What changed in this filing

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Item 1. Financial Statements

2024-08-01 compared with 2024-05-09 · 123 added, 101 removed, 493 unchanged (31% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

ASSETS (Unaudited)

19 unchanged sentences

Founders advisory fees payable - related party 9,129 2,702

Deferred revenue 7,927 —

Total current liabilities 81,852 55,051

12 unchanged sentences

166,824,659 and 165,066,195 shares issued;

145,240,112 and 146,451,005 shares outstanding at March 31, 2024 and December 31, 2023, respectively

145,221,577 and 146,451,005 shares outstanding at June 30, 2024 and December 31, 2023, respectively

166,825 165,067

Treasury shares, at cost;

21,584,547 and 18,615,190 shares at March 31, 2024 and December 31, 2023, respectively

21,603,082 and 18,615,190 shares at June 30, 2024 and December 31, 2023, respectively

( 127,824 ) ( 113,407 )

9 unchanged sentences

(in thousands, except share and per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net sales $ 127,276 $ 76,137 $ 186,320 $ 119,995

7 unchanged sentences

Total operating expenses 28,249 ( 34,021 ) 123,815 ( 36,475 )

Operating (loss) income ( 74,864 ) 12,852

Operating income (loss) 45,018 63,347 ( 29,846 ) 76,199

Other expense (income):

4 unchanged sentences

Total other expense, net 10,888 10,600 22,856 20,343

(Loss) income before income taxes ( 86,832 ) 3,109

Income tax benefit 4,274 6,322

Net (loss) income ( 82,558 ) 9,431

Other comprehensive (loss) income, net of tax:

Income (loss) before income taxes 34,130 52,747 ( 52,702 ) 55,856

Income tax (expense) benefit ( 12,480 ) ( 733 ) ( 8,206 ) 5,589

Net income (loss) 21,650 52,014 ( 60,908 ) 61,445

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments ( 989 ) 2,215 ( 6,532 ) 3,808

Total comprehensive (loss) income $ ( 88,101 ) $ 11,024

(Loss) earnings per share:

Total comprehensive income (loss) $ 20,661 $ 54,229 $ ( 67,440 ) $ 65,253

Earnings (loss) per share:

Basic $ 0.15 $ 0.33 $ ( 0.42 ) $ 0.39

15 unchanged sentences

Balance, December 31, 2022 163,234,542 $ 163,235 6,436,736 $ ( 49,341 ) $ 1,698,781 $ ( 25,471 ) $ ( 648,304 ) $ 1,138,900

163,234,542 $ 163,235 6,436,736 $ ( 49,341 ) $ 1,698,781 $ ( 25,471 ) $ ( 648,304 ) $ 1,138,900

Share-based compensation — — — ( 3,074 ) — — ( 3,074 )

4 unchanged sentences

Balance, March 31, 2023 165,066,195 $ 165,067 6,552,306 ( 50,205 ) $ 1,693,875 $ ( 23,878 ) $ ( 638,873 ) $ 1,145,986

Share-based compensation — — — — 1,195 — — 1,195

Ordinary shares repurchased — — 3,993,056 ( 26,348 ) — — — ( 26,348 )

Net income — — — — — — 52,014 52,014

Other comprehensive income — — — — — 2,215 — 2,215

Balance, June 30, 2023

165,066,195 $ 165,067 10,545,362 $ ( 76,553 ) $ 1,695,070 $ ( 21,663 ) $ ( 586,859 ) $ 1,175,062

Balance, December 31, 2023 165,066,195 165,067 18,615,190 $ ( 113,407 ) $ 1,701,163 $ ( 19,710 ) $ ( 580,818 ) $ 1,152,295

165,066,195 $ 165,067 18,615,190 $ ( 113,407 ) $ 1,701,163 $ ( 19,710 ) $ ( 580,818 ) $ 1,152,295

Share-based compensation — — — — 1,742 — — 1,742

4 unchanged sentences

Balance, March 31, 2024 166,824,659 $ 166,825 21,584,547 $ ( 127,685 ) $ 1,701,147 $ ( 25,253 ) $ ( 663,376 ) $ 1,051,658

Share-based compensation — — — — 2,994 — — 2,994

Ordinary shares repurchased — — 18,535 ( 139 ) — — — ( 139 )

Net income — — — — — — 21,650 21,650

Other comprehensive loss — — — — — ( 989 ) — ( 989 )

