Perimeter Solutions' Q3 2025: Contradictions Emerge on Fire Safety Segment Earnings Power, USDA Contract Impact on Revenue Split, and Government Contracting Metrics

Date of Call: October 30, 2025

Financials Results

• Revenue: $315.4M, up 9% YOY (consolidated Q3); Fire Safety Q3 $273.4M, up 9% YOY; Specialty Products Q3 $42.1M, up 15% YOY; YTD consolidated sales $550.1M, up 16%
• EPS: GAAP loss per share Q3 $0.62 vs $0.61 prior year; Q3 adjusted EPS $0.82 vs $0.75 prior year; YTD adjusted EPS $1.24 vs $0.99 prior year; YTD GAAP loss per share $0.45 vs $1.03 prior year

Guidance:

• Long-term assumptions unchanged from Q2; Q3 consistent with those expectations.
• Expect North America EBITDA to grow in 2026 on a like-for-like acre season, inclusive of the new Forest Service contract.
• Full-year tax expectation and year-end net working capital outlook unchanged.
• Plan to continue IMS product-line M&A (tens of millions annually) and maintain moderate leverage (~1x net debt/LTM adjusted EBITDA) with a $100M revolver undrawn.

Business Commentary:

* Strong Financial Performance of Fire Safety Segment: - Fire Safety segment reported adjusted EBITDA of $186.3 million for Q3, with a 13% increase over the previous year, and $265 million year-to-date, marking a 24% gain. - Growth was driven by execution of operational value drivers, greater consistency and predictability in the retardant business, and proactive initial attack strategies by customers.

• International Retardant Business Strength:
• International retardant business grew sales by $5.5 million from the previous year.

• The international retardant business continued strong results year-to-date and in Q3 due to robust performance in key markets like Australia, France, and new applications in countries like Italy.

• Specialty Products Segment Challenges:

• Specialty Products Q3 adjusted EBITDA fell to $9.1 million, down from $12.9 million in the prior year quarter.

• Operational challenges and unplanned downtime at the Flexsys-operated Sauget plant contributed to lower sales and higher costs.

• Capital Allocation and M&A Strategy:

• The company invested nearly $17 million in capital expenditures and product line acquisitions in IMS during Q3.
• The focus is on strategic acquisitions to enhance operating value drivers and growth opportunities, with plans to continue allocating capital at attractive IRRs.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted Q3 adjusted EBITDA of $186.3M and YTD adjusted EBITDA $295.7M, called the new 5-year USFS contract “a win‑win” that drives savings and Perimeter momentum, and said they expect North America EBITDA growth in 2026; caveats noted around ongoing Specialty plant operational/safety issues and related litigation.

Q&A:

• Question from Joshua Spector (UBS): What is the normal earnings power within the Fire Safety segment overall? If acres rebound next year (e.g., +30%–40%), will gallons increase or are you tapped out on capacity?
  Response: This year is broadly indicative of normalized earnings power; additional acres would increase benefit but likely be muted by sustained aggressive initial-attack posture, and the company was not capacity-constrained this year.

• Question from Joshua Spector (UBS): Did you benefit from a more dispersed/less chaotic fire season in terms of loading ability, and if future activity is more unpredictable can you still load similar or more gallons?
  Response: Yes — benefited from more even dispersion of acres, growth in the air tanker fleet and improved loading capability; these factors interact and are difficult to separately quantify.

• Question from Joshua Spector (UBS): On the new USDA framework, between the first-year price reduction and increased services, what's the net impact to earnings potential in 2026 vs 2025, and how has the split shifted between fixed (services) and per-gallon?
  Response: Expect North America EBITDA to grow in 2026 on a like-for-like acre basis inclusive of the contract; the contract shifts mix toward more fixed services (greater predictability) while year‑1 price cuts reduce the proportion tied to gallons.

• Question from Daniel Kutz (Morgan Stanley): Thoughts on the planned formation of the U.S. Wildland Fire Service (combining USDA USFS and DOI agencies) — implications for debottlenecking, resource efficiency and potential for joint contracting extending your USDA contract?
  Response: Our federal contract already combines all five federal firefighting agencies and serves as a template; consolidation aligns with that structure, is materially positive for efficiency, the air tanker industry and preparedness, and is supportive of joint contracting.

• Question from Daniel Kutz (Morgan Stanley): When negotiating large contracts, what are the key puts-and-takes you prioritize (stability vs flexibility, term, cost pass-through, pricing)?
  Response: Contracting is critical: we collaborate to understand customer needs and structure deals that balance customer outcomes with Perimeter priorities (stability, predictability, value sharing), applying that disciplined approach across businesses to protect and create value.

