Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the Perimeter Solutions Fourth Quarter 2022 Earnings Call. At this time, all participants’ are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Seth Barker. Mr. you, Thank Barker.

begin. You may

Seth Barker

operator. joining Good thank you, everyone, morning, Solutions fourth for Perimeter call. you quarter Thank and XXXX earnings

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

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

call, that on which also would SEC's The and company The these of website. measures, other press including found our available release information both non-GAAP our items reconciliation on earnings the like be presentation and EBITDA. of in regarding be advise and you referring to be financial can will during website we to will the

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

Haitham Khouri

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

financial of where analysis role both appointed business Planning our Let is veteran, currently Seth and led corporate of a me he Financial introducing start Seth previously measurement Investor level plays key products specialty our and Relations. Seth reporting. Head and by President our unit recently and Barker, Perimeter having suppressants Vice planning, is Analysis, in off a businesses.

with work. is primary And equity role our Chuck continued Congratulations, investor excellent of Eddie, for debt with thank FP&A, for also closely and and he where addition to perimeter's as will as I you engage VP work the In we assuming his relations function investors. responsibility Seth Seth.

summary slide on starting turning to make on financial capital comments now performance our before three. our Let me strategy allocation, and our strategy with

is of a on critical, account value public and products Three, for equity the but long-term uniquely owning, to flow One, returns high-quality streams. we portions Two, And goal potential very Our five, to new specific with criteria the by deliver five like economic believe cash for tailwinds. criteria present five consolidation. operating free businesses current following goal larger high-quality recurring private define opportunistic predictable We through evaluate returns market. at businesses. plan this that attain these businesses growing Perimeter's revenue economic Four, secular We acquisitions. these tangible the and of criteria. small generation are with growth uniquely potential and significant capital. higher liquidity We to streams. use

by seek we which four, creation drivers, value value slide new on drive described consistent As long-term profitable improvements; are productivity improvement three pricing the to to a in and our reflect provide. we continual equity value operational business;

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

Turning now to results Fire with and our Safety. financial starting

XX% fire mild burned discussed U.S. acres was acres States. fire and impact outside the reflected the of activity of Safety results. with XX% ex-Alaska milder beyond. that on mild our season and for season and United The The our impact season ‘XX full-year U.S. burned markets The expectations no has QX Fire is we've even fire fire down XXXX was ‘XX ex-Alaska our in in ‘XX Canadian with America minimal quarter As mild and previously, down fourth hectors burned North down XX%.

to EBITDA with more doubling than adjusted year a solid year-over-year. Specialty The Products. Turning business had

year-end unexpected QX, this in sudden market. and Products our additives expectations lubricant Specialty missed across However, due a inventory our reduction was end to

fact, on solid in destock their economics I'll down they we're comfortable off facilities couple activity that in late quarter fourth note nature. temporarily is inventories. this QX of in focused the that as shut unit customers Products working remain businesses In and a that large our our Specialty temporary

Turning for of allocation. repurchased We $XX million in an million. now consideration approximately shares $X.XX price an ‘XX purchase $X.XX QX X.X shares to average approximately million at cash at approximately full-year of capital and $XX X.X the total approximately average total consideration of of in price and million. We for repurchased

remaining repurchase ended our authorization and on million balance with cash have We sheet. million approximately $XXX of under XXXX about $XXX

the and XXXX, cash expect allocation generate to otherwise. repurchases we capital balance, any compelling take opportunities potential acquisitions, that positioned well to flow including that arise, Between of we our share significant or significant are free in potential might cash available believe we advantage

Let on me now full-year our comment expectations. XXXX

Our provide policy is financial to not forward guide.

we another. the challenges annually season a ‘XX We've that roughly However, I'll that mild fire the the to high-level when on We expect EBITDA in trend. consolidated given grow fire mid-teens comparing consider fire XXXX. that XXXX on to trend the modeling adjusted fairly stated might long-term, framework for range season over create, provide one season

recorded XXXX also on two years trend, a the in imply XXXX XXXX EBITDA. Assuming is it's to CAGR season adjusted reasonable million adjusted $XXX this of mid-teens fire to compounded EBITDA to the apply consolidated we over

