What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-12 · 117 added, 180 removed, 86 unchanged (78% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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.

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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.

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".

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

rather than in PSSA.

On October 25, 2024, the Company filed Amendment No.

1 to the registration statement on Form S-4 to amend certain information on the registration statement on Form S-4 filed on July 31, 2024.

The Company expects to complete the Redomiciliation Transaction by December 31, 2024, subject to shareholder approval at a special meeting of shareholders on November 20, 2024.

The Company is currently evaluating the potential impact on deferred taxes, resulting from and subject to the completion of the Redomiciliation Transaction.

We are a global solutions provider, producing high-quality firefighting products and high quality specialty chemicals.

Perimeter Solutions, Inc.

(“we,” “us,” “our,” or the “Company”) is a global solutions provider for the Fire Safety and Specialty Products industries.

Approximately 79% of our 2024 annual revenues were derived in the United States, approximately 10% in Europe and approximately 6% in Canada with the remaining approximately 5% spread across various other countries.

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Fire Safety and Specialty Products.

The Fire Safety business is a formulator and manufacturer of fire management products that help our customers combat various types of fires, including wildland, structural, flammable liquids and other types of fires.

Our Fire Safety business also offers specialized equipment and services, typically in conjunction with our fire management products to support firefighting operations.

Our specialized equipment includes air base retardant storage, mixing, and delivery equipment;

The Fire Safety segment is a formulator and manufacturer of fire management products that help the Company’s customers combat various types of fires, including wildland, structural, flammable liquids and other types of fires.

The Company’s Fire Safety segment also offers specialized equipment and services, typically in conjunction with its fire management products to support firefighting operations.

The Company’s specialized equipment includes air base retardant storage, mixing, and delivery equipment;

mobile retardant bases;

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mobile foam equipment;

and equipment that we custom design and manufacture to meet specific customer needs.

Our service network can meet the emergency resupply needs of over 150 air tanker bases in North America, as well as many other customer locations globally.

The segment is built on the premise of superior technology, exceptional responsiveness to our customers’ needs, and a “never-fail” service network.

and equipment that it custom designs and manufactures to meet specific customer needs.

Significant end markets include primarily government-related entities and are dependent on approvals, qualifications, and permits granted by the respective governments and commercial customers around the world.

Th e 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.

We operat e four busi ness units within our two reporting segments.

The business unit structure is meant to promote the decentralized execution and accountability and maintain the geography and product-specific focus and granularity necessary to drive continued improvement in our key operational value drivers.

The Specialty Products segment includes operations that develop, produce and market products for non-fire safety markets.

The Company’s largest end market application for the Specialty Products segment is Phosphorus Pentasulfide (“P2S5”) based lubricant additives.

P2S5 is also used in pesticide and mining chemicals applications, and emerging electric battery technologies.

The Specialty Products Segment also includes Intelligent Manufacturing Solutions (“IMS”), which is a manufacturer of electronic or electro-mechanical components of larger solutions.

IMS has a flexible, vertically integrated production facility centered on its printed circuit board (“PCB”) line that allows it to acquire and produce a variety of product lines across a range of end markets, including large medical systems, communications infrastructure, energy infrastructure, defense systems, and industrial systems, with a substantial focus on aftermarket repair and replacement.

We operate five business units within our two reporting segments.

The business unit structure is meant to promote decentralized execution and accountability, and 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.

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.

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

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

Cost of goods sold $ 69,357 $ 72,825 $ 3,468 $ 144,509 $ 153,096 $ 8,587

Gross profit 73,301 69,833 (3,468) 118,144 109,557 (8,587)

Selling, general and administrative expense 16,161 12,693 (3,468) 41,523 32,936 (8,587)

Total operating expenses 46,133 42,665 (3,468) 14,777 6,190 (8,587)

Operating income 27,168 27,168 — 103,367 103,367 —

Net income 19,282 19,282 — 80,727 80,727 —

When analyzing changes in the Results of Operations section below, we define our base business as our existing operations plus operations of an acquired business once it has been owned for a full four quarters after the date of acquisition.

