Perimeter Solutions, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Strategy: Goal is to provide quality products/services, deliver private equity-like returns. Focus on three operational value drivers: profitable new business, continual productivity improvements, pricing to value.
• Wildfire Response: Team responded to January 2024 Southern California fires, with six air tanker bases, three mobile retardant bases, and ground units active. Distributed and localized manufacturing footprint with 5 existing and 6 under construction retardant facilities in North America.
• Capital Allocation: Reinvested record capital in 2024, including CapEx growth and increased OpEx on R&D, sales/marketing, etc. Closed acquisition of Intelligent Manufacturing Solutions (IMS) for ~$33 million in Dec 2024. Repurchased ~3 million shares in 2024, ~21.6 million since IPO.

Segment Performance

• Fire Safety Segment: Fourth quarter revenue increased 72% to $60.7 million, full year revenue grew 93% to $436.3 million. Q4 adjusted EBITDA rose 289% to $27.2 million, full year adjusted EBITDA was $240.1 million, up 215%.
• Specialty Products Segment: Q4 sales increased 6% to $25.5 million, full year sales grew 29% to $124.7 million. Q4 adjusted EBITDA grew 34% to $5.6 million, full year adjusted EBITDA improved 95% to $40.2 million.
• Consolidated: Q4 sales increased 45% to $86.2 million, full year sales expanded 74% to $561 million. Consolidated adjusted EBITDA increased 193% to $32.9 million in Q4 and totaled $280.3 million for the full year, up 190%.

Guidance

• Adjusted EPS: Introduced adjusted EPS, Q4 2024 adjusted EPS $0.13, full year $1.11.
• Free Cash Flow: Generated $172.9 million in 2024. Expect to deploy free cash flow and incremental leverage towards internal reinvestment, M&A, share repurchases, special dividends.
• CapEx: Moved CapEx assumption to $15-20 million annually, driven by fire safety projects with attractive IRRs.

Risks

• Market Variations: Acres burned ex Alaska can deviate, impacting fire season intensity.
• Tax and Regulatory: Changes in tax policies or regulations could impact financial results.
• M&A Execution: Challenges in integrating acquisitions and realizing expected synergies.

Question and Answer

• Q: Dig in on PCB market fit in Perimeter's strategy A: PCBs fit as they have solid long-term organic growth, spare/repair aftermarket demand, and potential for consolidation. IMS acquisition is a platform for expanding PCB portfolio.
• Q: Higher CapEx spending driver A: Predominantly in fire safety, with projects fulfilling customer missions and attractive IRRs.
• Q: Implications of California wildfires on business A: Longer term, increased focus on wildland firefighting will benefit industry, including Perimeter.
• Q: Taxes and cash flow statement A: Cash taxes impacted by timing, redomicile affecting deferred taxes.
• Q: Leverage ratio and M&A A: Target higher leverage via M&A, actively scouring for businesses fitting operational value drivers strategy.