Good afternoon, and welcome to the Cadre Holdings First Quarter ended March 31, 2022 Conference Call. Today’s conference is being recorded, and all lines have been placed on mute. At this time, I would like to turn the conference over to Matt Berkowitz of the IGB Group for introductions and the reading of the safe harbor statement. Please go ahead, sir.

Thank you, and welcome to Cadre Holdings First Quarter 2022 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 estimate assumption based on our understanding and information available to us today. 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 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 to 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 May 26, 2022, starting at 8 p.m. 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’d like to turn the call over to Cadre’s Chairman and CEO, Warren Kanders.

Thank you very much, and good afternoon. Thank you for joining Cadre’s Earnings Call to discuss our results for the first quarter of 2022. I’m joined today by our President, Brad Williams; and CFO, Blaine Browers. Following a year of record net sales and adjusted EBITDA that also included the successful completion of our IPO, we continue to position Cadre to create long-term shareholder value. We have now completed two accretive acquisitions since our November 2021 IPO that further expand Cadre’s international presence and add multiple growth avenues. We are incredibly proud that in a short period of time as a public company, we have made considerable progress delivering on the M&A strategy we laid out to our investors. We remain excited about both our long-term and near-term outlook and have increased our 2022 guidance. This is reflective of our success in accelerating growth through acquisitions as well as our team’s strong execution in a challenging macro environment. Brad, over to you.

Thank you, Warren. You’ll see on Slide 4 that on today’s call, we’ll provide a quarterly update and business overview, including a review of our most recent acquisition and M&A strategy and cover our financial performance and 2022 outlook followed by a Q&A session. First, turning to Slide 5. I’ll discuss our strong execution in the first quarter as we continue to capitalize on the attractive long-term tailwinds and recurring demand drivers in our entrenched mission-critical first responder markets. Against the backdrop of ongoing supply chain disruptions and inflationary pressures, we delivered on our strategic objectives. During the first quarter, we significantly exceeded our 1% pricing growth target above material inflation. We believe this pricing power is a direct reflection of the performance and engineering that goes into our mission-critical products, which has enabled us to maintain a premium price point in a challenging operating environment. While we continue to watch macro developments related to price, material inflation, and supply chain constraints, we expect that our unparalleled reputation of our trusted brands will enable us to command pricing power going forward. Our low CapEx model was evident in the quarter as we generated a strong EBITDA conversion of 92%, consistent with our guidance. In terms of our product portfolio mix, as we indicated last quarter, we anticipate a more favorable mix in the second half of the year. During Q1, volumes in the higher-margin duty gear and EOD product categories were down, offset by growth in the Distribution segment. From an operational perspective, we continue to benefit from our entrenched positions as demand for our trusted brands remains strong within law enforcement, first responder, and military markets. Our orders backlog as of March 31, which we believe is an effective forward-looking indicator of potential sales, increased $3.3 million from the end of the year. This was primarily driven by increased demand for both soft body armor, U.S. domestic duty gear, and the acquisition of RADAR, offset by the reductions in EOD due to project shipments and distribution reduction in past due backlog. We have increased our full year 2022 outlook based on our strong and increasing backlog, expectation that our mix becomes more favorable, and the progress we have made executing strategic objectives. Blaine will spend more time addressing our guidance later on the call. Importantly, our resilient operating model continues to drive strong free cash flow generation that is enabling us to capitalize on attractive opportunities to unlock strong long-term shareholder value. Specifically, in January, we completed the accretive acquisition of RADAR Leather division, a premium duty gear brand with a reputation for innovation, safety, and quality. The acquisition of RADAR supports our further penetration in the European market, adding to our international footprint in the U.K. and Lithuania, and provides multiple growth avenues. The integration process is going well and as expected. Our initial focus has been working with the team on the supply chain and localization in Italy. We’re pleased to have begun the engineering process to produce the initial run of some holsters and accessories. More recently, we acquired Cyalume Technologies, the world leader in chemical light solutions for U.S. and NATO military forces. Later on the call, Blaine will discuss this acquisition in greater detail, but I note that we continue to have success adding high-margin companies with leading market positions and strong recurring revenues and cash flows. Moving forward, we’re excited about our long-term prospects and believe our disciplined capital allocation approach will serve us well. In addition to returning capital to shareholders through our $0.08 quarterly dividend, we expect to further leverage our targeted M&A strategy to continue to unlock value for shareholders. Our funnel of opportunities remains robust, and we are actively evaluating acquisition targets consistent with our key M&A criteria. On the next two slides, we’ll discuss macro tailwinds driving demand and visibility for Cadre’s mission-critical products as well as provide an update on current market trends. Starting on Slide 6, we outlined significant demand drivers supporting a long-term sustainable growth opportunity for Cadre, both domestically and internationally. These drivers, which we have discussed in the past, remain intact and are focused on continued increases in major U.S. cities' police budgets and the potential for increased spending abroad with two-thirds of all NATO countries spending less than 2% of GDP targets on defense and security. We continue to anticipate our total addressable market to grow and see opportunities to expand market share. While certain of the developments outlined on this slide are not necessarily immediate-term tailwinds, they represent long-term opportunities supporting our investment thesis. Zooming in on trends currently impacting the markets in which we operate, I’d like to highlight several on Slide 7. While domestic law enforcement budgets are healthy, the U.S. is experiencing a shortage of officers that will take many years to grow headcount back to acceptable levels. As we assess the current geopolitical landscape amidst the war in Ukraine, we continue to receive inbound inquiries. What we’ve seen thus far is demand for lower-end equipment, which doesn’t fit our model. With that said, we expect there could be movement that creates demand for our higher-end premium products moving forward as the conflict shifts to its next phase; for example, we anticipate active discussions we’ve been having about providing EOD tools and equipment could lead to attractive opportunities. We’re watching the situation closely and remaining in regular contact with customers to be prepared to serve them when the time comes. Turning to supply chain constraints, we are very proud of our team’s ability to execute in a challenging environment. Operationally, we have experienced extended lead times with electronic components and various raw materials. Regarding consumer trends, the run rate for holsters demand has stabilized. This supports our strong outlook for the second half of the year. I’ll now turn the call over to our CFO, Blaine Browers.

