PRM - Earnings call transcript Q2 2022 | Perimeter Solutions, SA

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Operator

Greetings, and welcome to the Perimeter Solutions' Second Quarter 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Nori Yokozuka, General Counsel. Thank you.

You may begin.

Noriko Yokozuka

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

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

Haitham Khouri

thank Good morning, joining everyone, Thank for today. you you, Nori. and us

then turning on call with summary comments strategy I'll I'll our Starting before performance to Slide financial start strategy, usual, and X. over the Eddie As Chuck. capital allocation, touch and our on on with

account public of one, define businesses. with to market. owning, equity-like and potential free for streams; through criteria: on As high-quality is consolidation. these businesses goal two, secular We flow recurring higher of tailwinds; to returns acquisitions. private generation goal products high-quality deliver portions very opportunistic X tangible streams; that And larger present by liquidity you've we five, heard evaluate for as to that predictable also value following but the revenue new growth described criteria four, critical the use small economic X. and We attain from this at Perimeter these cash uniquely three, us on are a returns operating capital; and We significant uniquely potential believe long-term the Slide economic with specific before, our growing plan criteria

as creation described improvement value operational X, structure. cost we plus profitable our are to of and a provide, we clear our pricing management seek and As Slide follows: via drivers, drive on continual which on equity of consistent capital capital improvement our the X value the reflect allocation business, new to in long-term value focus the

to on Moving results. financial our

Adjusted later year-to-date. Eddie our XX% is up call. our on in Fire this is name EBITDA will business Safety name XX% and the Specialty Oil solid is businesses. that year-to-date, and our Safety is Products Products in adjusted up EBITDA consolidated with both for Our business, Note Fire EBITDA in Products the Adjusted up elaborate new XX% business Specialty Specialty year-to-date. change Additives in growth our

of several the years. adjusted $XX over XXXX, EBITDA last Specialty of first business in EBITDA each this generated generated half the comfortably exceeds has million Our fiscal by business in the Products almost which adjusted

As confident growth such, Specialty business EBITDA Products our year-over-year year. we're should that now solid adjusted deliver this

long-term adjusted of assuming business. our We've aspects the consistent expect best our and a we tied within for annual Fire with, all that assumptions long-term consistently North stated perhaps America in the XXXX of fire expectations predictable consolidated year highly severity the Safety on-trend full consistently incorporating our season. and mid-teens primarily growth above, to fire around the dependable highlighted our and also growth and to roughly expect expect variability quarterly our of consolidated framework business, We've that, growth. EBITDA business, we other Turning we also the season

driven burned use growth its little observe has through National July slower XX% and Despite As retardant, mid-teens of halfway Interagency operational soft. we the Alaska approach strong Center, which year-over-year. fire adjusted that value on has the point, fire to the our southern America end both the acres are our the EBITDA above North down of execution of through Coordination year-to-date, the early been framework. July year-to-date excluding U.S. end drivers relatively over season, we'll historically season long-term areas, According

fire to don't I'll that believe now emphasized modestly down volumes, season. season. move repeatedly weakness drivers we we of as tied North deliver XXXX growth near-term while to softness That slow the close consistent line season, operational our consolidated significant with and fact, year-over-year deliver to growth the expect the our of in much fire potential in balance XXXX fire our value what line expect has discussion we and the said, mid-teens offset from to to consistent the adjusted the offset results expect In perhaps to above of long-term and this in start still with fire with should financial results the season. of predictive in in the we assuming by EBITDA for season regarding targets, year severity framework variability noting we the severity with seasonal our benefit flat American variability the value modest modest long-term the to any

that climate conducive the remain not to active conditions although across United of season, has States an transpired date. much In to necessarily Western fact,

allocation. capital Regarding

the global value dividends flexibility, Therefore, especially the fire approximately mind, hand potential across XXX,XXX We greatly significant valuation capital free the disciplined. turn we repurchased our to or With generate that, financial will average allocating in the we that of million the and relates flow for an price year, almost half $XXX it to an all The to In the the this you're With $X strength however, meaningfully essentially of capital midst cash of cash buybacks million. over consideration of of bar bar on end powder May of a As proved across opportunities. at the at access expectation environment, pleased the approximately markets, M&A board. of in remain QX specifically second with high aware, we season. balance with irrespective especially is I'll shares in approximately short-lived, at high have and capital to as for challenging this call sheet significant total on dry restricted opportunity we're Eddie. we're $X.XX moment. period the to this in of

