Perimeter Solutions(PRM) - 2024 Q2 - Quarterly Report

Preliminary Information This section provides initial details on the Form 10-Q filing, company classification, registered securities, and a cautionary statement regarding forward-looking information Form 10-Q Filing Details Details the Form 10-Q filing by Perimeter Solutions, SA, including its filer status, registered securities on NYSE and OTC, and outstanding shares - Perimeter Solutions, SA is filing a Quarterly Report on Form 10-Q for the period ended June 30, 2024[2] - The company is classified as a 'large accelerated filer'[3] Securities Registered and Shares Outstanding | Class of Security | Trading Symbol(s) | Exchange | Shares Outstanding (July 26, 2024) | | :---------------- | :---------------- | :------- | :--------------------------------- | | Ordinary Shares | PRM | NYSE | 145,221,178 | | Warrants | PRMFF | OTC | N/A | Cautionary Statement Regarding Forward-Looking Statements This statement warns that forward-looking information involves risks and uncertainties, and actual results may differ materially due to various factors - Forward-looking statements are based on current expectations, estimates, and projections, and are subject to inherent uncertainties and risks beyond the company's control[4] - Key risk factors include negative economic conditions, industry volatility, substantial dependence on sales to the U.S. Department of Agriculture and the State of California, changes in regulation, supply chain disruptions, and ongoing litigation[5] - The company assumes no obligation to update or revise these forward-looking statements, except as required by law[6] PART I - FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements Presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, equity statements, cash flows, and detailed explanatory notes Condensed Consolidated Balance Sheets The balance sheet shows total assets increased slightly to $2,321.6 million, while total liabilities rose to $1,246.5 million, and shareholders' equity decreased to $1,075.2 million Key Balance Sheet Data (in thousands) | Metric | June 30, 2024 (Unaudited) | December 31, 2023 | | :---------------------- | :------------------------ | :---------------- | | Total Assets | $2,321,630 | $2,315,422 | | Total Liabilities | $1,246,456 | $1,163,127 | | Total Shareholders' Equity | $1,075,174 | $1,152,295 | - Current assets increased from $251.0 million to $295.3 million, primarily driven by a significant rise in accounts receivable[8] - Current liabilities increased from $55.1 million to $81.9 million, largely due to increases in accrued expenses and founders advisory fees payable[8] Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Net sales increased significantly for both periods, but net income decreased for the three months and turned into a net loss for the six months, primarily due to founders advisory fees Key Income Statement Data (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Sales | $127,276 | $76,137 | $186,320 | $119,995 | | Gross Profit | $73,267 | $29,326 | $93,969 | $39,724 | | Operating Income (Loss) | $45,018 | $63,347 | $(29,846) | $76,199 | | Net Income (Loss) | $21,650 | $52,014 | $(60,908) | $61,445 | | Basic EPS | $0.15 | $0.33 | $(0.42) | $0.39 | | Diluted EPS | $0.14 | $0.31 | $(0.42) | $0.36 | - Founders advisory fees - related party significantly impacted operating income, changing from a $(60.0) million decrease in expense for the three months ended June 30, 2023, to a $0.6 million increase in expense for the same period in 2024[10] - Income tax expense increased substantially for both the three and six months ended June 30, 2024, compared to the prior year periods[10] Condensed Consolidated Statements of Shareholders' Equity Total shareholders' equity decreased from $1,152.3 million to $1,075.2 million, mainly due to a net loss and other comprehensive loss, partially offset by share-based compensation Key Shareholders' Equity Changes (in thousands) | Metric | December 31, 2023 | June 30, 2024 | | :----------------------------------- | :---------------- | :------------ | | Total Shareholders' Equity (Balance) | $1,152,295 | $1,075,174 | | Net Loss (Six Months) | N/A | $(82,558) | | Other Comprehensive Loss (Six Months)| N/A | $(5,543) | | Share-based Compensation (Six Months)| N/A | $4,736 | | Ordinary Shares Repurchased (Six Months)| N/A | $(14,417) | - The company repurchased 2,987,892 ordinary shares for $14.4 million during the six months ended June 30, 2024[12] Condensed Consolidated Statements of Cash Flows Operating cash flow significantly improved to $11.4 million