Known Trends and Uncertainties

Growth in Fire Safety

We believe that our Fire Safety segment benefits from several secular growth drivers, including increasing fire severity, as measured by higher acres burned, longer fire seasons and a growing wildland urban interface resulting in a need for higher quantity of retardant use per acre and thereby necessitating an increase of the airtanker capacity.

We believe that these trends are prevalent in North America, as well as globally and we expect these trends to continue and to drive growth in demand for fire retardant products.

need for higher quantity of retardant use per acre and thereby necessitating an increase of the airtanker capacity.

We believe that these trends are prevalent in North America, as well as globally, and we expect these trends to continue and drive growth in demand for fire retardant products.

We are also working to grow our fire prevention and protection business, which is primarily focused on expanding use of ground-applications for long-term fire retardant.

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The protection business expands on our existing aerial support to enhance the ability of customers to effectively fight active fires.

Fire prevention products can be used to prevent fire ignitions and protect property from potential fire danger by providing proactive retardant treatment in high-risk areas such as roadways and near critical infrastructure like electrical utilities and railroads.

Fire prevention products can be used to prevent fire ignitions and protect property from potential fire danger by providing proactive retardant treatment in high-risk areas such as roadways, and critical infrastructure like electrical utilities and railroads.

Treating these areas ahead of the fire season can potentially stop ignitions from equipment failures or sparks.

We have invested and intend to continue investing in the expansion of our fire safety business through acquisitions to further grow our global customer base.

We have invested and intend to continue investing in the expansion of our fire safety business through acquisitions in order to further grow our global customer base.

Weather Conditions and Climate Trends

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As such, our financial condition and results of operations are significantly impacted by weather as well as environmental and other factors affecting climate change, which impact the number and severity of fires in any given year.

Historically, sales of our products have been higher in the summer season of each fiscal year due to weather patterns which we believe are generally correlated to a higher prevalence of wildfires.

Historically, sales of our products have been higher in the summer season in the northern hemisphere of each fiscal year due to weather patterns which are generally correlated to a higher prevalence of wildfires.

This is in part offset by the disbursement of our operations in both the northern and southern hemispheres, where the summer seasons alternate.

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In addition, interest payments for borrowings under the Company’s revolving credit facility are based on variable rates, and any continued increase in interest rates may reduce the Company’s cash flow available for other corporate purposes.

Additionally, amid broader volatility in the global economy, certain raw materials and components used in our manufacturing processes may be subject to the recently announced tariffs on imported goods by the United States, Canada, and other countries.

However, tariffs have not had, and we do not currently expect tariffs to have, a material impact on our consolidated financial statements, as substantially all of the Company’s products sold in the United States are supported by domestic manufacturing capabilities.

The Company prioritizes sourcing raw materials domestically and continues to maintain alternative supply sources.

Although the ultimate impact of tariff policies, coupled with broader macroeconomic challenges, remains uncertain, the Company is actively monitoring developments to identify necessary actions to maintain its competitiveness and adapt to changing economic conditions.

Results of Operations

Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

Total Company

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

The following table sets forth our results of operations for each of the periods indicated (in thousands):

Three Months Ended September 30, Change

2024 2023 $ %

Net sales $ 288,417 $ 142,658 $ 145,759 102 %

Cost of goods sold 107,195 72,825 34,370 47 %

Gross profit 181,222 69,833 111,389 160 %

Operating expenses

Selling, general and administrative expense 18,520 12,693 5,827 46 %

Amortization expense 13,765 13,778 (13) — %

Founders advisory fees - related party 184,176 (24,544) 208,720 (850 %)

Intangible impairment — 40,738 (40,738) (100 %)

Total operating expenses 216,461 42,665 173,796 407 %

Operating (loss) income (35,239) 27,168 (62,407) (230 %)

Other expense (income):

Interest expense, net 10,054 10,448 (394) (4 %)

Gain on contingent earn-out — (7,665) 7,665 (100 %)

Foreign currency (gain) loss (1,354) 1,384 (2,738) (198 %)

Other expense (income), net 151 (60) 211 (352 %)

Total other expense, net 8,851 4,107 4,744 116 %

(Loss) income before income taxes (44,090) 23,061 (67,151) (291 %)

Income tax expense (45,077) (3,779) (41,298) 1093 %

Net (loss) income $ (89,167) $ 19,282 $ (108,449) (562 %)

Net product and services sales increased by $145.8 million for the three months ended September 30, 2024, compared to the same period in 202 3.

