Earnings Call Transcript - CDRE Q3 2023

Operator, Operator

Good afternoon, and welcome to Cadre Holdings Third Quarter Ended September 30, 2023 Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Matt Berkowitz of the IGB Group for introductions and the reading of the Safe Harbor statement. Please go ahead, sir.

Matt Berkowitz, IGB Group

Thank you, and welcome to Cadre Holdings third quarter 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 and the industries and markets in which we operate. More information on potential factors that could affect Cadre's financial results is included from time to time in Cadre's public reports filed with the Securities and Exchange Commission. Please 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 November 22, 2023 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 would like to turn the call over to Cadre's Chairman and CEO, Warren Kanders.

Warren Kanders, Chairman and CEO

Good afternoon, and thank you for joining Cadre's earnings call to discuss our results for the third quarter of 2023. I am joined today by our President, Brad Williams, and our Chief Financial Officer, Blaine Browers. Coming off of the third quarter of 2023, I continue to be very proud of the focus and execution our management team has demonstrated in achieving record results and adjusted EBITDA and adjusted EBITDA margins for the second consecutive quarter. Brad, Blaine, and the team's implementation of the Cadre operating model is driving these results. As I said last quarter, this execution creates operating leverage by using superior operating tools and business processes to produce profitability improvements above our natural growth rate. We've continued rolling the model out across our entire portfolio, and we are gaining momentum as we do. Brad and Blaine will go into more detail later, but the results here speak for themselves. For the third quarter, while revenues were up 12.1%, gross profit increased 22.7%. We achieved record adjusted EBITDA margins of 19%, record quarterly adjusted EBITDA of $23.7 million, adjusted EBITDA grew 14.4%, and fully diluted net income per share for the quarter increased 123%. Looking at the 9 month year-to-date results underscores the performance outside the lenses of a single quarter. Revenues up 7.1%, gross profit up 18.7%, adjusted EBITDA up 22.1%, and adjusted EBITDA margin up to 18.2% from 16%. We as a team are exceptionally proud of how we have been able to deliver for our shareholders. Before moving to M&A, I would like to comment again on the macros driving our business. We are in an environment where geopolitical conditions seem to get worse by the day, and the level of internal conflict inside most countries is on the rise. Domestically, the levels of danger facing first responders have not abated to any appreciable degree, if at all. Our role is to provide mission critical life-saving equipment to the professionals around the world who work to keep us safe. We have the distribution and manufacturing capabilities to cover a substantial part of the world, and we see no sign that the secular trends driving demand for our products are going anywhere but up. As our business has grown, we have experienced increasing capacity requirements and have reacted accordingly. Our ability to do this is a testament to our management team, and our many dedicated employees, suppliers, distribution partners, and other stakeholders. It also speaks to the quality of our products, the strength of our brands, superior execution of deliveries, and the trust our customers and end-users place in Cadre’s equipment. Having said that, to be clear, the ongoing conflicts in Ukraine and the Middle East have not impacted our businesses in any material way. As we have mentioned previously, we do not expect these events eventually to abate; we do expect, these events will eventually abate, and there may be an opportunity for Cadre to play a larger role with a number of our products, most notably through our various EOD offerings. Lastly, an update on our M&A program. I am pleased to report that we signed a letter of intent approximately three weeks ago with a business that we have been in discussions with for a number of months. The business in its most recent fiscal year ended during the summer achieved approximately $19 million of revenues with gross margins in excess of 50% and EBITDA margins in excess of 25%. While we cannot be more specific due to confidentiality obligations, the business is in a category that we have targeted as a priority for a tuck-in type deal. Confirmatory due diligence is underway, and we hope to speak more about this soon. More broadly, we continue to work hard on our M&A pipeline, and we believe we are starting to get more traction. As you are all aware, the credit markets remain very weak. They started deteriorating in mid-2022, and this time last year, bankers were predicting conditions would improve in the first or second quarters of 2023; that did not happen, and the credit markets have only gotten worse. In the context of our company, we have been patient and disciplined in our approach to M&A while generating substantial free cash flow to deliver and fortify our balance sheet with net debt standing at less than one time net debt to adjusted EBITDA at the end of the quarter. As the credit conditions and an anaemic M&A market have persisted for such a long time, and not shown signs of improving, many different types, including financial sponsors and founders have decided to engage in discussions to sell, and valuations are adjusting to reflect these realities. In addition to the current letter of intent we have executed, we are seeing more actionable opportunities, and our balance sheet and financial performance position as well to capitalize on these opportunities as they present themselves. Lastly, we are in constant contact with our banks, and they have indicated their support for our approach, given the way in which we have delivered on our commitments to them over the years. In conclusion, I am proud of our results for this quarter and for the first nine months of the year. We are happy to be able to increase our earnings guidance for the year, again, based on our performance and as the remainder of the year comes into focus. As I have said before, our businesses are resilient, our operating model is showing results, and we are excited about how we think this year will play out and how things are setting up for 2024. With that, thank you for being with us today. And I will turn the call over to Brad. Brad, over to you.

