All right, I think we're gonna go ahead and kick off. My name is Bert Subin. I'm a Senior Research Analyst here covering Aerospace and Defense, and today we have the pleasure of hearing from Cadre Holdings. Cadre has been public now going on three years, and has pursued, you know, I guess, a strategy focused on building out a presence across the law enforcement base, across the federal space and into new verticals, both organically and through M&A. Maybe just to kick things off, we have Brad Williams here, President, and Blaine Brower, CFO.
Just to kick things off, Brad, maybe if you just want to give a little bit of an overview of Cadre, you know, what's changed, maybe since you went public, and maybe just a sort of a recap of some of the M&A you've been doing over the last year.
Yeah, absolutely. Thank you guys for taking the time to be with us today. Quick overview, so Cadre Holdings, as Bert said, we've been around since November 2021 as a public company, but we're actually over 55 years old as a private company, specializing in protective equipment for law enforcement, military. And I'll talk about in a little bit what's changed since going public, and one of the things that have changed is diversifying into the general, highly engineered safety product space. So that's, that's who we are. We have leading brands in really three major product categories: EOD, which is explosive ordnance disposal, which are bomb suits. We have high share globally for militaries around the world with that product category. Second category are holsters.
So the majority of law enforcement officers in the U.S. and military carry our holsters, our safety holsters within their jobs and also globally. And then the third largest category is body armor. So that's both hard and soft armor within law enforcement, predominantly around the world in that category. What's changed since we went public? What's changed is really four acquisitions since going public. The macros for us have not changed. When you look at law enforcement over many, many years, budgets and police expenditures, especially for protective equipment, pretty much constant over a long period of time. Financial recession, industrial recession, Defund the Police, which turned into Refund the Police, by the way, and then also COVID. Nothing typically wavers what's going on from a macro spend standpoint in law enforcement. That stayed the same.
Even though headcount is down within law enforcement, it has stabilized, but it has not affected our business overall due to the global nature and diverse product portfolio. Acquisition-wise, we've made four acquisitions. Our first acquisition was after we went public in January of 2022. That was a company called Radar Holster. So that was our strategy to expand our holster share in Europe. It's a company in Italy that's been around for 55+ years also. And so now we have a footprint there to manufacture not just the Radar-branded holsters, but also the Safariland branded holsters that are well known throughout the world. Second acquisition was a company called Cyalume Technologies.
Cyalume is a chemiluminescence company, essentially light sticks, and these aren't your party sticks, these are your light sticks that are highly specified for U.S. military and NATO forces. So they use those in, in their missions and also in, in training. The third acquisition happened in January of this year, a company called ICOR Technology. ICOR is a EOD robotics company, so those are the robots that EOD technicians use. Along with our bomb suits, they also use these robots to work on devices that are out there. And then lastly, the fourth acquisition that we made was a diversification play for us.
So we love law enforcement, military, but we're also looking for something else to continue to build the company out, and so we decided to go in the nuclear space, where we also love the macros there, and we acquired a company called Alpha Safety. And we make products that are highly engineered within the life cycle of the nuclear process within three different end markets.
Very helpful. You mentioned Defund the Police. If we go back in history, you know, sort of four core components of the business, excluding nuclear, you know, body armor, duty gear, EOD, and then just sort of your other products. You know, can you just walk us through how those different segments were impacted by Defund the Police? And maybe, like, what's changed? Because it didn't seem like your organic results were overly impacted. You know, how were you able to pass that through, and is that starting to improve, or is that staying similar?
Yeah, definitely not overly impacted, really not impacted at all when you look at Defund the Police and COVID and what was going on a few years ago. Back to those strong macros that we've always experienced over time, long history in this end market segment. What's changed there is just from an innovation standpoint. I mean, we didn't make it this far with the amount of share that we have in command globally, and also in these three product categories, not being innovative. So we've launched a lot of new products since going public, both in the holster side of things. We've also launched law enforcement holsters. We've launched some consumer holsters, which is a whole different segment compared to our law enforcement segment.
We've launched a tactical body armor that has differentiated itself, and we've done a really nice job taking share there. We just launched a new Apex carrier system, which is something that can't be found in the marketplace. We've launched a 3-D body sizing app, where basically, officers can measure themselves versus being measured with tape measures that's been done for, you know, 20, 30 years. It's all been about innovation for us and using that innovation to maintain those high shares that we have and then grow into pockets, niche areas that we haven't, you know, experienced growth in in the past.