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.

Cost of Goods Sold.

Cost of goods sold increased by $34.4 million for the three 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.

Selling, General and Administrative Expense.

Selling, general and administrative expense increased by $5.8 million for the three 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.

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.

Intangible Impairment.

Intangible impairment decreased by $40.7 million for the three months ended September 30, 2024 compared to the same period in 2023.

The decrease was due to the prior year impairment on the carrying value of the technology underlying the contingent earn-out eligible fire retardant product acquired by the Company during the purchase of LaderaTech in May 2020.

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.

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.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2025 2024 $ %

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Founders advisory fees - related party (80,613) 68,333 (148,946) (218 %)

Intangible impairment — 40,738 (40,738) (100 %)

Other operating expense 561 — 561 — %

Total operating expenses (49,654) 95,566 (145,220) (152 %)

Operating (loss) income (65,085) 103,367 (168,452) (163 %)

Operating income (loss) 77,807 (74,864) 152,671 (204 %)

Other expense (income):

Interest expense, net 9,644 10,648 (1,004) (9 %)

Gain on contingent earn-out — (7,273) 7,273 (100 %)

Foreign currency loss 163 756 (593) (78 %)

Foreign currency (gain) loss (1,159) 1,293 (2,452) (190 %)

Other expense, net 143 27 116 430 %

Total other expense, net 8,628 11,968 (3,340) (28 %)

(Loss) income before income taxes (96,792) 78,917 (175,709) (223 %)

Income (loss) before income taxes 69,179 (86,832) 156,011 (180 %)

Income tax (expense) benefit (12,493) 4,274 (16,767) (392 %)

Net (loss) income $ (150,075) $ 80,727 $ (230,802) (286 %)

Net product and services sales for the nine months ended September 30, 2024 increased by $212.1 million compared to the same period in 202 3.

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.

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.

Net income (loss) $ 56,686 $ (82,558) $ 139,244 (169 %)

Net sales increased by $13.0 million for the three months ended March 31, 2025, compared to the same period in 2024.

Net sales in the Fire Safety segment increased by $12.0 million, representing higher fire retardant sales of $17.5 million offset by lower fire suppressant sales of $5.5 million.

Fire retardant sales increased $14.2 million in North America and $3.3 million in other geographies.

The increase in North America fire retardant sales was driven by above average fire activity in multiple states, most notably in California, during the three months ended March 31, 2025.

Fire suppressant sales decreased $7.0 million in North America offset by $1.5 million increase in other geographies.

A significant launch of our Suppressants products occurred in the North American market in the first quarter of 2024 and the same level of sales did not repeat as no comparable product launch occurred in the first quarter of 2025.

Net sales in the Specialty Products segment increased $1.0 million, including a $7.5 million increase in revenue due to a recently acquired business, offset by a $6.5 million decrease in the base business due to unplanned plant downtime.

The Company considers that revenue attributable to base business includes revenue from an acquired business that has been owned for a full four quarters after the date of acquisition.

Cost of Goods Sold.

Cost of goods sold increased by $46.5 million for the nine 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.

Cost of goods sold increased $5.5 million for the three months ended March 31, 2025 compared to the same period in 2024.

The increase in the Fire Safety segment of $1.6 million was primarily due to a $0.4 million increase in material, manufacturing and freight costs and a $1.2 million increase in personnel related expenses, each as a result of increased sales.