provided, while financing activities used $14.8 million, resulting in a $4.1 million decrease in cash Key Cash Flow Data (in thousands) | Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------------- | :----------------------------- | :----------------------------- | | Operating Activities | $11,418 | $(72,936) | | Investing Activities | $187 | $(4,375) | | Financing Activities | $(14,784) | $(27,315) | | Net Change in Cash | $(4,114) | $(104,632) | | Cash and Cash Equivalents, End of Period | $43,162 | $22,118 | - The improvement in operating cash flow was driven by changes in founders advisory fees (change in fair value), deferred income taxes, and favorable changes in accounts receivable and inventories[14] - Cash used in financing activities decreased due to lower ordinary share repurchases compared to the prior year[14] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures for the financial statements, covering business operations, accounting policies, and specific financial components 1. Description of Business and Basis of Presentation Perimeter Solutions, SA is a global provider of fire safety and specialty products, operating two segments and actively mitigating inflationary pressures - Perimeter Solutions, SA is a global solutions provider for fire safety and specialty products industries[16] 2023 Annual Revenue Geographic Distribution | Region | Percentage of 2023 Annual Revenues | | :------------ | :--------------------------------- | | United States | ~65% | | Europe | ~15% | | Canada | ~14% | | Other | ~6% | - The company's business is organized into two reporting segments: Fire Safety and Specialty Products[16] - The company is actively taking actions to mitigate inflationary pressures, including aggregating purchase requirements, negotiating cost-reductions, and identifying more cost-competitive suppliers[18] 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements Financial statements adhere to U.S. GAAP, involve significant management estimates, and include a retrospective reclassification of freight expense - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information[19] - In 2024, the company retrospectively reclassified freight expense from selling, general and administrative expense to cost of goods sold to better match freight expense with freight income[24] Impact of Freight Expense Reclassification (Three Months Ended June 30, 2023, in thousands) | Metric | Previously Reported | As Adjusted | Effect of Change | | :-------------------------------------- | :------------------ | :---------- | :--------------- | | Cost of goods sold | $44,140 | $46,811 | $2,671 | | Gross profit | $31,997 | $29,326 | $(2,671) | | Selling, general and administrative expense | $14,897 | $12,226 | $(2,671) | - The company is assessing the potential effects of recently issued ASUs, including those on Income Tax Disclosures and Segment Reporting, but does not expect material impacts from ASU 2024-02 or ASU 2023-06[26][27][28][29] 3. Balance Sheet Components This note details changes in inventories, prepaid expenses, property, plant, and equipment, and a significant increase in accrued expenses and other current liabilities Inventories (in thousands) | Category | June 30, 2024 | December 31, 2023 | | :----------------------------- | :------------ | :---------------- | | Raw materials and manufacturing supplies | $76,029 | $77,657 | | Work in process | $328 | $224 | | Finished goods | $65,815 | $67,771 | | Total Inventories | $142,172 | $145,652 | Accrued Expenses and Other Current Liabilities (in thousands) | Category | June 30, 2024 | December 31, 2023 | | :----------------------------- | :------------ | :---------------- | | Accrued bonus | $1,858 | $3,483 | | Accrued salaries | $1,660 | $2,336 | | Accrued employee benefits | $1,424 | $1,185 | | Accrued interest | $7,036 | $8,342 | | Accrued purchases | $6,900 | $2,072 | | Accrued income taxes | $17,189 | $7,100 | | Operating lease liabilities | $2,226 | $2,146 | | Finance lease liabilities | $767 | $600 | | Other | $3,931 | $3,446 | | Total Accrued Expenses and Other Current Liabilities | $42,991 | $30,710 | - Depreciation expense for property, plant and equipment was $5.2 million for the six months ended June 30, 2024, up from $4.7 million in the prior year[30] 4. Goodwill and Other Intangible Assets Goodwill decreased slightly due to foreign currency translation, while definite-lived intangible assets had a net book value of $913.7 million with $27.6 million amortization expense Goodwill by Reportable Segment (in thousands) | Segment | December 31, 2023 | Foreign Currency