Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, greetings, and welcome to the Perimeter Solutions Q3 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Seth Barker of Investor Relations. Please go ahead.

Seth Barker

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

updated today's will are Chief X, today, on be that Executive have want Speaking all call statements remind XXXX, listening Officer; they Goldberg, Chairman; to call. been subsequent are of not and and Chief to Edward statements a to these Chuck this who made today's November Kropp, anyone Financial be replay We Haitham Officer. nor may Khouri, call Vice of as

today's may our or today actual our our which current on implied filings and Also, call These in our SEC contain statements impact Please a more expressed for and about are expectations, of results today's forward-looking call. made complete may beliefs business statements. environment operate, discussion management's results. and materially the based differ factors could review on we those assumptions that from

like will as our be the during release our The filings, refer on that to presentation company earnings you to also which of website. both on including SEC Please website available measures, well as referring SEC's to financial and be and would EBITDA. advise we our press call, will the non-GAAP

Khouri, turn call will I that, With over Vice to the Haitham Chairman.

Haitham Khouri

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

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

Starting with our strategy Slide on X.

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

economic We also to use these Perimeter at acquisitions. as X, five criteria believe present evaluate that criteria described potential and Slide on new we these are

value consistent value to in As described drive our we new equity three Slide improvement we by drivers, which profitable a X, operational seek provide. long-term to business, pricing improvement, cost creation the reflect value on are: and continual

capital to as our focus addition value clear of operational we maximize value allocation the on our to equity well In capital drivers, creation through structure. the of our as seek management a

starting there based variability, the expectations of for In Fire season. the is fire highly expect with Turning The Fire The Safety fire dependable, is an our while Fire We've term primarily severity is America Safety. XXXX impact our fire Safety growth the volume in the on that results. consistently long volume North exists our the impact now America growth season financial results, of season more positive within variable. mild beyond. annual on predictable XXXX nutshell, and element no mild, we and term and was emphasized financial has quarterly ’XX to annual our predictable business reflected a and and long in growth quarterly North

to due expect double more ’XX Turning to now to business is Products which than $XX to well, our adjusted We Specialty business’s each in the EBITDA prior drivers. continues perform exceed three operational Specialty Products, primarily the EBITDA implementation the value years. million, solid of of adjusted

more specifically. implementation, discuss now our value I'll driver

pricing response one-time to to piece, to these drive that provide, a value this and new a and improvements. productivity business, performance they value value and as that the fire financial important a new our profitable which a fire is are can't the laser season. forward. going refer annual both to business, cost, Rather, we mentality our operational three at these focused control can season, control. pricing approach it's mild We It’s businesses we on value an driver services on we and three products While drivers basis to should guides emphasize focus not our to

specific To this business is that This completed into driver to Fire has improvement end, granularity our drive and the within entire and a units, value we focus seven maintain to Specialty accountability our Safety execution and five necessary business. across and ensure decentralized reorganization Products business, geography drive operational Perimeter business. continual structure two within product and meant our

the from quarter $XXX second of $XXX cash balance We at million on capital to allocation. third and million the our with quarter. cash approximately now end the ended up Turning sheet, of

flow free cash any a We million prior generating as acquisitions, or our continue expect approximately convert repurchases of the to $XX balance portion in fourth quarter to to receivable cash. primarily

our this capital With for dollars, premium. in We approximately shares carries environment unique X.X available we $XX with purchased in board repurchased another access for continue the significant across almost a shares premium the mind, to million. we approximately therefore approximately a XXX,XXX million markets operate $X.X to and in restricted cash quarter and October capital in third highly million

capital that While $XXX our we points affords when presented initial this repurchase authorization. our have given compelling share and authorization, we very that half opportunities, value repurchase the utilized balance our has end, allocate million of approximately various new we M&A flexibilities To us, share we a authorized at continue related million $XXX our our with will year. that to Board to cash as repurchases

headwinds close I'll a two financial our expectations. in comment full year XXXX. with on significant faced We

fire is burned, year-over-year. significantly acres material more down the with US season, and the relevant the mild first The

million which slightly elaborate full will estimate The for the as is and we Chuck at costs, year more company shortly. public than on new second $XX

deliver adjusted expect last adjusted very to material digits expect in company despite Given consolidated decline versus these to measure XXXX. full-year costs in like-for-like true performance, get flat exclude year, we the acres we percent roughly to XXXX estimated If two now headwinds, down burned. be single terms EBITDA consolidated of a we versus XXXX public EBITDA