The $3.9 million increase in the Specialty Products segment was primarily due to a $4.9 million increase from a recently acquired business, offset by a decrease in base business due to unplanned plant downtime.

Selling, General and Administrative Expense.

Selling, general and administrative expense increased by $13.0 million for the nine 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.

Selling, general and administrative expense increased by $2.8 million for the three months ended March 31, 2025 compared to the same period in 2024.

The increase was primarily due to a $3.4 million increase in personnel related and share-based compensation expenses, offset by a $0.6 million decrease in professional fees, and other costs.

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

$108.8 million was primarily due to a reduction in the average price per Ordinary Share from $8.86 as of December 31, 2022 to $5.02 as of September 30, 2023.

Intangible Impairment.

Intangible impairment decreased by $40.7 million for the nine months ended September 30, 2023 compared to the same period in 2023.

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 decrease in the fair value of the Annual Advisory Amounts for the three months ended

March 31, 2025 of $80.6 million was primarily due to a decrease in the Company’s average price per share from $12.85 at December 31, 2024 to $9.67 as of March 31, 2025.

The increase in the fair value of the Annual Advisory Amount for the three months ended March 31, 2024 of $68.3 million was primarily due to an increase in the average price per share from $4.51 as of December 31, 2023, to $6.81 as of March 31, 2024.

Income Tax Expense.

Income tax expense increased by $16.8 million for the three months ended March 31, 2025 compared to the same period in 2024.

The increase is due primarily to changes in earnings in certain jurisdictions.

Business Segments

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:

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023

The following tables provide information for our net sales and Segment Adjusted EBITDA (in thousands) for the three months ended March 31, 2025 compared to the same periods in 2024:

Three Months Ended March 31, 2025 Three Months Ended March 31, 2024

Fire Safety Specialty Products Fire Safety Specialty Products

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Segment Adjusted EBITDA $ 10,085 $ 7,998 $ (241) $ 12,377

Adjusted EBITDA for our Fire Safety segment increased by $101.4 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.

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.

Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023

Fire Safety Specialty Products Fire Safety Specialty Products

Net sales $ 375,538 $ 99,199 $ 190,164 $ 72,489

Adjusted EBITDA for our Fire Safety segment increased by $10.3 million during the three months ended March 31, 2025 compared with the same period in 2024.

The increase was primarily due to higher net sales, as described above.

Adjusted EBITDA for our Specialty Products segment decreased by $4.4 million during the three months ended March 31, 2025 compared with the same period in 2024.

The decrease was primarily due to higher cost of goods sold, as described above.

The following table provides a reconciliation of financial measures that are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) to Non-GAAP measures.

Segment Adjusted EBITDA should not be considered an alternative to net income (loss), operating income (loss), cash flows provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with U.S.

GAAP (in thousands).

(Unaudited) Three Months Ended March 31, 2025 Three Months Ended March 31, 2024

Fire Safety Specialty

Products Total Fire Safety Specialty

Products Total

Income (loss) before income taxes $ 58,878 $ 10,301 $ 69,179 $ (84,411) $ (2,421) $ (86,832)

Depreciation and amortization 12,765 4,128 16,893 12,890 3,522 16,412

Interest and financing expense 5,954 3,690 9,644 10,114 534 10,648

Founders advisory fees - related party (69,327) (11,286) (80,613) 58,766 9,567 68,333

Non-recurring expenses (1)

234 1,234 1,468 375 165 540

Share-based compensation expense 1,576 1,095 2,671 1,449 293 1,742

Foreign currency loss (gain) 5 (1,164) (1,159) 576 717 1,293

Segment Adjusted EBITDA $ 10,085 $ 7,998 $ 18,083 $ (241) $ 12,377 $ 12,136

Adjusted EBITDA for our Fire Safety segment increased by $143.7 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.

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.

(1) For the three months ended March 31, 2025, $0.6 million was related to acquisition costs, $0.4 million was related to the Redomiciliation Transaction and $0.5 million was related to restructuring and other non-recurring costs.

