Perimeter Solutions SA

Previous wording

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this quarterly report on Form 10‑Q for the quarter ended June 30, 2024 (this “Quarterly Report”). This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, such statements are subject to the “safe harbor” created by those sections and involve risks and uncertainties. Forward-looking statements are based on our management’s beliefs and assumptions and on information available to our management as of the date hereof. As a result of many factors, such as those set forth under “Item 1A. Risk Factors” included in our 2023 Annual Report and Part II, “Item 1A. Risk Factors” in this Quarterly Report, our actual results may differ materially from those anticipated in these forward-looking statements, accordingly, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Current wording

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this quarterly report on Form 10‑Q for the quarter ended September 30, 2024 (this “Quarterly Report”). This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, such statements are subject to the “safe harbor” created by those sections and involve risks and uncertainties. Forward-looking statements are based on our management’s beliefs and assumptions and on information available to our management as of the date hereof. As a result of many factors, such as those set forth under “Item 1A. Risk Factors” included in our 2023 Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements, accordingly, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Previous wording

Perimeter Solutions, S.A. (“PSSA”), a public company limited by shares (société anonyme) was incorporated on June 21, 2021 under the laws of the Grand Duchy of Luxembourg. PSSA is headquartered in the Grand Duchy of Luxembourg with business operations across the globe. PSSA's ordinary shares, nominal value, $1.00 per share (the “Ordinary Shares”), are listed on New York Stock Exchange ("NYSE") and trade under the symbol "PRM."

Current wording

Perimeter Solutions, SA (“PSSA”), a public company limited by shares (société anonyme) was incorporated on June 21, 2021 under the laws of the Grand Duchy of Luxembourg. PSSA is headquartered in the Grand Duchy of Luxembourg with business operations across the globe. PSSA's ordinary shares, nominal value, $1.00 per share (the “Ordinary Shares”), are listed on New York Stock Exchange ("NYSE") and trade under the symbol "PRM".

Previous wording

We are a global solutions provider, producing high-quality firefighting products and phosphorus-based specialty chemicals. Approximately 65% of our 2023 annual revenues were derived in the United States, approximately 15% in Europe and approximately 14% in Canada with the remaining approximately 6% spread across various other countries. Our business is organized and managed in two reporting segments: Fire Safety and Specialty Products.

Current wording

We are a global solutions provider, producing high-quality firefighting products and high quality specialty chemicals. Approximately 65% of our 2023 annual revenues were derived in the United States, approximately 15% in Europe and approximately 14% in Canada with the remaining approximately 6% spread across various other countries. Our business is organized and managed in two reporting segments: Fire Safety and Specialty Products.

Previous wording

The Specialty Products segment produces and sells P 2 S 5 used in several end markets and applications, including lubricant additives, various agricultural applications, various mining applications, and emerging electric battery technologies. Within the lubricant additives end market, currently the Company’s largest end market application, P 2 S 5, is primarily used in the production of a family of compounds called ZDDP, which is considered an essential component in the formulation of lubricating oils with its main function to provide anti-wear protection to engine components. In addition, ZDDP inhibits oxidation of lubricating oil by scavenging free radicals that initiate oil breakdown and sludge formation, resulting in better and longer engine function. P 2 S 5 is also used in pesticide and mining chemicals applications. We offer several grades of P 2 S 5 with varying degrees of phosphorus content, particle size, distribution, and reactivity to our global customers.

Current wording

The Specialty Products segment produces and sells P 2 S 5 used in several end markets and applications, including high quality specialty chemicals, various agricultural applications, various mining applications, and emerging electric battery technologies. Within the high quality specialty chemicals end market, currently the Company’s largest end market application, P 2 S 5, is primarily used in the production of a family of compounds called ZDDP, which is considered an essential component in the formulation of lubricating oils with its main function to provide anti-wear protection to engine components. In addition, ZDDP inhibits oxidation of lubricating oil by scavenging free radicals that initiate oil breakdown and sludge formation, resulting in better and longer engine function. P 2 S 5 is also used in pesticide and mining chemicals applications. We offer several grades of P 2 S 5 with varying degrees of phosphorus content, particle size, distribution, and reactivity to our global customers.

Previous wording

We operate seven business units within our two reporting segments. The business unit structure is meant to promote the decentralized execution andaccountabilityand maintain the geography and product-specific focus and granularity necessary to drive continued improvement in our key operational value drivers. Our key operational value drivers are profitable new business, pricing our products and services to the value they provide, and continued productivity improvements. Each business unit has a business unit manager, who is responsible for achieving targeted financial and operational results.