Edward Goldberg

period Thanks, quarter performance first strong year-to-date Haitham. and with business. the our with for starting pleased each I'll half Safety X consolidated performance our financial We're XX% Fire with businesses, the EBITDA of our up review for year-to-date. our

increased Second points We're XX%, and and material EBITDA Adjusted adjusted the year-to-date basis inflation quarter while impacted period. significant in were roughly the quarter increased and respectively, raw XXX XXXX. increased revenue by negatively in X% XX% year-to-date year-to-date. EBITDA experiencing margins in XX%

vast on Fire passing the successfully expected, majority business. contractual across of in As Safety inflation this mechanisms our place we're through

during business revenue with is margins reported to inflationary leads grow margin dynamic, solid reported dampen half periods, EBITDA EBITDA This the a XXXX our this, also feature incremental business keeping our inflation public season. well While compression. it flat, an is company first this coupled that to of Fire is had powerful while and Safety this pass-throughs the costs fire line serves as reported the protects with dollars which our margins. year, a adjusted adding growth, year-to-date Despite are we EBITDA assuming impacting on-trend believe positioned our we XX%

this note our some quarter. business accomplishments key opportunity during take me the to Let the of Safety second Fire in

our of expertise, We in own and do aerial when facilities wildland efforts. activity fail, continued experience as air ensuring countries supply as to supported called world, various or America all by to bases retardant We providing of around North bases, MRBs, fire well demonstrate the firefighting to throughout customers, our retardant firefighting so customers' reliability continuous customers. our upon our in mobile of and our without and a support

international with performance last over our a We've the years. of international business moment spend our the pleased business. me Let been few extremely wildfire on

that if most Our than as when around increases customers. the fire-prone is fire severity world, consistent experience question of countries rather of the retardant, adopt use become it's a Perimeter more therefore and

historically typically experience is that switch effort to and Our over wildfires. in and used to XXXX, adoption rather also time. growth We've help curve. continued along than and see countries necessary a pay with country meaningful use examples. Greece the exhibit they concerted makes and X investments to progress has touch We retardant combat foam this investment various less-effective make retardant, and I'll on retardant therefore and away consistent off engage products them the when cheaper rarely strategy a to

This wildfire their this made the grows bases retardant important retardant problem in Greek the an adoption more often consultations contracted Perimeter after this Greece in We've severity retardant significant services. products Italy. significant Solutions for between year our fire year, mobile and season. and one the for progress and XXXX is authorities meaningful toward of As of also fire fire step has and associated Perimeter's

to the in this a the and of the concluding Italy addition and the retardant the has implementing aerial firefighting are that and made Perimeter Italy After used very Solutions entire effort equipment several provides less-effective similar superior also to retardant, their States, logistics, decision cheaper model switch service solution necessary to issues to Perimeter, products, United retardants minimal operation. run retardant Furthermore, significant to their after to staffing growing is the a also and wildfire in Italy consultations with years, the providing where, year. For primarily national fire past use foam starting sporadic model full retardant. with

very growth positive the business. long-term We of around be continue wildfire to international our potential

making good Our protection prevention business progress. and is

their again ability and conduct once Reaction that operations. Quick County Orange provides support emissions or partnering to response to Fire night quick program Force, QRF, are with retardant the protection, to We Authority

portfolio retardant to also our over our fire now in several we fluorine-free suppressant fluorine-free business, prevention our product infrastructure. new we demonstrate County foams market expand are coming continue this critical In to the the foam leadership protection to San and and months. expect Diego We commercialized working provide have for with growing and of year, developed further services and firefighting

to Specialty Now Products. turning

First, let business. the this me name in address change

expand end mentioned markets electric with various and end PXSX various applications working line mining market product previous currently including and battery very and emerging As we encouraging oil additives traditional the applications, applications diverse applications, PXSX calls, beyond agricultural our markets diligently we're on serves to for the lubricant additives, results. technologies.

no associated applications to the Products represent note name diversity such, this results. Please to Specialty a better with or impact As this markets. renamed segment strictly we end of current change is financial historical and

our Now financial Products addressing performance Specialty the in business.