• Question from Daniel Kutz (Morgan Stanley): Can you unpack international retardants performance YTD vs Q3 and remind us of key markets north vs south hemisphere and relative strength this year?
  Response: International retardants were strong in both Q3 and YTD — Europe, Middle East, Asia, Australia and South America all performed well; the market is early in adoption with strong execution and a durable growth runway.

Contradiction Point 1

Fire Safety Segment Earnings Power and Capacity Utilization

It involves the perceived capacity utilization and earnings power of the Fire Safety segment, which directly impacts the company's financial outlook and operational capabilities in managing wildfire response.

What is the normal earnings power of the Fire Safety segment? Will gallons increase with a 30%-40% rise in acres burned, or is capacity fully utilized? - Joshua Spector (UBS Investment Bank, Research Division)

2025Q3: The earnings power of the Fire Safety business is pretty indicative of normalized conditions. Volumes had a headwind from acres, offset by aggressive tactics. Acres benefit will be less than expected due to initial attack posture. Capacity was not fully utilized, and more acres would not be an issue. - Kyle Sable(CFO)

With historically low leverage, do you have a target and is M&A part of the strategy? - Christopher Perrella (UBS)

2024Q4: We have capacity today that we can expand into both by fleet and also by aircraft and capacity as we expand both our aircraft fleet and our air tanker fleet, which we believe that we can expand our fleet significantly without having to make significant investments in infrastructure. - Haitham Khouri(CEO)

Contradiction Point 2

Impact of USDA Contract on Revenue and Service Versus Product Revenue Split

It involves differing statements about the impact of the USDA contract on revenue and the service versus product revenue split, which are critical for financial forecasting and strategic decision-making.

Can you elaborate on the new USDA framework for next year and how it affects earnings potential and the service versus product revenue split? - Daniel Kutz (Morgan Stanley, Research Division)

2025Q3: The contract will grow financial metrics, even in a like-for-like acre season. It increases revenue and EBITDA from services and reduces product revenue, improving predictability and consistency. - Haitham Khouri(CEO)

What is your outlook for EBITDA margins beyond Q1? - Kyle Sable (UBS)

2025Q1: Our expectation for 2025 is to continue to have like-for-like directly billed volumes in 2025 from 2024. This is built into our 2025 guidance. - Kyle Sable(CFO & Principal Accounting Officer)

Contradiction Point 3

Fire Safety Segment Earnings Power and Capacity

It involves differing statements about the earnings power and capacity utilization of the Fire Safety segment, which could impact investor expectations and strategic planning.

What is the normal earnings power of the Fire Safety segment? With a 30% to 40% increase in acres burned, will there be an increase in gallons, or are you at full capacity? - Joshua Spector (UBS Investment Bank, Research Division)

2025Q3: The earnings power of the Fire Safety business is pretty indicative of normalized conditions. Volumes had a headwind from acres, offset by aggressive tactics. - Kyle Sable(CFO & Principal Accounting Officer)

What are your expectations for suppressant sales in Q2 and Q3 given the tough comps? - Joshua Spector (UBS)

2025Q1: We expect 2025 volumes to be more aligned with historical norms. - Kyle Sable(CFO & Principal Accounting Officer)

Contradiction Point 4

Impact of Government Contracting on Financial Metrics

It pertains to the financial implications of government contracting, which is crucial for the company's revenue stability and growth.

Can you provide more details on the new USDA framework for next year, including its impact on earnings and the service versus product revenue split? - Daniel Kutz (Morgan Stanley, Research Division)

2025Q3: The contract will grow financial metrics, even in a like-for-like acre season. It increases revenue and EBITDA from services and reduces product revenue, improving predictability and consistency. - Haitham Khouri(CEO)

Does increased focus on fire suppression and prevention have implications for Perimeter's business? - Daniel Kutz (Morgan Stanley Investment Management)

2024Q4: Our federal contract is structured as a cost-plus contract, which is a lump-sum contract with a firm-fixed price. This contract will cover all our operational costs and allow us to respond to any wildfire emergency nationwide. - Haitham Khouri(CEO)

Contradiction Point 5

USDA Contract Impact on Earnings and Revenue Split

It pertains to the financial impact of a new USDA contract, which could influence earnings and revenue projections.

Could you elaborate on the new USDA framework for next year, and its impact on earnings potential and the service-to-product revenue split? - Joshua Spector (UBS Investment Bank, Research Division)

2025Q3: The contract will grow financial metrics, even in a like-for-like acre season. It increases revenue and EBITDA from services and reduces product revenue, improving predictability and consistency. - Haitham Khouri(CEO)

Is Fire Safety's high margin sustainable, and what guidance do you have for 3Q? - Joshua David Spector(UBS Investment Bank)

2025Q2: We've got some good quality contracts coming up that I think should help us get to the $1+ billion mark, during which time we can stabilize this business, get it to a more predictable cash flow. - Haitham R. Khouri(CEO)