Thank you, Brad. We’re on Slide 8, the key M&A criteria slide. I’ll begin my remarks by expanding on Brad’s comment about our M&A strategy. Over the course of our history, Warren and the team have demonstrated a long track record of value creation by acquiring, integrating, and optimizing asset-light businesses with high free cash flow models. As we have mentioned previously, we take a very targeted approach focused on three buckets. First, geographic expansion and expanding core products in new markets; second, introducing new products in existing core markets; and third, expanding our portfolio of safety products outside of our current law enforcement and military markets into attractive adjacencies within the safety and survivability landscape. In evaluating potential acquisitions, we favor businesses with a leading market position that have a strong and defensible technology and strong brand recognition. In addition, it is critical that a target business has a recurring revenue profile, high cash generation relative to EBITDA, is asset-light, and has an attractive return on invested capital. Following the acquisition of Cyalume, which I will discuss in a moment, we are currently in the process of actively evaluating other compelling opportunities. In terms of M&A valuations, we expect that in this environment, we could see multiples compress. Moving to Slide 9. In line with the criteria that I just outlined, we recently completed the acquisition of Cyalume, the leading supplier of chemical illumination solutions to U.S. and NATO military forces among other commercial markets. The purchase price of the acquisition was $35 million, subject to customary adjustments for net working capital, transaction expenses, and indebtedness and was funded through withdrawals on our existing credit facilities. The business is expected to generate approximately $25 million in pro forma revenues for the calendar year ending December 31, 2022. Cyalume has a rich history with roots tracing back to the origins of chemical illumination over 60 years ago. Today, the company provides light sticks, chemical luminescent ammunition, and infrared devices to the U.S. and NATO military forces among other commercial and law enforcement markets. Warren has followed Cyalume for over two decades, and it’s a business that’s perfectly aligned with our lifesaving mission. As a leading supplier of chemical light products to the U.S. Department of Defense, NATO, and Allied nations, Cyalume is entrenched in combat in recurring military training applications. The addition of Cyalume advances our strategic focus on increasing wallet share with our current military, law enforcement, and commercial customer base and adds a resilient recurring revenue stream to our portfolio. Moving forward, we’re focused on the integration process. Our top priorities include working with the functional teams on the first 100-day basics of integration, utilizing the 80/20 rule to prioritize factors that will produce the best results optimizing growth by leveraging Cyalume and Cadre selling teams and implementing core Cadre operating tools. We look forward to expanding Cyalume product penetration across new military and commercial markets leveraging Cyalume's deep competency and strong customer relationships, along with our selling teams' expertise and global resources. On Slides 10 and 11, we detail our first quarter 2022 results. Q1 net sales of $104.5 million exceeded the high end of our guidance range we provided last quarter. The decline versus last year’s first quarter was primarily the result of a large U.S. federal duty gear shipment in Q1 2021, combined with strong commercial demand and higher demand for crowd control products last year. Gross profit margin was 38.5% for the first quarter, mainly driven by the less favorable portfolio mix that Brad discussed earlier, partially offset by price. I’d like to highlight that we expect margin expansion in the second half of 2022 to be similar to the strong margins we saw in the first half of 2021. Net loss was $10.2 million for the quarter ended March 31, 2022, which reflects a $23.6 million stock compensation expense and illustrates our success in generating significant free cash flow. Our first quarter EBITDA conversion of 92% remained strong and was in line with our guidance. I’d like to remind everyone that we generally 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. Turning to the next slide, we illustrate anticipated top line and adjusted EBITDA growth for the full year 2022. As Warren and Brad mentioned, we have upwardly revised our 2022 net sales and adjusted EBITDA ranges. Based on their midpoints, we expect 5% annual growth for both full year net sales and adjusted EBITDA. On Slide 12, we present our capital structure as of March 31. Our net debt was $147 million, and we believe our net leverage around 2x provides significant financial flexibility to grow organically and, more importantly, inorganically through acquisitions. We provide our updated guidance on Slide 13. As we mentioned, based on our strong and increasing backlog, expectation that our product portfolio mix normalizes moving forward, and our progress executing strategic objectives related to M&A, we’ve increased our 2022 outlook. Cadre expects to generate net sales in 2022 between $441 million and $452 million and adjusted EBITDA in 2022 of between $72.5 million and $77.5 million. Additionally, we expect adjusted EBITDA conversion to be between 92% and 95% for the full year 2022. I’ll now turn it back to Brad for concluding comments.