Maybe just add on that a little bit. When you think about COVID and we talk about budgetaries and the resiliency of our business through those cycles, and the data supports it, but going through COVID—you know, there was a perception, I think, for most counties, and cities, and states, there was gonna be a bit of a budget crunch, right? Which would theoretically impact law enforcement budgets. But, you know, what we see is, where our products sit, they're really mandatory. So if you have an officer on the street, they have to have body armor, right? And that body armor is specific to that officer. If they're going on the streets with a gun, they have to have the holster, and they have to have a safety holster to keep the gun in the holster and out of, you know, the criminal's hands.
So what we saw is, our business continued on through that summer of COVID, et cetera. What you see is, where they start on the really thinking about cutting costs is on the soft goods, so on the uniform side, boot side, overtime. So that... It kind of went through and proved out what we talked about during the IPO, is that we don't have that impact on budgets now. We have the resiliency, and it's all around protection. You just can't send an officer on the street without our equipment.
In terms of maybe delineating between funding and then the actual, like, end market and volumes, like, it doesn't seem like funding has really, over the last several years, been an issue. It's been more a function of, you know, maybe high employment, Defund the Police movement, making it sort of less attractive to be a police officer, so having high attrition during the pandemic, and then sort of inability to grow that volume on the other side. Brad, I know we've talked about this a lot, the data is sparse, but, I mean, are you seeing anything that you would call encouraging there? Has it been more of the same? And is your ability to do so well during that period just been a function of you have high market share and your pricing effectively, or are volumes also getting better?
Yeah. On the encouraging front, I would say, you know, during the COVID period and, you know, after COVID, you know, you saw a lot of retirements. You know, like you mentioned, just not as desirable and to be in that profession as it used to be. And what we've seen now is a stabilization of headcount. And our gauge is, not only do we have our own sales force in the US, but we also have company-owned distribution, that we have sales teams that are connecting directly with end customer base. And, you know, what we see there is they're continuing to kick off recruit classes, which is really kind of a good measurement of that.
And then those recruit classes, they're, they're not necessarily filling the classes fully, like they used to, but there's enough recruits that are coming in to be able to fill those open spots.
As we think about the core, I think, if we're going back to the IPO, the core sort of focus for you was law enforcement, and, and that was, you know, largely, you know, driven by the large police departments I think of, so there's less of a federal element to that. As we think about where you've been going recently, maybe increasing that federal exposure, you know, with Radar, you increased the international exposure. You know, how, how different are those markets, and, and are those more desirable, less desirable, or is that just a sort of effective use of capital, given where your market share is?
Yeah. We wouldn't think about the markets by themselves, more about where you play in those markets, that make them unattractive or attractive. Yeah, we play in the federal markets with holsters and EOD, and it's. Yeah, but those are both great businesses, great market share, and places we like to supply. There are other parts of the federal budget, you know, maybe larger equipment, exposure to tempo of operations, cyclicality that we would avoid. And we are much the same, a little bit, even in law enforcement and internationally. So when we think about the business and how we move forward, it's really about finding those niches where you have value-added products, you're protected, you have moats, you're minimizing that cyclicality, and that we like the predictability, right?
You know, we've talked about, you know, in our core markets, you know, the budgets grow about 3% every year over a long period of time, and we like that stability. There's a lot we can do operationally because of that predictability to really streamline results, leveraging the operating model and staying really tight on the price, where we can deliver outsized returns on the bottom line. So we don't really focus on, "Hey, let's grow the federal side." There are components, even when we talk about the Alpha Safety acquisition, that are, you know, really attractive, have some attractive tailwinds. We'll continue to watch it, and we'll be opportunistic to a bit on what products and what markets we look for. But internationally is certainly a place we continue to want to have a bigger presence.
You know, we bought Radar Leather, you know, in January of 2022. Still have a desire to have, you know, a larger presence in Europe, both in our core markets and new markets. So it's one we'll continue to stay focused on and, you know, have a couple of folks internally continuing to comb through the potential acquisition targets.
It's been sort of maybe hard to track, just following up on that plan. Like, if we think about, like, what the recipe is for organic growth, it's not been... There's been some lumpiness the last couple of years. Can you sort of walk us through that? Is it police budgets, on average, grow 3%, you pass through inflation and then some pricing, and so that's 1%-2% more, and so there's a pretty consistent equation for you to grow, call it low to mid-single digits year in, year out, or is there a sort of a cyclicality to this, to where maybe some years are flat and some years are up 8%? Like, how should you think about that trajectory?