Brad Williams, President

Thank you, Warren. On today's call, Blaine and I will provide a Q3 update and business overview, including recent trends and financial performance followed by a Q&A session. Before I dive into our third quarter results, I'd like to take a moment to expand on Warren's comments about our operating model and success continuing to fulfill Cadre’s mission of 'together we save lives.' We're excited about our progress advancing the Cadre operating model as we engage the organization in pursuit of the idea of better every day. Our team members feel an extraordinary sense of purpose, supporting our special mission, which lives not just in the hearts and minds of our associates, but extends to our channel partners and end customers. As many of you know, we have what we call the Safe Club, which was set up many years ago to recognize first responders that survived life-threatening situations using or wearing our products. This club has grown to 2,177 saves. We’re averaging about 34 saves per year. So if you think about that for a minute, that equates to approximately three men or women that get to come home and live their lives with their families and friends every day. We're proud of who we are and what we do and look forward to continuing to provide best-in-class equipment that protects the law enforcement, military, and security professionals who keep us all safe. Turning now to our third quarter, we will begin on Slide 5. During the quarter, we continued to capitalize on Cadre and Trent's positions in law enforcement, first responders and military markets as the company increased quarterly revenue, net income, and gross margin sequentially, and year-over-year. Our outstanding results reflect the team's continued strategic execution, combined with strong sustained demand for our mission-critical safety and survivability equipment. We value the strong relationships we have with customers, and we continue to have success in the third quarter managing our portfolio of premium products in the market. Combined with favorable Q3 product mix, as well as productivity gains driven by the continued implementation of our operating model, we achieved significant margin expansion. Third quarter adjusted EBITDA margin of 19% was our highest since going public, and gross margins increased by 370 basis points. Q3 product mix reflected favorable armor product mix in the quarter. Looking ahead, we maintained our strong orders backlog which was $126.2 million as of September 30, an $8.3 million increase since the start of the year. We remain focused on executing M&A and believe our funnel is still healthy with opportunities that we continue to actively evaluate. As Warren mentioned, we have recently signed an LOI to acquire a new business and expect to be able to share more soon. Based on our low CapEx model, we continue to generate strong free cash flow that enables us to take advantage of attractive growth opportunities while returning capital to shareholders. Last month, we declared our ninth consecutive quarterly dividend of $0.08. On Slide 6, we highlight the macro tailwinds supporting a sustainable growth opportunity for Cadre for the foreseeable future. We continue to see a broad push to privatize public safety both in the US and abroad, and believe Cadre is ideally positioned to capitalize on these secular tailwinds over the medium and long-term. Turning to Slide 7, I'll take a moment to zoom in on current market trends and their impacts on our business. We have not seen any signs that police hiring is becoming easier, but healthy police budgets continue to drive increased spending per officer. Cadre’s mission-critical protective equipment is consistently prioritized when departments are determining officer needs, no matter the economic environment. Police protection expenditures have continued to trend upward, even during past financial and industrial recessions. Moving to the next bullet, in terms of the current geopolitical landscape and consequences for our core businesses, we continue to engage with partners and customers globally to meet orders that fit our model. With that said, we expect there could be movement that creates demand for our products moving forward as the war in Ukraine shifts to its next phase. For example, we anticipate active discussions we've been having about providing EOD tools and equipment could lead to opportunities down the road. Based on the situation on the ground, it will take decades to clear the vast amount of unexploded ordnance in Ukraine, which expands the cycle of opportunity on the EOD side for Cadre, but likely will be focused on a harm mix of the mine protective wear rather than EOD suits. Turning to supply chain and labor trends, the environment has been stable in recent months. Our team continues to do an outstanding job at pro-actively addressing supply chain issues, and the extended lead times that we saw last year appear to be mostly behind us. We continue to be pleased with our progress attracting or retaining labor to meet our needs. On the consumer side, we saw 5% growth in our duty gear sales driven by our focus on new products in the space. One example that has been very successful is the launch of the INCOG X holster, which we launched in partnership with Haley Strategic. In fact, the INCOG X holster won Guns and Ammo holster of the year. Cadre’s commitment to innovation is a key differentiator and allows us to maintain our premium position in our core law enforcement, first responders, and military markets. Following the introduction of our HyperX tactical armor platform, XpertFit 3D body sizing app, and SafariVault line of holsters, all launched in March, we continue to hear positive feedback from customers. Of note, we've experienced a 47% increase in tactical soft armor in the first three quarters of 2023 compared to the same period of last year, with growth directly related and tied to HyperX. I'll turn the call over to our CFO, Blaine Browers.

