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3Q25 Update.
Perimeter Solutions reported 3Q25 and the stock jumped +26%. YTD the stock is now +112%.
While the results were good, it was not clear what would warrant such a large move.
Net sales increased +9% y/y to $315mn for the quarter, driven by fire safety net sales increasing +9% y/y and specialty product revenues increasing +15% y/y.
Fire safety revenue increased because of a more normalized fire season and because the U.S. Forest Service has started to advise a more aggressive stance towards smaller wildfires in order to limit the spread earlier. This includes a larger use of fire retardant than was previously expended. They also gave more details on a recently announced 5-year agreement with the USDA to expand their partnership. We go into more details on this below.
In terms of the fire suppressant business, they noted that “the suppressants business continued their momentum in the third quarter with particularly strong volume performance from our profitable new business initiatives and meaningful top and bottom line impact from our productivity and value pricing efforts”. This business added $12.4mn in revenue y/y. As they get more clients in their installation base, revenue from replacing the product follows.
Their Specialty Product segment continues to be plagued by a poorly performing plant that is being operated by Private Equity firm Flexsys: “There was once again a substantial amount of unplanned downtime, which significantly impacted specialty products’ financial results in the third quarter”. As a reminder, Perimeter is currently in the process of trying to take control over the plant that makes their P2S5 product because their contract granted them the right to operate it should they prove to be inept at it. Not only has the plant suffered from downtime, but Perimeter has alleged Flexsys has been severely risking workers safety. They are currently in the midst of litigation.
To the positive, the IMS business more than offset this, contributing $10.8mn for the quarter. Withing the specialty product segment, this is a more important business for two reasons. 1) It is their first foray into a new vertical since acquiring Perimeter Solutions and so their success or failure here will say much about their ability to allocate capital beyond the fire safety business. 2) It is a larger growth opportunity to deploy more capital. The P2S5 business was a legacy business acquired in the original acquisition and is a more “average” quality business.
In total adjusted EBITDA was $329mn, representing a 52% adjusted margin, over 10 points higher than 5 years ago. CEO Haitham Khouri attributes operational improvements and investments as a key driver of this.
All in all this was a fine quarter for Perimeter Solutions, but something mentioned on the call could improve their business quality overtime.
Business Commentary.
At the beginning of September, they announced..
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