Balance, June 30, 2024

166,824,659 $ 166,825 21,603,082 $ ( 127,824 ) $ 1,704,141 $ ( 26,242 ) $ ( 641,726 ) $ 1,075,174

3 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

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Foreign currency loss (gain) 1,517 ( 628 )

(Gain) loss on disposal of assets ( 10 ) 5

Loss on disposal of assets 9 20

Changes in operating assets and liabilities, net of acquisitions:

1 unchanged sentence

Inventories 2,681 ( 19,963 )

Prepaid expenses and current other assets ( 1,819 ) 360

Prepaid expenses and other current assets ( 126 ) 1,260

Accounts payable 277 ( 4,744 )

Deferred revenue 7,927 2,653

Income taxes payable, net 8,635 ( 10,479 )

8 unchanged sentences

Proceeds from short-term investments 5,383 —

Net cash used in investing activities ( 472 ) ( 2,456 )

Net cash provided by (used in) investing activities 187 ( 4,375 )

Cash flows from financing activities:

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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 the New York Stock Exchange ("NYSE") and trade under the symbol "PRM." The condensed consolidated financial statements herein include the assets, liabilities, and results of operations of PSSA and its subsidiaries, all of which are wholly owned (collectively, the “Company”).

Business Operations

The Company is a global solutions provider for the fire safety and specialty products industries.

Approximately 65 % of the Company's 2023 annual revenues were derived in the United States, approximately 15 % in Europe, approximately 14 % in Canada with the remaining approximately 6 % spread across various other countries.

Approximately 65 % of the Company's 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.

The Company’s business is organized and managed in two reporting segments:

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The results of operations for the interim period are not necessarily indicative of the results that will be realized for the entire fiscal year.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes thereto included in the Company’s 2023 Annual Report .

Principles of Consolidation

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Significant estimates made by management in connection with the preparation of the accompanying condensed consolidated financial statements include the useful lives of long-lived and intangible assets, the fair value of financial assets and liabilities, valuation of goodwill, stock options, founder advisory fees and realizability of deferred tax assets.

Significant estimates made by management in connection with the preparation of the accompanying condensed consolidated financial statements include the useful lives of long-lived and intangible assets, the fair value of financial assets and liabilities, the valuation of goodwill, stock options, and founder advisory fees, and the realizability of deferred tax assets.

Actual results could differ from those estimates.

As of March 31, 2024, the Company’s significant accounting policies are consistent with those discussed in Note 2 - “Summary of Significant Accounting Policies and Recent Accounting Pronouncements” to its consolidated financial statements included in the Company’s 2023 Annual Report.

Accounting Policies

As of June 30, 2024, the Company’s significant accounting policies are consistent with those discussed in Note 2 - “Summary of Significant Accounting Policies and Recent Accounting Pronouncements” to its consolidated financial statements included in the Company’s 2023 Annual Report.

Reclassification

During the three months ended March 31, 2024, the Company changed the presentation to present freight expense as a component of cost of goods sold rather than selling, general and administrative expense to better align freight expense with freight income.

The change has been applied retrospectively to the condensed consolidated financial statements for the prior period presented in this Quarterly Report.

The impact to the accompanying condensed consolidated statements of operations and comprehensive income (loss) is presented in the following table (in thousands).

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.

Three Months Ended March 31, 2023

As Previously Reported As Adjusted Effect of Change

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

As Previously Reported As Adjusted Effect of Change As Previously Reported As Adjusted Effect of Change

Cost of goods sold $ 44,140 $ 46,811 $ 2,671 $ 75,152 $ 80,271 $ 5,119

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In March 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2024-02 “Codification Improvements,” which amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification.

The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance.

The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances, the references removed are extraneous and not required in order to understand or apply the guidance.

Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities.

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Details of certain balance sheet items are presented below (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Raw materials and manufacturing supplies $ 76,029 $ 77,657

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Total accrued expenses and other current liabilities $ 42,991 $ 30,710

Depreciation expense related to property, plant and equipment for the three months ended March 31, 2024 and 2023 was $ 2.6 million and $ 2.3 million, respectively, substantially all of which was presented in cost of goods sold in the accompanying condensed consolidated statements of operations and comprehensive income (loss).

The Company had an allowance for doubtful accounts, included in accounts receivable, net of $ 1.0 million and $ 0.9 million as of March 31, 2024 and December 31, 2023, respectively.

Depreciation expense related to property, plant and equipment was $ 2.6 million and $ 5.2 million for the three and six months ended June 30, 2024, respectively, and $ 2.4 million and $ 4.7 million for the three and six months ended June 30, 2023 , respectively, substantially all of which was presented in cost of goods sold in the accompanying condensed consolidated statements of operations and comprehensive income (loss).