Blaine Browers, CFO

Thanks, Brad. I'll begin my remarks by discussing our M&A strategy and the general acquisition environment. Slide 8 summarizes the key criteria that drive Cadre’s M&A process with potential transactions within three categories; those that will expand our suite of products, those that will enable us to enter new markets, and those that will grow our geographic footprint. We target businesses with high margins leading market positions and strong recurring cash flows and revenues. As per Warren’s earlier remarks, we cannot be more specific about the recent LOI we signed due to confidentiality obligations. But I can share that this business aligns well within our platform and its profile is very much consistent with our key criteria. Regarding the broader M&A market, it continues to be a tough financing market as lenders have significantly tightened their lending standards. As Bloomberg recently reported, the average multiple on new LBO deals is down 1.4 turns from a year ago. Reflecting this new environment, it shows us that the gap between buyers and sellers appears to be closing. The next few slides detail the third quarter financial performance. As you can see, in Slide 9, we increased net sales, gross margin, net income, adjusted EBITDA, and adjusted EBITDA margin in the third quarter, both on a sequential and year-over-year basis. The increase in net sales reflects our significant orders backlog and was mainly driven by higher domestic demand for armor products and large orders for our crowd control products. This was partially offset by decreased efficiency demand for hard goods. Third quarter net income was $11.1 million, or $0.29 per share, grew nearly 125% compared to last year’s Q3. As we continue to implement our operating model and manage the positioning of our portfolio of premium products during the third quarter, we achieved significant margin expansion. For the second consecutive quarter, our adjusted EBITDA margin of 19% was our highest since going public, and gross margins increased 370 basis points year-over-year. Illustrated on Slide 10, was net sales and adjusted EBITDA growth year-over-year. As you can see, driven by increased revenue and improved gross profit margin, Cadre’s nine-month 2023 adjusted EBITDA was up by 2% versus last year. Based on our third quarter performance and management's outlook for the remainder of the year, we have raised the midpoint of our full-year adjusted EBITDA guidance range and increased the midpoint of our 2023 net sales guidance. I'll discuss our new guidance in a moment. On Slide 11, we present our capital structure as of September 30. Our net debt was $74 million, a further reduction of 15% since the end of Q2; this gives us net leverage of 0.8 times. At these levels, we maintain significant financial flexibility to grow both organically and inorganically through acquisitions. We provided updated 2023 guidance on Slide 15; we've tightened our full-year net sales range, raising the midpoint. We do expect 2023 net sales to be between $477 million to $481 million. Our upwardly revised adjusted EBITDA guidance range is now between $82 million and $85 million, implying 10% annual growth on adjusted EBITDA versus our initial forecast of 4% at the beginning of the year. Additionally, whereas the midpoints of our original guidance implied an adjusted EBITDA margin was up 16.2%, our success in the year-to-date has significantly increased our expectations for the full-year margins. Based on the updated midpoints, adjusted EBITDA margins rise to 17.4%. While the prior year Q4 was our largest revenue quarter of the year, we now expect that Q3 will be the high watermark for revenue. One of the large international orders that we expected to ship in Q4 was actually shipped ahead of time in Q3, changing this expectation. We do expect armor volume to be down sequentially and the mix to return to normal. Based on these developments along with the mix in EOD, which is shifting to less profitable products, we expect margins to be lower sequentially. We'd also like to reiterate that for most of our businesses, we only have 45 to 60 days of backlog visibility at any given time. I'll now turn it over to Brad for concluding comments.