XX% year-to-date increased quarter Second quarter adjusted and revenue in XX% EBITDA increased respectively, while year-to-date. and increased and the XX% XX%,

focus our the our business our gains productivity drivers, profitable customers, with in cost customer. from and performance new on stems Specialty to strong Our our value reflect via specifically, both Products operational winning we pricing existing new provide and continued business structure value improving the to

We approximately the Specialty the I'll exceed expect call of years. this Products in to to this turn comfortably EBITDA business our performance year that, Chuck. continue X deliver with of delivered the adjusted to $XX in solid prior each million business over and And should

Charles Kropp

Eddie. Thanks,

X. Slide Turning to

the retardants Second prior increased business of $XX $XX.X the million, the quarter the quarter Safety as and sales prior up million versus year; in in period. suppressants well XX% were both in second versus as fire up year-to-date, X-month year. and Sales our XX% Fire

Second year. business XX% $XX.X prior EBITDA the versus up versus X% and adjusted was million, prior Safety Switching Fire quarter year; in $XX.X to Products. our Specialty million the year-to-date, up

our quarter XX% year. were year-to-date, up and prior $XX.X XX% $XX.X Specialty sales year; Second versus the in Products up million, business the prior million versus

Specialty Products versus prior million, Second up year; business XX% year. XX% up year-to-date, prior million versus our $XX.X quarter and adjusted was EBITDA the the in $XX.X

on Moving to the consolidated business.

million XX% consolidated quarter versus prior $XXX.X prior versus sales up the year-to-date, year; XX% the and million, up year. were Second $XXX

$XX.X prior versus XX% the the year. adjusted versus million quarter year; $XX.X XX% and EBITDA consolidated prior was up year-to-date, Second up million,

below approximately item. quarter. Of CapEx in this, approximately quarter the was million $X.X $X.X million. EBITDA. Taxes were the Now $X.X accounting was expense adjusted $XX moving accrual Interest quarter approximately $XX.X was million, million. million the an expense approximately while during was approximately a $X.X benefit in Depreciation million. noncash was amortization onetime

shares and outstanding. and with $XXX CapEx summarized million of Our and basic expectations largely million around X. are on interest taxes, notes, depreciation, unchanged Slide expense, We XXX approximately working approximately million the ended approximately of first capital $XXX senior are cash quarter

Let the to they excluded includes of options period's count warrants the met antidilutive, X, labeled row, are contingencies been following share a the share XXX.X the row related and the not been on The from calculation. in average million. have of the effect the of diluted weighted Since captures well of warrants. The captures walks of table's differences shares had spend would number quarter the XXXX. diluted shares The shows our the in of shares basic impact me performance-based 'XX X stock outstanding as end X, between next moment basic count. and dilutive dilutive impact the Slide issuable Founder This of through investors Advisory maximum second QX QX XXX% row, of options the top figure fixed on the issuable the our table under labeled fixed which X, as Agreement. reporting between as Slide employee period the and

we this years, impact future which variable is included This contingencies calculated accounting is treatment that the I'll for years. hand three that count on to table over shares captures practice, a ratably the the final diluted share Since [shares] for XXX% X our to in such high in the reporting issuable the The QX price, over in the had operator of which, issue figure call shares, labeled these outstanding the The reiterate of be variable the are relative calculation next met diluted be million under to related is expect required the the from basis reporting fixed With excluded Q&A. period, includes weighted essentially Advisory the the entire maximum the I'll to practice, expect watermark shares period. shares been row issued the Founder payment ratably they share the While is shows average we X variable row the period. of XXX million. Agreement. the XX.X mark-to-market the to on back incentive in in not the to amount. the amount diluted next that, count each dilutive over

Operator

first Joshua Our questions with Instructions] [Operator the come of UBS. line Spector from

Lucas Beaumont

I for if could. to Safety, on This is start on Beaumont Lucas we just Fire wanted Josh.