For the three months ended March 31, 2024, $0.5 million was related to restructuring and other non-recurring costs.

Liquidity and Capital Resources

We have historically funded our operations primarily through cash flows from operations, borrowings under our revolving credit facility, and the issuance of debt and equity securities.

However, future operating cash flows are subject to a number of variables, including the length and severity of the fire season, growth of the wildland urban interface and the availability of air tanker capacity, all of which could negatively impact revenues, earnings and cash flows, and potentially our liquidity if we do not moderate our expenditures accordingly.

O ur cash requirements, cash flows, indebtedness and available credit as of September 30, 2024 is discussed below.

We believe that our existing cash and cash equivalents of approximately $223.1 million, net cash flows generated from operations and availability 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.

We may 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.

However, future cash flows are subject to a number of variables, including the length and severity of the fire season, growth of the wildland urban interface and the availability of air tanker capacity, and higher costs from inflation, all of which could negatively impact revenues, earnings and cash flows, and potentially our liquidity if we do not moderate our expenditures accordingly.

We believe that our existing cash and cash equivalents of approximately $200 million, net cash flows generated from operations and availability under the Revolving Credit Facility as of March 31, 2025 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 March 31, 2025, we expect our remaining fiscal year 2025 capital expenditure budget to cover both our maintenance and growth capital expenditures.

We may 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.

On September 27, 2024, the Company executed a supplement (the “Supplement”) to the Warrant Instrument with Computershare Trust Company, N.A.

and Computershare Inc.

dated as of November 8, 2021 (the “Warrant Instrument”) permitting holders of all outstanding warrants of the Company issued to investors in connection with its initial public offering, which expired on November 11, 2024, to exercise their warrants on a cashless exercise basis.

A copy of the Supplement, the notice provided to holders of warrants of the Company and the related press release can be found on our Form 8-K filed with the SEC on October 1, 2024.

W e have the following financing arrangements in place to, among other things, fund our operations and supplement our liquidity position.

Revolving Credit Facility

SK Invictus Intermediate II S.à r.l.’s, a private limited liability company governed by the laws of the Grand Duchy of Luxembourg (“ SK Intermediate II”), five-year revolving credit facility (the “ Revolving Credit Facility ”) provides for a senior secured revolving credit facility in an aggregate principal amount of up to $100.0 million.

On November 9, 2021, a wholly owned subsidiary of the Company entered into a five-year revolving credit facility (the “ Revolving Credit Facility ”), which provides for a senior secured revolving credit facility in an aggregate principal amount of up to $100.0 million.

The Revolving Credit Facility matures on November 9, 2026.

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All borrowings under the Revolving Credit Facility are subject to the satisfaction of customary conditions, including the absence of a default and the accuracy of representations and warranties, subject to certain exceptions.

Borrowings under the Revolving Credit Facility bear interest at a rate equal to (i) an applicable margin, plus (ii) at SK Intermediate II’s option, either (x) Secured Overnight Financing Rate for the applicable corresponding tenor (“Term SOFR”) as published by CME Group Benchmark Administration, adjusted for certain additional costs or (y) a base rate determined by reference to the highest of (a) the prime commercial lending rate published by the Wall Street Journal, (b) the federal funds rate plus 0.50%, (c) the one-month Term SOFR rate plus 1.00% and (d) a minimum floor of 1.00%.

Borrowings under the Revolving Credit Facility bear interest at a rate equal to (i) an applicable margin, plus (ii) at Perimeter Holding LLC’s option, either (x) Secured Overnight Financing Rate for the applicable corresponding tenor (“Term SOFR”) as published by CME Group Benchmark Administration, adjusted for certain additional costs or (y) a base rate determined by reference to the highest of (a) the prime commercial lending rate published by the Wall Street Journal, (b) the federal funds rate plus 0.50% (c) the one-month Term SOFR rate plus 1.00% and (d) a minimum floor of 1.00%.

The applicable margin is 3.25% in the case of Term SOFR-based loans and 2.25% in the case of base rate-based loans, with two step downs of 0.25% each based upon the achievement of certain leverage ratios.