Translation | June 30, 2024 | | :--------------- | :---------------- | :--------------------------- | :------------ | | Fire Safety | $863,889 | $(4,826) | $859,063 | | Specialty Products | $172,390 | $(1,273) | $171,117 | | Total | $1,036,279 | $(6,099) | $1,030,180 | Definite-Lived Intangible Assets, Net Book Value (in thousands) | Asset | June 30, 2024 | December 31, 2023 | | :--------------------- | :------------ | :---------------- | | Customer lists, net | $653,472 | $674,786 | | Technology and patents, net | $173,456 | $180,653 | | Tradenames, net | $86,745 | $89,568 | | Total Net Book Value | $913,673 | $945,007 | - Amortization expense for definite-lived intangible assets was $27.6 million for the six months ended June 30, 2024, consistent with $27.5 million in the prior year[35] Estimated Annual Amortization Expense (in thousands) | Year | Amount | | :--------------- | :----- | | 2024 (remaining) | $26,675 | | 2025 | $53,350 | | 2026 | $53,350 | | 2027 | $53,350 | | 2028 | $53,350 | | Thereafter | $673,598 | | Total | $913,673 | 5. Leases Total lease cost was $2.6 million, with weighted-average remaining lease terms of 8.0 years for operating and 6.7 years for finance leases, and future payment obligations totaling $30.9 million Total Lease Cost (in thousands) | Lease Type | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $1,752 | $2,271 | | Finance lease cost | $870 | $193 | | Total Lease Cost | $2,622 | $2,464 | - Weighted-average remaining lease terms: operating leases 8.0 years, finance leases 6.7 years[39] - Weighted-average discount rates: operating leases 6.8%, finance leases 7.6%[39] Estimated Future Minimum Lease Payment Obligations (in thousands) | Year | Operating Leases | Finance Leases | | :--------------- | :--------------- | :------------- | | Remainder of 2024 | $1,620 | $632 | | 2025 | $3,202 | $1,195 |\ | 2026 | $2,870 | $1,067 | | 2027 | $2,690 | $914 | | 2028 | $1,996 | $1,632 | | Thereafter | $9,042 | $4,064 | | Total Lease Payments | $21,420 | $9,504 | 6. Long-Term Debt and Redeemable Preferred Shares Long-term debt primarily consists of $675.0 million Senior Secured Notes, with a $100.0 million undrawn Revolving Credit Facility, and $100.0 million Redeemable Preferred Shares classified as a liability Long-Term Debt (in thousands) | Debt Type | June 30, 2024 | December 31, 2023 | | :-------------- | :------------ | :---------------- | | Senior Notes | $675,000 | $675,000 | | Less: Unamortized debt issuance costs | $(7,875) | $(8,506) | | Long-term debt, net | $667,125 | $666,494 | - The Revolving Credit Facility has an aggregate principal amount of up to $100.0 million and matures on November 9, 2026[42][43] - As of June 30, 2024, the company had no outstanding borrowings under the Revolving Credit Facility and was in compliance with all covenants[46] - Redeemable Preferred Shares have a nominal value of $100.0 million and are entitled to a 6.50% annual cumulative dividend, paid 40% cash and 60% in kind[50] - The Redeemable Preferred Shares are classified as a liability due to mandatory redemption requirements, with a redemption price of $110.7 million at June 30, 2024[51][52] 7. Income Taxes The effective tax rate for the three months was 36.57% and (15.57)% for the six months, differing from the Luxembourg statutory rate due to various factors Effective Tax Rates | Period | 2024 Effective Tax Rate | 2023 Effective Tax Rate | | :---------------------------- | :---------------------- | :---------------------- | | Three Months Ended June 30 | 36.57% | 1.39% | | Six Months Ended June 30 | (15.57)% | (10.01)% | - The primary differences from the Luxembourg statutory rate (24.94%) are due to losses in jurisdictions with valuation allowances, non-deductible compensation, withholding taxes, and foreign tax rate differences[53] - The company evaluates tax positions and recognizes benefits only if they are more likely than not to be sustained upon examination[55] 8. Commitments and Contingencies The company is involved in AFFF litigation with non-material loss exposure and has a $1.8 million remaining commitment for capital equipment purchases - The company is involved in legal proceedings related to aqueous film forming foam (AFFF) litigation, but the exposure to losses is not considered probable or reasonably estimable[56] - The company has a commitment to purchase capital equipment up to $5.0 million through October 2027, with $1.8 million remaining as of June 30, 2024[57] 9. Equity Authorized share capital includes 4.0 billion Ordinary Shares, with shareholders approving a plan to repurchase up to 25% of outstanding