Brad Williams, President

Thank you, Blaine. In summary, we're highly pleased with our strategic execution year-to-date, which is reflected in our strong third quarter and nine-month financial results. Once again, we generated record EBITDA margins and quarterly adjusted EBITDA as we continue to implement our operating model focused on attaining and sustaining exceptional results. We're pleased to raise the midpoint for both our full year 2023 adjusted EBITDA and revenue outlook. M&A continues to be a focus, and we recently signed a letter of intent with the business that meets our key criteria. We expect to capitalize on additional attractive growth opportunities and remain confident that we will see more of these opportunities in the months ahead. Backed by macro tailwinds related to increasing public safety budgets and favorable industry dynamics, we believe Cadre is ideally positioned to further grow our leading platform of premium safety brands moving forward. With that, operator, please open up the lines for Q&A.

Operator, Operator

Your first question comes from Daniel Imbro with Stephens. You may proceed.

Daniel Imbro, Analyst

Hey, good evening, everybody. Thanks for taking our questions. Maybe one on the international markets side. I think it was encouraging to hear you guys won a contract there. Warren, I think your comments kind of signaled that it wasn't the Middle East that hasn't really materialized into new business yet. So, one, can you comment on what markets you won the international contract? And then two, given what's going on globally, how long would it be for you to expect that evolving conflict to materialize into some safety orders for you guys products?

Blaine Browers, CFO

Yes, I can address the first part, and Warren can add in. When I mentioned the large international contract in the third quarter that was initially planned for the fourth quarter, it was actually for North America, specifically outside of the US, regarding the gun control products. We have received some orders for Ukraine, but as we've mentioned, it hasn't been significant so far. The focus will really be on the demining aspect for explosive ordnance disposal. Just to clarify, it won't be for the suits; it will be specifically related to demining, which is a less protective version of the EOD suit. Does that make sense, Daniel?

Daniel Imbro, Analyst

Could you quantify maybe the contract that was pulled from Q4 into Q3 at all, Blaine?

Blaine Browers, CFO

We can't disclose it due to sensitivity. But it was significant for the business, I think as you kind of go through and look at the change in consensus, that'll give you a feel for the size and scale of it.

Daniel Imbro, Analyst

Got it. And then, maybe taking a step back here. More cash continues to build on the balance sheet even for this pending deal, but let's call it a few million bucks of EBITDA? You still should have excess cash assuming it on a normal mode. What do you view as the strategic or best uses of that cash? Are there CapEx projects you can pull forward? You guys don't have a ton of that. Is it a special dividend? So how do you foresee deploying that capital back to shareholders in the absence of deals?

