Perimeter Solutions SA Q4 2023 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Daniel Kutz - Morgan Stanley - Analyst : Hey, thanks. Good morning. So I just wanted to kick it off. Haitham, you talked a lot about capital allocation priorities and how M&A fits into that. I guess my question is against kind of the prevailing debt and equity capital markets backdrop and cost of capital per perimeter. Is kind of smaller full-time M&A still on the menu? And then I guess maybe more importantly, what would some of the milestones or what would you need to see for bigger M&A opportunities to kind of potentially look more attractive? Is it just a factor of maybe a more normal severity fire season and, you know-- the stock better reflecting the earnings power of the business or anything that you could help us with in terms of-- what would make bigger M&A more attractive in the capital allocation stack? Thanks.

Question: Daniel Kutz - Morgan Stanley - Analyst : That's great. That's all super helpful, and I appreciate that color. Maybe just quickly, I appreciate it's early in the year, but just wondering if there's anything you can share in terms of what kind of like the snowpack and precipitation indicators might-- signal thus far this year relative to maybe REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 22, 2024 / 1:30PM, PRM.N - Q4 2023 Perimeter Solutions SA Earnings Call some prior years, or the historical normal trends, or is there anything to garner thus far in terms of the potential severity of this fire season from those indicators? Thanks.

Question: Daniel Kutz - Morgan Stanley - Analyst : Fair enough, and I really appreciate that. Thanks a lot, guys. I'll turn it back.

Question: Josh Spector - UBS - Analyst : Yeah, hey, guys. Good morning, so I first want to just ask for clarification. Just when you talked about the fire safety business in fourth quarter, I think you said it was roughly half suppressants and retardants. I wasn't sure if that was referring to the year-on-year growth or the mix in the quarter. So can you clarify that, please?

Question: Josh Spector - UBS - Analyst : Okay, thanks. No, that's helpful. I guess just related on suppressants, when you talk about the mil-spec win, how much of that would you say now is in the numbers, I guess at least in the second half of this year versus a further opportunity as you look at next year?

Question: Josh Spector - UBS - Analyst : Thanks, I appreciate that. I'll ask a couple more and then turn it over. I guess first, just I wanted to ask on the contracts for the 2024 season. I think, you know, your competitor flagged that there was some delays in going out. I'm not really sure what that means for you guys and what your view is on share pricing, but just curious on any color there.

Question: Josh Spector - UBS - Analyst : Okay, thanks. I have more questions, but I'll leave it there. So I'll just jump back in the queue.

Question: Brian DiRubbio - Baird - Analyst : Good morning, gentlemen. A couple of questions for me. Just first off, Kyle, I think you mentioned that 2024 you will see a working capital benefit. Can you give us any sense of how much of that inventory is in fire safety versus specialty products?

Question: Brian DiRubbio - Baird - Analyst : Okay, are you going to manage that aggressively this year or put another way, are you going to reduce operating rates to make sure you get that benefit?

Question: Brian DiRubbio - Baird - Analyst : Understood. And a final question for me, early this month, the US Forest Service released a record decision about how they want to attack wildfires on national forest lands-- basically calling for using more water and less toxic suppressants. Sorry-- retardants. Just sort of any thoughts on how that can affect your business overall? I think one of the comments they made in the R&D was that it impacted about 20% of the land-based system.

Question: Brian DiRubbio - Baird - Analyst : Okay.

Question: Brian DiRubbio - Baird - Analyst : Yeah, and I'll send you a copy of the report. It was posted on their website, the US Forest Service website in early February. I think it was February 2. Sort of detailing how they want to change their approach. I'll pass along until we can follow up offline.

Question: Brian DiRubbio - Baird - Analyst : Great, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 22, 2024 / 1:30PM, PRM.N - Q4 2023 Perimeter Solutions SA Earnings Call

Question: Josh Spector - UBS - Analyst : Hey again. So I just wanted to ask about the international growth in retardants. Are there specific markets or products you'd call out that helped you in the fourth quarter? And I'm just wondering if that's any read of any flow through of wins, et cetera, for next year, or something just within this fire season in those countries in this quarter?

Question: Josh Spector - UBS - Analyst : Okay, thanks. And just to follow up on the working capital part of it, I guess if I look at where you ended, working capital looks like it's about 50% of sales. Historically, it's closer to maybe 25%. I guess very rough math, if your sales are flat, should we think about getting that working capital percentage down to that historical level as about the right framework? And I guess if you were to grow sales, do you actually get a working capital benefit, or do you just grow into that? So just curious on those two points.

Question: Josh Spector - UBS - Analyst : Okay, fair enough. And just a couple on specialty. So I guess the sales were up, but the EBITDA wasn't. So I'm curious if there's anything you could share about why that was the case.

Question: Josh Spector - UBS - Analyst : Okay, and I mean, since you don't disclose price or volumes, I don't know if there's a way you can roughly frame where the volumes in that segment today versus-- I think you said 22 was normal. Can you frame that at least so we can understand what a recovery might look like?

Question: Josh Spector - UBS - Analyst : Okay, no, fair enough. And the last one to me, just kind of a picky one here on the share count you present in your slide. I assume that reflects the current share count with the full buyback. So as of January versus the December quarter average. And does that include the roughly couple million shares that will be added with the founder of share structure?

Question: Josh Spector - UBS - Analyst : Okay, but does it, if the founder shares will be added this year, or is that already in that?

Question: Josh Spector - UBS - Analyst : Got it, makes sense. Thank you very much.