You know, over the long term, you know, the data holds to that low singles, that 3%-5% organic growth. And if you kind of break apart our products, there's parts. You know, we have equipment that's $100 price tag, and then we have bomb suits, which are $36,000 a suit. And you start to think about the markets and your customer set. Depending on how they're refreshing, you may have a 1% organic year, and you may have a 6% organic year. But it will level out, and it really holds true. And as you mentioned, Bert, we really focus on price, right?
Price, productivity, and leverage with our model, because with that consistent growth, that, you know, 3%-5%, if we're focused on getting 1% price net of material inflation, focused on controlling SG&A, as we, you know, gain the 3% volume, and then focus on productivity, you know, we believe, and we've demonstrated, that you can grow your bottom line 10% consistently with that. You know, we often get the question of, "Well, where are you at in the ending? Is- have you squeezed all the, the juice out of it?" You know, really the operating model professionalization and really launch has really only happened in the last couple of years. So we're strong believers, lots of runway, runway to get, you know, EBITDA margins into the mid-20s.
In terms of that productivity side, this is maybe something that comes up less, but you guys both come from operating backgrounds, sort of like lean manufacturing and, and a lot of focus on process and operations. And I think you've instilled a lot of that into what you're doing at Cadre. As you think about maybe, like, the incremental opportunity, you know, how much more automation can you deliver? How much leaner can you get? Does that have a substantial impact on margins or cash, or are you sort of in the later innings on that effort?
Early. Early innings. You're never done. That's, that's kind of how we grew up, at, at the three companies that I've been at. You're just never done, right? So it's the only way we know how to operate. Automation-wise, there's a lot we can be doing in, in that space. So, we actually kicked off, at the beginning of last year, automation projects to begin to use cobots within, our operations that we have. And so we've implemented two cobots, which is a way to, to automate and, and use, robot-type technology that can work with humans, in our areas within the factory. So we've got two up and running right now, and then we've got, multiple CapExes on the way for it. So I would say on the automation front, there's more to do.
On the lean front, there's a significant amount of activities that we can continue on. So we're in the—use the baseball analogy—the second or third inning. We're really early.
Yeah. Now, two dedicated resources towards the operating model. I hired one, I guess, beginning of last year, Brad, and another one about a year and a half ago. So there's a real commitment by the company, not just to have the operating model, but, you know, leverage these two folks to be the people out in the business to really drive it to that lowest level. And, like Brad said, it's really early. The automation's incredibly exciting, so...
If we put this back into maybe 2024 terms, you've given guidance on sales and margins, or sales and EBITDA, we get back into margins. If we think about, I think there must have been some degree of disappointment after the first quarter when you reaffirmed, just based on the stock reaction, after a good quarter. Are there any sort of the factors that you just mentioned in terms of, you know, you're going through some sort of the cyclical end, where refreshes are lower later in the year, and so some of that goodness was one Q weighted, or is that a conservative outlook? You know, how do you put the, you know, what you're seeing in terms of improvement in productivity, some improvement in volumes, you know, good traction in M&A?
Like, why, why is that not maybe putting the bar a little higher?
No, it's a great question, Bert, and it's certainly one that's come up. And, you know, I think first can I start with just general timeline. You know, we announced the Q1 earnings about 45 days after we provided guidance, so pretty short time frame. So in that 45 days, you know, we look at and say not a lot has changed for us to spend a lot of time focused on guidance. Not a lot has changed in those 45 days. Now, the other piece to keep in mind is our backlog visibility. So when you think about the largest parts of our business, the armor business and the duty gear business, they generally carry about 45 days of backlog. The 45 days, and we're making a call for the year.
So when we, we think about that, along with the 45 days that we just did, you know, our guidance, we take a look and say, "Hey, nothing meaningful has changed." It was a strong Q1, which was fantastic. I think there was lots of good feedback that the organic growth was high, but didn't change, in that 45 days, it didn't change our outlook. We're certainly very happy with the Q1. We're certainly, you know, comfortable with our guidance. And our approach, much like last year, is we get into, you know, Q2 earnings, we'll have better feel for obviously for the first half, but then also Q3 and Q4, and we'll be nearer term, and then we'll evaluate and, you know, make determination on guidance at that point.
I would just add, too, that we closed two acquisitions in Q1, one in January and one in March. So as we're settling in, getting to know both of those companies and making sure we understand how conservative they're being on their forecasts, and versus being aggressive, too, we just wanna make sure that we get some more time with those.