Current wording

We operate four busi ness units within our two reporting segments. The business unit structure is meant to promote the decentralized execution andaccountabilityand maintain the geography and product-specific focus and granularity necessary to drive continued improvement in our key operational value drivers. Our key operational value drivers are profitable new business, pricing our products and services to the value they provide, and continued productivity improvements. Each business unit has a business unit manager, who is responsible for achieving targeted financial and operational results.

Previous wording

In 2024, the Company changed the presentation of freight expense from selling, general and administrative expense to cost of goods sold, to better match freight expense with freight income. The change has been applied retrospectively to the condensed consolidated financial statements for the prior periods presented in this Quarterly Report. The impact to the accompanying condensed consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2023 is presented in the following table (in thousands). There was no impact on previously reported balances in the accompanying condensed consolidated balance sheet or statement of cash flows.

Current wording

In 2024, the Company changed the presentation of freight expense from selling, general and administrative expense to cost of goods sold, to better match freight expense with freight income. The change has been applied retrospectively to the condensed consolidated financial statements for the prior periods presented in this Quarterly Report. The impact to the accompanying condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2023 is presented in the following table (in thousands). There was no impact on previously reported balances in the accompanying condensed consolidated balance sheet or statement of cash flows.

Previous wording

Net Sales. Netproduct and services sales increased by$51.1 million for thethree months ended June 30, 2024 compared to the same period in 2023. Net sales in the Fire Safety segment increased by $45.4 million, representing a $41.3 million increase in fire retardant sales and a $4.1 million increase in fire suppressant sales. Fire retardant sales increased $42.5 million in the Americas and $0.6 million in Asia Pacific, partially offset by a decrease of $1.8 million in Europe. Retardant strength was driven by increasingly proactive use of air attack, and by extension of fire retardant, by our customers, as they combat the growing threat of wildfires, as well as by continued implementation of the Company’s strategies on profitable new business, productivity and pricing our products and services to the value they provide. Fire suppressant sales increased by $4.5 million in Americas and $0.6 million in Asia Pacific, driven by sales of fluorine-free foam concentrates, offset by a $1.0 million decrease in Europe. Net sales in the Specialty Products segment increased by $5.7 million, of which $6.3 million was an increase in Americas offset by a $0.6 million decrease in Europe. The growth in Specialty Products sales reflects an increase in purchases by our lubricant additives customers. The Company continues to monitor the inventory rationalization activities in its key end markets.

Current wording

Net Sales. Netproduct and services sales increased by$145.8 million for thethree months ended September 30, 2024, compared to the same period in 2023. Net sales in the Fire Safety segment increased by $133.6 million, representing a $132.9 million increase in fire retardant sales and a $0.7 million increase in fire suppressant sales. Fire retardant sales increased $131.5 million in the Americas and $1.7 million in Europe, partially offset by a decrease of $0.3 million in Asia Pacific. Retardant strength was driven by increasingly proactive use of air attack, and by extension of fire retardant, by our customers, as they combat the growing threat of wildfires, and by continued successful implementation of the Company’s strategies on profitable new business, as well as pricing our products and services to the value they provide. Fire suppressant sales increased by $0.7 million, primarily due to sales of fluorine-free foam concentrates. Net sales in the Specialty Products segment increased by $12.2 million, of which $8.0 million was an increase in Americas and $4.2 million was an increase in Europe. The growth in Specialty Products sales reflects an increase in purchases by our high-quality specialty chemicals customers.

Previous wording

Cost of Goods Sold. Cost of goods sold increased by$7.2 million for thethree months ended June 30, 2024 compared to the same period in 2023. The increase in the Fire Safety segment of $6.1 million was primarily due to an $5.9 million increase in labor, material and freight costs as a result of the increase in revenue and a $0.2 million increase in other costs. The $1.1 million increase in the Specialty Products segment was due to a $1.9 million increase in raw material, manufacturing and freight, offset by a $0.8 million decrease in other costs.

Current wording

Cost of Goods Sold. Cost of goods sold increased by$34.4 million for thethree months ended September 30, 2024 compared to the same period in 2023. The increase in the Fire Safety segment of $30.2 million was primarily due to a $29.5 million increase in labor, material and freight costs as a result of the increase in revenue and a $0.7 million increase in other costs. The $4.2 million increase in the Specialty Products segment was due to a $4.5 million increase in raw material, manufacturing and freight, offset by a $0.3 million decrease in other costs.

Previous wording

Selling, General and Administrative Expense. Selling, general and administrative expense increased by$7.1 million for thesix months ended June 30, 2024 compared to the same period in 2023. The increase was primarily due to a $6.1 million increase in personnel related and share-based compensation expenses and a $3.4 million increase in other costs partially offset by $2.4 million decrease in professional fees.

