Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Perimeter Solutions SA (PRM, Financial) reported a significant increase in third-quarter revenue, with Fire Safety revenue rising 113% to $251.8 million.
- The company's adjusted EBITDA for Fire Safety rose 181% in Q3, contributing to a year-to-date increase of 208%, driven by the Retardants business.
- Perimeter Solutions SA (PRM) has a strong market leadership position in Suppressants, with a 99% win rate in fluorine-free facility conversion projects at FAA 139 compliant airports.
- The Specialty Products segment showed robust growth, with Q3 sales increasing 50% and adjusted EBITDA growing 137%, indicating a recovery from previous destocking activities.
- The company maintains a strong balance sheet with over $200 million in cash and a net leverage ratio of 1.7 times, providing substantial liquidity for future investments and M&A opportunities.
Negative Points
- Despite strong performance, there were periods in Q3 where the entire aerial firefighting industry, including Perimeter Solutions SA (PRM), was running at max capacity, indicating potential missed sales opportunities.
- The company faces challenges in maintaining 100% reliability in its Retardants business due to the critical and complex nature of its operations.
- Perimeter Solutions SA (PRM) is experiencing elevated spending in areas such as R&D and field service, which is expected to remain high, potentially impacting short-term profitability.
- The company's capital allocation strategy indicates a need for patience in finding suitable M&A targets, which could delay immediate returns to shareholders.
- There is uncertainty regarding the timing of potential special dividends or share repurchases, as the company prioritizes M&A and internal reinvestment over immediate capital returns.
Q & A Highlights
Q: Given the strength in the fire season, were your volumes maximized, and what would drive higher volumes in the fire safety business over time?
A: (Haitham Khouri, CEO) There were periods in Q3 where the entire aerial firefighting industry was at max capacity. We could have sold more Retardants if there was more industry capacity. Going forward, capacity is consistently being added by private industry partners and public customers like CalFire, which plans to double capacity. We are also investing in increasing our capacity at air bases by adding more loading pits and upgrading equipment.
Q: How do you think about the timing of cash deployment, such as M&A or special dividends, to manage leverage?
A: (Haitham Khouri, CEO) We will be patient with capital allocation. While we are currently under-levered, we will wait for the right M&A opportunities. However, if we cannot allocate capital efficiently over time, we will consider returning capital to shareholders via special dividends.
Q: Can you comment on whether US wildfire activity could drive an increase in Q4 year-over-year fire safety results?
A: (Haitham Khouri, CEO) We do not comment on an in-process quarter. However, we strategically relocate assets based on different fire seasons across regions.
Q: Which regions does Perimeter focus on outside of the peak US wildfire seasons, and what is the timing of those seasons?
A: (Haitham Khouri, CEO) We focus on Central America, South America, Europe, the Middle East, Asia, and Australia. South America and Australia run counter-seasonal to North America, with their peak wildfire seasons just beginning.
Q: What are the key drivers behind the significant year-over-year growth in industry capacity?
A: (Haitham Khouri, CEO) The growth is driven by private industry partners adding more and larger air tankers, public customers like CalFire increasing capacity, and our own investments in air base capacity and equipment upgrades. These are long-term secular processes that contribute to consistent growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
