Perimeter Solutions, S.A. (PRM) Earnings

Management highlights

- Core Corporate Strategy * Goal is to deliver private equity-like returns with public market liquidity while providing high-quality products to customers. * Strategy is built on three pillars: owning niche market leader businesses with critical customer roles that generate high returns on invested capital; rigorously applying three operational value drivers (profitable new business growth, continuous productivity improvement, value-based pricing); operating with a highly decentralized structure that gives business unit managers full autonomy with aligned accountability and owner incentives, to optimize long-term free cash flow. * Capital allocation is focused on maximizing long-term per share equity value, with M&A as the primary priority after meeting organic investment needs. - Acquisition Update * Perimeter closed the acquisition of Monaco Enterprises for approximately $120 million in cash post-quarter end, adding it to the Fire Safety segment. Monaco is the installed standard for fire alarm and mass notification networks on over 200 U.S. military installations globally, with more than 95% of revenue coming from recurring aftermarket sales (spare parts, upgrades, support) to its existing installed base. * The acquisition fits Perimeter's target criteria: it solves a critical customer need, has a low cost relative to customer total base budgets, is the niche leader in a highly specialized market, has durable competitive advantage via proprietary protocols that require new equipment from Monaco for network changes/expansions, and has high returns on capital with recurring revenue. - Fire Safety Segment Operations * Two temporary factors weighed on Q2 results: a 5% pricing step-down from the new U.S. federal retardant contract, and minimal foam deliveries to the U.S. Defense Logistics Agency (DLA) during transition to the vendor-managed inventory structure for the new 5-year $500 million maximum value contract awarded last quarter. Both headwinds are expected to abate in the second half of 2026, with foam deliveries resumed and new CAL FIRE pricing offsetting the federal pricing step-down. * Secular growth tailwinds remain intact: severe fire seasons in recent years have driven government investments in aerial firefighting infrastructure. Canada launched the 5-year $316.7 million Pan-Canadian Aerial Asset Program, adding 4 new retardant-capable air tankers to its national fleet and extending retardant use to new provinces, creating a foundation for long-term demand growth. Similar growth followed 2019-2020 bushfires in Australia and the 2022 severe fire season in France, and similar dynamics are emerging in Europe. Geographic diversification has moderated regional demand fluctuations, creating a more stable earnings profile. - Specialty Products Segment Operations * PDI: Q2 adjusted EBITDA declined YoY due to ongoing production issues at the Flexus-operated P2S5 facility in Saget, Illinois. A court ordered an independent receiver for the facility in June 2025, citing multiple safety lapses (fires, an explosion, H2S releases causing injuries, improper storage of decaying P2S5) under owner One Rock Capital. Perimeter is taking action to eliminate PDI's reliance on Flexus and will enforce its full contractual rights. Production issues are expected to diminish progressively in the second half of 2026 as capacity is restored. * MMT: Continues to outperform management's underwriting model, with strong adjusted EBITDA growth YoY. Perimeter is investing in its innovation pipeline to accelerate new product launches and capture organic growth opportunities, with early pricing and productivity initiatives already driving benefits. * IMS: Delivered a strong Q2 2026, with integration of Q4 2025 acquired product lines proceeding well. It is actively evaluating additional add-on product lines aligned with its strategy of providing proprietary aftermarket replacement products to extend equipment lifecycles.

Guidance

- Annual cash interest expense is expected to remain approximately $75 million, consistent with prior guidance. - Annual tax-deductible depreciation and amortization is expected to remain in the $60 million to $65 million range, unchanged from prior guidance. - Long-term cash tax rate is expected to remain approximately 20% or better, consistent with prior guidance. - Annual capital expenditures are expected to remain in the $30 million to $40 million range, with full-year spending expected to land at the upper end of the range to fund investments including new retardant bases, expanded suppressants production capacity, and MMT productivity initiatives, unchanged from prior guidance. - Working capital investment is expected to remain 10% to 15% of revenue growth, consistent with prior guidance. - Management maintained its expectation that temporary Q2 2026 fire safety headwinds will moderate in the second half of 2026, with DLA foam contract ramping and CAL FIRE pricing offsetting federal contract pricing impacts.