As of September 30, 2024, the Company did not 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").

As of March 31, 2025, the Company did not have any outstanding borrowings under the Revolving Credit Facility and was in compliance with all covenants.

On November 9, 2021, a wholly owned subsidiary of the Company assumed $675.0 million principal amount of 5.00% senior secured notes due October 30, 2029 (the “Senior Notes”) , under an indenture dated as of October 22, 2021 (“Indenture”).

The Senior Notes bear interest at an annual rate of 5.00%.

Interest on the Senior Notes is payable in cash semi-annually in arrears on April 30 and October 30 of each year.

The Senior Notes are general, secured, senior obligations of SK Intermediate II;

rank equally in right of payment with all existing and future senior indebtedness of SK Intermediate II (including, without limitation, the Revolving Credit Facility);

and together with the Revolving Credit Facility, are effectively senior to all existing and future indebtedness of SK Intermediate II that is not secured by the collateral.

For additional information about our long-term debt, refer to Note 6, “Long-Term Debt and Redeemable Preferred Shares,” in the notes to the condensed consolidated financial statements included in this Quarterly Report .

The Senior Notes are general, secured, senior obligations of Perimeter Holdings, LLC;

rank equally in right of payment with all existing and future senior indebtedness of Perimeter Holdings, LLC (including, without limitation, the Revolving Credit Facility);

and together with the Revolving Credit Facility, are effectively senior to all existing and future indebtedness of Perimeter Holdings, LLC that is not secured by the collateral.

For additional information about our long-term debt, refer to Note 7, “Long-Term Debt and Preferred Stock,” in the notes to the condensed consolidated financial statements included in this Quarterly Report .

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.

We repurchase d 399 and 2,988,291 Or dinary 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.

Under the Share Repurchase Plan, we are authorized to repurchase, from time-to-time, shares of our Common Stock through open market purchases, in privately negotiated transactions or in such other manner as permitted by the securities laws and as determined by management at such time and in such amounts as management may decide.

The Share Repurchase Plan does not obligate us to repurchase any specific number of shares and may be modified, suspended or discontinued at any time.

The timing, manner, price and amount of any repurchases are determined by management in its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions.

On February 21, 2024, the Board re-established the limit for Common Stock repurchases at $100.0 million.

The approximate dollar value of shares that may yet be repurchased under the Share Repurchase Plan was $89.0 million as of

March 31, 2025.

We repurchased 888,454 and 2,969,357 shares during the three months ended March 31, 2025 and 2024, respectively.

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

Founder Advisory Agreement

The advisory agreement entered into on December 12, 2019 by EverArc ("Founder Advisory Agreement") with EverArc Founders, LLC, a Delaware limited liability company (the "EverArc Founder Entity"), which is owned and operated by William N.

Thorndike, Jr., W.

Nicholas Howley, Tracy Britt Cool, Vivek Raj and Haitham Khouri (the "EverArc Founders"), 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.

For 2023, the EverArc Founder Entity was entitled to receive the Fixed Annual Advisory Amount of 2,357,061 Ordinary Shares or a value of $10.6 million, based on average price of $4.51 per Ordinary Share (the “2023 Fixed Amount”).

The EverArc Founder Entity did not qualify to receive the Variable Annual Advisory Amount as the average price of $4.51 per Ordinary Share for 2023 was lower than the average price of $13.63 per Ordinary Share established in 2021 (the “2023 Variable Amount” and together with the 2023 Fixed Amount, the “2023 Advisory Amount”).

The EverArc Founder Entity elected to receive approximately 74.6% of the 2023 Advisory Amount in Ordinary Shares 1,758,464 Ordinary Shares) and approximately 25.4% of the 2023 Fixed Amount in cash $2.7 million).

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

For additional information about the Founder Advisory Agreement, refer to Note 10, “Share-Based Compensation” and Note 12, “Related Parties,” in the notes to the condensed consolidated financial statements included in this Quarterly Report .