Blaine Browers, CFO

Well, the good news is, we don't have an absence of deal; something we're working on as we speak. In fact, one we thought had gone away; I think the last time we spoke, we talked about skills that we had bid on that had been withdrawn; one of those is back. So your pipeline right now is quite full. And as the guys said before, the multiples are now reflective of the cost of capital and the overall environment. So we couldn't be more excited. So our objective is to use to reinvest our cash in transactions. The company that we're buying that we have an ROI on, similar to our existing businesses; and that one also has low CapEx requirements and has margins. And I think from the last couple of transactions we've done, we are trying to target EBITDA margins in excess of 20%.

Daniel Imbro, Analyst

Got it. And then last one for me, Brad. You mentioned productivity gains and some self-help on 3Q margin. Other than the timing of that contract, anything one-time in that leverage or are you unlocking more savings? Maybe as you continue to scale the business and just turn over more stones on the productivity side? Thanks.

Brad Williams, President

No, there is nothing significant that is one-time, Daniel. When we look at productivity, it reflects our approach of making small improvements each day. As we assess things sequentially, we use this as a reliable measure to show our progress, not just compared to last year, but also that we're performing better this quarter than last quarter. This is something we will keep building on. We've seen strong gains from the team on both a year-over-year and sequential basis, and we are very pleased with the progress everyone's making globally regarding the adoption of the operating model and daily management, all of which is helping to advance the businesses.

Daniel Imbro, Analyst

Understood. Appreciate the color and best of luck.

Brad Williams, President

Thanks, Daniel.

Operator, Operator

The next question comes from the line of Jeff Van Sinderen with B. Riley & Co. Your line is open.

Jeff Van Sinderen, Analyst

Hi, everyone. So just wanted to go back to the demining suit, I guess you would call it the less protective version of the EOD suit. Can you just remind us of the dollar price point there versus the full suit?

Blaine Browers, CFO

When considering a full bomb suit, the cost is typically over $30,000. The demining suit varies in price, with a mid-range option known as a tack-six or tactical suit. The demining suit provides protection above standard body armor but falls short of tack-six protection, generally costing between $1,000 and $5,000. The market for explosive ordnance disposal (EOD) is limited, with around 20,000 operators worldwide, which restricts sales but reinforces our reputation as the trusted product among these users. Demining personnel require less training compared to EOD operators and face different threat levels, justifying the variation in protection. However, demining represents a much larger market. Our teams are actively collaborating with partners, particularly in Ukraine and various embassies, to ensure we have a range of products ready to protect those working to restore safety.

Warren Kanders, Chairman and CEO

The timing for that depends on the continuation of hostilities, and the same efforts will also be necessary in Gaza.

Jeff Van Sinderen, Analyst

That was going to be my next question: have you had any inquiries yet about what's happening in the Middle East?

Warren Kanders, Chairman and CEO

We receive inquiries about that; Israel is a customer and we're doing what we can. However, much of the activity over there right now pertains to significant missions related to Iron Dome and the bombs being used.

Jeff Van Sinderen, Analyst

Okay, that's helpful. I would like to follow up with a quick question about the blast sensor product. Can you provide an update on its status?

Brad Williams, President

Jeff, you talked about blast sensors?

Jeff Van Sinderen, Analyst

Yes. Yes, the sensor.

Brad Williams, President

Okay. I just want to make sure. So on the blast sensor side of things, we expect to receive feedback on the current phase of the project in the first quarter of next year. We're still in that wait-and-see phase regarding any changes in requirements as we proceed. But so far, no news is good news.

Jeff Van Sinderen, Analyst

Okay, great. Thanks for taking my questions. I'll take the rest offline.

Brad Williams, President

Okay. Thank you, Jeff. We’ll talk to you in a little bit.