The Company had an allowance for doubtful accounts, included in accounts receivable, net of $ 1.0 million and $ 1.0 million as of June 30, 2024 and December 31, 2023, respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS

4 unchanged sentences

Foreign currency translation ( 4,826 ) ( 1,273 ) ( 6,099 )

Balance, March 31, 2024

Balance, June 30, 2024

$ 859,063 $ 171,117 $ 1,030,180

Intangible assets and related accumulated amortization as of March 31, 2024 and December 31, 2023 are as follows (in thousands):

March 31, 2024

Intangible assets and related accumulated amortization as of June 30, 2024 and December 31, 2023 are as follows (in thousands):

June 30, 2024

(in years) Gross Value Impairment Foreign

5 unchanged sentences

Tradenames 20 101,000 — ( 1,012 ) ( 13,243 ) 86,745

Balance, March 31, 2024

Balance, June 30, 2024

$ 1,112,000 $ ( 40,738 ) $ ( 11,889 ) $ ( 145,700 ) $ 913,673

10 unchanged sentences

During the year ended December 31, 2023, due to a downward revision in the revenue forecast related to a contingent earn-out eligible fire retardant product acquired by the Company in May 2020 during the purchase of LaderaTech, Inc.

(“LaderaTech”), the Company determined that the $ 40.7 million in carrying value of the technology underlying the contingent earn-out eligible fire retardant product is no longer recoverable.

(“LaderaTech”), the Company determined that the $ 40.7 million in carrying value of the technology underlying the contingent earn-out eligible fire retardant product was no longer recoverable.

As a result, during the year ended December 31, 2023, the Company recorded an impairment of $ 40.7 million.

Amortization expense for definite-lived intangible assets for the three months ended March 31, 2024 and 2023 was $ 13.8 million and $ 13.8 million, respectively.

Amortization expense for definite-lived intangible assets was $ 13.8 million and $ 27.6 million for the three and six months ended June 30, 2024, respectively, and $ 13.7 million and $ 27.5 million for the three and six months ended June 30, 2023, respectively.

Estimated annual amortization expense of intangible assets for the next five years ended December 31 and thereafter is as follows (in thousands):

2 unchanged sentences

Total $ 913,673

Lease cost for the three months ended March 31, 2024 and 2023 are as follows (in thousands):

Three Months Ended March 31,

Lease cost for the three and six months ended June 30, 2024 and 2023 are as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Operating lease cost (1)

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(1) Operating lease cost does not include short-term leases or variable costs, all of which are immaterial.

As of March 31, 2024, the weighted-average remaining lease terms of the Company’s operating leases and finance leases were approximately 8.2 years and 7.0 years, respectively, and the weighted-average discount rates applied were 6.7 % and 7.6 %, respectively.

Supplemental cash flow information related to leases for the three months ended March 31, 2024 and 2023 are as follows (in thousands):

Three Months Ended March 31,

As of June 30, 2024, the weighted-average remaining lease terms of the Company’s operating leases and finance leases were approximately 8.0 years and 6.7 years, respectively, and the weighted-average discount rates applied were 6.8 % and 7.6 %, respectively.

Supplemental cash flow information related to leases for the six months ended June 30, 2024 and June 30, 2023 are as follows (in thousands):

Six Months Ended June 30,

Cash paid for amounts included in the measurement of operating lease liabilities:

5 unchanged sentences

Financing leases 751 4,688

As of March 31, 2024 , the estimated future minimum payment obligations for non-cancelable operating and finance leases are as follows (in thousands):

Net change in operating lease right-of-use assets due to lease modifications resulting in reclassification of leases from operating to finance $ — $ ( 1,514 )

As of June 30, 2024 , the estimated future minimum payment obligations for non-cancelable operating and finance leases are as follows (in thousands):

Operating Leases Finance Leases

10 unchanged sentences

Long-term debt consists of the following (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Senior Notes $ 675,000 $ 675,000

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Deferred financing costs incurred in connection with securing the Revolving Credit Facility were $ 2.3 million, which are carried as a long-term asset in the accompanying condensed consolidated balance sheets and is amortized on a straight-line over the term of the Revolving Credit Facility and included in interest expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss).

As of March 31, 2024, the Company did no t have any outstanding borrowings under the Revolving Credit Facility and was in compliance with all covenants.