As our expected financial next similarly our on consolidated reiterate line, that performance expect view ’XX deliver EBITDA I will we our season occurs. versus we mid-teens us, fire a or roughly with approximately In press season adjusted drivers. to XXXX million had had we referenced on hope the And percent the trend in XXXX. and closing, in to operational when fire prior $XXX continue behind in improve come to earlier, value I greater the largely year we and reported growth mild

over I'll that, call to With Eddie. the turn

Edward Goldberg

level provide equation per Thanks, acres of Haitham. I'll start retardant is high some context on Slide X. a function of our with plus Safety acre. growth business business volume in and growth burned growth starting Fire in our The retardant

acres US our unit As at volumes CAGR. analysis, measured on fairly are seasons, points normalized years averages. seven this increased year excluding respective where We years, as the XXXX burned end and a use both have slide, the for illustrated within percentage a moving the few XXXX through fire past years XX% represent seven start XXXX over and Alaska retardant of their XXXX, as trailing

five a Slide acres the million series over on CAGR. a ex-Alaska. burned CAGR to XXXX. increased rolling at growth US the a approximately burned of average ex-Alaska five X% have million year average year rolling in X.X a burned trend, decades in average to of multi-year XXXX five acres from year three capture retardant X.X burned XXXX acres over volume illustrated acres our This and rolling increased acres time the long-term a part ex-Alaska the US Using first line is of X% period, As to with equation, in longest XXXX in available at burned growth utilizing X, US the

remain We dependable in very term. expect long will over growth trend ex-Alaska long the that the acreage burned term and

XXXX increased illustrated Slide As at volume X% CAGR. per the XXXX X, on of burned, to retardant second over our period, retardant acre equation, growth the part

wildfires; Slide air agencies. in function retardant which the fleet, and interface, aggressive by the in fire primarily is need to X, aerial management continued increases wildfires, the on to summarized wildland growth growth As the in the fight increases and acre which attack per tanker growth ability urban of a fight

future. secular these into persist trends growth expect We to the

As summarized on Slide XX.

a retardant or were base, dependable by not acre. volumes in up burned single we forward, per to mid-to-high grow expect long-term our driven digits acreage Looking retardant normalized and both annually, growth continued

illustrates XX% term Moving the of The season. short severity hand US secular of variability. shows variability as season we element fire slide any of this exists which short-term US the on the are XXXX. volume left The growth, side fire individual North there acreage to burned it's QX an year-to-date predictable versus QX horizon, XXXX this within that chart on time long-term based clear compress Slide XX, of the America ex-Alaska, down

magnitude this the year. US short-term same down of ex-Alaska right on the fire year-to-date It's XX% of burned chart acreage The the hand end the US last slide in variation period through to season. September, difficult which overcome are illustrates versus the side of

Safety while Fire Fire XX% such, respectively. decreased As third year-to-date, third EBITDA and XX% Safety adjusted revenue XX% decreased XX% and and quarter year-to-date quarter and respectively,

reemphasize believe milder to anything also season fire are to trend a seasons season. XXXX seasons, season variables. we fire we're either consistent that I'll informs planning the with XXXX for negatively. that XXXX while future about fire more don't XXXX positively or a the independent respond The and line, preparing or there's long-term And fire severe

at most XXXX softest acres was with XX.X acres million was fire recorded fire It was burned the burned the million US season roughly past For ex-Alaska. in reference, severe which US history the X.X by years, the XX XXXX of ex-Alaska. followed season,

Fire on inflation Moving primarily XXXX, the our declined year-over-year QX impact margins. to which pass-throughs of margins, on Safety to in due reported

material inflation As in Fire via we've of the vast on on year, passed across this XXXX. contractual experienced in business. calls our our discussed of majority successfully significant We raw mechanisms Safety this we place each inflation

periods, this inflation our dollars margin protects compression. dampens leads it EBITDA grow as our the a revenue to pass-throughs while our during inflationary powerful reported that of feature keeping While EBITDA also business flat, reported margins which is

within profitable opportunities expand call. made Prevention progress pleased in touch customers as broaden Let continue on as year portfolio our with to new Fire developments Safety. wins in pursuing me and referred on now which Protection, well important solid growth prior we're business, We with on new Italy this international of customers. We're including current we actively and Greece, retardant also our we where in our to business business

year, support Reaction to second expanded County Force Orange partnered Fire with Authority we a and For program. Quick

financial our can for publicly quantify the significant results, While it's potential be has still we early it time. too to business over financial believe contributor this what mean a to

to fluorine-free foams and in Finally, commercialize continue to portfolio. expect to business, our we and suppressants continue firefighting develop grow our fluorine-free new

Specialty Moving to well. Products, is performing this business

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

EBITDA adjusted EBITDA business’s years. on the of than This Specialty expect illustrated which implementation, driver units. three is Haitham noted, XX, double annual is XXXX and to Slide should in drive Products As and exceed prior adjusted value part of all operational we a our now million, value each more performance as $XX result on an across basis incremental of culture our business our of forward going businesses the

And I'll to the with that, over Chuck. turn call

Chuck Kropp

Thanks, Eddie.

