PRM - Earnings call 3 2021 | Perimeter Solutions, SA

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Operator

Hello, and welcome to the Perimeter Solutions Q3 2021 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Nori Yokozuka, Perimeter Solutions General Counsel. Please go ahead, Nori.

Noriko Yokozuka

Thank you, operator. thank Call. joining and Quarter Solutions' everyone, Earnings XXXX morning, you Perimeter for Third Good

Perimeter's materially and results. as non-GAAP we will to for SEC XX-Q, from website. With that call, differ will including financial refer well Please those today's are Eddie our results both Co-Chairman. subsequent statements press that on XX, XXXX, will Officer. We listening expressed Perimeter; Officer; Speaking more turn on to I call Barry statements made to will our want Haitham and these that, today's during to not call have today's Co-Chairman nor release our as which advise that Will be a and updated based made of who impact on Howley, actual complete Khouri, factors operate presentation statements. These of implied December review statements are of they management's to assumptions also filings been may Thorndike, a the be like today's over company of EBITDA. earnings business our remind as we Vice may current environment would which today, about Chief could and website on Nick be replay to all our are call. Please Chairman; and forward-looking in Lederman, Goldberg, anyone may Also Executive SEC's available to and Nick Chief call. measures, expectations, the of Financial Howley you contain be the beliefs and call the and on today referring this call or The the discussion our

Walter Howley

is I the to going each do for calling objective. expect everyone, our not I slide, and at introductory join call and this first morning, Perimeter, call forward. Starting every make will on comments. Good and Will Thorndike first Will Since our in. earnings thanks earnings

optimizing as goal our equity by on equity-like equity. is liquidity allocation long-term long-term one, our public in before, reflect with the structure. us management seek to high-quality full consistent drivers, the owning, strive a careful our value the of: we all business from pricing by heard operations, or goal improvement, of of that value X and capital; including of operational uniquely We returns creation attain continual capital existing new and three, this our performance growing to operating two, provide private X IRR the cost to you've our this improvement As mid-teens deliver better define generation; businesses. We and to is value We plan of the our market.

ago. roles since impressions on as Now operating Khouri. of formed month committee our let methodology. this implement Eddie closing will well consisting and to business touch We on about me as going The a this and executive Executive specific an with CEO, forward value-based Perimeter Will Goldberg, myself, our Haitham Thorndike -- partner, work business closely responsibilities early our Committee

operational appointed Perimeter's as Haitham value creation through capital the equity as very committee across market value our our allocation capital unique We're optimizing opportunities by very the drivers the also priorities. capital has Board incentivizes sustainable as this Perimeter structure. company on role of addition and Perimeters' We've of the shareholders activities management led that will grown value Vice focus excellent it To Chairman, for end, executive the with where has long-term compensation creation. The XX management is and implemented to our in well the and aligns this into already business today. closely our years system we're with value encouraged still the long-term alignment on the it's by Eddie and allocation, structure focus we the Board on executive will primarily his strategic days, early encouraged creation While Eddie. in see company. committee, philosophical capital capital

results, over our plans. more business' our that touch the note Will which have Thank with a I'll exceeded turn this to pleased allocation expectations on I'll year. And to you. capital from we're little Finally, financial with earlier that, this

William Thorndike

Thank you, Nick.

of them. you criteria. it be acquisitions As given investors to allocation through we have we from us Perimeter these most important evaluate how closely heard very X we our specific capital walk how before, to helpful philosophy, on would based believe are fits economic potential And thought criteria

never secular and streams, that metrics to element churn the So use that scores we retardant and an said, overwhelm growth sort Investors however, of and revenue within exceptional is predictability, continue year-over-year gain the on revenue is line including fire there North That of almost the intensity the of the to long-term over time, long-term primarily variability, this stickiness, to tied you we season. to expect Perimeter and has American any a variability seek variability. bottom revenue near-term retention. will stickiness we and potentially prevention protection and over first grow acyclical time, is businesses as once qualitative expect net particularly lose evaluate countercyclical customer we recurring a this always diminish you of and pattern should overall our appreciate, almost business. international And The them our them. that customer, to you grow business'

metrics. us on has exceptional is criteria this for growth long-term and secular dimension, tailwinds again, Perimeter Second economic

XX% the compound primary has at X an grown growth been driven rate volume so And organic retardant XXXX. decade company this approximately factors. So volumes by over or has through growth the

increases urban driving acres that wildfires be way to to life acres growing about And from fire unfortunate burned to that interface, fight and and ability burn So the is course, which fought the result the of consistently to been that tanker of think the have tanker has constraint which by on now allowed as key higher as is capacity urban retardant of seasons, be is in and unable and our volume wildfires, of to increasingly order Interagency at request must drivers decade evidenced effects; we Perimeter's season limiting into must and broader Center. volume number climate fought many populations during And the these I to a confidence growth further Fire that underpinning factor a property. prospects. volumes protect volume forward, capacity, fill first perimeter in is data going begin think encroach simple fire would air ago to wildlands been improves the a a second long-term X persist increasing expect third the areas; longer wildland growth the National

Okay.