Thank you, Blaine. Before opening the call to questions, I note that following a record 2021, we remain on track to exceed those metrics in 2022 as we continue to deliver on our strategic objectives in a challenging supply chain inflationary environment. In terms of core revenue growth, we believe that our leading and entrenched market positions across our three life-saving product categories, Body Armor, Duty Gear, and EOD, continue to provide compelling global growth opportunities. Complementing our focus on accelerating growth organically is our commitment to continuously improving gross margin, gross and adjusted EBITDA margins. We seek to achieve cost structure optimization to drive operating leverage and expect there is room to achieve further margin expansion going forward. Finally, we believe our strong acquisition track record and active and robust pipeline focused on both 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. We’re extremely optimistic about our long-term prospects underpinned by this robust pipeline and the strong macro tailwinds driving demand and visibility for Cadre’s mission-critical products both domestically and internationally. With that, operator, please open up the lines for Q&A.

Our first question will come from Daniel Imbro with Stephens. Please go ahead.

Blaine, I want to start on maybe the revenue outlook or Brad. I think in the release you guys called out Q1; we were lapping a strong consumer demand from last year, some strong crowd control. Just curious, when do those comparisons begin to normalize through this year? And then related to the revenue outlook, you mentioned supply chain is improving, and you’re expecting that to improve in the back half I guess, are you already seeing that happen? Are you already hearing that supply throughput from your suppliers improving? Just trying to understand what underpins maybe that improvement you’re assuming in the back half.

Sure. So I guess on the first question, the comparison becomes easier in the back half of this year. So if you kind of look at the first half of last year and second half, as we get into the back half, not only will the comparisons get easier, but the results will look more like the first half of last year. So it’s kind of a combination. It’s not just a comparison issue. It’s really the mix of the business that drives that margin around. And you have to remember, when we think about last year in the first half, consumer demand on the duty gear side, along with the large federal shipment, we were still supplying law enforcement on the crowd control side through the first half as well. As we look forward, there are a couple of things that we expect to happen. One is we do have some larger duty orders that will ship in the back half, which will lift it, as well as EOD being stronger in the back half. So, Daniel, that’s one of the businesses or products that has more visibility than is typical in our business when it comes to the run rate. So we’re still feeling very good about the outlook for this year as stated in our guidance. As we mentioned earlier, the results in Q1 and the first half of Q2 are consistent with what we expected.

Got it. And then that’s helpful. I want to shift over to the Cyalume acquisition. It seems like a new product category for you guys. So maybe strategically, Brad, can you just discuss what the strategic synergies are? What do you bring to the table to accelerate their growth? What does that asset bring to you guys to help the existing Cadre business? And then I have a quick financial follow-up after that.

I think that's a great question. So there’s a couple of things. One, as we’ve talked about a lot in the past, our operating model that we’ve implemented through the company, and we’ll continue to refine it and implement it broader is something that we feel like any company, no matter what the products are, we bring that to the table and a lot of backgrounds are in that area. So what that brings is operational excellence, not only from a manufacturing perspective but also within the transactional environment within any of these companies. So that’s the first thing that we’ve seen. The second synergy that we feel will be a synergy for Cyalume but also potentially for our Safari Land company is around the commercial or the front end of the business. Their customer base is heavily slanted to the military side of things. As you know, our EOD business and our Holster business are also geared towards holsters, and we feel like there’s an opportunity for us to continue to leverage those relationships across the board, especially those accounts where they’re not buying Cyalume products and where they’re not buying the Cadre brand of products. So those are the biggest two opportunities that we see within the company as we continue to dig and move forward.

That’s great. That’s helpful. And then just a financial one, Blaine. On the revenue guidance, I think you took up the guidance about $10 million, but I hear you right, the Cyalume should add about $25 million of revenue this year. So I guess, if that is right, what softened in the core business from a few months ago that the full year guide is only going up 10%, if Cyalume is adding $25 million?

Yes, thanks, Dan. So the first part is, it is a very recent acquisition, so we want to have a level of caution as we get more comfortable with the business and the outlook. In addition, as we mentioned in the back half, we do expect some larger orders. So we’re just being a little cautious on that outlook. I think as we get through Q2, we’ll reevaluate our position, kind of how those orders look and tighten our guidance from there.

Our next question will come from Jeff Van Sinderen with B. Riley.

I wanted to revisit the supply chain situation and the inflationary cost pressures. Can you share your current perspective on where the slowdowns are occurring? I believe you mentioned issues related to electronics or chips. Where do you see potential risks in the supply chain moving forward? I understand it's challenging to predict, but any further insights would be appreciated. Additionally, considering the inflationary environment for the remainder of the year, do you anticipate needing to raise prices in specific areas? What are your thoughts on that? Also, is there anything pertinent regarding gross margins related to this?

Yes, on the supply chain side of things, the two areas we’re seeing slowness are in electronics. And keep in mind, it’s not a large percentage of our business when you look at electronics; it does relate to our bond suit side of things because of the electronics built into the helmets. The next biggest issue overall is our comp side of the business. So those are two areas that, like everyone else in the marketplace, need electronics and chips. Our teams continue to fight every day to make sure that we’re part of that and getting the supply delivered. At this point, on the more important side of the business, which is EOD, we haven’t seen any major delays as we move forward, and we feel like our team has a good handle on the supply chain there. Now, as we look outwards, an area that we continue to see potential issues in the supply chain has been on some raw materials, especially in the armor side of the business. We’re fortunate enough to say that so far, it’s not shutting any of our product lines down. We haven’t had any major issues; we just have to stay on top of it and monitor it and work closely with our partners. Luckily, we have some very good armor raw material partners that we’ve worked with for many years, and those relationships are extremely strong, and we’re very important to their business. So that’s what we see as an outlook so far.

Okay, good to hear. I wanted to revisit the sensor program you mentioned before. Do you have any updates on the explosive sensors for the military?

Yes. So on the sensor project, I would say, we’re continuing the R&D efforts with U.S. Special Forces. So that project continues. We are in the second phase of that project overall. As we reported last time, we’ve seen some delays in the project from the U.S. government side of things. At this point, we’re just continuing to test the product with the customer base and getting feedback on it. Another good sign on that project is we’ve seen additional demand for prototypes from Walter Reed, which I think we mentioned at one point in time also. There was a request for 30-plus sensors for them so that they can evaluate and look at those as well. So we continue to have good interest in this area and continue to fare well in the testing process as we go forward, and we’ll continue to stay focused on it as it progresses with the U.S. Special Forces.

Our next question will come from Bert Subin from Stifel.

Brad, just had a clarification question on your first question about the guidance. You won’t be adding the full $25 million, right? You’ll add some pro-rated amount, which I think comes out to like 16%. So if we’re thinking about the change in guidance relative to the first quarter, that would just be sort of like $6 million lower at the midpoint. Is that math approximately right?

Correct. The $25 million is on a full-year basis, and we obviously didn’t just close. So I think you got it.

Okay. All right. And then, Brad, as for my follow-up, you mentioned the police shortage. It’s sort of a weird dilemma because police budgets are getting funded, but there are issues getting police officers to either stay on the force or join the force. Do you have any visibility into what’s going on there? Is there any commentary you can provide about what you’re seeing in terms of the police shortage, whether it’s getting better or worse?