As of June 30, 2024, the Company did no t have any outstanding borrowings under the Revolving Credit Facility and was in compliance with all covenants.

SK Intermediate II has $ 675.0 million principal amount of 5.00 % senior secured notes due October 30, 2029 (“Senior Notes”).

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and change the Company’s line of business.

As of March 31, 2024 the Company was in compliance with all covenants.

As of June 30, 2024 the Company was in compliance with all covenants.

Deferred financing costs incurred in connection with securing the Senior Notes were $ 11.0 million, which were capitalized and amortized using the effective interest method over the term of the Senior Notes and included in interest expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss).

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The Company, under its articles of association (the "Articles") is mandatorily required to redeem the Redeemable Preferred Shares at any time prior to the earliest of (i) six months following the latest maturity date of the above-mentioned Senior Notes, (ii) nine years after the date of issuance of the Redeemable Preferred Shares or (iii) upon the occurrence of a change of control, as defined in the Company’s Articles.

Due to the fact that the Redeemable Preferred Shares are mandatorily redeemable, the Redeemable Preferred Shares are classified as a liability in the accompanying condensed consolidated balance sheets, and $ 1.8 million and $ 1.7 million of dividends on these Redeemable Preferred Shares for the three months ended March 31, 2024 and 2023, respectively, were recorded as interest expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss).

Preferred dividends in arrears were $ 9.6 million and $ 8.6 million at March 31, 2024 and December 31, 2023, respectively.

Due to the fact that the Redeemable Preferred Shares are mandatorily redeemable, the Redeemable Preferred Shares are classified as a liability in the accompanying condensed consolidated balance sheets, and $ 1.8 million, $ 3.5 million, $ 1.7 million, and $ 3.4 million of dividends on these Redeemable Preferred Shares for the three and six ended June 30, 2024 and June 30, 2023 , respectively, were recorded as interest expense in the accompanying condensed consolidated statements of operations and comprehensive income (loss).

Preferred dividends in arrears were $ 10.7 million and $ 8.6 million at June 30, 2024 and December 31, 2023, respectively.

The Redeemable Preferred Shares have an aggregate liquidation preference of $ 100.0 million, plus any accrued and unpaid dividends thereon and are senior to the Ordinary Shares with respect to dividends and with respect to dissolution, liquidation or winding up of the Company.

At March 31, 2024 and December 31, 2023, the redemption price was $ 109.6 million and $ 108.6 million, respectively.

At June 30, 2024 and December 31, 2023, the redemption price was $ 110.7 million and $ 108.6 million, respectively.

The Company is subject to U.S.

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The Company estimates its annual effective tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which it operates.

The Company’s effective tax rate was 4.92 % for the three months ended March 31, 2024, and ( 203.35 )%, for the three months ended March 31, 2023 .

The Company’s effective tax rate was 36.57 % and ( 15.57 )% for the three and six months ended June 30, 2024, respectively, and 1.39 % and ( 10.01 )% for the three and six months ended June 30, 2023, respectively .

The primary differences between the effective tax rate and the amount computed by applying the Luxembourg statutory rate of 24.94 % are related to losses not expected to result in tax benefits in certain jurisdictions that have a valuation allowance, permanently non-deductible compensation, withholding taxes accrued on unremitted earnings and the impact of foreign tax rate differences.

2 unchanged sentences

The Company considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment.

Company expects to realize the remaining net deferred tax assets, changes in future taxable income or in tax laws may alter this expectation and result in future increases to the valuation allowance.

The valuation allowance for deferred tax assets as of March 31, 2024 and 2023 primarily relates to net operating loss carryforwards that, in the judgment of the Company, are not more likely than not to be realized.

While the Company expects to realize the remaining net deferred tax assets, changes in future taxable income or in tax laws may alter this expectation and result in future increases to the valuation allowance.

The valuation allowance for deferred tax assets as of June 30, 2024 and 2023 primarily relates to net operating loss carryforwards that, in the judgment of the Company, are not more likely than not to be realized.

The Company evaluates its tax positions and recognizes only tax benefits that, more likely than not, will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.

The tax position is measured at the largest amount of benefit that has a greater than 50.0% likelihood of being realized upon settlement.

As of March 31, 2024, it is not expected that the Company’s unrecognized tax benefits will decrease within twelve months.

As of, June 30, 2024, it is not expected that the Company’s unrecognized tax benefits will decrease within twelve months.

COMMITMENTS AND CONTINGENCIES

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The Company has an agreement to purchase various types of capital equipment up to $ 5.0 million through October 2027.