shares, of which 2.99 million were repurchased - Authorized share capital consists of 4,000.0 million Ordinary Shares ($1.00 nominal value) and 10.0 million Redeemable Preferred Shares ($10.00 nominal value)[58] - Shareholders approved a plan to repurchase up to 25% of outstanding Ordinary Shares (36,310,028 shares) over five years, with a $100.0 million limit re-established by the Board[58] Ordinary Share Repurchases | Period | Ordinary Shares Repurchased | | :----------------------------------- | :-------------------------- | | Three Months Ended June 30, 2024 | 18,535 | | Six Months Ended June 30, 2024 | 2,987,892 | Outstanding Securities as of June 30, 2024 | Security Type | Quantity Outstanding | | :---------------------- | :------------------- | | Ordinary Shares | 145,221,577 | | Warrants | 33,843,440 | | Redeemable Preferred Shares | 10,000,000 | 10. Share-Based Compensation The company granted 3.98 million PBNQSO under its 2021 Equity Incentive Plan, and a $68.9 million increase in founders advisory fees liability impacted compensation expense due to share price appreciation - The 2021 Equity Plan authorizes 31,900,000 Ordinary Shares for issuance[62] - During the six months ended June 30, 2024, 3,980,000 performance-based non-qualified stock options (PBNQSO) were granted[63] PBNQSO Activity (Six Months Ended June 30, 2024) | Activity | Number of Options | Weighted-Average Exercise Price | | :------------------------ | :---------------- | :------------------------------ | | Outstanding at Dec 31, 2023 | 11,244,171 | $9.30 | | Granted | 3,980,000 | $5.30 | | Forfeited | (350,000) | $9.37 | | Cancelled | (240,000) | $8.63 | | Outstanding at June 30, 2024 | 14,634,171 | $8.22 | - Non-cash share-based compensation expense was $4.7 million for the six months ended June 30, 2024[66] - The fair value of the liability-classified Founder Advisory Amounts increased by $68.9 million for the six months ended June 30, 2024, primarily due to an increase in the Ordinary Share price[71] 11. Fair Value Measurements The fair value of founders advisory fees payable significantly increased to $125.8 million, primarily due to Ordinary Share appreciation, with Senior Notes valued at $611.2 million - The estimated fair value of the company's Senior Notes was approximately $611.2 million at June 30, 2024, calculated using Level 2 inputs[72] Founders Advisory Fees Payable by Hierarchy Level (in thousands) | Period | Level 1 | Level 2 | Level 3 | Total | | :-------------- | :------- | :------ | :------- | :------- | | June 30, 2024 | $36,519 | $— | $89,317 | $125,836 | | December 31, 2023 | $23,972 | $— | $35,647 | $59,619 | - The fair value of founders advisory fees payable is determined using a Monte Carlo simulation model, requiring subjective assumptions for Level 3 inputs[74] Changes in Level 3 Liabilities (Founders Advisory Fees Payable - Related Party, in thousands) | Metric | Six Months Ended June 30, 2024 | | :------------------------------------------- | :----------------------------- | | Fair value, beginning of period | $35,647 | | Founders advisory fees - related party, change in fair value | $53,670 | | Fair value, end of period | $89,317 | 12. Related Parties The Founder Advisory Agreement with EverArc Founder Entity resulted in a $68.9 million increase in share-based compensation expense due to the appreciation of Ordinary Shares - The company assumed the Founder Advisory Agreement, entitling EverArc Founder Entity to Fixed and Variable Annual Advisory Amounts[78] - For 2023, the Fixed Annual Advisory Amount was 2,357,061 Ordinary Shares, valued at $10.6 million, with 74.6% paid in shares and 25.4% in cash[80] - The Variable Annual Advisory Amount was not qualified for 2023 as the average share price was below the established minimum[80] - For the six months ended June 30, 2024, an increase in the fair value of liability-classified Advisory Amounts resulted in a $68.9 million increase in share-based compensation expense[82] 13. Revenue Recognition Total net sales increased to $127.3 million for the three months and $186.3 million for the six months, with significant growth in both product and service revenues Disaggregation of Revenues (in thousands) | Revenue Type | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues from products | $94,736 | $72,720 | $152,617 | $115,860 | | Revenues from services | $32,434 | $2,929 | $33,517 | $3,638 | | Other revenues | $106 | $488 | $186 | $497 | | Total Net Sales | $127,276 | $76,137 | $186,320 | $119,995 | - Service revenues saw a substantial increase for both the three and six months ended June 30, 