XXXX very dollar suggests for downward EBITDA is $XXX see a we'd impact expect figure should a the financial of approximately reflected adjusted in reasonable This mild, to is extent that or results. account season assuming for unusually this adjusted business XXXX, one again At our framework to internationally. stronger is the U.S. an the be season. our the fire roughly of expectation high million of on severe level, on-trend impact consolidated conducted the slightly then quarter the again To fire

season, the irrespective our on that we emphasize businesses. of fire our will at I'll Finally, drivers value press with the of operational severity both

to ‘XX ‘XX. still notably year-over-year should such, financial in we be out to Fire fire ‘XX improved ‘XX expect As deliver the the to versus Safety mild season, turn season similarly results

full-year we public note much that a In very I'll company first our closing, as our thesis long-term believe is on track. after

acres of time, experienced ex-Alaska challenges. like logistics and U.S. inflationary Safety XXXX Fire Fire XX%. resilient. two Our significant pressures we same over XXXX burned Safety's experienced business businesses, most Yet, the moved financial and down years At performance consecutive

business. in of is our Most our commitments to customers tanker importantly, support save We our mission with and time. loading met bright air Fire of by XXX% every we lives, the environment believe XXX% property reliability the for Safety future the

In Specialty Products, for speak themselves. numbers year-over-year the

the we Products' Specialty know we negatively surprised While and excited activity were we're QX, destock about future. by pass in will it that

Ed. turn that, with And over you. Thank I'll the to call

Edward Goldberg

financial million starting with into Safety Fire the revenue the XX% Haitham. Fire our EBITDA decreased Safety XX% Safety and quarter and and business. Fire Fourth QX was declined directly Thanks, results, in $X.X for respectively. full-year. I'll negative adjusted full-year jump XX%

America As XXXX we've noticed -- these season. the by noted, North fire were mild declines driven primarily

early product QX primary the we due outside and quarter, and XXXX in ex-Alaska the full-year activity across XXXX with fourth XX% region. our fire in Canadian Australia the very XX% U.S. unusually minimal decreased retardant decreased market the acreage the the an wildfire retardant for to fourth fourth of which quarter. sales delayed season, wet quarter. America recorded activity for burned burned is decreased hectors for in full-year Australia North XX% zero

was to season our reemphasize don't is and anything informs financial evident and with season negatively. summary, fire XXXX especially future for consistent or we most the XXXX so seasons milder The about the fire a fire believe XXXX always positively fire that in seasons. of fire respond mild our planning or results. I'll across and we're are severe XXXX the line, and season as In was trend seasons the either impact XXXX QX while that there's key independent to more markets, variables preparing long-term

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

I'd like our in our performance highlight now to business. suppressant QX

seasonal Suppressant fourth true by an life to value progress our Our in primarily strong quarter, business therefore in area retardant solution. the increased much system of is XX% the pricing our than and suppressant free less much products, innovation and saving flooring actions business driven sales clearer. sales where our our year-over-year reflect is is

meaningfully than and in productivity sales drove as expansion. QX value year-over-year more pricing significant our Suppressant margin initiatives EBITDA increased

which business is suppressant Our drive consistent of of business, and our helps an growth the dampens becoming the impact safety fire increasingly relevant component season. wildfire

in factors. Fire by Safety down EBITDA were driven primarily XXXX, adjusted and margins this was three

raw First, successfully Fire on material inflation the year, passed across mechanisms via significant in of our the vast XXXX in discussed majority Safety place contractual as business. we've throughout we

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

incremental in negative ‘XX, fire Second, Fire to company we over Safety. And million of leverage the drove third, mild portion of costs Fire a incurred public allocated which significant is season Safety. in cost fixed $XX

with the Fire discussion the this our while to I'll both reported confidence Safety into Fire We close a our future. let forward for speak reporting these position comment look will themselves, I And numbers results. we'll on Safety our year in competition. reemphasize market and

Specialty XXX%. Products. X% Fourth increased XX%. decreased Fourth full-year increased increased to adjusted sales adjusted full-year quarter Moving EBITDA sales quarter EBITDA while and X%,

end towards resulting expectations, in several That to shutdowns plant customers in due and our a business by of Specialty fourth event actions EBITDA These destocking were late across actions in came adjusted discussed, Chemicals not shy unexpected quarter. the industry As said, QX. the in quarter year. Specialty destocking Products our dollars such of primarily the uncommon actions our inventory sudden were million

