Perimeter Solutions, S.A. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Strategy: Built on 3 pillars: owning exceptional niche market leaders, applying 3 operational value drivers (profitable new business, productivity improvements, value-based pricing), and decentralized operation with autonomous business units.
• Operational Update: Strong results in international retardant, suppressants, and IMS; renewed retardant contracts for consistency; customers adopted proactive initial attack strategy; signed new US Forest Service contract for savings, efficiency, and enhanced wildfire preparedness.
• Capital Allocation: Invested nearly $17 million in Q3, including $5 million in capital expenditures and $12 million for IMS product line acquisitions, aiming for returns >15% IRR.

Segment Performance

• Fire Safety: Q3 revenue was $273.4 million, a 9% year-over-year increase, and year-to-date revenue was $430.8 million, a 15% increase. Q3 adjusted EBITDA was $177.2 million, a 13% year-over-year increase, and year-to-date adjusted EBITDA was $265 million, a 24% increase. Drivers included operational value drivers, reduced dependence on the North America fire season, and a proactive initial attack strategy by customers.
• Specialty Products: Q3 net sales were $42.1 million, a 15% year-over-year increase, with $10.8 million from IMS acquisitions offsetting a $5.3 million decrease from the base business. Year-to-date net sales were $119.3 million, a 20% increase, with $27.7 million from IMS acquisitions partially offsetting a $7.6 million decline due to unplanned downtime at the Sauget plant. Q3 adjusted EBITDA was $9.1 million vs. $12.9 million prior year, and year-to-date adjusted EBITDA was $30.8 million vs. $34.5 million.
• IMS: Continued to perform well, with 4 product lines acquired year-to-date, and plans to drive profitability via operational value drivers on existing and new product lines.

Guidance

• Q3 adjusted EBITDA was $186.3 million, and year-to-date adjusted EBITDA was $295.7 million. Expect continued growth via operational value drivers, contract renewals, and M&A. The business is insulated from policy and economic shifts, with trade policy effects and government funding disruption having minimal impact.

Risks

• Specialty Products: Ongoing unplanned downtime at the Sauget plant operated by Flexsys/One Rock, impacting sales and adjusted EBITDA until Perimeter takes operational control of the plant.

Question and Answer

Q: Congrats on the strong results. What do you think is the normal earnings power within the Fire Safety segment overall? Will you have any increase in gallons with a potential increase in acres burned next year?

A: Kyle Sable noted current year is indicative of normalized earnings, acres rebound would have some benefit but initial attack posture and unknowns affect quantification. Haitham Khouri added no capacity tap-out in stronger fire season.

Q: Thoughts on the implications of the U.S. Wildland Fire Service merger and potential contract extension to DOI agencies?

A: Haitham Khouri said existing contract is template, merger supports efficiency, and contract applies to all federal agencies including DOI.

Q: Thoughts on contracting tactics, prioritization in large contracts?

A: Haitham Khouri emphasized importance of optimal contracting, collaborative approach to meet customer needs and ensure value.

Q: Thoughts on the strength of the international retardants business?

A: Haitham Khouri stated international business strong YTD and Q3, with Europe, Middle East, Asia, Australia, and South America performing well, early adoption cycle and economics driving strength.