X%. in sort your XX% grew but are So the up sales of quarter, EBITDA only

price touching price So can from help us sort why weaker that then of we year? just volume quarter of the the [rules] on impacts you And you this should and we just mentioned cost understand quarter to the seen was the EBITDA drop-through, about the much earlier? in dynamics the kind dynamic we've think how related higher that the and as historically, growth progress than through

Edward Goldberg

Sure.

pass in as about those our in quite through we of customers. of revenue tends significant that So depress contract significantly. we increase associated we which mechanisms, The is, effect to talked net a able we inflation during to, in to amount call, experienced increase through costs pricing our margins EBITDA, were of our which additional said, an without the as

-- depress are related -- our operations, which to margins have is to public company percent. said, also we added as again, we observed addition, we costs margin-related In some

I think costs, dollars going see will to results forward but expect margins. terms of ability raw pass can similar to through our protect again we depress in material which EBITDA our those tend to

Lucas Beaumont

Great.

give And so in of think or it's percentage I different, us the in impact the segment like quarter company by basis? the materials, for year, the sort could for level if you what then, rest in feel either the raw at of quite suppose the a like dollars guess either I and or of you outlook total the was terms a

Edward Goldberg

Yes.

raw around from world standpoint the a and there. material going markets can the commodity on you pricing general or and the standpoint impact So kind of see the in the a inflation on world what's

costs are get for next ability that into year to to those similar go I and year. the like raw into of by to of costs But expecting hopeful similar While expect we we through see is remainder costs the even I to for can't those pass materials specifics course, will as moderate through. of We're, the year. the similar see the costs or segment, of everyone remainder continue we hopeful think types

Lucas Beaumont

Okay. Great. side. on I And just the volume guess

So XX% think, or XX% I the burned year-to-date above year-on-year. XX-year sort of up U.S. so acres average, and

sort So could volumes have how seem should think if us of we that of quarter just I far. season, so understand to flowed that was curious of dynamic. of you do the going sort why doesn't help the kind of through then about where that's higher to think And third to kind you peak or hit

Edward Goldberg

sure. a Yes, It's good question.

have of before, is this our illustrated a okay very look burned well but reflective sales. generally for way season reason said is fire overall efforts retardant a we not severity, at As that -- of the typically And to acres year. our is necessarily

acres So a burned are on in -- in A use couple burned. in areas, Alaska, South, of lower retardant of those as typically the talk, mentioned et acres significant amount things cetera. Texas, Haitham were areas that his areas

the acres the much were total acres So us nearly for not as up reported. effective as

in second the of because of the addition, most the on open period most of or quarter, In much the before was early a the tanker of tankers activity bases activation. in that's time quarter are are

much standpoint. the not much in may period, now. been as middle an of has part quarter while of the softer and really the in the of doesn't So the average, indication Generally, the October. later see part season relatively an business what And than the fire activity we less until late up we September, season was now, that's generate right from August, in significant in quarter, activity are acreage burned the early as quarter

see on-trend now, season we to that. expect active that forward. But are experienced an mentioned an So as haven't going could or until Haitham line also, conditions the up such we season

Operator

Morgan Connor of the Our next questions from Stanley. come with Lynagh line

Connor Lynagh

Yes.

the of to how escalators, the out on What's these cost this dollar -- a are margin you're sold? that EBITDA the to exactly conversation right is think Just ton close of of about sort retardants way per designed? protecting

Edward Goldberg

repeat I'm sorry, Can last I hear. the question? part you of didn't your

Connor Lynagh

How basically, coming margin is contracts up. flat to of like it down are -- generated basically percentage Because the designed? are the seems your your although are dollars year-over-year, EBITDA

way protected sold your is item relatively be EBITDA guess move I units revenue lot, your but is line per understand a So that year? it given to are a going the in might to

Edward Goldberg

right. exactly That's

have bit a and when to one although a these EBITDA of experience do designed in generally, they're different, contract periods. we little protect And contracts. our So mechanisms number of the are each kinds -- these we mechanisms dollars inflationary

So exactly is revenue it you'll cost a pass on go protected increases, EBITDA, margins. up, does as we see these has impact dollar through to but but -- you'll what tend are no so we it see standpoint, depress from

Connor Lynagh

Right. Yes.