As of March 31, 2024 , the Company has paid $ 3.2 million to the supplier and the remaining $ 1.8 million will be paid through October 2027.

As of June 30, 2024 , the Company has paid $ 3.2 million to the supplier and the remaining $ 1.8 million will be paid through October 2027.

The Company’s authorized share capital is $ 4,100.0 million, consisting of 4,000.0 million Ordinary Shares with a nominal value of $ 1.00 per share and 10.0 million Redeemable Preferred Shares with a nominal value of $ 10.00 per share.

Each Ordinary Share entitles the holder thereof to one vote.

On February 21, 2024, the Board re-established the limit for Ordinary Share repurchases at $ 100.0 million, which is within the repurchase limit approved by the Company’s shareholders on July 21, 2022.

During the three months ended March 31, 2024 , the Company repurchased 2,969,357 Ordinary Shares under its Share Repurchase Plan.

On May 23, 2024, subject to certain limits, the shareholders of the Company approved a proposal authorizing the Board to repurchase up to 25 % of the Company’s Ordinary Shares outstanding as of the date of the shareholders’ approval, being 36,310,028 Ordinary Shares, at any time during the next five years .

The Board had re-established the limit for Ordinary Share repurchases at $ 100.0 million on February 21, 2024, which is within the repurchase limit approved by the Company’s shareholders’ on May 23, 2024.

During the three and six months ended June 30, 2024 , the Company repurchased 18,535 and 2,987,892 Ordinary Shares, respectively, under its Share Repurchase Plan.

The repurchased Ordinary Shares were recorded at cost and are being held in treasury.

As of March 31, 2024, there were 145,240,112 Ordinary Shares, 33,843,440 warrants and 10,000,000 Redeemable Preferred Shares outstanding.

As of June 30, 2024, there were 145,221,577 Ordinary Shares, 33,843,440 warrants and 10,000,000 Redeemable Preferred Shares outstanding.

SHARE-BASED COMPENSATION

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Shares associated with underlying awards that are expired, forfeited, or otherwise terminated without the delivery of shares, or are settled in cash, and any shares tendered to or withheld by the Company for the payment of an exercise price or for tax withholding will again be available for issuance under the 2021 Equity Plan.

During the three months ended March 31, 2024 (“Q1-2024”) , the Company granted 3,855,000 performance-based non-qualified stock options ("PBNQSO") that vest based on the achievement of certain performance goals to its employees and independent directors.

T he Company recognizes compensation costs for PBNQSO granted in Q1-2024 based on the estimated fair value of the awards on the date of grant.

During the six months ended June 30, 2024, the Company granted 3,980,000 performance-based non-qualified stock options ("PBNQSO") that vest based on the achievement of certain performance goals to its employees and independent directors.

T he Company recognizes compensation costs for PBNQSO granted in 2024 based on the estimated fair value of the awards on the date of grant.

The Company estimated the grant date fair value, and the resulting share-based compensation expense, using the Hull-White model.

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As the AOP for 2023 was below the minimum vesting AOP target of $ 12.10 , employees separated from the Company through the date of determination of the 2023 AOP relinquished 240,000 options retained by them and such options were cancelled by the Company.

As of March 31, 2024 there were 14,509,171 PBNQSO outstanding.

As of June 30, 2024, there were 14,634,171 PBNQSO outstanding.

The exercise prices of these PBNQSO ranged from $ 2.94 to $ 14.00 per Ordinary Share and expire ten years from the grant date.

The table below summarizes the PBNQSO activity for the three months ended March 31, 2024:

The table below summarizes the PBNQSO activity for the six months ended June 30, 2024:

Number of Options Weighted-Average

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Cancelled ( 240,000 ) $ 8.63

Outstanding at March 31, 2024

Outstanding at June 30, 2024

14,634,171 $ 8.22 8.26 $ 11,167

Options vested and exercisable 245,004 $ 10.00 5.64 $ —

The assumptions used to fair value the Q1-2024 PBNQSO using the Hull-White model were as follows:

Q1- 2024 Option Grants

The assumptions used to fair value the PBNQSO granted during the six months ended June 30, 2024 using the Hull-White model was as follows:

June 30, 2024

Dividend yield — %

Expected volatility 44.00 %

Expected volatility 41.00 % to 44.00 %

Expected term (years) 10.00

Suboptimal exercise multiple 2.50

Drift rate 4.23 %

Drift rate 4.23 % to 4.42 %

Weighted average exercise price of options granted $ 5.30

Weighted average fair value of options granted $ 2.92

Non-cash share-based compensation expense recognized by the Company for the three months ended March 31, 2024 and 2023 was $ 1.7 million and $( 3.1 ) million, respectively.