We to and eventually the to persist first in expect though quarter destocking normalize. activity ease

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

Chuck Kropp

Eddie. Thanks,

Safety million. business sales to in negative sales adjusted million. to full-year XX% Turning to our decreased Fire quarter EBITDA XX% decreased Fourth XX% was and $X.X six. Fourth million full-year five business $XX.X Safety to and our and in $XXX.X Fire quarter decreased $XX.X adjusted million slides EBITDA

business our increased and adjusted quarter $X sales to $XX decreased Specialty Products sales quarter EBITDA Products increased our and adjusted Fourth to in business X% million. EBITDA $XXX.X Fourth full-year to XXX% million. increased Specialty to $XX.X XX% in million million full-year X%

XX% Moving to Fourth in million. sales decreased consolidated to $XXX.X quarter Fourth XX% adjusted X% quarter the to $XXX.X business. consolidated and $XX.X quarter EBITDA million decreased sales on XX% decreased full-year to decreased fourth million adjusted million. full-year EBITDA $X.X and consolidated to consolidated the

prior public on we we in in over incremental $XX company absorbed As XXXX. cost our noted million call,

adjusted have year-over-year to close Excluding been basis. a flat these costs, on consolidated our would EBITDA

prior to call, we As in our company realizing gains productivity public expense excess by forward annual noted goal is of on inflation. our also go the bucket reduce

ourselves and going We to goal to a forward. this plan productivity will hold XXXX this accomplish detailed have in target annually productivity

the for expense $XX.X full-year XXXX EBITDA. line quarter regular $XX expense. the in of adjusted $X.X million non-cash interest run Interest Interest below our fourth million was in $XX.X of with includes moving cash expense approximately quarterly which was expense approximately Now million, rate. interest million and

financing significant in in interest composition similar no to activities, beyond very expense and XXXX look to Assuming we quantum XXXX. expect and

approximately for the was respectively expense quarter was $XX.X million and while full-year. and the $XX.X $X.X million Depreciation fourth million, million $XX.X amortization in

D&A to We beyond. expect in XXXX be similar and

for taxes taxes capital, at approximately QX $XX.X increased paid was investors accrued and income net $XX and We receivables, inventory, full-year. $X.X and the prepaid in million suggest million expenses in XX%. for full-year short-term and and Working includes Cash income model tax XXXX which XXXX. change million by in payables the the beyond

requires The and always higher of do [showed] cash our significant our XXX% season. to transpire. inventory by build us our with was sales season business use As resulting more emergency (ph) a of change as call, meet noted mild reliability order prior a this sufficient in driven primarily needs to services we relative from is the fire inventory in nature to customers' the severe on

quarter fire to in expect $X.X increase CapEx an million million was approximately year-over-year. trend Assuming capital for fourth XXXX approximately season, and only on modestly $X.X networking the year. we the

of and $XX beyond, $XX we annual XXXX to For that investors CapEx. million model suggest million

evidenced covering CapEx. As roughly and both our years, million million growth by the $X to maintenance is $XX annual CapEx requirement prior three

deliver that cash modeling should extent CapEx expect project will potential range not $XX on $XX However, historical attractive million To projects savings. million forward, capital below. to By move capture million we investors we which of in projects cash strategic in several returns their range, do annual the productivity or the these evaluating IRRs projects, greenlighted the in are to via financial $XX actively projections. and CapEx remain if these

with million quarter approximate senior notes, the and $XXX of cash outstanding. We $XXX ended $XXX approximately approximately basic million million shares of

quarter. the third shares primarily to buyback aforementioned end the outstanding at Our are approximately basic activity $XXX during down from million fourth of the quarter, due the

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

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

Operator

you. Thank

comes We session. Please be question-and-answer with will question Our Spector first from ahead. now UBS. conducting go [Operator a Instructions] Josh

Josh Spector

Good for Yes, hi. morning. question. my Thanks taking

investors. if wondering expand pretty comments Just dynamics competitive you your within focus could fire the a It's for obviously upon retardants. on been big

here have can pricing, comment around paces that about number of year negotiations, anything any maybe anything on you talk So you prior the could curious XXXX change just if this that years? or versus specifically contract