$XXX third year prior to the versus Turning year. and, in XX prior and $XXX versus down Safety quarter our million, XX% Slides the down XX% Fire year-to-date, business sales were million

Third down the quarter $XX.X XX% Safety million prior versus versus the in XX% year-to-date, million, was EBITDA adjusted our $XX.X Fire business prior year. and down year

mentioned, expect company requirements to of million public This to compliance. insurance, expenses around comprised and audit, public external XXXX. than cost company in absorb slightly reporting Haitham As related $XX internal and legal is we and accounting, incremental the primarily more in

realizing reduce overall annual inflation. to goal company public Going by productivity gains is of in expenses forward, excess our

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

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

year Consolidated year-to-date, million, million on were down prior up X% Consolidated prior versus year. and Moving versus the to third the the sales quarter business, XX% $XXX.X $XXX.X

consolidated million and was the $XX.X quarter EBITDA prior year Third down adjusted year-to-date, the prior XX% year. versus down $XXX.X million, versus X%

million expense million the $XX while Depreciation amortization $XX.X quarter. $X during is EBITDA, million, in $XX.X regular in the expense million. was rate. adjusted was approximately quarterly quarter Taxes approximately were approximately run $X.X million. which CapEx was moving quarter our was Now interest the below

working one, term these Our two, capital. to long capital interest related and term expectations taxes, differences expectations, to and expect on two are XXXX, Slide XX. versus around In expense, summarized cash related longer CapEx taxes working we depreciation,

be should cash lower expect to We approximately expected. taxes come in than taxes cash million. $XX XXXX

longer part other to hand, to expect with to approximately $XXX inventory year, higher a the cash be coupled approximately large the of Senior $XXX we lead the outstanding. quarter resulting in we typically fire expect, use of and more basic million sales weaker from approximately shares significant the purchasing On cash with working relative in times. season XXX million We increase of than capital due Notes, ended this million

basic shares our diluted approximately the walks XXX counts. the walk XX issue ratably through share expect table investors of I will Slide through won't Advisory the though shares practice, XX.X In differences next to includes fixed investors that issue detail, I in the and over Agreement XXXX. we these between share to through our million XXX% years. count we million Founder under shares of the remind diluted expect six QX

that, back for operator over call I'll the hand Q&A. the With to

Operator

ahead. is a the [Operator Thank time, line you. be this from from Our Please question-and-answer Spector go Ladies will we and gentlemen, Joshua conducting first at of session. question Instructions] UBS.

Lucas Beaumont

for Lucas morning. Beaumont Good is Josh. This on

discussing to Fire the fire season of start we could. So performance the by I’d if like relative just Safety to

had had year, the something So sort down there. the the you year-to-date in in in are numbers of guys think I I guys burned for regions and third XX% quarter, the focused that on. similar you XX% acres

sales and only were your XX%. XX% of think and down EBITDA kind I

of the XXXX a there getting in products? the Is driven versus we think outperformance Was season? to an like international price of driver fire the So with markets impact that it about there the driven? new should of back in what normal volume market? on or how kind base earnings terms And was

Edward Goldberg

question. Yeah, good the morning. for Thanks

combination business the capacity increased the outperform burned, So typical a to I and It's for downside. think to initial it's by in fight agency. on strategy of pretty particularly aggressive fires volumes our attack acres

I see in in our acres So where business think typically you'll are sold. to of able that outperform we retardant terms

Lucas Beaumont

that in so which Can of buyback, then, And pretty cap. that like market of of year? another talk of next view you us X% It's XXX think million you you've terms about leverage announced, current new how over context just of and about the we Thanks. great. for substantial. the deploying sort you Okay, kind how your in is your should is the

Edward Goldberg

to buying to that way we is of use want right to we and advantage that, think firepower we've the opportunities back authorized make our we the stock when So sure the flexibility got take the capital.

to authorization allow flexibility. that So it's an us

Lucas Beaumont

So, businesses improved half, start to sort any worries. maybe other the kind no at the then there Specialty exposure moment, to we’re I to Products, so second seeing your with particularly in of And into similar Europe. quarter-on-quarter, shifting of expectations earnings those mean, weaken

driving So you half you how -- I just sort for the was and of wondering trending? what strength here if the second could talk see about what's you

Edward Goldberg

making half new our Yeah, the out pricing feel of And really we've the forward. Products good to and the second the hard drivers, driving that and been all working our value across feel taking about of about value, in business. good progress Specialty system, we and cost we're going in Specialty very in business Products, we

Lucas Beaumont

in there, so mean, annualize I'm in million. I me current mean I EBITDA million -- pricing there's of million current I going sort EBITDA wrong, I overrunning of is of or of on sort like, some the $XX like I And from on LTM flagged it’s million quarter, $XX $XX if to an get basis, sort -- you year. the from and a this Correct go sort but assume guys, you pricing so environment. $XX you the that if I if

earnings kind to Or So back out, there, -- $XX is think about should one about how mean, it this to a new I to how I we should does or $XX of them? is the it years mean, million? think normal million we base two go

Edward Goldberg

a couple say me of let things. Yeah,

were results And our own, of interruptions, on because probably of said had previously more were typical their bit little having results production quarter we no quarter second behaviors. mix customers first that etc. results the very good customer different very So good, a a were

is the third continue business. probably like QX we're quarter, make our The optimistic and value in that we across first a progress improve drivers look all we performance basis, way of an going look forward. this quarter on the And somewhere lot to business ongoing continue to right to to at are did the this going think but still

Lucas Beaumont

very much. Right, thanks

Operator

you. Thank

Our Connor ahead. of the Please Lynagh comes next Stanley. from Morgan go question line from

Connor Lynagh

thanks. Yeah,

as inflation framework were have the you've of was way pricing? help you done should the season. I'm What weak EBITDA wondering fire what obviously, we or can should Also we cost? if sort we highlighted, growth activity through, business? fire be dollar impact you the on to think through done on least you've next can a drivers see your So very at you would to think give how of the that guys what us been a have if to, what's you year-over-year, through think this think normalized on sort of about dealing us pass-throughs various as guys logical EBITDA with, for year,

Edward Goldberg

Sure.

we all saying see true. growth. we to return EBITDA we'll When to been normal to we've season, we So mid-teens believe believe that that continue continue along hold fire what will

forward, nothing Going changed has really there.

across value we We continue taking system, actions again, price take to aggressive business. the work, making very to for looking new cost out and value, of of hard sure to drivers the

in continue protected We ability cost through pass to unusual be increases. to our

about good to what's I our expected as will normal we feel performance when and a that. get return fire we So to more And seasons. think

Chuck Kropp

quick, real And Connor, off mid-teens a of I'll season. normalized EBITDA it’s just add growth fire

a $XXX earnings got is mid-teens trough-ish delivered of EBITDA, the year reasonable. adjusted normalized XXXX to been last we the roughly roughly be we is call, careful if season, off growth know, be which what of just fire or on would million we peak-ish years, You had in think

rough approximation very a preliminary off albeit mid-teens makes starting good on-trend growth of forward. point and good, that, then as going pretty that's So EBITDA, sense a XX

Connor Lynagh

just clarify to the just Thank point. just clarify -- And that that. color for but you so

you would incremental, just not if growth, were improvements XXXX, an improvements? mid-teens mid-teens have year, And So it the just I done for have you've EBITDA. the call, then you benefit, do normalized also it call that you have one worth XXXX but would EBITDA normal to is only I the think or to year, driven is example that? in a would volume about XXXX underlying business of How think year if

Chuck Kropp

the will which that'll season, X.XX, number We had And mid-teens been that normalized ’XX for, year can at is, was assume roughly be XXXX, to be to take mid-teen, this $XXX think it wherever a growth million normal right, or you least times spot fire in normalized growth get very a assuming over season. specific. is then you XXX.X ’XX ’XX EBITDA fire

Connor Lynagh

Got obviously one is stock on your it. then competition. conversations Thanks. the of And big

So enter competitors now? if and the is what for to of update qualify just provide could I'm right you on use attempting wondering an state the market

Edward Goldberg

of XX day changed barely say in I said Service Yeah, all, by -- that the it. this haven't before, so a what business website there I I've that the you really first I've in last see and at look somebody can Fire nothing's gone will I repeat quarter. into can hasn't that been get to trying has the running been years last on

noisier companies than Some are others.

bit I right system forward. noise the in think we good But our feel position market quite very about going there's a of now.

Connor Lynagh

Alright, Thank I'll turn it you. back.