The remeasurement of the PBNQSO to the period end fair value resulted in the Company recognizing negative compensation expense during the three months ended March 31, 2023, the reduction in fair value was primarily due to a decrease in the Ordinary Share price as of the period end and also due to reversal of share-based compensation expense upon forfeitures.

Non-cash share-based compensation expense recognized by the Company for the three and six months ended June 30, 2024 was $ 3.0 million and $ 4.7 million, respectively.

Non-cash share-based compensation expense recognized by the Company for the three and six months ended June 30, 2023 was $ 1.2 million and $( 1.9 ) million, respectively.

Compensation expense is recognized based upon probability assessments of PBNQSO that are expected to vest in future periods.

Such probability assessments are subject to revision and, therefore, unrecognized compensation expense is subject to future changes in estimate.

As of March 31, 2024, there was approximately $ 23.6 million of total unrecognized compensation expense related to non-vested PBNQSO expected to vest, which is expected to be recognized over a weighted-average period of 2.3 years.

As of June 30, 2024, there was approximately $ 21.1 million of total unrecognized compensation expense related to non-vested PBNQSO expected to vest, which is expected to be recognized over a weighted-average period of 2.1 years.

Founder Advisory Amounts

On November 9, 2021, the Company assumed the advisory agreement entered into on December 12, 2019 by EverArc ("Founder Advisory Agreement") with EverArc Founders, LLC, a Delaware limited liability company ("EverArc Founder Entity"), pursuant to which the EverArc Founder Entity, for the services provided to the Company, including strategic and capital allocation advice, is entitled to receive both a fixed amount (the “Fixed Annual Advisory Amount”) and a variable

amount (the “Variable Annual Advisory Amount,” each an “Advisory Amount” and collectively, the “Advisory Amounts”) until the years ending December 31, 2027 and 2031, respectively.

Under the Founder Advisory Agreement, at the election of the EverArc Founder Entity, at least 50 % of the Advisory Amounts will be paid in Ordinary Shares and the remainder in cash.

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For the Advisory Amounts classified as a liability, the Company remeasures the fair value at each reporting date, accordingly, the compensation expense recorded by the Company in the future will depend upon changes in the fair value of the liability-classified Advisory Amounts.

As of March 31, 2024 and December 31, 2023, the fair value of the Fixed Annual Advisory Amount was calculated to be $ 64.2 million and $ 42.5 million, respectively, based on the period end volume weighted average closing share price for ten consecutive trading days of Ordinary Shares of $ 6.81 and $ 4.51 , respectively.

As of March 31, 2024 and December 31, 2023, the fair value of the Variable Annual Advisory Amount, determined using a Monte Carlo simulation model, was $ 186.3 million and $ 71.3 million, respectively.

For the three months ended March 31, 2024, the Company recognized an increase in the compensation expense related to the founders advisory fees-related party due to an increase in fair value for liability-classified Advisory Amounts of $ 68.3 million.

For the three months ended March 31, 2023 , the Company recognized a decrease in the compensation expense related to the founders advisory fees-related party due to a decrease in fair value for liability-classified Advisory Amounts of $ 24.2 million.

As of June 30, 2024 and December 31, 2023, the fair value of the Fixed Annual Advisory Amount was calculated to be $ 73.1 million and $ 42.5 million, respectively, based on the period end volume weighted average closing share price for ten consecutive trading days of Ordinary Shares of $ 7.75 and $ 4.51 , respectively.

As of June 30, 2024 and December 31, 2023, the fair value of the Variable Annual Advisory Amount, determined using a Monte Carlo simulation model, was $ 178.6 million and $ 71.3 million, respectively.

For the three and six months ended June 30, 2024, the Company recognized an increase in the compensation expense related to the founders advisory fees-related party due to an increase in fair value for liability-classified Advisory Amounts of $ 0.6 million and $ 68.9 million, respectively.

For the three and six months ended June 30, 2023 , the Company recognized a decrease in the compensation expense related to the founders advisory fees-related party due to a decrease in fair value for liability-classified Advisory Amounts of $ 60.0 million and $ 84.3 million, respectively.

FAIR VALUE MEASUREMENTS

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The carrying amount of the Company's Redeemable Preferred Shares equals the redemption price, which approximates fair value.