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 shares of Common Stock and the remainder in cash.

For 2024, the average price of the Company’s Common Stock was $12.85 per share.

The EverArc Founder Entity was entitled to receive the Fixed Annual Advisory Amount of 2,357,061 shares of Common Stock or a value of $30.3 million, based on average price of $12.85 per share of Common Stock (the “2024 Fixed Amount”).

The EverArc Founder Entity was not entitled to receive the Variable Annual Advisory Amount for 2024, as the average price of $12.85 per share of Common Stock for 2024 was lower than the previous highest average price of $13.63 per Ordinary Share established in 2021.

Per the Founder Advisory Agreement, the EverArc Founder Entity elected to receive approximately 78% of the 2024 Fixed Amount in Common Stock (1,837,304 shares of Common Stock) and approximately 22% of the 2024 Fixed Amount in cash ($6.7 million).

On February 18, 2025, the Company issued 1,837,304 shares of Common Stock and paid $6.7 million in cash in satisfaction of the 2024 Fixed Amount.

For additional information about the Founder Advisory Agreement, refer to Note 11, “Stock-Based Compensation” and Note 13, “Related Parties,” in the notes to the condensed consolidated financial statements included in this Quarterly Report .

The summary of our cash flows is as follows (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Cash provided by (used in):

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Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2024 was $194.4 million compared to net cash used in operating activities of $10.2 million for the nine months ended September 30, 2023.

For the nine months ended September 30, 2024, the primary components of operating cash flows were net loss of $150.1 million, non-cash charges of $321.7 million and net operating asset reductions of $22.8 million.

For the nine months ended September 30, 2023, the primary components of operating cash flows were net income of $80.7 million, non-cash benefits of $27.8 million and net operating asset investments of $63.1 million.

The net operating asset reduction for the nine months ended September 30, 2024 was primarily related to inventories.

Net cash provided by o perating activities was $23.7 million and $2.8 million for the three months ended March 31, 2025 and 2024, respectively.

For the three months ended March 31, 2025, the primary components of operating cash flows were net income of $56.7 million, non-cash benefits of $49.6 million and net operating asset reductions of $16.6 million.

For the three months ended March 31, 2024, the primary components of operating cash flows were net loss of $82.6 million, non-cash charges of $86.6 million , and net operating asset investments of $1.2 million .

The net operating asset reduction for the three months ended March 31, 2025 was primarily related to accounts receivable.

Investing Activities

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.

Cash used in investing activities was $14.8 million and $0.5 million for the three months ended March 31, 2025 and 2024, respectively.

During the three months ended March 31, 2025, we purchased a business for $10.0 million and purchased property and equipment of $4.8 million.

During the three months ended March 31, 2024, we purchased property and equipment of $1.6 million offset by cash received from maturity of Euro denominated certificate of deposit of $1.1 million.

Financing Activities

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.

Cash used in financing activities was $8.4 million and $14.5 million for the three months ended March 31, 2025 and 2024, respectively.

During the quarter ended March 31, 2025, we repurchased shares of outstanding Common Stock for $8.2 million, and made $0.2 million in principal payments on finance lease obligations.

During the three months ended March 31, 2024, we repurchased outstanding Ordinary Shares for $14.3 million and made $0.2 million in principal payments on finance lease obligations.

Critical Accounting Estimates and Policies

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements which have been prepared in accordance with U.S.

The Company’s significant accounting policies and estimates are consistent with those discussed in Note 2, “Summary of Significant Accounting Policies and Recent Accounting Pronouncements” of its consolidated financial statements included in the Company’s 2023 Annual Report filed on Form 10-K with the SEC on February 22, 2024 .

Our significant accounting policies and estimates are consistent with those discussed in Note 2, “Summary of Significant Accounting Policies and Recent Accounting Pronouncements” of our consolidated financial statements included in our 2024 Annual Report filed on Form 10-K with the SEC on February 20, 2025.

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, stock options, founder advisory fees and realizability of deferred tax assets.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis