Perimeter Solutions 2026 Q2 Earnings Call

Thank you, operator. Good morning, everyone, thank you for joining Perimeter Solutions second quarter 2026 earnings call. Speaking on today's call are Haitham Khouri, Chief Executive Officer, and Kyle Sable, Chief Financial Officer. We want to remind anyone who may be listening to a replay of this call that all statements made are as of today, July 31st, 2026, these statements have not been, nor will they be updated subsequent to today's call. Today's call may contain forward-looking statements. These statements made today are based on management's current expectations, assumptions, and beliefs about our business and the environment in which we operate, our actual results may materially differ from those expressed or implied on today's call. Please review our SEC filings, particularly any risk factors included in our filings, for a more complete discussion of factors that could impact our results, expectations, or assumptions.

The company would also like to advise you that during the call, we will be referring to non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, LTM adjusted EBITDA, adjusted EPS, and free cash flow. The reconciliation of, other information regarding non-GAAP financial measures can be found in our earnings press release and presentation, both of which will be available on our website. With that, I will turn the call over to Haitham Khouri, Chief Executive Officer.

Thank you, Seth. Good morning, everyone. We're pleased to report second quarter adjusted EBITDA of $105.6 million, up 16% year-over-year, year to date adjusted EBITDA of $146.7 million, up 34% year-over-year. We're also excited to announce the acquisition of Monaco Enterprises for approximately $120 million in cash. Monaco designs and manufactures the fire alarm reporting and mass notification networks that are the installed standard on more than 200 U.S. military installations globally, where system compatibility requirements make Monaco the sole compatible supplier of spare parts, upgrades and expansions, and support across its installed base. Monaco fits the economic criteria we consistently target in every business we acquire, we will implement the same operational value driver playbook you've seen across our portfolio. With Monaco's addition, Perimeter now comprises six businesses across our two reporting segments.

Three in fire safety, our retardant business, which carries the Perimeter name, our suppressants business, Solberg, and Monaco, our new fire detection and notification business. Three businesses in specialty products, PDI, our P2S5-based lubricant additives business, MMT, our medical device manufacturing business, and IMS, our aftermarket electronics business. I'll now provide a summary of our strategy, followed by an operational update, and then return to Monaco in more detail. After that, Kyle will walk through the quarter's financial results and capital allocation. Starting with a summary of our strategy. Our goal is to fulfill our critical mission by providing our customers with high-quality products and exceptional service while delivering our investors private equity-like returns with the liquidity of a public market. Our strategy is built on three pillars. First, we own exceptional businesses.

These are niche market leaders that play critical roles in solving complex customer problems, qualities that support high returns on invested capital and durable earnings power. Second, we rigorously apply our three operational value drivers to the businesses we own. We drive profitable new business, achieve continual productivity improvements, and provide increasing value to customers, which we share in through value-based pricing. Third, we operate our businesses in a highly decentralized manner, granting our business unit managers full operating autonomy, paired with the accountability to deliver results with a tightly aligned incentive structure for our managers to think and act like owners. We believe that these three pillars will optimize our durable long-term free cash flow. We seek to maximize long-term per share equity value through a clear focus on the allocation of our capital as well as the management of our capital structure.

Turning now to our fire safety operations on slide four. Second quarter fire safety adjusted EBITDA increased 1%, while year-to-date adjusted EBITDA increased 11%. As Kyle will quantify shortly, two factors weighed on the second quarter. First, the 5% pricing step down baked into the first year of our federal retardant contract. Second, minimal foam deliveries to our U.S. federal customers as the DLA transitioned its ordering onto the vendor managed inventory structure we implemented under the five-year contract with a maximum value of $500 million that we announced last quarter. Excluding these two items, second quarter fire safety adjusted EBITDA grew at a double-digit rate. Both these dynamics improve in the third quarter. Foam deliveries to our federal customers resume and new pricing under our CAL FIRE agreement should offset the federal pricing step down.

Most pertinent to our long-term fire safety earnings power are several encouraging developments from the first half of 2026. In Canada, we are supporting the country's first federally funded aerial firefighting fleet. The Pan-Canadian Aerial Asset Program, backed by $316.7 million over five years, gives every province and territory access to a 10-aircraft national surge fleet, including four retardant-capable air tankers, and extends retardant operations into provinces that have historically relied on other suppression methods. In fact, 2026 marks the first time in decades that the province of Ontario has used retardant, supported in this case by one of our mobile retardant bases. The program reflects a pattern we've observed for many years. Following periods of elevated fire activity, governments reassess the resources available to respond to future fire seasons.