Operator, Operator

The next question comes from Shiela with Jefferies. Your line is open.

Unidentified Analyst, Analyst

Hi, guys. This is Sam on here for Sheila. Congrats on the quarter. Now I just want to ask quickly, another strong quarter of gross margins and EBITDA margins, continued sequential performance is strong. You mentioned EOD and armor mix should continue to normalize into Q4. Can you just help us frame some of these other moving pieces within the implied EBITDA guide that steps down a few points sequentially here in Q4?

Warren Kanders, Chairman and CEO

The two main factors are the armor mix and some larger armor orders we anticipate in Q4. We expect that this will lead to lower margins compared to Q3, moving us toward a normalization. On the EOD side, we are shifting from EOD suits to focusing more on other product lines like tools and robots, which typically carry a lower margin in that quarter. These are the primary drivers, along with some volume leverage given the lower top line, which is reflected in the guidance.

Unidentified Analyst, Analyst

Understood. That's useful information. Thank you. To take a step back and discuss the overall performance, we experienced strong 12% year-over-year growth and a 3% increase sequentially, despite typically seeing a seasonal decline in Q3. Can you break down the factors contributing to this growth? You mentioned a large international order, but were there any impacts from backlog timing, pricing, or increased volume that contributed to the results in Q3?

Blaine Browers, CFO

Yes, the growth is primarily due to volume. While price does play a role, it is not a major factor in this case. If we consider the key drivers, apart from the large international order I mentioned relating to crowd control, there isn’t anything else that stands out significantly. The armor team has experienced notable volume, and Brad touched on the HyperX, which is a soft tactical product. They have also continued to supply hard armor products, largely influenced by the school incident last year, which is resulting in orders for shields. Those are the main drivers. Outside of that, nothing else is particularly notable, but those figures are substantial. The large international order represents a significant number for that sector, and it clearly affected our results for the quarter. You can see the implications of the order, even though we can’t disclose its specific size, reflected in the updated guidance and notable changes for Q3 and Q4.

Unidentified Analyst, Analyst

Great. Really helpful. Thank you.

Operator, Operator

Your next question comes from the line of Matt with ROTH MKM. Your line is open.

Unidentified Analyst, Analyst

Good evening, everyone. We discussed the margin swing for the fourth quarter, but I would like to understand better the factors that could influence the revenue guidance for that quarter, particularly regarding the $10 million range. Can you elaborate on what might drive us towards either the high end or the low end of that guidance? Additionally, are there any significant orders that we should consider that might be delayed or expedited in relation to this?

Blaine Browers, CFO

Yes, the fluctuations are really implied in that range. As we approach the end of the year, timing becomes critical, particularly with the holidays. Any international considerations that are pushed into mid-December or earlier carry some risks. As we get closer to year-end, we tend to be a bit more cautious about those orders. We feel confident about the range and the guidance, but there are a couple of significant armor orders that are crucial. This visibility particularly impacts armor and duty gear, which have shorter visibility, while the Department of Defense usually has a broader view. When discussing armor or duty gear, it’s about those incoming orders. On the DoD side, changes in customer delivery dates may affect things, even if we have a firm order, or it could relate to waiting on pre-payments or full payments. These are the main factors that influence the range as we enter the fourth quarter.

Brad Williams, President

And I would say overall, Matt, we’ve factored in when we built that revised range overall, for any of those kind of potential situations that Blaine was just referencing.

Blaine Browers, CFO

And we kind of think about that too, Matt. That's not a loss. We don't think about that as losing; that would just be a push.

Unidentified Analyst, Analyst

Got you. Okay, that’s helpful, guys. And then just on the acquisition. I know you probably don't want to say too much on it, but just curious about the language you used; was that it's similar to the existing business? Does that mean that it could be an existing product or maybe just any flavor for sort of where you might be headed there?

