Perimeter Solutions, SA

Please note this conference is being recorded. I will now turn the conference over to your host, Seth Barker, Head of Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining Perimeter Solutions' first quarter 2024 earnings call. Speaking on today's call are Hatem Khoury, Chief Executive Officer, and Kyle Sable, Chief Financial Officer. We want to remind anyone who may be listening to a replay of this call that all statements made are as of today, May 9th, 2024, and these statements have not been nor will they be updated subsequent to today's call. Also, today's call may contain forward-looking statements. These statements made today are based on management's current expectations, assumptions, and beliefs about our business and the environment in which we operate, and our actual results may materially differ from those expressed or implied on today's call. Please review our SEC filings for a more complete discussion of factors that could impact our results. The company would also like to advise you that during the call, we will be referring to non-GAAP financial measures, including adjusted EBITDA. The reconciliation of and other information regarding these items can be found in our earnings press release and presentation, both of which will be available on our website and on the FEC's website. With that, I will turn the call over to Haitham Khoury, Chief Executive Officer.

Haitham Khoury Thank you, Seth. Good morning, everyone, and thanks for joining us. I'll start on slide three with summary comments on our strategy. As we stated repeatedly, our goal is to deliver private equity-like returns with the liquidity of a public market. We plan to attain this goal by owning, operating, and growing uniquely high-quality businesses. We define uniquely high-quality businesses through the following five very specific economic criteria. recurring and predictable revenue streams. Two, long-term secular growth tailwinds. Three, products that account for critical but small portions of larger value streams. Four, significant free cash flow generation with high returns on tangible capital. And five, the potential for opportunistic consolidation. We believe that these five economic criteria are present in our current businesses and we use these criteria to evaluate potential new acquisitions. As described on slide four, we seek to drive long-term equity value creation by a consistent improvement in our three operational value drivers, which are, number one, profitable new business, number two, continual productivity improvements, and number three, pricing to reflect the value our products and services provide. In addition to our three operational value drivers, we seek to maximize equity value creation through a clear focus on the allocation of our capital, as well as the management of our capital structure. Turning now to our financial results on slide five and starting with fire safety. Recall that the first quarter is usually fire safety's smallest quarter of the year. and a quarter in which the business has typically historically reported an adjusted EBDA loss. Fire safety delivered markedly improved year-over-year financial results in the first quarter of 2024, much as the business did in the prior quarter. Fire safety revenue increased 34% year-over-year in Q1, while the business was close to breakeven on an adjusted EBDA basis, versus a negative $3.4 million adjusted EBDA loss in the first quarter of 23. The year-over-year improvement in fire safety's revenue and adjusted EBDA was primarily driven by our suppressants business, where our 3Ps operating strategy continues to drive performance. Specifically, our focused R&D investments into fluorine-free technology is driving profitable new business by our market-leading product portfolio. Our focus on pricing our products and the significant value they provide is driving higher per unit revenue and profitability. And finally, our rigor around eliminating excess costs via consistent and measurable productivity initiatives is contributing to adjusted EVDA growth in excess of revenue growth. Turning to specialty products. After several slow quarters, which we attributed to D-Stock activity throughout the specialty chemicals supply chain, specialty products delivered solid financial results in the first quarter. The business's 37% adjusted EVDA margin, roughly in line with the business's margins prior to the D-Stock period, illustrates the point we repeatedly emphasized around specialty products' resilient underlying unit economics through the D-Stock period. While we're clearly encouraged by specialty products first quarter performance, we've also been candid around our surprise at the depth and duration of the D-Stock. As such, we will allow more time to pass before offering projections around end market demand in this business. Turning to cash and capital allocation. We repurchased approximately 3 million shares in the first quarter. at an average price of $4.79. Recall that we repurchased approximately 12.2 million shares last year at an average price of $5.24. We have approximately $97 million remaining on our existing repurchase authorization, and we ended the first quarter with approximately $34 million of cash on our balance sheet. As I did last call, I'll touch on our approach to capital allocation including M&A. We're confident that our three-piece operating strategy will create significant value when applied to the right businesses. The right businesses are defined by the five target economic criteria I covered on slide three. Our confidence in M&A good and value creation is based on the improvement our three-piece operating strategy has delivered in each of our retardants, depressants, and specialty products businesses over the past two years. Much of this improvement is evident in our reported results and commentary, including in specialty products and suppressants. We expect the balance of this 3P-driven improvement, particularly in our retardants business, to be evident in a more normalized fire season. As enthusiastic as we are about M&A-driven value creation, we're constantly evaluating the IRR trade-offs between our different capital allocation alternatives. We ultimately expect to deploy all of our excess free cash flow, as well as the incremental leverage capacity we expect to generate through organic EBITDA growth towards the highest expected IRR combination of M&A, share repurchases, and special dividends. Finally, and as I've done over the last several earnings calls, I'll reassert our conviction that Perimeter is the gold standard as far as the efficacy and safety of our products, the quality of our service and the passion, dedication and integrity of our team. This is reflected in our ongoing strong market positions. I will also reassert that we will never take our market leadership positions for granted. Rather, we will always relentlessly push to raise the bar on ourselves. Between the clear superiority of our products, services, and people, our fiercely competitive spirit, and our ever-vigilant mindset, we expect to thrive in all future environments. And with that, I will turn the call over to Kyle.