Can you give us a sense for maybe the process under which you build that revenue assumption? Like, if we think about the government services industry, you know, there's a book of business, and then there's, like, a probability of when to assign the things, and then you can toggle that. With you guys, like, you just said, 45-day backlog on some of your larger selling products. Like, how do you triangulate into that number, and sort of what confidence do you have around it?
Yeah. You know, and this is... We'll talk about armor and duty gear, and then we can switch gears and talk about EOD, which is a little bit different, because they have a little bit more visibility and backlog. In armor and duty gear, we break down the business in really two components: really a run, a run rate component, you know, which is, you know, order size less than X, and then we have large projects. That run rate, because of the size of the orders, the number of agencies we participate in, you know, it's very predictable, you know, within a couple points, and it's a very steady number. You know, on top of that, then we have our large, large projects or large opportunities. And much the same way you're talking about PW in, you track e...
You track each project, whatever agency, the equipment, and then you understand the competitive dynamics, and you assign your probability to win. So it looks very, very much the same. And that actually, you know, when we talk about sometimes the lumpiness within a year or a quarter, that's what drives those large orders, right? You can have larger agencies refresh in a quarter or two quarters that can drive revenue up. And, you know, it was one of the drivers that we talked about in Q1, was an order received in Q3 of last year that was shipping out of the armor business in Q1. So that's the armor and duty gear side of the business. We move over to EOD. I mentioned the bomb suits are $36,000, a much more expensive piece of equipment.
There's only about 20,000 EOD techs in the world and about 10,000 suits. It's a very limited number of end users, right? And so that team is able to really track every agency or—it's really not departments, every federal EOD squad, and really track them one by one and say, "Okay, here are the 15 that really matter. Here's when we last refreshed. Here's when we expect to refresh again. Here's where we're at in the tender." And keep in mind, that EOD business has really our leading share, I mean, it's north of 80%, so they will track that with a high probability. Now, what you can't account for in both those scenarios, and I think much like probably you've seen in government services, is what the government's gonna do.
You know, they may expect to order on this date, but sometimes, you know, budgets get pushed and pulled, and that's, that's the wild card, and that's a bit of the another factor in the conservatism. As we go through the year, we want to be confident that, you know, what we put out there for guidance, we're able to hit and deliver to our investors.
In terms of maybe some of the project activity, like what's the visibility you get there? Can, you know, things be happening? I mean, things are always happening domestically, and there was more, you know, going on in the last couple of months. Like, does that lead to, you know, maybe faster or more project activity with certain departments, or is the lead time on the projects normally sort of longer in terms of actually ordering to selling?
I would say there's a lot of variability across those, depending on if you're looking at tenders, for example, international tenders, that'll come out that we have visibility of, and obviously, everyone else does in that space. But those take quite a while to fulfill those tenders because they're larger. It's not like the U.S., where there's, you know, over 20,000 agencies, law enforcement agencies in the U.S. Internationally, you know, there are large national police forces, so they'll do like a body armor tender for thousands of pieces of body armor, where in the U.S. you can have a 100-person, you know, agency where they're buying a few pieces of body armor at a time when their body armor expires from a warranty standpoint.
So there's a lot of variability from that standpoint, you know, when you're looking at each of these agencies, and sometimes they're predictable and, you know, they'll hit that five-year mark when the warranty is over with for body armor or, you know, if they're doing a new gun change out or adding lights or optics or things, then it gives us that predictability to say, "Hey, wait a minute, holsters are getting ready to come up also." But it can be difficult from a visibility standpoint.
Can that kind of stuff drive margin variability, or should we expect that just because if you're getting thousands of orders from one project, that's presumably going to increase your utilization of the factory, but if you're not getting that, getting running lower, I mean, do those things have a meaningful impact, or?
Not with the way we manage. You know, we, you know, back to the operating model and how disciplined we are, I mean, you know, many years ago, I would say that was more of a challenge, right? In terms of chasing revenue. But, you know, we position our products in that premium segment because of the innovation that we bring to the market space and how much time we spend understanding what our customer base needs. So we continue to stay positioned there, and we don't go down to the lower price point levels.
I mean, and that's one of the reasons, you know, we talk about in the body armor space, we were primarily focused on law enforcement. And there's really, in my mind, two drivers why we don't participate in the military. You know, first is, you know, the margins are tougher, right? It's a more competitive environment. But point two is really that those tempo of operation, those ups and downs, right? As a business, that could be, you know, huge one year, and it could be down 75% or 80% the next year. And, you know, once you start to introduce that variability, you start to lose, you know, in our opinion, focus and opportunity on the operating model, because now you're dealing with these wild swings, and you're ramping up labor and ramping down.