Edward Goldberg

that wise. can discuss. in or share as in really comment get that question. season, little till market don't And season said, the opening know bit at Yes, the into to kicks expectations on comments, happen we very off, But -- basis the my with market we'll exactly going just We have said when individual for a base Josh. specifics we I Yes, more confident our further we position. what's just Thanks time. we're this we can't

Josh Spector

then guess, any that of earnings in down are next on I pricing I Okay. materially. have costs or or would thoughts for that through? impact your how All pretty right. on ask Does If see I within we margins could -- year specialty, sulfur terms flow mean,

Edward Goldberg

Sure.

that materials, impact reductions are We profitability. you increases. would there'll the be in some to costs some give we costs some Specialty through So, overall of Products modest are I we're raw able up, that know, have Generally, down. on pass overall back a say relatively overall,

Josh Spector

your level but please guess free your Okay. do year you to on. not And meaningfully, be look within fire this it -- I would It's to in more had if the context, flow could that's up, season cash comments think you that? correct I weak as confidence if like seeking fire you what or interested just if on what I'll here one EBITDA then last pass year, for is season a of I you expect similar me you that What gives if said drives this And similar said. guys? that what and year?

Edward Goldberg

and we put over it XP's quantify can right say profitable And season. statement specifically business. but value, the did a effort slow improvements, XX-months we lot last didn't to efforts we think feel of the wouldn't don't now, showing that our we results new we pricing I we of make similarly a and should Yes. the into really good productivity about have these

Haitham Khouri

and as free is essentially give CapEx the fire and is EBITDA trend, to season on in through, a no cash within capital Haitham. walked the that. the won't cash taxes, prepared working increase flow this Chuck's in net pick Chuck to that which your are I On doing expense, It's it's you more question, a cash extent Josh, interest your comprehensive, modest they're of number, as simple but then remarks. uses subtract cash

Josh Spector

it Okay. All right. on. I'll Thanks. Thank pass you.

Operator

comes ahead. Please question next Stanley. with Thomas Our go from Jonsson Morgan

Thomas Jonsson

my Hi, thanks for question. taking

obviously First operational one of, across the different Outside on whether maybe full that history. touching just supply competitive installed where here, kind just of qualification, in an key, of even bases you United your States? dynamics be overview us maybe, competitive you just Thanks. again. kind chain, the see of, logistics could advantages, give But air receiving

Edward Goldberg

Sure, you bet.

in virtually the it all, that best the close. So isn't measure say every industry even we're confident have that very of me that we on first let product and

We both over throughout in manufacturing, can almost really years over services deliver many infrastructure And long America retardant built hours. safe We products favorable of the distribution that in history and to North air-based anywhere reliability. delivers we've that XXX% ante we've environmentally industry. an and we've of the XX/X within the is that's near delivering What this game. time got a year. built deliver kind effective So in

basically largest in largest and the U.S. bases equipment the operate the air air bases And own and facilities tanker tanker we at or

deliver don't high that, be whenever think fire in investment any reproduced without long meant is So to extremely year reliability what whenever that's and burning tremendous way can and the material fires season or we've something all are we the built timing. that

Thomas Jonsson

here. expansion wildfire then you. international there's goal Thank where core of far XXXX. that Safety the activity in severe And the is business. Great. quarter just Chile, outside another know of last thus I here a have But kind unfortunately long-term market, one we Fire in mainly the more for of been

from and as update fire you a I on seeing customers international well maybe what strategy, in retardant? U.S. quick outside just So are your guess the interest as

Edward Goldberg

Sure.

I those let buyer before, Chile many seen we I our Outside Australia serving me describe include we've that activity America, think and but of for years in probably both So described where North XXXX. been markets again. this traditional it have and early we've

We America, supporting serve, are fire Mediterranean we of now. to Australia those And kind right area traditional in active South and of, to markets, continue Chile activity the Europe.

In To governments And emerging as customer experience to progress with think help the them build them wildfire we in over with previous retardant program addition, many Greece, to work we we develop that I made hard starting are became these talked over years we a their time markets. calls, in and issues. I've they and see programs worked XXXX. that a about retardant where very in

the grow also markets to going new to world. deal them markets continue about to wildfire with emerging our be help with we traditional and around we're are the and those issues markets, their help But expanding them work to excited continue So serve international geographically that programs.