Operator

De question of next ahead. go the Our Instructions] Baird. Please Brian [Operator Rubio you. from comes Thank line from

Brian DiRubbio

a just better business generically, May down this morning, drivers? are love price? of drivers on but there? have have Specialty just that can It the us to is was various a for Just just what what I'd know maybe were the questions to Products missed seeing second. give or you me. drill it like Good volumes you -- been just few for

Edward Goldberg

includes business We've in value previously, across across mentioned the good year, it to I looking to that profitable value, as of progress system of made last includes three price out all we working -- so are driving over the for drivers hard value business. costs drivers. all taking our and Yeah, improve all new the

that that results. of all to make continue aspects in that we the see And improvements forward we'll can going business. think You across

Brian DiRubbio

rate drive that's today? the Maybe more going to business, going what's of have in volumes sort or that driven the price What's this story And know the you you more ability do is be to operating forward? another a capacity? way, of

Edward Goldberg

We that take on believe ability on, new business good working feel we we're have we about profitable that. to the

Brian DiRubbio

quarter, I M&A was Last touch $X.X as this contingent Okay. performed activity, both actually and earn-outs. million, on on you Wanted not but means that like gains a was, the as took targets M&A think know, guys Obviously, when it quarter this item $X.X has non-cash you your relates that as non-cash well to happens, you your quarter to thought. million. quarter last of one

So are we'd happened bit little get love M&A today? you there, a about more how details what of sort to maybe and on thinking exactly

Chuck Kropp

M&A, that's is from terms good Chuck. morning. question. liability earn-out decrease really, product product the as in so eligible there. shift not of the simple This for the in earn-out Yeah, Yeah, as to thanks eligible, just Yeah, of historical the

Edward Goldberg

create And, get Brian, it. it, going value quality to forward, M&A When flow do as love unchanged. is our We're We'd the done. free we view find on focused shareholder very transactions very we share. cash per long-term completely we significant on high

good expectations to hand, the sheet and cash and in On the it's a on restricted forward cash we're of with generation. capital access a M&A great situation less competition, both environment one very balance

just hand, working hard it's and we're done it get things challenging super stay price to and things working, and environment, other On in at the tuned. more this we're loose

Brian DiRubbio

Got it.

I in Just of the reason that? there one of me last symbol changed [indiscernible] ticker for Is been bonds the the question know have months. your for final and But answer. couple any

Edward Goldberg

take our above That’s rate.

Brian DiRubbio

were me Okay, okay. they to looking So, was just up, what's They calling like, [Peri for got Everybody's bond new this but MS], I confused HLD. own? locked everybody.

Edward Goldberg

Okay.

sounds our like very to therefore holders, us. and it's important important it bond me earnings If it's the you're asking on call, to

with from a you'll e-mail figure out. And clarification. us, pointing us Let it for Thanks that get out. an Brian

Brian DiRubbio

Thank you it. appreciate Yeah, much.

Operator

Thank you.

Joshua comes line of Spector question Please the next Our from from UBS. ahead. go

Lucas Beaumont

Lucas, guys, again. Hey, its

as as over sort from materials moment fire isn't at the fleets get year seeing what a know next year into going to more the you visibility aerial that's couple follow-up, lack that wondering of years? down a a I positive you probably of I guys So -- kind could say ask you unmet more well. have say maybe just dynamics Just the the would the are are perspective increases so we So I sort how that be to that retardants in the acre that's you acres talk for sort burned well, growth but the wanted in you side? you plans? about would of guess, so captured year, per right rollout, of to is do in given due much or this normal demand benefit on been of guess CAGR as retardant a X% of And think about the Thanks. if

Edward Goldberg

Sure.

at tanker as in one increase year-over-year. our tanker see in the business. the the So, And capacity look we growth key an capacity you volume air do do air know, of in continue of drivers we to

are because that what couple to air next the into look specifically, you visibility FIRE all you is their adding seven what the expansion tanker and of private in pretty saying, the of kind years. tanker companies, probably should over their currently plans working CAL on companies of the both to terms in they're is air know, You fleet can C-XXXs see public

the acre contribute season. fire just what retardant of sell increases, positive. So It we to per and peak increases peak during see that the also very of we the it does as can

secular that of So as trends. business of a driver key the and we growth one see the

Lucas Beaumont

much. Right, thanks very

Operator

Goldberg, have gentlemen, I reached like question-and-answer to end Ladies you. would closing the now Edward conference we of and session. the CEO, Mr. turn over to Thank the And comments.

Edward Goldberg

fourth to you call. earnings. full-year all months in few to again for XXXX report quarter earnings Thank a We're joining forward third and looking you our quarter to talking

Operator

The participation. you. Solutions you Perimeter conference day. Thank now your for concluded. Thank a of lovely has Have

Perimeter Solutions (PRM) 4 Nov 222022 Q3 Earnings call transcript