There isn't any objective data available on this issue. There isn't a comprehensive database in the U.S. that tracks headcount details by agency, including open positions, hiring practices, and fill rates. We have explored various sources for this information, which include discussions with our third-party distributors in the U.S., insights from our company-owned distributors along the East Coast, and feedback from our sales team interacting with end customers. The feedback we receive indicates a mixed situation across the country. Some agencies, whether small, medium, or large, are managing well, while others are finding the hiring process challenging. Some agencies have implemented measures like signing bonuses to attract talent, and some are even relocating talent from one state to another, which does not contribute to an overall increase in the U.S. headcount. In addition to this, our order backlog remains a point of interest. Specifically regarding the duty gear and Armor segments in the U.S., we still see encouraging trends, suggesting that they are making progress, but we lack concrete visibility on how many positions are unfilled.

Can you provide any additional details? I understand you may not want to disclose too much, but it appears that you are pricing above inflation, which suggests pricing has been favorable. However, it seems that volumes may be slightly affected due to the shortage. Is that correct?

Yes, if you’re talking about the number of openings versus what we’re selling, I think that’s accurate, Bert, that if we flipped the switch today and said we’re going to get fully hired in the next 6 months, that would drive volume. But it’s not impairing our ability to fulfill current volume, if that makes sense. Pricing has been good. As we kind of mentioned, we have that target of 1% price above material inflation. Very happy with the Q1 results. It’s something we’re obviously watching closely as the year goes on, right? We’re all getting – we’re all seeing even as consumers sitting across the board, and we’ll continue to work to stay ahead of that as we go forward.

Got it. And I appreciate the questions just one final one. Are you seeing any sort of improvement, let’s say, in European sales as a result of what’s going on with Russia and Ukraine? I know 90 days ago, you sort of mentioned that it was a little early to tell. It could be an opportunity perhaps on holsters and Body Armor. Just curious if anything has changed there.

Yes, thanks, Bert. Nothing significant. We have done some orders in countries in Eastern Europe, but nothing significant that moves the needle for the whole company. Really, what we’ve seen, primarily armor fulfillment for destined for Ukraine and the countries around Ukraine has really focused on the low-cost providers, right? That’s just not where we play, and we can’t compete successfully with those low-cost providers. Some of the reasons we’ve talked about are the intentional decision not to play in the U.S. military space. Our product is light, comfortable, semi-custom fitted for individuals, and that’s not what they’re looking for. They’re looking for as much as they can get now. Now what we do believe, and we’ve seen inquiries, is a little bit longer term, and that’s dealing with the aftermath. So as the conflict de-escalates, you’ve seen some of the stories; there are unexploded munitions and mines that have to be dismantled, and we have been working closely with the governments there in Eastern Europe on EOD solutions to solve that. And reminding you that the EOD product is a leading supplier in that market. We believe we’re well positioned to capitalize when the demand comes.

Our next question will come from Matt Koranda with ROTH Capital.

Maybe just spinning back to the guidance and sort of the core trim that you did there, it sounds like about $6 million to $7 million. Just wanted to clarify; it sounded like you were talking about some larger orders in the second half that may be a bit more in question whether they slip out, and that was the rationale for the trend. But could you just provide a little more commentary around the product category that that was in? Would those slip due to customer delays and just program challenges? Or is it more related to supply chain?

Yes. So it’s specifically on the duty gear side, and I want to be clear, it’s a slip, not a miss. The order was expected to be kind of middle of the year; it’s moved out a little bit. It’s a question of kind of whether we get the order in time to get it through this year or it falls into early next year. In addition, we’ve just closed on style, and we want to be cautious in the outlook. We have to do some evaluations; kind of look at the business closely and get some comfort around it. And that’s part of the reason for our more cautious approach at this point.

Very helpful. And then I wanted to also address the longer-term sales opportunity you can see, and it was helpful to hear the explanation around EOD being potentially an opportunity around the Ukraine-Russia conflict. Curious if you guys have any way of quantifying the potential opportunity there. And then timing-wise, I know it’s pretty uncertain just given that’s out of your control. But are we talking something that’s going to be more impactful if things settle down in the near term here to 2023? Or is it even further out potentially into ’24?