2024, compared to the prior year periods[83] 14. Earnings (Loss) Per Share Basic EPS decreased to $0.15 for the three months and resulted in a $(0.42) loss per share for the six months, primarily due to the net loss Earnings (Loss) Per Share (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (Loss) | $21,650 | $52,014 | $(60,908) | $61,445 | | Basic EPS | $0.15 | $0.33 | $(0.42) | $0.39 | | Diluted EPS | $0.14 | $0.31 | $(0.42) | $0.36 | Weighted-Average Shares Outstanding (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | 145,236 | 156,525 | 145,280 | 157,109 | | Diluted | 154,665 | 168,310 | 145,280 | 168,895 | - As of June 30, 2024, 14.6 million PBNQSO and 23.1 million Ordinary Shares issuable under the Founder Advisory Agreement were excluded from diluted EPS calculations due to unfulfilled contingencies or anti-dilutive effects[84][86] 15. Segment Information Both Fire Safety and Specialty Products segments experienced significant growth in net sales and Adjusted EBITDA for the three and six months ended June 30, 2024 - The company's two operating segments are Fire Safety and Specialty Products[87] - The Chief Operating Decision-Maker (CEO) uses segment net sales and Segment Adjusted EBITDA to assess performance and allocate resources[88] Segment Net Sales (in thousands) | Segment | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Fire Safety | $98,538 | $53,140 | $123,693 | $71,884 | | Specialty Products | $28,738 | $22,997 | $62,627 | $48,111 | | Total Net Sales | $127,276 | $76,137 | $186,320 | $119,995 | Segment Adjusted EBITDA (in thousands) | Segment | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Fire Safety | $55,639 | $16,532 | $55,398 | $13,171 | | Specialty Products | $9,269 | $4,458 | $21,646 | $10,935 | | Total Segment Adjusted EBITDA | $64,908 | $20,990 | $77,044 | $24,106 | 16. Subsequent Event The company filed a Form S-4 for a Redomiciliation Transaction to convert into a Delaware corporation, expected to be completed by December 31, 2024 - On July 31, 2024, the company filed a Form S-4 for a Redomiciliation Transaction to convert PSSA into a Delaware corporation, Perimeter Solutions, Inc[90] - The Redomiciliation Transaction is expected to be completed by December 31, 2024, and is not expected to have a significant impact on the consolidated financial statements[90] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's business segments, the impact of freight expense reclassification, known trends, financial results, and liquidity Overview Perimeter Solutions, S.A. is a global provider of firefighting products and phosphorus-based specialty chemicals, operating in two segments: Fire Safety and Specialty Products - Perimeter Solutions, S.A. is a global solutions provider of high-quality firefighting products and phosphorus-based specialty chemicals[93] - The Fire Safety business formulates and manufactures fire management products, specialized equipment, and services for various fire types, primarily serving government-related entities[94] - The Specialty Products segment produces and sells Phosphorus Pentasulfide (P2S5) for lubricant additives (its largest end market), agricultural, mining, and emerging electric battery technologies[95] Reclassification Freight expense was retrospectively reclassified from SG&A to cost of goods sold to better align with freight income, impacting gross profit and SG&A - The company retrospectively reclassified freight expense from selling, general and administrative expense to cost of goods sold in 2024[96] - This change was made to better match freight expense with freight income[96] Impact of Freight Expense Reclassification (Six Months Ended June 30, 2023, in thousands) | Metric | Previously Reported | As Adjusted | Effect of Change | | :-------------------------------------- | :------------------ | :---------- | :--------------- | | Cost of goods sold | $75,152 | $80,271 | $5,119 | | Gross profit | $44,843 | $39,724 | $(5,119) | | Selling, general and administrative expense | $25,362 | $20,243 | $(5,119) | Known Trends and Uncertainties The Fire Safety segment benefits from secular growth drivers but is sensitive to weather, while the company faces inflationary pressures and rising interest rates - The Fire Safety segment benefits from secular growth drivers such as increasing fire severity, longer fire seasons, and a growing wildland urban interface[99] - The company is investing in expanding its fire prevention and protection business, focusing on ground-applications for long-term fire retardant and proactive treatments[100] - The business is significantly impacted