Australia transformed its aerial firefighting infrastructure after the 2019/2020 bushfires. France significantly enhanced its aerial resources after the particularly severe 2022 season. Both countries became meaningfully larger retardant customers following these investments. In Canada's case, the severe 2023 and 2025 fire seasons, the worst and second worst in the country's history, have prompted a similar investment cycle. While the impact this year is modest, we believe the program establishes a foundation for increased retardant use over time. We see similar dynamics emerging in other regions. Elevated fire activity, particularly in Europe, should support higher retardant use this year. More importantly, continued investment in aerial firefighting resources over the coming years. Beyond retardants, we continue to see attractive opportunities to expand our suppressants business.

Our success in building new international distribution relationships, together with the ramp of our DLA contract in the second half of the year, reflects growing customer investment in higher performance fire suppression technologies across a broad range of end markets. Taken together, these developments reinforce our expectation of solid long-term organic growth across our fire safety business. Turning now to our Specialty Product segment. Starting with PDI's adjusted EBITDA declined year-over-year in the second quarter, due primarily to continued production issues at the Sauget, Illinois, P2S5 facility. This facility is operated by Flexsys, which is owned by One Rock Capital. On June 10th, the Circuit Court of St. Clair County, Illinois, entered an order appointing an independent receiver over the Sauget plant.

In its order, the court made a series of findings that we believe validate the concerns we have raised on previous calls regarding the plant's performance since Flexsys was acquired. The court found the plant to be at risk of waste, loss, dissipation, or impairment, absent court-supervised intervention. As part of this finding, the court cited several safety lapses, including fires, at least one explosion, releases of highly poisonous H2S gas resulting in injuries, as well as the storage of decaying P2S5 on-site rather than proper disposal. These conditions developed under One Rock's ownership and control. We believe it bears direct responsibility for the decisions that led to them. A court-appointed receiver is now in place with authority to manage Sauget's day-to-day operations. We expect that oversight to bring a measure of stability that has been absent. Importantly, we are not waiting.

We are taking concrete action to eliminate PDI's reliance on Flexsys. We will provide further updates in due course. As we've promised repeatedly, we will do what's necessary to protect our customers, our employees, and the long-term value of this business while enforcing our contractual rights to their full conclusion and holding One Rock accountable for its actions. Turning to MMT, our medical device manufacturing business. MMT continues to run ahead of our operating model, with strong adjusted EBITDA growth in the second quarter versus the same period last year under prior ownership. As discussed on prior calls, while our pricing and productivity actions are driving immediate benefits, the most exciting value creation lever at MMT is the significant organic growth potential through profitable new business. We're investing behind MMT's innovation pipeline and meaningfully accelerating new product launches to capitalize on this growth opportunity.

Finally, IMS, our aftermarket electronics business, also delivered a strong second quarter. Integration of the product lines we acquired in the fourth quarter is proceeding well, and we're applying our operational value drivers across each of them. We're optimistic about the earnings power of IMS's current portfolio, and we look forward to adding new product lines over time. Turning to M&A. Yesterday, we closed the acquisition of Monaco Enterprises for approximately $120 million in cash. As I referenced earlier, Monaco designs and manufactures the fire alarm reporting and mass notification networks that are the installed standard on more than 200 U.S. military installations globally. Monaco checks every box we look for in a Perimeter business. First, we target businesses that solve a critical, complicated customer need.

Monaco systems connect the hundreds of buildings on a typical DoD installation into a single base-wide fire and life safety dispatch and response network using proprietary communication protocols transmitted over dedicated, hard-to-disrupt radio frequencies. These systems protect lives and mission-critical assets around the clock, and they're required by the codes that govern military construction. Second, we evaluate the solution's cost relative to its criticality. The cost of a Monaco system is minuscule relative to base construction and operating budgets, important context when assessing the value Monaco delivers to its customers. Third, we target businesses that are leaders in niche markets. Monaco's market, network fire alarm reporting and mass notification for military installations, is genuinely niche with highly specialized requirements, namely base-wide radio networks built to military specifications and supported for decades after installation. A market with these characteristics is well-suited to a focused leader.