Okay. and sense That logical. seems makes

So a lot just question your story. we that get one on high-level

where how the but products, can like making as successful the as point, it From starting So in type you're you entirely competitive inroads, something you then you speak competition there different going the of side flip within sounded markets are are U.S. what in just inroads to markets? to environment into many yours generally are international the against? industry? seeing guess the make comments, your solutions to a international And similar competing is competition I

Edward Goldberg

question the take me part of let So first. first that

do a It's call, to in can North methods get market dynamics. we is new do programs our an use wildfire of international off. seeing, when the in expansion get products are in as that about of cetera, competition still -- a or them our basically believe our in So whether international to good our relative still America, and it's perspective they But or going of with efforts unchanged the win et Italy share product, some for market very be countries maintain the America. optimistic very fighting. and we happy assuming are North markets as programs potential From are previous very competitor France, that programs retardants, they the very we're like the discussions. America, The we position And wildfire a qualified North in difficult similar international talked from We're of qualified. fighting, markets Greece. in and foams, our U.S. different the same relative perspective, to in in to about unknown really paying we're

Connor Lynagh

here. Makes sense. I'll throw in Maybe more one

areas Just on the market the you're or some the And market currently guys assessed on into? what addressable relative the you market you speak Products, to could have expansion Specialty size targeting? selling to of big you're

Edward Goldberg

that markets has those about So we business emerging agricultural, a in additives of good making to progress focusing say our the of largest in really good that time we're talked I could company. and significant see the we're markets, to I seeing than end on. detail on, we know the add don't success -- end-user lot we addressable some opportunities. that mining really been more of to the which to market. success market or new And traditionally these as applications. technology particularly But Lubricant can goes other our expect size emerging new we're across new think

Connor Lynagh

It's just the wondering, these okay I want markets XX% just of just relative size? the mean of I to but new magnitude this, guess lubricants similar punt if you on size? are market. order to I'm

Edward Goldberg

been market, right growth now, a market biggest would the say. lubricant are, lubricant of it's than market. our lot to early These but too smaller I there. -- has there's say The traditionally potential are

too we're very to I early markets say So but think how excited be, some the could about big it's opportunities. these of

Operator

with Baird. from come DiRubbio questions of Brian the next line Our

Brian DiRubbio

Products to over the the it you is sustainable know on the Specialty rate current off Starting I you the run near what that medium EBITDA touched of on but business. term? gives further, confidence there

Edward Goldberg

a customers is firmly result new the business, we long-term generating this and there's medium which value we'll And benefit spectrum new to minutes us our our the getting doing And on as to into I I'm really sustainable So end the ago, hard what our we're few and very price. of markets, for think Products working that and all work business, we're business value lot the of certainly I X mentioned business future. into the be productivity, benefits drivers for opportunity a -- look continue us the confident the I believe, if of that you working at long across have just could the making of in terms term. Specialty to over provide progress it entire that in on of grow

Brian DiRubbio

So the this of Europe? and of I none I'm especially is, of getting disruptions none has of this -- driven near-term sort question in the given been by some any guess volatility,

Edward Goldberg

say no. would I

I think this is to the result of starting seeing And efforts that are us. have the and that been I believe going going on is to sustainable. that for quite progress a while for dividends we're be pay

Brian DiRubbio

Fair dividends enough. M&A you on seeing the buybacks you know holding -- of terms on said But capital Switching could if you front? Fair . enough. allocation. you're in off I what gears. just or Wondering are

Haitham Khouri

Haitham it's Ryan, here.