by weather, environmental, and climate change factors affecting the number and severity of fires[101] - The company is implementing strategies to mitigate inflationary pressures, including aggregating purchase requirements, negotiating cost-reductions, and identifying more cost-competitive suppliers[102] Results of Operations Net sales increased significantly, but net income decreased for the three months and turned into a net loss for the six months, primarily due to founders advisory fees Key Financial Results (Three Months Ended June 30, in thousands) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :---------------------- | :-------- | :-------- | :--------- | :--------- | | Net Sales | $127,276 | $76,137 | $51,139 | 67% | | Cost of Goods Sold | $54,009 | $46,811 | $7,198 | 15% | | Gross Profit | $73,267 | $29,326 | $43,941 | 150% | | Operating Income | $45,018 | $63,347 | $(18,329) | (29%) | | Net Income | $21,650 | $52,014 | $(30,364) | (58%) | Key Financial Results (Six Months Ended June 30, in thousands) | Metric | 2024 | 2023 | Change ($) | Change (%) | | :---------------------- | :-------- | :-------- | :--------- | :--------- | | Net Sales | $186,320 | $119,995 | $66,325 | 55% | | Cost of Goods Sold | $92,351 | $80,271 | $12,080 | 15% | | Gross Profit | $93,969 | $39,724 | $54,245 | 137% | | Operating (Loss) Income | $(29,846) | $76,199 | $(106,045) | (139%) | | Net (Loss) Income | $(60,908) | $61,445 | $(122,353) | (199%) | - Fire Safety net sales increased by $45.4 million (three months) and $51.8 million (six months), driven by fire retardant and fluorine-free foam concentrate sales in the Americas[104][108] - Specialty Products net sales increased by $5.7 million (three months) and $14.5 million (six months), reflecting increased purchases by lubricant additives customers[104][108] - Founders advisory fees - related party significantly increased operating expenses, changing from a $(60.0) million decrease in expense (three months 2023) to a $0.6 million increase (three months 2024), and from an $(84.3) million decrease (six months 2023) to a $68.9 million increase (six months 2024), primarily due to the increase in Ordinary Share price[106][111] Liquidity and Capital Resources The company relies on cash flows, its $100.0 million undrawn Revolving Credit Facility, and existing cash to fund operations, with $675.0 million in Senior Notes - The company believes its existing cash ($43.2 million), operating cash flows, and Revolving Credit Facility will be sufficient for current capital expenditures, working capital, and debt service for at least 12 months[118] - The Revolving Credit Facility provides up to $100.0 million, matures on November 9, 2026, and had no outstanding borrowings as of June 30, 2024[119][120] - The company has $675.0 million principal amount of 5.00% Senior Secured Notes due October 30, 2029[121] - During the six months ended June 30, 2024, the company repurchased 2,987,892 Ordinary Shares for $14.4 million under its Share Repurchase Plan[122][130] Cash Flows Summary (Six Months Ended June 30, in thousands) | Activity | 2024 | 2023 | | :---------------------------- | :-------- | :-------- | | Operating activities | $11,418 | $(72,936) | | Investing activities | $187 | $(4,375) | | Financing activities | $(14,784) | $(27,315) | | Net change in cash | $(4,114) | $(104,632)| | Cash and cash equivalents, end of period | $43,162 | $22,118 | Critical Accounting Estimates and Policies Financial statements are prepared under U.S. GAAP, relying on significant management estimates consistent with the 2023 Annual Report, with no known events requiring updates - Financial statements are prepared in accordance with U.S. GAAP, consistent with policies in the 2023 Annual Report[131] - Significant estimates include useful lives of long-lived and intangible assets, fair value of financial assets and liabilities, stock options, founder advisory fees, and realizability of deferred tax assets[131] - No events or circumstances are currently known that would require updating estimates, but actual results may differ significantly[131] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from foreign currency, interest rates, and commodity prices, and is subject to inflationary pressures Foreign Currency Risk The company faces foreign currency exchange risks from international transactions and operations, primarily involving the Euro, Canadian dollar, Norwegian krone, and Australian dollar - Foreign currency exchange risks are attributable to sales to foreign customers, purchases from foreign suppliers, foreign plant operations, and