M&A, metric. of again in opportunistic characteristics. And of portions returns as about critical economic into streams, Retardant on that, by overall property potential more economic margin these costs, tremendous driven and criteria core where a single providing component third loss X Perimeter Haitham its XX% And and environmental percent wildfire economic see again, life to critical Perimeter, flow criticality, is failure, thus like over guided us, scores of core again small Haitham. both The on broadly, is course, of mid-single-digit turn but cash what inside And extremely despite potentially you, I moment. revenue. EBITDA And retardant a ingredient Safety, talk opportunity potentially consistently highly customer percentage consolidation. We capital. in and CapEx dimension. a represents approximately value outside significant capital the suppression with on products Fire And for damage. an with the that tangible active is, will again, a us And to account measured of calls more of for and this digits and excellent low small severe for and M&A free generation is this with larger criteria a will is of allocation in value. Fourth is firefighting big. low we ahead Thanks. lastly and wildland Nick things high significant

Haitham Khouri

Will. you, Thank

The Turning Perimeter summarizes to assumptions. section our the framing, long-term lists operating X, slide case. base which our case of top Slide investment investment

Specifically, the historical relative with we Perimeter's are: the compares unchanged high-single prospective mid- This increasing volume growth. case air in fire and drivers Again, XX% three, tanker so in volume of longer expect urban and of decade more base digits. approximately those these or of growth to wildland growth capacity. growth the severe seasons; Safety two, largely volume one, interface; drivers last to to over of Fire segment growth

We expect of Fire in is segment performance historical of Perimeter's a mid-single with case line cost in Perimeter's our to Safety price and high function base roughly criticality digits. growth uniquely This primarily is products' ratio.

roughly Our is Oil segment's base Additives EBITDA. and line flat for is in This the with historical revenue case segment performance. adjusted approximately the

expectations around at XXX growth. of expect company's margins again, historical revenue EBITDA with EBITDA adjusted Perimeter's margin the and to graphic and in pace expansion. The adjusted of XXX points consolidated We bottom expand our the line This, summarizes adjusted page the annually. is between EBITDA long-term basis

and consolidated allocation the historical capital EBITDA the that to Perimeter grow consolidated line XX% significant or actions. performance. in generally structure expect revenue any outcomes Note We are capital with grow to prior company's adjusted in these to approximately mid-teens

Specifically, attaining Perimeter. rates vast why adjusted in of confident helps in grew slide EBITDA with at our at XX% CAGR, at and the return XXXX, majority an through Hopefully, growth objectives grew nature. decade CAGR these this convey revenue we're a long-term Perimeter the XX% organic both in

and a long-term referenced and take value to our discuss disciplined noted, requiring our strive we shareholders. capital we active add not Capital It's X Slide will we're active perspective in how of high earlier. the out, and our We the management this value targets. number that we've columns X. Nick believe I'll order represent the column structure. I'll Allocation. slide returns, capture our case the in to very rightmost two, operational operational important M&A our base number value now number long-term these capital improvement fortunate to to point on an the ROIC As our consistently however, to hope can consistent on moment through: that ROIC behalf equity program allocation M&A understand X much which first focus attain on and value three, we of returns enhance position on allocation; in drivers, titled of capital one, on Note X to drivers; high

management meet program, implement exceed and Specifically, plus our which million flexibility or do our buybacks us repurchase returning $XXX either base or at structure capital so. drivers, capital gives we case to the To capital Board we to expect should to the through our decide organic a end, performance, by return a share special IRR our long-term strategy of target Perimeter authorized operational on X this shareholders value to dividends. execution

combination target in accretive confidence acquisition to target with our capital our must and The conditions our base case consistent conditions the be for these includes capital M&A. high where IRR Number this X in we expect the a stand-alone the be management criteria; Given dividends. necessary be organic deploy X must and IRR, especially present at bar to Perimeter. towards to returns must either projected for acquisitions, light number us and/or of X economic one, trajectory, structure the of two, equity stand-alone buybacks deliver stand-alone creates

clear a value. equity we long-term create However, Fire forth consistent put of We'll actively and both identify focused effort this within will outside bar and to Safety. acquisitions, acquisitions and that evaluate

search performance We're We close criteria the hurdles. extremely the delivered the EBITDA quarter growth IRR Safety. both year-over-year from Our expectations my to with our earlier won't always our X and business target will on and adjusted bat. I'll strict attractive period. pleased a year. and I'll start on X-month will business, economic the this comment with our be performance year-to-date swing relative of the Slide Fire in Safety third be we with the guided to When opportunities which XX% we identify always Fire do to over by of brief do, time. expect IRR-enhancing remarks scrutinized hesitate against

achieved have X As these of comfortably Nick were challenging face and circumstances. our mentioned, uniquely in expectations the results exceeded

was U.S. XXXX acreage in highest recorded burned First, the year history.

ex acreage Alaska, with year end approximately down year the We expect versus to very in XX% and roughly burned, long-term last come in line. line the XXXX trend

of XXX% relating also these terrific chain, delivered to we off start. see support margin challenges, time, our customers' delivering materials the and to to supply raw transportation. Despite It's we significant on business performance. faced year challenges the our Second, and while excellent Fire such a growth Safety to this efforts commitment solid

OA. to Moving on

of strong, so half part large to year was first XXXX. in due a from lapping period The COVID-impacted the

to though The materials. raw higher costs third transportation quarter due softer, and largely was certain for materially

the Eddie is pass roughly ultimately and raw in is call year transportations to in expectations these turn long-term from with segment the performance that, expect higher CEO, earlier and Year-to-date costs. Goldberg. which our to this We consistent our with expectations OA material for through segment. With Eddie? I'll over flat, the our line

Edward Goldberg

with save PHOS-CHEK changer completed a qualification We in environment, fire year-to-date the durable property Barry. far an Thanks, and before on what by turning all items. challenging then support lives, the XXX% strategic Haitham. environment. In proud and during we finally, quarterly FORTIFY any of and our and X. the new on of customers their believe disruption. product provide to summarized business supply without strong designed game I'll start in for by over season-long review protection our more was notable We mission this Most updates to our prevention logistics discussing we've I'm to market. And delivered protection. I'll is load reliability I'll Slide operational extremely our accomplishments process air met our some as provide segment year. it we every year financial importantly, what and every performance, FORTIFY loaded Alongside and tanker we to our accomplished so of chain the commitments results

We continued characteristics, improved B foams, Class LCEXX-Fx our successful liquid world's to fluorine-free technical firefighting effectiveness concentrate to landscape. and improved toward our concentrate Fire increased move to as provides the retardant. is transition introduced liquid this PHOS-CHEK make and fluorine-free the environmental we work industry business, health grade new continue progress safety, first we great a and LCEXX new stability. In we Suppressant and

to As so. increased look growth trends great in demand and interface expansion wildland-urban the the and years we continued we driving in trends long consistency are in retardant to the decade next to last we capacity. tanker business the wildfire or longer the to several trends continue global beyond, severity see relative fire Those And air these of fire to continue seasons, drive expect term. and forward the growth over

not more The fastest-growing one we As wildfire. partners earlier acquired the unique. more agencies hard is our that believe property similar our growth Australia, with the better alongside support our and fire keep even we the in rest mission-critical trends support to capabilities long-term of to the programs. most and and the in retardant this are seeing enable in lives, of the U.S. the become protect increasing growth increase environment, attack effective people's to year regions, distributor us seeing work in aerial agency directly is we with we the world our In way to small their will the future, working aerial demand. And are to to

see Over the in expansion our to coming years, growth market we in this volumes. and expect retardant

our provide property protection I Finally, want and used fire prevention to traditional be our to can to wildfires, a work fire that same little more danger. to color way from retardant active slow on The ignitions they and protect prevent products fire stop business. or potential

devastating can areas sparks from departments lives fires and focus on to season we in electrical prevention, large communities. fire fire of ignitions proactive potentially retardant stop transportation provide saves stopping railroads high failures industries and areas. Treating hazard treatment high-risk these For or like and equipment of utilities, from the ahead starting

can the protection early all long. FORTIFY new applied in or product provide season before season Our