Segment performance

Consolidated: Q2 2026 net sales increased 31% year-over-year to $213.8 million, adjusted EBITDA rose 16% YoY to $105.6 million, and year-to-date adjusted EBITDA increased 34% YoY to $146.7 million. Adjusted net income increased to $68.6 million from $61.2 million YoY, while adjusted diluted EPS remained constant at 41 cents. Fire Safety Segment (now includes 3 businesses: Perimeter retardant, Stolberg suppressants, newly acquired Monaco): Q2 2026 revenue rose 7% YoY to $129.1 million, adjusted EBITDA increased to $78.8 million from $77.7 million YoY (1% YoY growth). First half 2026 revenue totaled $174.5 million, up 11% YoY, while adjusted EBITDA increased to $97.5 million from $87.87 million YoY (11% YoY growth). Excluding two temporary headwinds, Q2 2026 adjusted EBITDA grew at a double-digit rate YoY. This segment contributes 60.4% of total Q2 2026 revenue. Specialty Products Segment (includes 3 businesses: PDI lubricant additives, MMT medical device manufacturing, IMS aftermarket electronics): Q2 2026 revenue doubled YoY to $84.7 million, adjusted EBITDA increased to $26.8 million from $13.7 million YoY. First half 2026 revenue totaled $164.3 million, up 113% YoY, while adjusted EBITDA rose to $49.3 million from $21.7 million YoY. The large year-over-year increase is driven primarily by contributions from recent acquisitions, particularly MMT. This segment contributes 39.6% of total Q2 2026 revenue.

Risks & headwinds

- Production disruption at the Flexus-operated P2S5 facility continues to weigh on PDI's near-term financial performance, driven by safety and operational issues under owner One Rock Capital. - Actual results may differ materially from management's forward-looking expectations due to variable global wildfire activity, which can cause full-year 2026 volumes to finish above or below normal seasonal levels. - Integration of new acquisitions carries inherent execution risk, though Perimeter's decentralized model is designed to mitigate this risk by retaining existing management teams. - DLA contract ramp timelines may differ from current expectations, impacting near-term revenue and EBITDA for the fire safety segment.

Analyst Q&A

• Q: What key drivers will lift fire safety profitability in the back half of 2026, and what is the expected cadence? Also, what are the strategies for Monaco talent retention, customer execution, and cultural integration?

  A: The two temporary Q2 headwinds (federal contract pricing step-down, paused DLA sales) will abate in the back half, returning EBITDA growth and margins to historical levels. For Monaco, Perimeter targets long-term retention of the existing talented management team that built the business. The decentralized operating model gives teams high autonomy, accountability, and incentive alignment, which attracts leaders to grow the business further, and management expects a positive outcome for this acquisition.

• Q: Is there volume growth opportunity for Monaco beyond its current U.S. Air Force base on the DoD installations? Could it expand into other markets like municipal facilities?

  A: Underlying industry growth is low single-digit, and Monaco already holds majority share of its core TAM. There are material expansion opportunities in other branches of the DoD where Monaco already has a presence but not its dominant Air Force-level market position, plus potential opportunities in other highly regulated government adjacent sectors. Management's underwriting for the acquisition only assumes low single-digit baseline industry growth, so any upside from new business adds incremental IRR.

• Q: Will the missed DLA suppressant sales from Q2 be made up in the back half of 2026, or does the ramp push into 2027?

  A: The Q2 pause was intentional, as the company completed capital investments and operational preparations for the new large contract after ending prior PO-by-PO sales. Some delayed Q2 volume will be recovered in the back half of 2026, with the main substantial ramp of the contract occurring starting in 2027. Q2 saw full fixed costs for the contract infrastructure but no meaningful revenue, so this negative impact will fully disappear once sales ramp in Q3 2026.

• Q: What is the long-term incremental growth opportunity from Canada's new Pan-Canadian Aerial Asset Program? Does the Australia experience serve as a good analog?

  A: The program adds 4 new, large retardant-capable air tankers to the global fleet, representing a more than 10% net increase in the global dedicated large air tanker fleet that drives most of Perimeter's retardant volume. Similar capacity expansions are occurring across the U.S. (Texas, Pacific Northwest states) and Europe, and the pattern matches Australia: severe fire seasons drive political attention and infrastructure investment, leading to meaningful long-term demand growth for retardant. This positions Perimeter for material volumetric growth across multiple new markets over the coming years.