That's just a reinforcing of, hey, we're having that stable law enforcement-focused model that is diversified, where a single order isn't gonna make or break the year or the quarter for you, is really important to us.
Yeah, I think people sort of miss that, because every earnings call, I feel like someone asks about, you know, OPTEMPO in the Middle East or Ukraine, and then all of a sudden, it's like, well, we don't really service that. What are the opportunities in the military? Like, where would you want to play? I think you've sold holsters into that market. I mean, there are areas you play. Like, how do you make, pick and choose where to play with the idea?
So I think it has to fit in a couple of things. One, first and foremost, is it, from a price positioning and product standpoint, does it fit the end user's need? So that's the first kind of test that we look at. And, you know, if that works, then, you know, can we actually service the customer, right? Because that's important to us, too. You know, are we gonna take on something that, you know, is too large, that we can't service it within their timeframe? That's important to make sure that we're aligned on that. So we look at, you know, both of those. You know, yes, we do have pretty much all the major U.S. military branches, all have our holsters.
EOD, as Blaine mentioned, you know, pretty much all the majority of the EOD techs, 80%+ of them around the world have our bomb suit. So we like those two product categories in the military space. We just don't necessarily like the body armor margins, so that's why we stayed away from it. And then ICOR, the new robot company that we acquired, we like the margins, you know, within that product category, in the militaries. And then the last one, as I'm thinking through the categories, is Cyalume. So light sticks, believe it or not. So that's the biggest customer of ours of light sticks, is NATO forces and US Military, and we've had those contracts for many years because we're able to meet the tight specifications required for those products.
You know, it meets that niche for us, which is, you know, tight specs, high-performing products that you know serve that space, and it's not as price sensitive on those.
I guess the other thing in the military side that I feel like has stopped coming up recently was you had a reasonable opportunity on blast sensors, which, I mean, you can give a better understanding, but my understanding, you put a sensor on the back of the helmet, and it gives you sort of an assessment of different traumatic brain injuries that can come as a result of impact. And there was another competitor that I believe you were going against, but that's been three years in the making. Can you just give us a appraisal of where that is and-
Yeah
... what you think it could mean?
Absolutely. Still is an opportunity. It's an area that, you know, we're continuing to invest in, so what Bert's referencing is, you know, we've been working with SOCOM, so Special Forces, on a project where we're doing paid R&D work for the U.S. military to take our. So we have a blast sensor today that's used by the EOD technicians, but what the SOCOM specs is really to create a blast sensor that you can put on a field soldier, so that traumatic brain injuries can be better understood. It's a big problem within our military folks, not just the U.S., but also around the world.
So we've been working on that R&D project for a few years since, since we went public, and we've been meeting the various phases of criteria, with the last phase being a delivery that happened last year, and we were supposed to get communication in the first quarter, the final feedback on the sensor and testing and that side of things. I was actually-- We had a leadership team meeting up at the EOD headquarters in Ottawa last week, and, you know, it's a project we were talking through, and, you know, we just haven't gotten the feedback yet. We've gotten, you know, a little bit of feedback here and there. Nothing bad. Doesn't mean anything bad. Overall, they've been super happy with us and our testing.
We're just waiting on that feedback, and then, based on the feedback, are they gonna change any other specifications or add anything to it? For those who've been involved in those R&D kind of projects with the U.S. Military, that's just kind of the way they work. So, I guess I've learned my lesson. I've stopped quoting dates at this point. So we will quote things when they actually happen as we go forward on that project.
What is the opportunity? I mean, like, what is the... even in terms of what you're bidding for-
Yeah
Is there a certain lot number of sensors?
So we sized it at IPO time. You can see it in any of the, the public information out there, but we sized it at $500 million. So if you take, blast sensors and you put them on every field soldier in the U.S., we're not talking outside the U.S., it, it blows up even larger if you... No pun intended, by the way. A bit larger if you look at all the other countries out there, which, by the way, have the same problem. It's a $500 million type TAM opportunity. Now, it's not clear if they're gonna dual source it between us and the other company that's doing R&D work, or if they'll end up choosing a single source. Overall, we, we feel good about what we've done.
We do this with one sensor, either on the back of the helmet, or on the top of the helmet. It's not clear yet. We've done testing in various areas on the soldier, versus our competitor uses three sensors that has to go on a soldier to triangulate their data, and we get very, very, very good readings from a single sensor, overall.