I think it’s really how the conflict continues to progress, right? Whether it moves to that phase that Blaine mentioned, which is more about the mining side of things, and we do have the mining suits that will drive demand for it or full bomb suits overall. I think it’s really hard for us to tell around that timing side of things. What we can share, from a Ukraine perspective, they are a current customer today regarding our EOD suits, and we have been approached for them so far, asking questions and dialoguing with us about EOD. So that timing is not clear at this point, but likely it would be a couple of phases as things progress.

Okay, great. Just last one for me. We haven’t talked a lot about RADAR. Just curious if maybe you guys would be open to breaking out sort of the revenue contribution from RADAR in the first quarter. And then now that you’ve had it as part of the operations for the better part of the last four months, where are you seeing opportunities for commercial synergies, cost synergies? Maybe just speak to some of the opportunities you’re seeing on a go-forward basis there.

Yes. What we’ve seen so far in terms of the opportunities with RADAR is on supply chain and then also in localization. And what we mean by localization are Safari Land branded holsters that are manufactured in Mexico and the U.S. that we sell predominantly to the international market, giving us the ability to have a local footprint in Italy in Europe so that we can manufacture there. So all of our focus so far to date has been in that process of evaluating the supply chains, looking for those leverage points. We’ve had a team working on the initial higher-volume holsters and accessories that fall into the category I just talked about, working through that manufacturing and transition process with the Italian facility. We have produced a handful of holsters and accessories as initial prototypes and runoffs. We are a company that’s extremely careful about quality as we transition things like that. We have to ensure that we get the Italian team up to speed with the differences in the Safari Land branded products and the technology versus the RADAR side of things. So those are the big opportunities. Those are areas that we’re focused on most – the next one is around international tenders; now we have two brands to answer tenders with, the RADAR brand and the Safari Land brand. We’ve made sure as we answer those tenders, we’re positioning the pricing in the appropriate fashion so that if we win those, we’re happy if we win with the RADAR brand, and we’re happy if we win with the Safari Land brand.

Our next question will come from Mark Smith with Lake Street Capital Markets.

Just want to circle back to the guidance just a little bit, but look at the EBITDA. Can you guys talk at all about EBITDA contribution from the Cyalume acquisition?

Yes. So Cyalume, on a full year basis, will be accretive to overall EBITDA rate, and you kind of have the revenue. I think you can kind of back into it there. I think a note of caution as we mentioned, we have to do a full post-close evaluation of the business, and that includes looking at it from a restore standpoint, as well as looking at where we spend our time with them. We’re kind of holding out if you’re familiar with 80/20. One of the goals is really to evaluate the business differently and understand where those pools of profitability and effort are and make sure you’re aligning our resources appropriately. So yes, that’s one thing we do with all businesses routinely just as we enter markets, evaluate how we’re doing and if it’s a worthwhile long-term play.

And I would just add to that. The other thing we haven’t mentioned, we talked about some of the synergistic opportunities with Cyalume. One of the things we haven’t addressed is we feel like through the diligence process, it is a fairly lean organization overall, especially on the front-end selling part of the organization. As we went through that diligence process, we’ve evaluated, and we’ll begin to work through that now, which is where we’re going to have to invest in, especially on the front-end side of things so that we can continue to work through growing that business.

Okay. And then just an odd modeling one. Just stock-based compensation was up a lot. Can you just walk through any puts and takes there and your outlook for the remainder of the year on stock-based compensation?

Yes. So we think for the full year, stock-based compensation would be around $33 million - right around $34 million. That includes the LTIP portion, which is a cash award that the company decided to settle in stock here in Q1 that was pre-IPO. The out years drop dramatically; a good portion of the stock compensation in Q1 was related to the Phantom plan that’s been in our S-1 and our K. Going forward, maybe just to answer, Mark, I mean, for 2023, it’s early at this point, but we expect it to drop to more like $10 million and then continue to decline as it falls off on the Phantom Plan.

Perfect. And then last one for me, just a big-picture question. I’m curious, if we see countries move into NATO, does that make any impact on selling opportunities? For instance, if we look at Finland, is there any difference today in selling opportunity into Finland versus if it was an official NATO member?

Yes, we don’t have a clear answer yet. There is potential there. For instance, if Finland joins, it will depend on the product categories. When we look at our global share of EOD, particularly in developed countries, we’ve discussed our opportunities, especially for holsters in Europe. We will have to see how things unfold with their NATO status. Our goal is to continue to engage with those accounts and the customer base where we currently lack share in these key product categories.

Thanks. And that will conclude today’s question-and-answer session. I would now like to turn the call back over to 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.

And that will conclude today’s conference. Thank you for your participation, and you may now disconnect.