grow credit public debt, excuse me, with the is be sellers too the for equity availability. in always constrained powder more not and markets, and So freezing and line and like not on to environments for balance quickly to equity we with most the good now drop that these dry expectation buyers in to dislocations, It's swift Buyers in reaction between and tend a public we prices both amount sheet very find to said, M&A the in more well capitalized That of market private challenging this. declines potential like quickly should capitulate tend up. market tend the challenged periods reasons, tend significantly almost capital and primarily various ourselves year-end. buyers -- that, first

is is position pick up. means we a Activity, So but transactions, cease will market slower. X is markets however, have going Private transactions. in like eventually activity pause to think quite can't this. can us that things And forward. attractive for One our

And things is need that most much are in harder will that believe case, and stuff of on loose. we not, take is what time, that be we'll maximum sidelined like come and times will If in we effort see care hustle up doors not knock somewhat very we're and buyers do Number into us, shake to this we're this. means two, to putting which us process, happens. the less and think So to itself. on we proactive

Brian DiRubbio

Got just it. for final And me.

founders of fee, be? portion the is cash the what Just expected that to

Charles Kropp

portion, what pardon? beg I So your

Brian DiRubbio

cash that to cash to The the what be? related fees, -- expected payment founders portion the is

Charles Kropp

on the of $XX approximately. million price, Based current stock maximum roughly

Brian DiRubbio

for year, the That's full correct?

Charles Kropp

Yes.

Brian DiRubbio

correct? gets And quarter paid just that remind next out the in first year, me, of

Edward Goldberg

Correct.

Charles Kropp

Yes.

Operator

Our come with the from of Wellington. questions line Goolgasian Chris next

Christopher Goolgasian

"protecting all that? administration Biden with And focused the management And thoughts buried is for reasons. for heavily take the revised it to where obviously of in it's urban closer are forestry. That said, of has very executive for paid some orders focus kind idea acres from matters money the there's been I on that capture potential other on have the carbon this, some on forest", bill far point attention there's to the more burned and municipalities. although declarations, that forests the Any protecting vague. interface, I the be going on more an

Edward Goldberg

growth it's trends tankers where that we are continued the think that it's consistent used and years last and few in Yes, long-term the continued on And we trends experience burned, growth including growth resources, our our solid fighting with great over acreage those in question. completely of both a air view will fire, fight to are continue. the continued in spending wildfires, and see

of Some protection for us help allocated health there money grow prevention the our -- now there's protection, to we that think forest toward being and business. forest opportunity is and

forward. see, trends I just you're going support and see the accelerate really So even of those about we can from things that maybe talking what that all

Christopher Goolgasian

forest closer you the carbon with that's coming the stuff deep up just but And otherwise, for yet? capture Understood. where we any residential areas? have early, not have municipalities reasons, too to discussions it's or that is maybe protect had Or they're not just also saying, look, to

Edward Goldberg

protect done No, change. levels federal fires, also something health, forest to a climate at general prevent be communities recognition to but I state with local both think and the that there's deal has improve

So carbon now, capture definitely right focuses along large of climate the is to -- or forest with just health very other a a the relative it's general focus view change and firefighting.

it's on with that all say is community, focus so that health focusing than definitely that spent been at the we county, definitely on money local And the are -- of focus, at in I primary it's are working a in the the becoming being organizations they forest -- been terms past. state wouldn't dealing -- broader the bigger have but municipality, it So level, are have this definitely levels.

Christopher Goolgasian

say, could say, protect be interface capture just field would just the growth depth Understood. I carbon noted and I the the opportunity, material the Yes. equally, I to given you've could zero with mean the material is already obviously urban which European beyond it on market some decided a would a we think opportunity and also focus. I forests there. travel to net be

question. So that's why I asked the

Edward Goldberg

Totally agree.

Operator

There you. would I over this like now Eddie back closing to any further no to the Goldberg call for questions Thank at comments. turn time. are

Edward Goldberg

to second again our you Yes. Thank you. thank for call, and in to everybody quarter want with you. I participating next to talking we earnings Thank look calling forward and quarter.

Operator

This does participation. We your conclude today's teleconference. appreciate

your time. day. You this may rest the lines Enjoy of your disconnect at

Perimeter Solutions (PRM) 7 Aug 222022 Q2 Earnings call transcript