Thomas Jonsson

back Thanks. I'll it. Got there. turn it

Operator

next Brian Our Please with from ahead. comes Baird. DiRubbio [Operator Instructions] question go

Brian DiRubbio

of A gentlemen. me. couple for questions morning, Good

broke Obviously, retardants. market, how of be revenue versus line the today. breakout the about coming out [Indiscernible] willing that much revenues of disclose suppressants you'd Just just commentary you of you from that that suppressants when first is retardants? came some off made some you versus something Is to even to sales

Haitham Khouri

out retardant said, Probably this be not there versus call. should and is on more our disclosure -- keep XX-K your That soon there. suppressant

will shortly, you this your So very on have in call. quite answer although not hands an

Brian DiRubbio

update just something can disclosure is quarterly that's going provide you're going to more provide that be that on a annual And an that or basis? to Okay. you

Edward Goldberg

give what retardant versus out assume As now tend adjusting we should to that, we think I with it that's to going won’t stands forward. so disclosure, our specific suppressant We annually. consideration break any

Brian DiRubbio

enough. Fair Okay.

Just Or you year now? switching you results sense gears its this on business not think sustainability Just there business of Specialty Products very strong function get a as of factors you margin business, there right Is that out better a to were given step sustain that going may mid-XXs your generating is look know, last the change noted the that EBITDA year. forward? any last repeat to the profitability? can

Edward Goldberg

Yes.

gave, in business on what ‘XX. a still but I driving working right? growth of can confident be see on -- improvements, step across about achieve We we're XX-months a we it's new of, fronts. kind to same, we've for on the looking know, we're the that made over that to able a into XPs in work carry see ‘XX business. -- in I a this before. little that products do Still in saw were business XXXX, expect the into that value, we're business multiple little did talked to future. opportunities You I gains that we through last think for I mean, ‘XX productivity ’XX. bit expect the lot largely But price improving and the in pretty And sustainable in change really specialty bit for higher although it. successful don't I year we And the we've working been early, a

Brian DiRubbio

valuations, what And M&A (ph) terms helpful are two In in quick Fair for expectations enough. would there. then That's some] terms ones. [want today? describe on thoughts that? the current of How just of targets, you environment

Haitham Khouri

not minimal, the would would very discovery I'm I describe as say, has it's transacted. M&A price has been broadly activity much surprisingly There Hey Haitham. market I quiet. more Brian, because largely, very,

sellers is and unchanged because are If XX-months from you traded nothing's multiples ask ago, the contrary. that

multiples ask If things and down. they argue public buyers, you and point other that are to markets

the front, multiples [falling] stage, thawing will would this we're we’re inevitable activity in remain and sort there cycle. we're to internal where seeds perimeter, we're busy. it. a at a pleased at be around like very M&A capital We're which difficult largely low (ph) stage. hope extremely some I will So But progress of, extremely allocation doing feel harvesting lot will about more just and it. an eventually for point settle standoff can at future market with I this for tangible -- we this, they say the we will good the There's do is and up. planting market very in our in not pick very, busy and progress at on I'm have point M&A

Brian DiRubbio

you And just to when in the you. constant of fire question Thank you OM in came number about the for state Is had going Okay. me. full-service market. the North since issue, basis that American you back then market XX then? bond Again, mentioned final for

Edward Goldberg

is I know that number. don't the Yes. right XX

XX. is but the relatively generally stable off closer some of think service, full comes that full I become service to the or number year-over-year. odd basis, each base basis But year, it's

Brian DiRubbio

Perfect. Appreciate much. so Thank all the color. you

Edward Goldberg

Brian. Thanks,

Operator

like no comments. the I further for questions back floor Edward to ahead. would closing at go are Please There turn over to Goldberg time. this

Edward Goldberg

looking forward next again to the and to start Yes. us results. Thank joining fire you the to this our you all on quarter We're call. of much season very for talking report

have great So a day.

Operator

today's concludes This teleconference.

time. You at participation, day. you and your lines great your this for Thank may a have disconnect

Perimeter Solutions (PRM) 28 Feb 232022 Q4 Earnings call transcript