FORTIFY can year, of assets to treated of the from high-value and Santa be FORTIFY infrastructure addition, from of danger wildfire. proactively on In California Ranch the protect Reagan danger. protect structures the In to the with critical this Perimeter outside Ranch August Barbara, wildfire applied

ensured the local threatened the Ranch retardant along our suffer with damage. As in October not the Ranch, by heroic firefighters Alisal efforts Fire did

to see and for increase. We demand expect the and next protection over several years to services products prevention our

touch qualify XX retardant someone competing the market Hardly day product. sell last and our passed years without a Let briefly trying me now position. to has on over a

have no significant other quietly one has commercially is competitors the Perimeter remained has a have not in Some of and consistent to loudly. sold others that historical quite today. done active so retardant of than is What one compete amount while attempted our market would-be

and in confident that Fire sure expanded and growth the come position. I'll take adjusted XXX adjusted can I'll we are our revenue is a acres start structural both flat are in revenue with competitors and the on the see to with Safety Fire primarily Fire our segment, And growth QX the market delivered longer period. discussed, which year clearly due long-term Slide experienced EBITDA accounted The we tanker QX a versus review long-term of for to XX% segment a XX% X. performance our approximately which XX% outperformed XX% benefit burned in attack very year-to-date Safety XXXX fire period. Safety the EBITDA entrants QX We're revenue long-term And and as QX we in significantly in season, margins volume adjusted the continued periods. in with XX% We comparison prior margin of will challenging, at period, XXXX of and EBITDA growth while our as both quarter third line Adjusted QX future. extremely we've points air go as segment, year-to-date and continued product ever Safety basis was of as you volume and revenue both mix in yet retardant seriously, in aspiring of in was growth margin always over other pleased and Safety now adjusted by quarter potential that strategy in Fire XXXX. XXXX lower our year-to-date of namely periods EBITDA EBITDA margin XX% in fleet. prior XXXX, expectations. Fire the the to our and aerial our aggressive drivers compared our the year the over year-to-date Fire Safety increased segment periods. in compared year-to-date the

yet we the period third year, margins We the hold margins managed also X-month challenges faced and quarter. and supply transportation in material to chain, in the steady during expand raw

the on than less the impacted performance comparison and for X% quarter The adjusted the in than adjusted related X% Oil weaker slightly was to revenue quarter by EBITDA positively third was X-month our revenue the lapping declined Additives our segment, in than in period. year-to-date EBITDA to in expect we though Turning well which as margins XX% was of Adjusted COVID in revenue our XX% the materials in for performance of as transportation quarter less expectations to slightly with OA This transportation. higher transitory. OA line year-to-date segment. and due period. declined depressed headwinds impacts EBITDA be segment to in costs period flat revenue XXXX. QX our our increased a accounted expected, weaker-than-expected And third primarily therefore, and and as long-term pass costs and compressed. in in this for as raw raw materially certain to material expect well these roughly

period. our in segment in roughly quarter continue XX% X% both increased XX% the expect both third while to and adjusted period, a XXXX EBITDA over OA revenue the basis, time. On year-to-date We year-to-date increased to flat, quarter in be consolidated and in and the the

spend seasonal financial the investors let Now give on distribution to understanding of throughout a a me of impacts year results. moment our high-level on business and better fiscal EBITDA the

accounts Fire in annual adjusted its XX% is a weighting to Our quarters business, generated fourth XX% of adjusted EBITDA toward stronger approximately third XX% tends and over Only Safety of which adjusted for second XX% our first EBITDA XX% generate Fire quarter. EBITDA typically the Safety quarters and to combined. third to with of in combined, the the

EBITDA medium recurring over plant maintenance. is customers' long and of across approach adjusted I'll highly can for a And experience EBITDA quarters, has of close quarterly the Oil with consistent forward We than for our guidance. quick facility timing which our XX% business comment the fairly though Our on closures that regarding impacts distribution our Additives predictable less term. based and business, accounts believe to

necessary is we're expectations. such, and and assumptions long-term As updating our comfortable sharing

of wildfire the annual performance subject is as American in fluctuations our noted, However, which predict. to season, the we've North we cannot severity

will refrain would Lederman. Financial annual providing our that, to We guidance. And call Barry with to therefore over Officer, from turn like or quarterly I the Chief

Barry Lederman

Thanks, Eddie.

and XX Slides to Turning XX.