Current wording

Selling, General and Administrative Expense. Selling, general and administrative expense increased by$5.8 million for thethree months ended September 30, 2024 compared to the same period in 2023. The increase was primarily due to a $3.3 million increase in personnel related and share-based compensation expenses, a $1.0 million increase in professional fees, and a $1.5 million increase in other costs.

Previous wording

Founder advisory fees - related party. Founder advisory fees - related party represents the change in the fair value of the liability-classified Fixed Annual Advisory Amount and Variable Annual Advisory Amount (collectively, the “Annual Advisory Amounts”). The increase in the fair value of the Annual Advisory Amounts for the three months ended June 30, 2024 of $0.6 million was primarily due to an increase in the average price per Ordinary Share from $6.81 as of March 31, 2024 to $7.75 as of June 30, 2024. The decrease in the fair value of the Annual Advisory Amount for the three months ended June 30, 2023 of $60.0 million was primarily due to a reduction in the average price per Ordinary Share from $7.73 as of March 31, 2023 to $5.89 June 30, 2023.

Current wording

Founder Advisory Fees - related party. Founder advisory fees - related party represents the change in the fair value of the liability-classified Fixed Annual Advisory Amount and Variable Annual Advisory Amount (collectively, the “Annual Advisory Amounts”). The increase in the fair value of the Annual Advisory Amounts for the three months ended September 30, 2024 of $184.2 million was primarily due to an increase in the average price per Ordinary Share from $7.75 as of June 30, 2024 to $12.85 as of September 30, 2024. The decrease in the fair value of the Annual Advisory Amount for the three months ended September 30, 2023 of $24.5 million was primarily due to a reduction in the average price per Ordinary Share from $5.89 as of June 30, 2023, to $5.02 September 30, 2023.

Previous wording

Foreign Currency Loss (Gain). Foreign currency loss of $1.5 million for the six months ended June 30, 2024 reflects strengthening of the U.S. dollar, primarily against the Euro. Foreign currency gain of $0.6 million for the six months ended June 30, 2023 reflects weakening of the U.S. dollar, primarily against the Euro.

Current wording

Foreign Currency (Gain) Loss. Foreign currency gain of $1.4 million for the three months ended September 30, 2024 reflects weakening of the U.S. dollar, primarily against the Euro. Foreign currency loss of $1.4 million for the three months ended September 30, 2023 reflects strengthening U.S. dollar, primarily against the Euro.

Previous wording

Income Tax Expense. Income tax expense increased by $11.7 million for the three months ended June 30, 2024 compared to the same period in 2023. The increase is due primarily to changes in earnings in jurisdictions that were not covered by a valuation allowance and the impact of non-deductible compensation and accrued withholding taxes on the annualized effective tax rate.

Current wording

Income Tax Expense. Income tax expense increased by $41.3 million for the three months ended September 30, 2024 compared to the same period in 2023. The increase is due primarily to changes in earnings in jurisdictions that were not covered by a valuation allowance and the impact of non-deductible compensation and accrued withholding taxes on the annualized effective tax rate.

Previous wording

Net Sales. Netproduct and services sales for thesix months ended June 30, 2024 increased by$66.3 million compared to the same period in 2023. Net sales in the Fire Safety segment increased by $51.8 million, representing a $40.7 million increase in fire retardant sales and $11.1 million increase in fire suppressant sales. Fire retardant sales increased $42.9 million in the Americas and $0.1 million in Asia Pacific partially offset by a $2.3 million decrease in Europe. Retardant strength was driven by increasingly proactive use of air attack, and by extension of fire retardant, by our customers, as they combat the growing threat of wildfires, as well as by continued implementation of the Company’s strategies on profitable new business, productivity and pricing our products and services to the value they provide. Fire suppressant sales increased $13.4 million in Americas and $0.6 million in Asia Pacific, driven by sales of fluorine-free foam concentrates, offset by a decrease of $2.9 million in Europe. Net sales in the Specialty Products segment increased by $14.5 million, of which $13.7 million was in the Americas and $0.8 million was in Europe. The growth in Specialty Products sales reflects an increase in purchases by our lubricant additives customers. The Company continues to monitor the inventory rationalization activities in its key end markets.

Current wording

Net Sales. Netproduct and services sales for thenine months ended September 30, 2024 increased by$212.1 million compared to the same period in 2023. Net sales in the Fire Safety segment increased by $185.4 million, representing a $173.6 million increase in fire retardant sales and $11.8 million increase in fire suppressant sales. Fire retardant sales increased $174.4 million in the Americas, offset by decreases of $0.3 million in Asia Pacific and $0.5 million in Europe. Retardant strength was driven by increasingly proactive use of air attack, and by extension of fire retardant, by our customers, as they combat the growing threat of wildfires, and by continued successful implementation of the Company’s strategies on profitable new business, as well as pricing our products and services to the value they provide. Fire suppressant sales increased by $11.8 million, primarily due to sales of fluorine-free foam concentrates. Net sales in the Specialty Products segment increased by $26.7 million, of which $21.8 million was in the Americas and $4.9 million was in Europe. The growth in Specialty Products sales reflects an increase in purchases by our high-quality specialty chemicals customers.

Previous wording

Cost of Goods Sold. Cost of goods sold increased by$12.1 million for thesix months ended June 30, 2024 compared to the same period in 2023. The increase in the Fire Safety segment of $8.7 million was primarily due to an $8.3 million increase in labor, material and freight costs as a result of the increase in revenue and a $0.4 million increase in other costs. The $3.4 million increase in the Specialty Products segment was due to a $4.8 million increase in raw material, manufacturing and freight, offset by a $1.4 million decrease in other costs.

Current wording

Cost of Goods Sold. Cost of goods sold increased by$46.5 million for thenine months ended September 30, 2024 compared to the same period in 2023. The increase in the Fire Safety segment of $38.9 million was primarily due to a $37.9 million increase in labor, material and freight costs as a result of the increase in revenue and a $1.0 million increase in other costs. The $7.6 million increase in the Specialty Products segment was due to a $9.4 million increase in raw material, manufacturing and freight, offset by a $1.8 million decrease in other costs.

Previous wording

Selling, General and Administrative Expense. Selling, general and administrative expense increased by$1.7 million for thethree months ended June 30, 2024 compared to the same period in 2023. The increase was primarily due to a $1.7 million increase in personnel related and share-based compensation expenses and a $1.2 million increase in other costs partially offset by $1.2 million decrease in professional fees.

Current wording

Selling, General and Administrative Expense. Selling, general and administrative expense increased by$13.0 million for thenine months ended September 30, 2024 compared to the same period in 2023. The increase was primarily due to a $9.5 million increase in personnel related and share-based compensation expenses and a $6.5 million increase in other costs, partially offset by $3.0 million decrease in professional fees.

Previous wording

Founder advisory fees - related party. Founder advisory fees - related party represents the change in the fair value of the liability-classified Fixed Annual Advisory Amount and Variable Annual Advisory Amount. The increase in the fair value of the Annual Advisory Amounts for the six months ended June 30, 2024 of $68.9 million was primarily due to a increase in the average price per Ordinary Share from $4.51 as of December 31, 2023 to $7.75 as of June 30, 2024. The decrease in the fair value of the Annual Advisory Amount for the six months ended June 30, 2023 of $84.3 million was primarily due to a reduction in the average price per Ordinary Share from $8.86 as of December 31, 2022 to $5.89 as of June 30, 2023.

Current wording

Founder Advisory Fees - related party. Founder advisory fees - related party represents the change in the fair value of the liability-classified Fixed Annual Advisory Amount and Variable Annual Advisory Amount. The increase in the fair value of the Annual Advisory Amounts for the nine months ended September 30, 2024 of $253.1 million was primarily due to a increase in the average price per Ordinary Share from $4.51 as of December 31, 2023 to $12.85 as of September 30, 2024. The decrease in the fair value of the Annual Advisory Amount for the nine months ended September 30, 2023 of

Previous wording

Income Tax (Expense)Benefit. Income tax expense increased by $13.8 million for the six months ended June 30, 2024 compared to the same period in 2023. The increase is due primarily to changes in earnings in jurisdictions that were not covered by a valuation allowance and the impact of non-deductible compensation and accrued withholding taxes on the annualized effective tax rate.

Current wording

Income Tax (Expense) Benefit. Income tax expense increased by $55.1 million for the nine months ended September 30, 2024 compared to the same period in 2023. The increase is due primarily to changes in earnings in jurisdictions that were not covered by a valuation allowance and the impact of non-deductible compensation and accrued withholding taxes on the annualized effective tax rate.

Previous wording

We use segment net sales and segment adjusted earnings before interest, taxes, depreciation and amortization (“Segment Adjusted EBITDA”) to evaluate operating performance by segment, for business planning purposes and to allocate resources. The following tables provide information for our net sales and Segment Adjusted EBITDA (in thousands) for the three and six months ended June 30, 2024 compared to the same periods in 2023:

Current wording

We use segment net sales and segment adjusted earnings before interest, taxes, depreciation and amortization (“Segment Adjusted EBITDA”) to evaluate operating performance by segment, for business planning purposes and to allocate resources. The following tables provide information for our net sales and Segment Adjusted EBITDA (in thousands) for the three and nine months ended September 30, 2024 compared to the same periods in 2023:

Previous wording

Adjusted EBITDA for our Specialty Products segment increased by $4.8 million during the three months ended June 30, 2024 compared with the same period in 2023. The increase was primarily due to higher net sales.

Current wording

Adjusted EBITDA for our Specialty Products segment increased by $7.5 million during the three months ended September 30, 2024 compared with the same period in 2023. The increase was primarily due to higher net sales.

Previous wording

Adjusted EBITDA for our Specialty Products segment increased by $10.7 million during the six months ended June 30, 2024 compared with the same period in 2023. The increase was primarily due to higher net sales.

Current wording

Adjusted EBITDA for our Specialty Products segment increased by $18.2 million during the nine months ended September 30, 2024 compared with the same period in 2023. The increase was primarily due to higher net sales.

Previous wording

We believe that our existing cash and cash equivalents of approximately $43.2 million, net cash flows generated from operations andavailability under the Revolving Credit Facility as of June 30, 2024 will be sufficient to meet our current capital expenditures, working capital, and debt service requirements for at least 12 months from the filing date of this Quarterly Report. As of June 30, 2024, we expect our remaining fiscal year 2024 capital expenditure budget to cover both our maintenance and growth capital expenditures. Wemay also utilize borrowings under other various financing sources available to us, including the issuance of equity and/or debt securities through public offerings or private placements, to fund our acquisitions, the Annual Advisory Amounts and long-term liquidity needs. Our ability to complete future offerings of equity or debt securities and the timing of these offerings will depend upon various factors including prevailing market conditions and our financial condition.

Current wording

We believe that our existing cash and cash equivalents of approximately $223.1 million, net cash flows generated from operations andavailability under the Revolving Credit Facility as of September 30, 2024 will be sufficient to meet our current capital expenditures, working capital, and debt service requirements for at least 12 months from the filing date of this Quarterly Report. As of September 30, 2024, we expect our remaining fiscal year 2024 capital expenditure budget to cover both our maintenance and growth capital expenditures. Wemay also utilize borrowings under other various financing sources available to us, including the issuance of equity and/or debt securities through public offerings or private placements, to fund our acquisitions, the Annual Advisory Amounts and long-term liquidity needs. Our ability to complete future offerings of equity or debt securities and the timing of these offerings will depend upon various factors including prevailing market conditions and our financial condition.

Previous wording

We repurchased 18,535 and 2,987,892 Ordinary Shares during the three and six months ended June 30, 2024, respectively. The repurchased Ordinary Shares were recorded at cost and are being held in treasury.

Current wording

We repurchased 399 and 2,988,291 Ordinary Shares during the three and nine months ended September 30, 2024, respectively. The repurchased Ordinary Shares were recorded at cost and are being held in treasury.

Previous wording

Cash provided by (used in) investing activities was $0.2 million and $(4.4) million for the six months ended June 30, 2024 and 2023 respectively. During the six months ended June 30, 2024, the Company purchased property and equipment of $5.2 million offset by proceeds from short-term investments of $5.4 million upon settlement of a Euro denominated certificate of deposit. During the six months ended June 30, 2023, the Company purchased property and equipment of $4.4 million.

Current wording

Cash used in investing activities was $3.7 million and $6.6 million for the nine months ended September 30, 2024 and 2023 respectively. During the nine months ended September 30, 2024, the Company purchased property and equipment of $9.1 million offset by proceeds from short-term investments of $5.4 million upon settlement of a Euro denominated certificate of deposit. During the nine months ended September 30, 2023, the Company purchased property and equipment of $6.6 million.

Previous wording

Cash used in financing activities was $14.8 million and $27.3 million for the six months ended June 30, 2024 and 2023 respectively. During the six months ended June 30, 2024, we repurchased outstanding Ordinary Shares for $14.4 million and made $0.3 million in principal payments on finance lease obligations. During the six months ended June 30, 2023, we repurchased outstanding Ordinary Shares for $27.2 million and made principal payments on finance lease obligations of $0.1 million.

Current wording

Cash used in financing activities was $14.9 million and $37.5 million for the nine months ended September 30, 2024 and 2023 respectively. During the nine months ended September 30, 2024, we repurchased outstanding Ordinary Shares for $14.4 million and made $0.5 million in principal payments on finance lease obligations. During the nine months ended September 30, 2023, we repurchased outstanding Ordinary Shares for $37.2 million and made principal payments on finance lease obligations of $0.3 million.