forces, police forces in many cases, who are making larger big buys and that have more impact if there is a push or pull, right? And there's just -- it's just a different dynamic and there -- it's 0 or 1, right? It's very digital when you have those. And there's a number of those opportunities that is -- they flush through and we're excited about. But it's still early and we know we can't control the outcome there. We have to continue to do what we do, which is provide the best products for our end users and be there when they're ready and ensure we have the right product with the right lead time.

Great. Cool. That's all the questions I have. So thank you both for spending the time.

Thank you.

Thank you for inviting us. Appreciate it.

I appreciate it. Thank you.