Perimeter Solutions(PRM) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Fourth quarter consolidated sales were $59.5 million, up 44% year-over-year, while full year 2023 consolidated sales were $322.1 million, down 11% compared to 2022 [19][20] - Fourth quarter consolidated adjusted EBITDA was $11.2 million, up from $2.1 million the prior year, and full year 2023 consolidated adjusted EBITDA was $96.8 million, down 23% versus 2022 [19][20] - The decline in consolidated revenue and adjusted EBITDA was primarily attributed to destock-related volumes in the Specialty Products business [19][20] Business Line Data and Key Metrics Changes - Fire Safety business fourth quarter sales were $35.4 million, up 81% year-over-year, and full year 2023 sales were approximately flat at $225.6 million [39] - Specialty Products business fourth quarter sales were $24.1 million, up 11% year-over-year, but full year 2023 sales were down 28% to $96.6 million [40] - Adjusted EBITDA for Fire Safety in the fourth quarter was $7 million, recovering from a loss of $3.9 million the prior year, while adjusted EBITDA for Specialty Products was $4.2 million, down 30% year-over-year [39][40] Market Data and Key Metrics Changes - The 2023 fire season was mild, with 2.3 million acres burned in the U.S. (excluding Alaska), representing a nearly 50% decrease from 2022 [11] - The weak demand in the Specialty Products business was driven by inventory destocking in the specialty chemical supply chain [12] Company Strategy and Development Direction - The company aims to deliver private equity-like returns with public market liquidity by owning and growing high-quality businesses [7][10] - The company focuses on five economic criteria for evaluating businesses: predictable revenue streams, long-term growth, critical product contributions, significant free cash flow, and potential for consolidation [10] - The company will refrain from providing annual guidance for 2024 and beyond, indicating confidence in future performance in a normalized demand environment [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of demand for products despite the weak market conditions in 2023 [12] - The company believes that the rigorous application of its operational strategy has established a credible base EBITDA even in a soft market [34] - Management emphasized the importance of being vigilant against competition and maintaining high standards in product efficacy and service quality [15][54] Other Important Information - The company repurchased approximately 12.2 million shares in 2023 at an average price of $5.24, with a new $100 million share repurchase authorization approved by the Board [13] - The company ended 2023 with approximately $675 million in senior notes and $47.3 million in cash [20] Q&A Session Summary Question: Is smaller bolt-on M&A still on the menu given the current capital markets? - Management confirmed that small tuck-in M&A is on the table, and larger deals would depend on expected internal rates of return (IRR) compared to share repurchases [24] Question: Can you clarify the performance of the Fire Safety business in Q4? - Management indicated that the performance was roughly split between suppressants and retardants, with improvements driven by international markets and new product introductions [18] Question: What are the indicators for the upcoming fire season? - Management stated that predicting fire seasons in February is challenging, but current indicators do not suggest anything particularly mild or severe [48] Question: How will working capital benefit impact cash flow in 2024? - Management noted that the bulk of inventory is in the Fire Safety business, and the impact on free cash flow will depend on the severity and timing of the fire season [59] Question: How will the U.S. Forest Service's new approach to wildfires affect the business? - Management was not familiar with the report but emphasized that their products have been developed in partnership with customers and have undergone rigorous testing [61]