growth XX% both and were segment segment Fire prior the was the year. Safety Substantially, the XX% $XXX.X Safety in revenue versus third segment million, year. million, up year-to-date versus sales the Fire in all the up Year-to-date quarter quarter in were sales $XXX.X prior in periods. Third organic our our

our Safety year. Switching up our was Third XX% adjusted segment quarter $XXX.X in EBITDA XX% Additives. prior year. the $XX.X EBITDA adjusted Year-to-date Fire to gears million, segment versus Safety the in up Fire was Oil million, prior also versus

sales million, in versus Oil down Third X% Oil Year-to-date the the up quarter year. were were prior sales our million, in $XX.X segment Additives year. segment Additives prior our XX% $XX versus

$X.X prior EBITDA Third quarter the $X.X in from adjusted was million our million, segment Oil Additives year. in down

QX. costs As and raw transportation in Eddie referenced, impacted result material this

We pass year. $XX.X million, $XX.X this Additives therefore, to adjusted in the on these segment expect recover in XXXX. expect in from Year-to-date in costs, prior was EBITDA to our million up profitability Oil segment

Now for the consolidated entity.

revenue prior consolidated versus Third was revenue XX% $XXX.X million, XX% also million, quarter Year-to-date $XXX.X prior the consolidated versus up was year. up the year.

quarter adjusted in consolidated million, $XXX.X million, adjusted million. up $XXX.X versus EBITDA was prior was approximately EBITDA the Interest the prior quarter consolidated year. X% year. was the Third Year-to-date versus XX% expense up $X.X

interest Going in based expense annual expect cash of while $XX was $XX.X amortization million. Depreciation facility, expense new million we $X.X million. senior our on QX, credit approximately was forward,

deductible, forward, expect we $X amortization million to Going million and of annually. $XX between depreciation tax

during to that million. expected CapEx utilize impacts we the tax transaction-related purchase XX%. well the the excluding jurisdictions quarter be as the during from approximately $X.X quarter costs lost we excluding are as rate accounting information have, the tax the rate, will unable benefits ongoing XX.X%. Based current effective was was on and Our

net to change working going approximately approximately approximately $XX working shares that, million. we in note in of investors sales recapitalization these $XXX suggest We million $XX expect forward. We currently the change back numbers. We occur forward sales, timing the the model million have outstanding. With will $XX.X sales lead Please million the annual XX% prior change with million capital. million. year to Q&A. debt XX% and in expect XXX influence of end going the million CapEx of Though to to change that when hand approximately our annual should of debt cash a the a quarter at $XXX.X that of to I'll $X the in over of ended such to $X million We consolidated listing, operator a for level, with it are and these on capital

Operator

Instructions] [Operator

today Tiger first from question Press Eye from is Our Michael Capital. coming

Michael Press

earlier, Fire by down It Yet you XX% average. mentioned XX% don't more Can bet revenues despite grew we in What fire the the you year air comp grow tanker below for specifically Safety As PRM discuss capacity record-setting in third is year-over-year and have XX-year to seems capacity? acres this burned the outlook on tough to XXXX. the years you record air order in tanker how to growth? future is nicely. growth is the for driving your quarter

Edward Goldberg

Sure. It's Thank question. great a you.

burned. the As business revenue mentioned, for the of acres the amount you outpaced retardant,

in this wildland continue We the on continue see do as the continue tanker urban move capacity. longer acres we drivers fire to growth of see to to growth which are forward, consistently have, interface burned we in as We believe And we becomes long see -- the more will with that term. do that expect the with we our seasons, expectations those and drivers excess consistent increase to those that over trends.

Michael Press

up. follow quick X And

ways On to enhance the the profitability? PRM TransDigm now operational in side, can which playbook you discuss utilizing is

Edward Goldberg

Sure.

we as they price the sure business. to drivers, on number on we're the lot our looking focused in doing growth usually that And are making reducing on of attention laser-focused value products things We we that costs. discussed, We're got we that efficiencies in a at those very we've create. opportunities operational for significant pay obviously, that included are and focused our a value our of

drivers. So those are all consistent those with value very

Operator

the further closing [Operator of Instructions] We've the over I'd back to to session. reached any comments. for question-and-answer end our or floor turn management like

Edward Goldberg

thank in you to Thank first and our call. talking full I forward I Great. report you. to to Thank want XXXX to you. earnings we year quarter look fourth dialing when for earnings. Yes, everybody again

Operator

does teleconference today's and webcast. That you. Thank conclude

your at for a We wonderful and today. may you thank You have participation disconnect day. line your time, this

Perimeter Solutions (PRM) 14 Dec 212021 Q3 Earnings call transcript