Perimeter Solutions, S.A. Q2 FY2025 earnings call

• Second quarter adjusted EBITDA was $91.3 million and first half adjusted EBITDA was $109.4 million, driven by execution on operational value drivers, normalized U.S. fire activity, and strong performance in international retardant markets, suppressants, and Specialty Products. - Deployed nearly $62 million in the second quarter across capital expenditures, share repurchases, and asset purchases for the retardant business. - Concluded trade secret litigation with Compass Minerals, regaining intellectual property and acquiring surplus assets for the retardant business. - Specialty Products' Sauget plant, operated by a third party, faced significant safety and operational issues with elevated unplanned downtime. - IMS acquisition is performing well, exceeding underwriting assumptions, and production capacity was expanded.

Fire Safety segment: Second quarter revenue was $120.3 million, representing a 22% year-over-year improvement, and year-to-date revenue reached $157.4 million with a 27% gain. Adjusted EBITDA for the second quarter was $77.7 million, a 40% increase from the prior year, and year-to-date adjusted EBITDA was $87.7 million, a 58% gain. Specialty Products segment: Second quarter net sales were $42.4 million, a 47% increase from the prior year, and year-to-date net sales totaled $77.2 million, up 23%. Second quarter adjusted EBITDA for Specialty Products was $13.7 million compared to $9.3 million in the prior year quarter, and year-to-date adjusted EBITDA was approximately steady at $21.7 million.

• Increased the high end of capital expenditures assumptions from $20 million to $30 million. - Full year tax expectation remains unchanged. - Q2 free cash flow was negative $15.6 million primarily due to seasonal working capital build and property purchases. - Allocated nearly $62 million in capital, expecting returns to exceed 15% targeted equity returns. - Continued share repurchases in the second quarter.

• Specialty Products' Sauget plant operated by Flexsys has experienced ongoing safety and operational issues, leading to continued financial drag and legal challenges until control is regained. - Legal dispute with Flexsys over control of the Sauget plant poses ongoing operational and financial challenges.

Q: Dan Kutz asked about how Perimeter thinks about the range of normal wildfire activity and the inverse relationship between acres burned and retardant usage.

A: Haitham Khouri stated normal wildfire activity in the U.S. Lower-48 is roughly 6-7 million acres, and large swings in acres affect retardant usage due to resource availability, weather, and proximity to structures. Kyle Sable added that large spikes in fire activity can lead to less retardant usage due to resource utilization, and vice versa for large declines in acres.

Q: Josh Spector inquired about the sustainability of Fire Safety's margins, impact of Sauget plant outages on Specialty Products, the $20 million payment to Compass, and U.S. wildfire management tactics.

A: Haitham Khouri said Fire Safety's margins are sustainable, the Sauget plant issues continue to impact Specialty Products' financials, the $20 million payment included acquired assets, and efforts are ongoing to improve plane availability and contract structures for suppressants through industry associations and customer collaborations.