intercompany indebtedness/investments[133] - Key currency exposures include the Euro, Canadian dollar, Norwegian krone, and Australian dollar[133] Interest Rate Risk Interest rate risk primarily stems from the variable-rate Revolving Credit Facility, though no borrowings were outstanding as of June 30, 2024 - The company is subject to market risk exposure related to changes in interest rates on borrowings under the Revolving Credit Facility[134] - Interest on borrowings under the Revolving Credit Facility is based on adjusted SOFR or a base rate plus an applicable margin[134] - As of June 30, 2024, there were no outstanding borrowings under the Revolving Credit Facility[134] Commodity Price Risk Margins are sensitive to the differential between sales prices and supply costs, with potential adverse impacts from supply disruptions and fixed sales prices - Realized margins depend on the differential of sales prices over total supply costs[136] - Market, weather, or other conditions can disrupt product supply, potentially requiring purchases at increased prices that cannot be passed to customers[136] - Some material supply contracts follow market prices, while product sales prices may be fixed, leading to potential margin fluctuations[136] Effects of Inflation The company is exposed to inflationary pressures on raw materials, labor, and transportation, implementing mitigation strategies without guaranteed full offset - The company is subject to inflationary pressures on raw materials, labor, and transportation[137] - Mitigation strategies include contractual price escalation clauses, negotiated customer recoveries, aggregation of purchase requirements, and identification of cost-competitive suppliers[137] - There is no assurance that these actions will fully offset increased costs from inflationary pressures[137] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting Evaluation of Disclosure Controls and Procedures Management evaluated and concluded that the company's disclosure controls and procedures were effective as of June 30, 2024 - The company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2024[138] Changes in Internal Control Over Financial Reporting No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2024 - No material changes occurred in the company's internal control over financial reporting during the quarter ended June 30, 2024[139] PART II - OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and a list of exhibits Item 1. Legal Proceedings The company is involved in AFFF litigation, but its exposure to potential losses from these legal matters is not considered material - The company is involved in legal proceedings related to aqueous film forming foam litigation[141] - The company's exposure to losses from these legal proceedings is not considered material[141] Item 1A. Risk Factors No material changes to the company's risk factors were disclosed compared to the 2023 Annual Report - No material changes to the company's risk factors were disclosed compared to the 2023 Annual Report[142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 18,535 Ordinary Shares during the quarter as part of a shareholder-approved plan to repurchase up to 25% of outstanding shares Ordinary Share Repurchases (Quarter Ended June 30, 2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------------------- | :------------------------------- | :--------------------------- | | April 1, 2024 - April 30, 2024 | — | $— | | May 1, 2024 - May 31, 2024 | — | $— | | June 1, 2024 - June 30, 2024 | 18,535 | $7.47 | | Total | 18,535 | $— | - Shareholders approved a plan to repurchase up to 25% of outstanding Ordinary Shares (36,310,028 shares) over the next five years, with a $100.0 million limit[143] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the reporting period - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three and six months ended June 30, 2024[145] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer (pursuant to Sarbanes-Oxley Act Sections 302 and 906), and various Inline XBRL documents for interactive data - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1)[147] - Various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) are filed for interactive data[147] SIGNATURES The report is duly signed on behalf of Perimeter Solutions, SA by its Chief Executive Officer and Director, Haitham Khouri, and its Chief Financial Officer, Kyle Sable, as of August 1, 2024 - The report is signed by Haitham Khouri, Chief Executive Officer and Director, and Kyle Sable, Chief Financial Officer[150] - The report was signed on August 1, 2024[150]