Perimeter Solutions(PRM) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported second quarter consolidated sales of $76.1 million, down 25% year-over-year, and year-to-date sales of $120 million, down 24% year-over-year [36] - Second quarter adjusted EBITDA was $21 million, down 41% year-over-year, and year-to-date adjusted EBITDA was $24.1 million, down 49% year-over-year [36] - The Fire Safety business saw second quarter sales of $53.1 million, down 20% year-over-year, and year-to-date sales of $71.9 million, down 15% year-over-year [33] - Specialty Products business reported second quarter sales of $23 million, down 33% year-over-year, and year-to-date sales of $48.1 million, down 35% year-over-year [35] Business Line Data and Key Metrics Changes - Fire Safety's second quarter adjusted EBITDA decreased by 32% year-over-year, while year-to-date adjusted EBITDA decreased by 37% [34] - Specialty Products' second quarter adjusted EBITDA was $4.5 million, down 61% year-over-year, and year-to-date adjusted EBITDA was $10.9 million, down 59% year-over-year [35] - The global suppressants business delivered strong results with significant year-over-year revenue growth and margin expansion [12] Market Data and Key Metrics Changes - U.S. acres burned (excluding Alaska) were down 70% year-over-year and more than 50% below the 10-year average as of the end of Q2 [11] - International retardant revenue more than doubled year-over-year in the first half of 2023, with excellent growth in adjusted EBITDA [13][66] Company Strategy and Development Direction - The company aims to deliver private equity-like returns with public market liquidity by focusing on high-quality businesses with recurring revenue streams, long-term growth, and significant free cash flow generation [7][8] - The company is honing its operational playbook and building its M&A pipeline, emphasizing that M&A remains a key part of its long-term value creation strategy [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that unit economics have improved in 2023 compared to 2022, and they expect notable year-over-year financial results if market conditions normalize [29] - The company anticipates that consolidated adjusted EBITDA of approximately $180 million is a reasonable expectation for 2023, contingent on the severity of the U.S. fire season and the normalization of the Specialty Products market [30] Other Important Information - The company repurchased approximately 4 million shares in Q2 at an average price of $6.58, with $71.6 million remaining on its repurchase authorization [23] - The company ended Q2 with approximately $22 million in cash and $675 million in senior notes [38] Q&A Session Summary Question: Follow-up on free cash flow and implied EBITDA - Management did not disclose the specific EBITDA assumption behind the expected $100 million in free cash flow for the second half of the year [42][43] Question: Impact of destocking on pricing and unit economics - Management indicated that unit economics have improved compared to last year, and the lower volume is primarily due to destocking rather than a loss of market share [48] Question: Inventory build and its impact on operations - The majority of the inventory build is in the fire safety retardant market, with some impact from specialty products, but the focus remains on being prepared for customer demand [55] Question: Capital allocation and M&A pipeline - The company is focused on long-term equity value creation and is looking for businesses that fit its five target criteria for potential acquisitions [70][71]