And then what happens is this data gets sent to the cloud, and then that data can be analyzed and tied back to the medical records for each individual soldier to understand, you know, when a blast happened, what type of a blast was it, the direction it came from, so that, you know, we can help these individuals that are putting their lives on the line for us, quite frankly, to help them, you know, during the military and when they come out of the military. It'll even tell them at what point they've been exposed to too much blast intensities in field training, for example, and they need to be pulled out of training and set on the sidelines for a given amount of time based on the procedures of whatever branch that is.
So it is one that, we will continue to invest in. We've got an interest. I've not disclosed what countries, but there have been two other countries outside the U.S. that have requested our sensors, and so we've sent them, and they're doing testing on the sensors also. So we're gonna, we're gonna hang in there, and we're gonna continue as long as however long it takes them, and to draw—they draw all this out, we're gonna be right there.
Is this something you're paying for, or is this being covered under the-
All the paid R&D work is through SOCOM.
Okay.
So, we do a lot of paid R&D work with our EOD business, so we do, like, next generation bomb suits, helmets, you name it, for the U.S. military. So, you know, they pay and fund for those products or the, that research, and then, once it's completed, it's our IP, and we get to incorporate that IP into the product so that we can sell it to other customers.
Maybe just, we've got two minutes left just to, just sort of finish up with you, Blaine, on the margin side. Last quarter, you guys made some comments that you think you can get sort of well into the 20s on margins. Right now, you're in the high teens range, which has been, I'd have to go back to the, to the model, but I think you were, like, 16, and now maybe you're closer to 18. Some of that's been pricing and mix on what's been M&A. Can you just walk us through sort of how the, how margins evolve from here, and, like, if you do ultimately get to, like, 22, 23, 24%, how that happens?
Sure. Yeah, I mean, I think the big drivers from, you know, what you're referencing, IPO and now, has been, you know, really, you know, price and productivity. Mix always plays an impact, and for us, when you think about mix, it's not just product line mix, it's also channel mix, right? And then you throw in M&A as well, and what I mean by that is, on the channel mix, you know, we have. It's a little bit less than 10% now goes to consumers, direct to consumers through our e-com and Amazon, right? Very favorable mix on that side. And then there's some channels internationally that are just, they're lower, lower than average. So it's kind of that, that balance on that mix, which will always kind of plus and minus.
I wouldn't say that's a significant driver from where we were to where we are now. What I'd say has really driven that is that focus on price. You know, we're targeting that 1%, you know, and we don't have a high inflationary environment, so it's not the case we're trying to pass on 10% or 12% price increases. These are, you know, very much single digits. That will continue to be a lever we'll pull on. You know, as we go forward, where we send the premium products, the innovation side, our ability to serve our customers, yeah, we'll continue to push on that, and when we think about price, don't think about it as a broad brush. It's very much a pinpoint approach, right?
We're gonna look at not a product line, we're gonna look at an individual product, how it prices versus our competitors, what's the value we deliver to our, to our end users, and price that way, not... So you may have, in a particular duty year, you may have some parts that are gonna be above average a couple points, maybe some parts that don't get any price. So don't, don't want anyone to walk away thinking it's this broad brush approach, and we just do X% and move on, but that'll continue to be a part. The piece I think that's, you know, exciting is the momentum as we get operationally focused on the operating model and really moving towards with the automation. That will continue to evolve to be a significant component, and then M&A will absolutely be a driver.
Not that we will only do accretive acquisitions, but that's certainly our bias towards accretive acquisitions as we go forward. If we're looking at what we'd call a fixed business, you know, a fixed acquisition, a business that's lower than average, you know, part of our checklist is: What's the path to make it accretive, right? And any reasonable path, and, you know, we wanna focus on not a path that relies on outside forces. So we're not gonna rely on growth to drive it. It's what can we do with the business, whether that's operating model, all the tools available there to move it up, if it's a synergy with cost, whatever it may be, but we're really gonna focus on there, on getting them to be accretive. So those are kind of drivers. Like I said, I think it's exciting.
Automation's exciting, the operating model. There's a lot to do, and we're ready.
So if we were to rank it, maybe it's automation, you know, growth and consumer price?
I think price is gonna be at the top just because, you know, if you're getting that 1%, it's a pretty outsized return. I think you have automation close, and then, you know, the other two. But that's really the focus, that price and the operating model op-