Warren Kanders, Chairman and CEO

Matt, we're not going to go there. It's a very comfortable business, we know the people, and we're excited about the opportunity. We need to go through all the steps to acquire businesses, including working through the contracts and due diligence. However, we are encouraged by this opportunity, and I believe when we can discuss it in detail, you'll agree that it's a strong deal.

Unidentified Analyst, Analyst

Okay, great. Had to try there, Warren. Thank you.

Operator, Operator

And the next question comes from Ron Epstein with Bank of America. Your line is open.

Ron Epstein, Analyst

Good evening, everyone. A lot has been discussed, but let me broaden the scope a bit. Warren, when you consider mergers and acquisitions, the definition of security is quite expansive, right? There are areas where you aren't currently active, perhaps more technical sectors like electronics. As we consider possible transactions, how are you viewing adjacent markets and other sectors outside of your current focus?

Warren Kanders, Chairman and CEO

That's a great question. We have an exceptional management team led by Brad and Blaine, who have a background in operating models. Any opportunities we pursue will need to align with the operating models we have developed over the years. We are currently experiencing the benefits of that. The transaction we mentioned earlier is central to everything we do. We're looking at adjacent areas that might involve electronics, where we have some in-house capabilities, particularly with Brad's personal experience in that field, as well as in industrial safety. We are seeking businesses that can take advantage of our operating model and discipline. We have also discussed the margins we aim for in those businesses, specifically looking for opportunities with margins exceeding 20% and minimal capital expenditure required to maintain and grow them. There appear to be more opportunities available now than before; I believe there's going to be increased internal evaluation among larger companies regarding their mix and potential divestitures of non-essential assets. This situation presents favorable conditions for us. Additionally, private equity firms face challenges in raising new funds, even the largest ones, resulting in many firms needing to reassess their holdings and strategies in light of higher interest rates. We're quite optimistic about our position, operations, and careful management of our balance sheet. Blaine focuses daily on both operational efficiency and our financial health. These disciplines will guide us as we pursue acquisitions.

Operator, Operator

Your next question comes from the line of Mark Smith with Lake Street Capital Markets. Your line is open.

Mark Smith, Analyst

Hi, guys, sorry, if I missed this earlier in the call, but can you discuss kind of new products, how those are performing, especially a lot of those that we saw kind of introduced early in calendar 2023?

Brad Williams, President

Hey Mark, this is Brad. So new product-wise, what I talked about little bit earlier, we're really proud of the progress we've made. And I know you've seen some of those HyperX product, XpertFit 3D body sizing, the SafariVault line, and then we have a whole host of consumer holsters that we've launched. Most notably, our INCOG X holster just won Guns and Ammo holster of the year. So we're really, really proud about what we're doing from a new product perspective. When you look at the growth overall, for the consumer side of things, we, in our remarks, showed a 5% increase on duty gear, on the consumer side for us. And then HyperX has reported 40%, 45% growth on the HyperX side of things. So, we love engineers; the world would be a better place with more engineers, quite frankly. And our team is having fun with innovation, and quite frankly, spending a lot of time with customers and just understanding pain points and where we can continue to improve things and make their lives better and continue to uphold our mission around saving lives. So, I'm really proud of the results we're seeing.

Mark Smith, Analyst

Okay. You mentioned that the consumer side of the business is performing well; can you provide any commentary on that? We've observed an increase in demand in October following the events in the Middle East, which has also affected domestic sales for some products. Can you share any insights on the consumer trends in October?

Blaine Browers, CFO

I think October has aligned with our expectations, which have been consistent throughout the year. Our outlook may differ from broader market expectations, primarily due to the success of our new products. When examining the statistics, the consumer markets, especially in this space, have generally been flat to down. However, with our new products, we've managed to expand our market share and continue to grow, and we're seeing this trend carry into the early part of Q4 as well.

Mark Smith, Analyst

Perfect. Thank you.

Operator, Operator

And there are no further questions at this time. Brad Williams, I will turn the call back over to you.

Brad Williams, President

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

Operator, Operator

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