At March 31, 2024 and December 31, 2023, the estimated fair value of the Company's Senior Notes, calculated using Level 2 inputs, based on bid prices obtained from a broker was approximately $ 604.0 million and $ 587.9 million, respectively.

At June 30, 2024 and December 31, 2023, the estimated fair value of the Company's Senior Notes, calculated using Level 2 inputs, based on bid prices obtained from a broker was approximately $ 611.2 million and $ 587.9 million, respectively.

The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.

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Liabilities by Hierarchy Level

The following tables set forth the Company’s liabilities that were measured at fair value on a recurring basis, by level, within the fair value hierarchy as of March 31, 2024 and December 31, 2023 (in thousands):

The following tables set forth the Company’s liabilities that were measured at fair value on a recurring basis, by level, within the fair value hierarchy as of June 30, 2024 and December 31, 2023 (in thousands):

Fair Value Measurements Using:

March 31, 2024

June 30, 2024

Level 1 Level 2 Level 3 Total

6 unchanged sentences

The reconciliations for all liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are as follows (in thousands):

For the three months ended March 31, 2024:

Founders Advisory Fees Payable - Related Party

Three Months Ended June 30, 2024 Six Months Ended June 30, 2024

Founders Advisory Fees Payable - Related Party Founders Advisory Fees Payable - Related Party

Fair value, beginning of period $ 93,136 $ 35,647

1 unchanged sentence

Fair value, end of period $ 89,317 $ 89,317

For the three months ended March 31, 2023:

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

Founders Advisory Fees Payable - Related Party LaderaTech

Contingent Earn-out

Earn-out Founders Advisory Fees Payable - Related Party LaderaTech

Fair value, beginning of period $ 100,938 $ 7,519 $ 118,490 $ 7,273

2 unchanged sentences

Fair value, end of period $ 51,729 $ 7,665 $ 51,729 $ 7,665

During the year ended December 31, 2023, due to a downward revision in the revenue forecast of the contingent earn-out eligible fire retardant product, the Company determined that $ 7.7 million in contingent earn-out payable to LaderaTech is no longer probable.

Accordingly, the Company recorded a gain of $ 7.7 million during the year ended December 31, 2023.

For this reason, the Company no longer recognizes a contingent earn-out payable as of March 31, 2024.

For this reason, the Company no longer recognizes a contingent earn-out payable as of June 30, 2024.

RELATED PARTIES

7 unchanged sentences

On February 15, 2024, the Company issued 1,758,464 Ordinary Shares and paid $ 2.7 million in cash in satisfaction of the 2023 Advisory Amount.

As of March 31, 2024, the Company calculated the fair value of the Fixed Annual Advisory Amounts using the period end volume weighted average closing share price of Ordinary Shares for ten consecutive trading days of $ 6.81 and used a Monte Carlo simulation model to calculate the fair value of the Variable Annual Advisory Amount.

As of June 30, 2024, the Company calculated the fair value of the Fixed Annual Advisory Amounts using the period end volume weighted average closing share price of Ordinary Shares for ten consecutive trading days of $ 7.75 and used a Monte Carlo simulation model to calculate the fair value of the Variable Annual Advisory Amount.

These approaches resulted in fair values of $ 73.1 million fo r the Fixed Annual Advisory Amount and $ 178.6 million for the Variable Annual Advisory Amount , of which 50 % may be paid in cash and recorded as a liability and the remaining 50 % would be settled in Ordinary Shares .

While the entire instrument is subject to the fair value calculation described above, the amount classified and recorded as equity remains consistent while the amount classified and recorded as a liability is updated each period.

For the three months ended March 31, 2024, the Company recognized an increase in share-based compensation expense related to an increase in fair value for liability-classified Advisory Amounts of $ 68.3 million primarily due to the increase in share price of its Ordinary Shares .

For the three and six months ended June 30, 2024, the Company recognized an increase in share-based compensation expense related to an increase in fair value for liability-classified Advisory Amounts of $ 0.6 million and $ 68.9 million primarily due to the increase in price of its Ordinary Shares .

REVENUE RECOGNITION

Disaggregation of revenues

Amounts recognized at a point in time primarily relate to products sold whereas amounts recognized over time primarily relate to services associated with the full-service and portable retardant contracts.

Revenues for the three months ended March 31, 2024 and 2023 are as follows (in thousands):

Three Months Ended March 31,

Amounts for products sold are recognized at a point in time, whereas amounts for contract services associated with full-service and portable retardant are recognized over time.

Revenues for the three and six months ended June 30, 2024 and 2023 are presented below (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Revenues from products $ 94,736 $ 72,720 $ 152,617 $ 115,860

2 unchanged sentences

Total net sales $ 127,276 $ 76,137 $ 186,320 $ 119,995

(LOSS) EARNINGS PER SHARE

EARNINGS (LOSS) PER SHARE

Basic earnings per share represents income available to ordinary shareholders divided by the weighted average number of Ordinary Shares outstanding during the reported period.

1 unchanged sentence

Basic and diluted weighted average shares outstanding and (loss) earnings per share were as follows (in thousands, except share and per share data):

Three Months Ended March 31,

Net (loss) income $ ( 82,558 ) $ 9,431

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net income (loss) $ 21,650 $ 52,014 $ ( 60,908 ) $ 61,445

Weighted-average shares outstanding:

Weighted average shares used in computing (loss) earnings per share, basic 145,326,933 157,700,326

Weighted average shares used in computing earnings (loss) per share, basic 145,236,526 156,525,006 145,279,938 157,109,418

Founders advisory fees 9,428,244 11,785,305 — 11,785,305

Weighted average shares used in computing (loss) earnings per share, diluted 145,326,933 169,485,631

Basic (loss) earnings per share $ ( 0.57 ) $ 0.06

Diluted (loss) earnings per share $ ( 0.57 ) $ 0.06

As of March 31, 2024, 14.5 million PBNQSO and 16.9 million Ordinary Shares issuable under the Founder Advisory Agreement towards Variable Annual Advisory Amount were excluded from the diluted earnings per share calculation as the contingencies related to such instruments had not been met.

In addition, 8.5 million Ordinary Shares equivalent warrants and 9.4 million Ordinary Shares issuable under the Founder Advisory Agreement towards Fixed Annual Advisory Amount were excluded from the diluted earnings per share calculation as their effect would have been anti-dilutive.

As of March 31, 2023, 11.3 million PBNQSOs and 26.1 million Ordinary Shares issuable under the Founder Advisory Agreement were excluded from the diluted earnings per share calculation as the contingencies related to such instruments had not been met.

Weighted average shares used in computing earnings (loss) per share, diluted 154,664,770 168,310,311 145,279,938 168,894,723

Basic earnings (loss) per share $ 0.15 $ 0.33 $ ( 0.42 ) $ 0.39

Diluted earnings (loss) per share $ 0.14 $ 0.31 $ ( 0.42 ) $ 0.36

As of June 30, 2024, 14.6 million PBNQSO and 23.1 million Ordinary Shares issuable under the Founder Advisory Agreement towards Variable Annual Advisory Amount were excluded from the diluted earnings per share calculation as the contingencies related to such instruments had not been met.

In addition, 8.5 million Ordinary Shares equivalent

warrants and 9.4 million Ordinary Shares issuable under the Founder Advisory Agreement towards Fixed Annual Advisory Amount were excluded, as applicable, from the diluted earnings per share calculation as their effect would have been anti-dilutive.

As of June 30, 2023, 11.2 million PBNQSOs and 17.6 million Ordinary Shares issuable under the Founder Advisory Agreement were excluded from the diluted earnings per share calculation as the contingencies related to such instruments had not been met.

In addition, 8.5 million Ordinary Shares equivalent warrants were excluded from the diluted earnings per share calculation as their effect would have been anti-dilutive.

13 unchanged sentences

Summarized financial information for the Company’s reportable segments are presented and reconciled to consolidated financial information in the following tables (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Products $ 65,998 $ 49,723 $ 89,990 $ 67,749

14 unchanged sentences

Foreign currency loss (gain) 224 93 1,517 ( 628 )

(Loss) income before income taxes $ ( 86,832 ) $ 3,109

Income (loss) before income taxes $ 34,130 $ 52,747 $ ( 52,702 ) $ 55,856

SUBSEQUENT EVENT

On July 31, 2024, the Company filed a registration statement on Form S-4 with a preliminary proxy statement to convert PSSA (the “Redomiciliation Transaction”) into a corporation incorporated under the laws of the State of Delaware, after which, PSSA will continue as an entity under the name “Perimeter Solutions, Inc.” and the existing PSSA shareholders would hold shares in Perimeter Solutions, Inc.

rather than in PSSA.

The Company expects to complete the Redomiciliation Transaction by December 31, 2024 and does not expect that the Redomiciliation Transaction will have a significant impact on the Company’s consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements