Perimeter Solutions Stock

Greetings. Welcome to Perimeter Solutions Second Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I'll now turn the conference over to Seth Barker, Head of Investor Relations. Thank you. You may now begin.

Thank you, operator. Good morning, everyone, and thank you for joining Perimeter Solutions Second Quarter 2026 Earnings Call. Speaking on today's call are Haitham Khouri, Chief Executive Officer; and Kyle Sable, Chief Financial Officer. We want to remind anyone who may be listening to a replay of this call that all statements made are as of today, July 31, 2026, and these statements have not been nor will they be updated subsequent to today's call. Today's call may contain forward-looking statements. These statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate, and our actual results may materially differ from those expressed or implied on today's call.

Please review our SEC filings, particularly any risk factors included in our filings for a more complete discussion of factors that could impact our results, expectations or assumptions. The company would also like to advise you that during the call, we will be referring to non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, LTM adjusted EBITDA, adjusted EPS and free cash flow. The reconciliation of and other information regarding non-GAAP financial measures can be found in our earnings press release and presentation, both of which will be available on our website.

With that, I will turn the call over to Haitham Khouri, Chief Executive Officer.

Thank you, Seth. Good morning, everyone. We're pleased to report second quarter adjusted EBITDA of $105.6 million, up 16% year-over-year and year-to-date adjusted EBITDA of $146.7 million, up 34% year-over-year. We're also excited to announce the acquisition of Monaco Enterprises for approximately $120 million in cash. Monaco designs and manufactures the fire alarm reporting and mass notification networks that are the installed standard on more than 200 U.S. military installations globally, where system compatibility requirements make Monaco the sole compatible supplier of spare parts, upgrades and expansions and support across its installed base.

Monaco fits the economic criteria we consistently target in every business we acquire, and we will implement the same operational value driver playbook you've seen across our portfolio. With Monaco's addition, Perimeter now comprises 6 businesses across our 2 reporting segments, 3 in Fire Safety, our retardant business, which carries the Perimeter name; our suppressants business, Solberg; and Monaco, our new fire detection and notification business; and 3 businesses in Specialty Products, PDI, our P2S5-based lubricant additives business; MMT, our medical device manufacturing business; and IMS, our aftermarket electronics business.

I'll now provide a summary of our strategy, followed by an operational update and then return to Monaco in more detail. After that, Kyle will walk through the quarter's financial results and capital allocation. Starting with a summary of our strategy. Our goal is to fulfill our critical mission by providing our customers with high-quality products and exceptional service while delivering our investors private equity-like returns with the liquidity of a public market. Our strategy is built on 3 pillars. First, we own exceptional businesses. These are niche market leaders that play critical roles in solving complex customer problems, qualities that support high returns on invested capital and durable earnings power. Second, we rigorously apply our 3 operational value drivers to the businesses we own. We drive profitable new business, achieve continual productivity improvements and provide increasing value to customers, which we share in through value-based pricing.

Third, we operate our businesses in a highly decentralized manner, granting our business unit managers full operating autonomy paired with the accountability to deliver results with a tightly aligned incentive structure for our managers to think and act like owners. We believe that these 3 pillars will optimize our durable long-term free cash flow. We then seek to maximize long-term per share equity value through a clear focus on the allocation of our capital as well as the management of our capital structure. Turning now to our Fire Safety operations on Slide 4. Second quarter Fire Safety adjusted EBITDA increased 1%, while year-to-date adjusted EBITDA increased 11%. As Kyle will quantify shortly, 2 factors weighed on the second quarter.

First, the 5% pricing step down baked into the first year of our federal retardant contract; and second, minimal foam deliveries to our U.S. federal customers as the DLA transitioned its ordering onto the vendor-managed inventory structure we implemented under the 5-year contract with a maximum value of $500 million that we announced last quarter. Excluding these 2 items, second quarter Fire Safety adjusted EBITDA grew at a double-digit rate. Both these dynamics improved in the third quarter. Foam deliveries to our federal customers resume and new pricing under our CAL FIRE agreement should offset the federal pricing step down. Most pertinent to our long-term fire safety earnings power are several encouraging developments from the first half of 2026.

In Canada, we are supporting the country's first federally funded aerial firefighting fleet. The pan-Canadian aerial asset program backed by $316.7 million over 5 years, gives every province and territory access to a 10 aircraft national search fleet, including 4 retardant capable air tankers and extends retardant operations into provinces that have historically relied on other suppression methods. In fact, 2026 marks the first time in decades that the province of Ontario has used retardant, supported in this case by one of our mobile retardant bases. The program reflects a pattern we've observed for many years. Following periods of elevated fire activity, governments reassess the resources available to respond to future fire seasons. Australia transformed its aerial firefighting infrastructure after the 2019, 2020 bushfires, and France significantly enhanced its aerial resources after the particularly severe 2022 season. Both countries became meaningfully larger retardant customers following these investments.

In Canada's case, the severe 2023 and 2025 fire seasons, the worst and second worst in the country's history, have prompted a similar investment cycle. While the impact this year is modest, we believe the program establishes a foundation for increased retardant use over time. We see similar dynamics emerging in other regions. Elevated fire activity, particularly in Europe, should support higher retardant use this year and more importantly, continued investment in aerial firefighting resources over the coming years. Beyond retardants, we continue to see attractive opportunities to expand our suppressants business. Our success in building new international distribution relationships, together with the ramp of our DLA contract in the second half of the year reflects growing customer investment in higher performance fire suppression technologies across a broad range of end markets.

Taken together, these developments reinforce our expectation of solid long-term organic growth across our Fire Safety business. Turning now to our Specialty Products segment and starting with PDI. PDI's adjusted EBITDA declined year-over-year in the second quarter due primarily to continued production issues at the Sauget, Illinois P2S5 facility. This facility is operated by Flexsys, which is owned by One Rock Capital. On June 10, the Circuit Court of St. Clair County, Illinois entered an order appointing an independent receiver over the Sauget plant. In its order, the court made a series of findings that we believe validate the concerns we have raised on previous calls regarding the plant's performance since Flexsys was acquired.

The court found the plant to be at risk of waste, loss, dissipation or impairment absent court-supervised intervention. As part of this finding, the court cited several safety lapses, including fires, at least one explosion, releases of highly poisonous H2S gas resulting in injuries as well as the storage of decaying P2S5 on site rather than proper disposal. These conditions developed under One Rock's ownership and control, and we believe it bears direct responsibility for the decisions that led to them. A court-appointed receiver is now in place with authority to manage Sauget's day-to-day operations, and we expect that oversight to bring a measure of stability that has been absent. Importantly, we are not waiting. We are taking concrete action to eliminate PDI's reliance on Flexsys and we'll provide further updates in due course. As we've promised repeatedly, we will do what's necessary to protect our customers, our employees and the long-term value of this business while enforcing our contractual rights to their full conclusion and holding One Rock accountable for its actions.

Turning to MMT, our medical device manufacturing business. MMT continues to run ahead of our operating model with strong adjusted EBITDA growth in the second quarter versus the same period last year under prior ownership. As discussed on prior calls, while our pricing and productivity actions are driving immediate benefits, the most exciting value creation lever at MMT is the significant organic growth potential through profitable new business. We're investing behind MMT's innovation pipeline and meaningfully accelerating new product launches to capitalize on this growth opportunity. Finally, IMS, our aftermarket electronics business, also delivered a strong second quarter. Integration of the product lines we acquired in the fourth quarter is proceeding well, and we're applying our operational value drivers across each of them. We're optimistic about the earnings power of IMS's current portfolio, and we look forward to adding new product lines over time.

Turning to M&A. Yesterday, we closed the acquisition of Monaco Enterprises for approximately $120 million in cash. As I referenced earlier, Monaco designs and manufactures the fire alarm reporting and mass notification networks that are the installed standard on more than 200 U.S. military installations globally. Monaco checks every box you look for in a Perimeter business. First, we target businesses that solve a critical complicated customer need. Monaco systems connect the hundreds of buildings on a typical DoD installation into a single base-wide fire and life safety dispatch and response network using proprietary communication protocols transmitted over dedicated hard-to-disrupt radio frequencies.

These systems protect lives and mission-critical assets around the clock, and they're required by the codes that govern military construction. Second, we evaluate the solution's cost relative to its criticality. The cost of a Monaco system is miniscule relative to base construction and operating budgets, an important context when assessing the value Monaco delivers to its customers. Third, we target businesses that are leaders in niche markets. Monaco's market, network fire alarm reporting and mass notification for military installations is genuinely niche with highly specialized requirements, namely base wide radio networks built in military specifications and supported for decades after installation. A market with these characteristics is well suited to a focused leader. Fourth, we target businesses with sustainable differentiation.

Within its niche, Monaco's competitive position is exceptionally strong. Its systems run on a proprietary communications protocol. So expanding or maintaining an installed network requires Monaco equipment and displacing Monaco means replacing an entire multimillion dollar base-wide system rather than winning a single order. Fifth and finally, we target businesses that possess recurring revenue, high returns on capital and opportunities for reinvestment and add-on positions. The vast majority of Monaco's revenue comes from proprietary products, often customized to DoD specifications. And with 50 years of operating history, more than 95% of Monaco's sales come from its existing installed base, spares, repairs, expansions, upgrade and support, creating an annuity-like aftermarket revenue stream.

Putting these attributes together yields an attractive investment thesis. When a product needs to be replaced or a new building goes up on a base, the customer adds an incremental Monaco product for a few thousand dollars, a de minimis cost relative to the building and systems it protects and a small fraction of what replacing base-wide infrastructure would cost, which often runs into the millions. We expect to accelerate investment in Monaco in service, capacity and innovation and to earn the right to share and the resulting value creation. Monaco will operate under our decentralized model led by its existing management team. We're excited to welcome the Monaco team to Perimeter. With that, I'll turn the call over to Kyle to walk through the quarter's financial results and capital allocation. Kyle?

Thanks, Haitham. Perimeter's Q2 2026 net sales increased 31% to $213.8 million, while adjusted EBITDA rose 16% to $105.6 million. For the quarter, we reported a net loss of $181.6 million or $1.11 per diluted share compared to a net loss of $32.2 million or $0.22 per diluted share in the second quarter of 2025. Adjusted net income increased to $59.6 million from $57.1 million, translating to adjusted diluted earnings per share of $0.35 versus $0.39 in the prior year quarter. In the first half, net sales rose 44% to $338.9 million, while adjusted EBITDA increased 34% to $146.7 million. Our first half net loss was $108.7 million or $0.69 per diluted share compared to net income of $24.5 million or $0.16 per diluted share in the prior year period. Adjusted net income increased to $68.6 million from $61.2 million last year, while adjusted diluted earnings per share remained constant at $0.41. Our consolidated results reflect the impact of the ongoing execution of our operational value drivers, continued secular tailwinds and our acquisition strategy.

Moving into the details of Fire Safety. Revenue for the quarter rose 7% to $129.1 million, while adjusted EBITDA increased to $78.8 million from $77.7 million in the prior year period. First half revenue totaled $174.5 million, an increase of 11% year-over-year, while adjusted EBITDA increased to $97.5 million from $87.87 million in the prior year period. Fire Safety performance benefited from continued execution of our operational value drivers. Our strongest value driver contribution came from profitable new business, where we established new relationships with significant international Class B foam customers. These wins continue to broaden the reach of our suppressants business and position us well for future growth. The financial benefit of our value drivers efforts was partially offset by 2 temporary factors that we expect to moderate in the second half of the year. First, our first half reflected the pricing step down under our new U.S. federal government contract while capturing only a limited benefit from our recently signed CAL FIRE agreement.

As fire activity shifts towards California during the second half, we expect the CAL FIRE contribution to offset a larger portion of the federal pricing impact. Second, sales to the Defense Logistics Agency were minimal during the quarter as we prepared for production under the $500 million contract awarded last quarter. We are expanding our production facility. We have developed customer-specific IT interchange and logistics capabilities, and we secured the necessary supply chain inputs to support this expansion. We expect deliveries under the new contract to begin ramping during the second half of this year, providing an incremental contribution through 2027 and 2028 as discussed in previous calls. Excluding the impact of these 2 factors, we believe Fire Safety EBITDA would have grown at a double-digit rate year-over-year. Beyond these quarter-specific dynamics, the underlying Fire Safety market continues to evolve broadly in line with our long-term expectations.

We have frequently discussed the secular growth drivers supporting retardant demand, particularly increasing fire activity over time, combined with expanding aerial firefighting resources. Our second quarter volumes support that framing, growing year-over-year despite a mix of conditions across our geographies. The U.S. experienced stronger demand, supported by continued aggressive initial attack strategies and increased underlying activity, while Canadian activity was notably lower than the prior year. As is typically the case, change in acres burn did not translate directly into changes in our volumes. U.S. volumes increased by less than acres burned, while Canadian volumes declined by less than the reduction in fire activity. Similarly, strength in Europe offset slower activity from Asia-Pacific.

The diversification of our geographic footprint continues to moderate these regional fluctuations and contributes to a more stable earnings profile over time. In the near term, having observed global fire activity within the normal range through the second quarter and into early third quarter, we believe the season is becoming more representative of a normal year. Conditions are currently in the normal range and volumes for the remainder of the year could still finish above or below normal, and we remain prepared to support our customers across the full range of potential outcomes. Overall, we continue to see the Fire Safety business progressing in line with our long-term expectations. Our operational value drivers continue to enhance the business while expanding firefighting demand and increasing geographic diversification reinforce the durability of our growth profile.

We believe these structural trends position the segment to continue creating value over time. Turning now to our Specialty Products portfolio. Revenue from the quarter doubled from previous year to $84.7 million, while adjusted EBITDA increased to $26.8 million from $13.7 million in the prior year period. For the year-to-date period, revenue totaled $164.3 million, an increase of 113% year-over-year, while adjusted EBITDA rose to $49.3 million from $21.7 million last year. The year-over-year increase was driven primarily by contributions from recent acquisitions, particularly MMT. MMT provides a good example of how we seek to create value following an acquisition. The business continues to perform ahead of our underwriting model, supported by its large and growing installed base, which generates recurring aftermarket demand. Since acquiring MMT, we have invested behind research and development, new product introductions and productivity initiatives.

We've put our operational value drivers into action through pricing updates that better reflect the value of MMT's highly engineered products and reengineering processes and investing in CapEx that supports productivity. While these initiatives remain in the early stages, we believe they establish a meaningfully runway for long-term earnings growth. PDI illustrates a different stage of that same value creation process. The business continued to make operational progress during the quarter, although the production disruption at the Flexsys facility discussed in prior quarters continue to weigh on near-term financial performance. As production capacity is restored during the second half of the year, we expect those impacts to diminish progressively.

Importantly, the underlying business remains healthy, and we believe the operational improvements implemented over the past several quarters position PDI well as we enter 2027. At IMS, disciplined product line acquisitions continue to expand the business' opportunity set. During the quarter, IMS continued integrating intellectual property acquired through recent acquisitions while actively evaluating additional product lines that fit its strategy of extending equipment life cycles through proprietary replacement products. As the portfolio of proprietary products grows, so does the opportunity to apply our operational value drivers through pricing, productivity and profitable new business. We believe this combination provides a repeatable avenue for creating long-term value at IMS.

Overall, the Specialty Products portfolio demonstrates that our operational value drivers are not specific to any one business, but rather a repeatable framework for creating value across a diverse portfolio of niche industrial companies. While each platform is at a different stage of its value creation journey, they share the same disciplined approach to operational execution, capital allocation and reinvestment. As we continue to expand the broader portfolio through acquisitions such as Monaco, we broadened the opportunity set to apply our value drivers framework across more products and solutions. Turning to our cash flow expectations on Slide 8. Our assumptions are unchanged and with minimal quarterly variation, second quarter results are consistent with those expectations. Our framework contemplates annual cash interest expense of approximately $75 million. And in the second quarter, cash interest expense was $19.6 million.

We expect tax deductible depreciation and amortization in the range of $60 million to $65 million annually, and second quarter taxable depreciation and amortization was $11.7 million. We expect our cash tax rate to be approximately 20% or better over time. And in the second quarter, cash taxes paid were $7.7 million compared to $12.3 million in Q2 2025, primarily reflecting timing dynamics. We continue to expect annual capital expenditures of $30 million to $40 million. Capital expenditures in the second quarter were $12.7 million, bringing year-to-date spending broadly in line with our expectations. We have discussed previously, investments across the business, including new retardant bases, expanded suppressants production facility and productivity initiatives at MMT are expected to drive full year capital expenditures toward the upper end of our guidance range.

Finally, we expect working capital investment of approximately 10% to 15% of revenue growth and working capital performance in the quarter was consistent with that framework, reflecting seasonal dynamics and the impact of recent acquisitions. Overall, the quarter tracks in line with our long-term assumptions. Moving to capital allocation on Slide 9. As Haitham mentioned, we completed the acquisition of Monaco Enterprises following quarter end, funding the transaction with cash on hand and borrowings under our existing credit facility. Monaco is another example of the type of business we believe fits our strategy, a mission-critical business with attractive competitive positioning and meaningful opportunities to create value through the application of our operational value drivers.

It also expands Perimeter into a sixth distinct product platform, broadening the opportunity set over which we can deploy that playbook. Monaco will be reported in our Fire Safety segment. One of the advantages of the Perimeter operating model is it allows us to integrate acquisitions without disrupting what makes them successful. Our decentralized approach preserves the autonomy that keeps businesses closer to customers while aligning incentives around our operational value drivers and providing a consistent framework for accountability across the portfolio. We also continue to invest organically in our businesses through capital expenditures. These investments are focused on projects that enhance our ability to serve customers while driving productivity improvements and supporting profitable growth. As with all capital allocation decisions, we underwrite these investments to generate returns above our targeted threshold, and we continue to see an attractive pipeline of opportunities across the business.

Looking forward, we have ample capital to deploy even after funding our organic investment pipeline. Once those capital needs are met, our primary focus remains M&A. Our acquisition framework remains consistent. We target businesses that provide a small but essential component within a broader solution to critical customer needs, operate in niche markets with sustainably differentiated solutions and exhibit characteristics such as recurring revenue, high returns on capital and opportunities for reinvestment in add-on acquisitions. Importantly, we believe value creation comes not from completing acquisitions, but from what happens after closing. Our operational value drivers provide a repeatable framework to improve businesses over time, allowing us to consistently create value across an expanding portfolio.

From a capital standpoint, we retain significant flexibility. Even after the MMT and Monaco acquisitions, we remain modestly levered with meaningful capacity to continue deploying capital into attractive opportunities. We remain active in evaluating a robust pipeline of acquisition opportunities and are focused on deploying capital where we believe it can generate attractive long-term returns for shareholders. Turning to our capital structure. We maintain a disciplined and flexible capital structure comprised of long-dated fixed rate debt maturing in 2029 and 2034. Blended coupon rate is 5.6% across both tranches. Quarter end, we were approximately 3.1x net debt to LTM adjusted EBITDA, remaining below our target leverage level and preserving substantial financial flexibility.

We also retained strong liquidity, including approximately $83 million of cash on the balance sheet and as of quarter end, a fully undrawn $200 million revolving credit facility. Following our acquisition of Monaco, our total liquidity between cash on hand and undrawn revolving credit facility capacity exceeds $150 million, which will increase over the course of the third quarter as we enter peak cash generation months for the company. This liquidity provides significant flexibility to continue investing in the business while pursuing M&A opportunities. We ended the quarter with approximately 163.7 million basic shares outstanding. Our second quarter demonstrates the strength of the model we have built. Earnings growth reflected contributions from our operational value drivers, favorable long-term demand trends across our businesses and the continued expansion of our portfolio through disciplined acquisitions.

We continue to identify opportunities to apply our operational value drivers across the portfolio and remain focused on acquisitions that fit our strategy and further expand that opportunity set. We believe this combination of operational value drivers, growing end markets and disciplined capital allocation positions us to continue compounding earnings and shareholder value over time.

With that, I'll turn the call back to the operator for Q&A.

Ladies and gentleman, Haitham. You may please proceed here in line is live.

Thanks, operator. Good morning, folks. I'm sorry, there was a little glitch there as I was ending my remarks and Kyle was beginning his my very enthusiastic comments about how pumped we are about Monaco were repeated twice, which, by the way, is arguably not a bad thing because we are very pumped about Monaco, and I don't mind repeating it. Unfortunately, I did inadvertently talk over Kyle's opening remarks.

The key point to just reiterate from there is our Q2 net sales increased 31% to $213.8 million. Our adjusted EBITDA rose 16% year-over-year to $105.6 million. A couple of other snippets got spoken over from Kyle, you can find those in our earnings press release. And with that, operator, back to you, and we'll take questions.

[Operator Instructions] And our first question comes from the line of Tomo Sano with JPMorgan.

On Fire Safety EBITDA margins, if we adjust for 2 specific headwinds you talk about, the EBITDA margins could have been north of 66%. And you talked about some improvement in third quarters. Could you walk us through the key drivers that should lift Fire Safety profitability from second quarter into back half? And then how you expect the cadence to evolve the quarter-by-quarter, please?

Tomo, it's Kyle. Thanks for the question. I'll say yes, I think you have it exactly right. There were 2 large headwinds in Q2 that impacted the quarter that we expect to abate in the back half. Those 2 are the step-down in pricing under our new federal contract, the pause in sales to the Defense Logistics Agency. Each of those things had a material impact in Q2. Absent those, we would have been double-digit EBITDA growth. And exactly as you highlighted, that would have had a positive impact on both our EBITDA margins, and we expect those to be more in line with their historical averages in the back half of the year.

Okay. On a follow-up, integration, acquisitions, Monaco, could you talk about the strategies for the talent retention and customer executions, if you could talk about the culture integrations as well.

Tomo, it's Haitham. Our stance on that is very consistent. We're typically buying exceptional businesses and those typically come with very talented management teams that got them there. Our goal is always to fully and deeply partner with those teams and retain them over the long term. Our hope is they fit into our decentralized operating culture and are attracted to our very high levels of autonomy, very high levels of accountability and very high levels of incentive alignment. And we hope we're fired up about taking a good company to great or a great company even greater with us high [ F3Ps ] application. And I very much hope and expect that's going to be the outcome with Monaco, which appears to have a truly excellent management team.

Our next question is from the line of Josh Spector with UBS.

I enjoyed you guys hammering home the acquisition comments. I'll start there with just -- I think the value driver of that acquisition is very clear. I think the piece which I'm just curious on is really, is there a volume opportunity in that business really at all? I think your kind of slide says it's the majority of the TAM. So like kind of expand beyond air bases into municipal or some other markets? Or is that kind of really not the strategy of that business?

Josh, so I would say industry growth is volumetrically in the low single digits. And we will -- we certainly expect to get that. We do think there is an opportunity to do materially better by driving B&B. Monaco is extremely strong today in the Air Force, which for obvious reasons, tends to have especially large sophisticated bases. There are significant expansion opportunities in other branches of the DoD, where Monaco is present today, but does not have the dominant market position they have with the Air Force. And then there are very interesting potential opportunities in sort of highly regulated government areas around the 3 main branches of the military.

So combining low single-digit underlying industry growth with a meaningful new business opportunity, I think we can do very nicely here from a volumetric perspective. I'll emphasize our underwriting model, which, as always, suggests a well over 20% IRR doesn't assume any PNB. We typically don't assume P&D in our models. We run with low single-digit industry growth and any volumetric upside under our ownership is IRR upside.

Okay. No, that makes sense. And I wanted to follow up on Fire Safety. I guess it's pretty clear and it's very helpful for you guys to get that comment to what growth would have been kind of ex those items. But on suppressants specifically, I guess, if I was modeling $30 million a quarter for that business, and let's say it was $10 million, I guess we'll figure that out in the queue later. Do you make up that $20 million in the back half? Or are we still at that $30 million rate, just giving examples of numbers. It sounded like the implementation wasn't immediate. So I'm not sure if some of that pushes into '27 or if you make that up in '26.

Josh, it's Kyle. Great question. And let me see if I can add some more color to this. So the way this contract works is we have historic -- well, the way the relationship works, historically, we've had shorter-term sales, and that's what you see already in the run rate in 2025. This year, we continued in the first quarter to be operating on that PO to PO basis. As we signed this larger contract, there was a pause in that PO activity that also corresponded with us spending a good chunk of money and capital on getting ready to take a big step up. That was the slowdown that we experienced in Q2. As we look into the back half of the year, we're going to see a resumption of that activity and starting to ramp into the more substantial activity that we've outlined from the overall scope of the contract. So we will get a little bit of that lift back in the back half, and then you'll see the more substantial ramp as we enter 2027.

Josh, this is Haitham. Just to reiterate, and I think Kyle has done a nice job making this clear, but for the avoidance of doubt here. Q2 was tricky with our DoD foam sales in that we had essentially full run rate costs of everything we've put in place to service the contract, the vendor managed inventory system, the warehousing, the logistics, et cetera, the expanded facility, yet hardly any sales. And so from an EBITDA perspective, you lose a good amount of revenue, but you're run rating a good amount of cost. And we got caught in that in Q2. Sales resume the ramp in Q3, and therefore, that impact essentially falls away.

Our next question is from the line of Will Gildea with CJS Securities.

So on the Monaco deal, 10.5x EBITDA multiple, I mean, that's pretty reasonable for a company generating 35% margin. So was it a competitive process? Just curious why the multiple wasn't somewhat higher.

It was a competitive process. We're very, very happy we prevailed and we're not in the business of asking people to make us pay more. So we're pretty happy with the outcome.

Yes. Fair enough. Congratulations on that. And then just record-breaking wildfires in Oregon as we speak. Should we think about these acres as more remote, low retardant usage similar to the Nebraska fires in Q1? Or should we think of these acres is more typical in terms of retardant deployment?

More typical. California, the Pacific Northwest, most of the Southwest is much more intensive retardant per acre burned or usage than some of the acres you saw burn in Florida and Georgia and Nebraska early in Q2. These are retardant heavy acres burn in Q3.

Our next question is from the line of Dan Kutz with Morgan Stanley.

So I just wanted to ask a few clarifying questions on the updates from Canada. And then, I guess, maybe some follow-up questions that could maybe help us think through how we might quantify that opportunity. But just to kick it off, I wanted to clarify that I think you said there's 10 aircraft, 10 incremental aircraft that will be dedicated. 4 of them are retardant capable air tankers. Are the other 6 like tactical aircraft or other aircraft that are used in wildfire-fighting efforts that don't deploy retardant?

Or are they retardant capable aircraft, but is not air tankers? And then I guess, on top of that, for the 4 air tankers, would you happen to be able to share or know specifically what type of air tanker they are because there's a -- there could be like a 10x difference in the retardant capacity of like a very large air tanker versus a single engine air tanker and then the large air tankers are somewhere in between. But yes, just the composition of those 10 aircraft and then the type of air tanker for the four, thanks.

Sure. So composition-wise, the other 6 are going to be a mix of air attacks,coopers, et cetera, essentially rotary wings or helicopters, typically non-retardant dropping aircraft, in some cases, to support retardant dropping aircraft. As far as the 4 retardant planes, these are genuine, by the way, brand-new build additions to the fleet, large air tankers with 3,000, 4,000 gallons of [ Pop ] capacity. So quite a meaningful long-term capacity expansion to the fleet.

Great. That's really helpful. And then, yes, I mean, the next question is around like trying to think through how much of an incremental opportunity this could be? And if you have a better way that you'd point us to think through this, please feel free, but a couple of ideas I have was just if I look back at just credit, this is an older report, but I think a couple of years ago, the U.S. had 20 exclusive use large and very large air tankers and then another 10 or 15 when needed plus the MAPS aircraft. And so if the U.S. and those 20 exclusive use, they kind of would contribute the lion's share of retardant deployment. So 4 aircraft in Canada could be pretty meaningful if you just use that U.S. baseline number.

And then I guess the other data point that I thought was interesting is you'd mentioned that Australia after 2019, 2020 brushfires, they really increased their wildfire fighting capacity. I think I assume that Australia is a decent chunk of the rest of world revenue that you disclosed. And if you look at 2019, 2020 versus the subsequent 5 or 6 years, it kind of looks like your rest of world revenue has doubled. So between those 2 examples, would you say that either of those would be decent analogs for the incremental Canada opportunity? Or is there a different way that you might point us to helping think through that?

Let me take that in 2 chunks. I would say the addition of the 4 air tankers to the fleet could be a significant long-term driver. There are 30-something air tankers in service today globally, and those carry essentially 100% of our retardant. We have seen very nice growth in that fleet over the past several years, and we're seeing that growth actually meaningfully accelerate. So 4 air tankers in Canada is a 10-plus percent addition to the fleet, which you'll see over the next couple of years. We are working with Texas to meaningfully modernize their airbase infrastructure and actually build them one specific state-of-the-art Airbase, which is well underway, and you'll see in our capital expenditures and Texas plans to buy a fleet of several brand-new air tankers will be in addition to the fleet.

We're seeing several U.S. states in the Pacific Northwest and otherwise order bespoke state-owned air tankers, which will be additions to the fleet. And then you see a lot of fleet additions in Europe with a new product from Airbus that got used this summer for the first time with our retardant with significant capacity. And so yes, the 4 air tankers in Canada are a meaningful addition to the fleet, and there are several other similar additions happening, and we expect that to potentially be a very material volumetric driver for us over the coming years. As you know, virtually every fire season, in fact, every fire season, we can drop more retardant than we do, but we are volume constrained during peak periods by a lack of air tankers.

And therefore, these additions are very welcome from a safety of life and property perspective and will drive our business for sure. Your second question on Australia and France being analogs, yes, 100%. The consistency with which kind of events play out in new geographies is remarkably consistent. You get a severe fire season, you got a lot of political attention, you get significant capital allocated typically by federal or provincial authorities. They work with us in all cases. We build out the infrastructure for them. They buy the air tankers or lease the air tankers and a small market becomes a large market or a large market becomes a very large market. And we believe that is on the come in several areas building out infrastructure now.

Again, Australia being a good example, Texas being an excellent example. and several others we haven't necessarily talked about where we are hard at work building out national infrastructures and working with them to get their hands on air tankers.

We've reached the end of our question-and-answer session. I'll turn the floor back to Haitham for any closing remarks.

No, not at all. Josh, Dan, Tomo, Will, appreciate what you guys do for us very much. Thank you for the great questions. Thank you to our investors for their support, and we'll speak in 90 days.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Greetings, and welcome to the Perimeter Solutions First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Seth Barker, Head of Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining Perimeter Solutions' First Quarter 2026 Earnings Call. Speaking on today's call are Haitham Khouri, Chief Executive Officer; and Kyle Sable, Chief Financial Officer. We want to remind anyone who may be listening to a replay of this call that all statements made are as of today, May 6, 2026, and these statements have not been nor will they be updated subsequent to today's call.

Today's call may contain forward-looking statements. These statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate, and our actual results may differ materially from those expressed or implied on today's call. Please review our SEC filings, particularly any risk factors included in our filings for a more complete discussion of factors that could impact our results, expectations or assumptions.

The company would also like to advise you that during the call, we will be referring to non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, LTM adjusted EBITDA, adjusted EPS and free cash flow. The reconciliation of and other information regarding non-GAAP financial measures can be found in our earnings press release and presentation, both of which will be available on our website.

With that, I will turn the call over to Haitham Khouri, Chief Executive Officer.

Thank you, Seth. Good morning, everyone. We're pleased to report a strong start to 2026 with first quarter adjusted EBITDA of $41.2 million, reflecting both organic and acquired growth. Our Q1 results highlight 2 key points. First, our operational value driver strategy is translating directly to our bottom line. Second, we have built a durable and predictable earnings base. This predictability is driven by 3 things: number one, new and improved contracting structures in both our retardant and suppressants businesses; two, diversification within our Fire Safety segment due primarily to the growth in our suppressants and international retardants businesses. And three, organic and M&A-driven growth in our Specialty Products segment.

As always, I will start with a summary of our strategy, then provide an operational update, after which Kyle will walk through the quarter's financial results and capital allocation in more detail. Starting with a summary of our strategy. Our goal is to fulfill our critical mission by providing our customers with high-quality products and exceptional service while delivering our investors private equity-like returns with the liquidity of a public market. Our strategy is built on 3 key operational pillars. First, we own exceptional businesses. These are niche market leaders that play critical roles in solving complex customer problems, qualities that support high returns on invested capital and durable earnings power.

Second, we rigorously apply our 3 operational value drivers to the businesses we own. We drive profitable new business, achieve continual productivity improvements and provide increasing value to customers, which we share with through value-based pricing. And third, we operate our businesses in a highly decentralized manner, granting our business unit managers full operating autonomy paired with the accountability to deliver results with a tightly aligned incentive structure for our managers to think and act like owners.

We believe that our operational pillars will optimize our durable long-term free cash flow. We then seek to maximize long-term per share equity value through a clear focus on the allocation of our capital as well as the management of our capital structure.

Turning to our Fire Safety operations on Slide 4. Our Q1 Fire Safety results are a direct reflection of the 2 themes I highlighted in my opening, the successful implementation of our operational value drivers and the durability and predictability of our earnings. Starting with our value drivers. Fire Safety's Q1 performance was driven by profitable new business. Our international retardant business was strong based on both activity in existing markets and footprint expansion in new and early-stage markets. Our global suppressants business also delivered strong results based on both new wins and higher sales to our large installed base.

In addition to the profitable new business results, we delivered year-over-year productivity across our business units in Fire Safety and our internal investment initiatives translated into value-based pricing. Turning to the predictability of our earnings base. The resilience of our model was clear this quarter. We delivered year-over-year adjusted EBITDA growth in Fire Safety despite lower North American retardant sales stemming from the tough comparisons of the Eaton and Palisades fires in Q1 2025.

Moving to Slide 5, where we stay with Fire Safety, but step back from the first quarter. Last week, Perimeter inked 2 milestone Fire Safety contracts that will both grow our earnings and enhance their durability. First, suppressants. We worked hard over the past several years to align our products and services with the specific needs of the Defense Logistics Agency or the DLA. On the product side, we made significant R&D investments to develop products for the DLA's unique requirements and deployed capital to expand our Green Bay, Wisconsin facility to meet the DLA demand and redundancy needs.

At the same time, we also invested heavily in our service capabilities, including standing up a customized vendor-managed inventory service for the DLA and optimizing our packaging to meet the agency specifications. And we did all this with a U.S.-based manufacturing footprint that supports the DLA's need for reliable domestic supply. These efforts have driven a steady increase in our business with the DLA, specifically on behalf of the Navy, the Coast Guard and the Army.

In line with our efforts to establish mutually beneficial long-term contracting structures within our fire safety business, last week, we entered into a 5-year agreement to provide foams to the DLA with a maximum contract value of $500 million. Since we already provide suppressants to the DLA, we expect the incremental uplift from this agreement to be approximately 2/3 of the total contract value. We expect that the financial impact will begin in late 2026, ramp up through 2027 and reach a steady-state run rate in 2028 and beyond. We're making further investments to support this ramp-up, including further expansion of our Green Bay facility and a further increase to our staffing levels. These capital and operating investments directly support U.S. job creation. This contract is an excellent example of how our focus on understanding and meeting our customers' needs translates into profitable new business opportunities.

Moving to our retardants. Last week, we renewed our CAL FIRE contract for a new 5-year term. Given the time elapsed since the prior renewal as well as the evolution of our offering on both the product and service sides, pricing on this contract increased relative to the previous CAL FIRE contract, bringing historically lower CAL FIRE pricing in line with our other large retardant customers. No state has more population exposed to wildfire risk than California. We are proud that CAL FIRE has once again trusted Perimeter to protect the lives, properties and environment of their state.

Finally, let me comment on the national wildfire landscape. The formation of the U.S. Wildland Fire Service is an important development in the wildland firefighting space. Our existing federal contract already spans all of the federal wildfire fighting agencies that will be consolidated into this new service, and our contract will carry forward under this new organizational structure. We believe a more unified structure will improve coordination and streamline decision-making, supporting more effective wildfire response over time.

Turning to the next slide, which covers our Specialty Products segment and starting with PDI. The first quarter of 2026 was the most challenging period of operational performance in the history of our Sauget, Illinois facility. The plant experienced substantial unplanned downtime. This disruption is the direct result of a sustained failure to provide the resources, personnel and operational discipline required to run the facility safely and reliably, a failure that has persisted ever since One Rock Capital acquired Flexsys. And as the controlling owner of Flexsys, One Rock is responsible for the strategic and financial decisions governing this facility, and One Rock bears the ultimate responsibility for driving performance to its lowest level on record.

We are pursuing all available legal avenues to enforce our contractual rights. We have a proven track record of operating P2S5 facilities safely and reliably, and we are confident that upon assuming control of Sauget, we will restore operating discipline, safety standards and production consistency for the benefit of the facility, its workers and our customers. Our resolve in this matter is absolute. We are highlighting these operational failures publicly because our investors, our customers and the workforce at Sauget deserve transparency. We have a duty to protect this critical facility from One Rock's sustained mismanagement, and we will actively manage the near-term impacts while pressing our legal rights to their full conclusion.

In contrast to Flexsys' performance, we're proud of how Perimeter's PDI team has performed. Despite the greatest operational headwind the business has ever experienced, our team grew revenue and adjusted EBITDA at PDI slightly year-over-year. This result speaks to the power of the operational value driver model and highlights our team's ability to fight through obstacles and deliver results irrespective of the external environment.

Turning to MMT. Integration is proceeding smoothly, and we are making tangible progress across each of our operational value drivers. A key advantage of bringing MMT into Perimeter's forever hold structure is that it immediately unlocks significant new capital and resources for the MMT team. We are actively deploying these resources to implement our value drivers and further accelerate MMT's business. On profitable new business, this capital is directly supporting the MMT team's innovation pipeline. As a result, new product development has accelerated meaningfully with expected product launches at MMT stepping up from 2 in 2025 to 9 in 2026.

On productivity, we are putting these resources to work to eliminate manufacturing bottlenecks and maximize throughput, driving permanent improvements to MMT's cost structure. And on pricing, we are applying our disciplined value-based approach. By combining our pricing frameworks with the MMT team's deep product expertise and strong customer relationships, we are ensuring that pricing fully reflects the exceptional value MMT delivers to its customers.

Just as important as the operating model is the team. Cultural alignment has been excellent. MMT leadership shares our approach to value creation and our partnership is translating directly into performance. MMT is performing very well early in our ownership period. We see strong potential for upside as we back the MMT team and fully deploy our operating model.

Turning finally to IMS. Similar to MMT, IMS' acquisitions to benefit from the resources we immediately make available to maximize the potential and value of these acquired product lines. Given the product lines IMS acquires are often orphaned or underinvested in prior to acquisition, the benefits of our forever hold structure can be particularly pronounced at IMS. The IMS team is focused on systematically applying our operational value drivers across the product line acquisitions completed in 2025. We are encouraged by our progress and look forward to further investing in these acquired products and to closing future product line acquisitions.

In closing, our disciplined operational value driver strategy is delivering strong financial performance across both of our segments, while our commercial and contracting initiatives are driving durable and predictable long-term earnings.

With that, I'll turn the call over to Kyle to walk through the financials in more details. Kyle?

Thanks, Haitham. Perimeter delivered net sales of $125.1 million in the quarter, up 74% year-over-year, with adjusted EBITDA of $41.2 million, more than doubling from $18.1 million last year. Net income was $72.9 million or $0.44 per diluted share compared to $56.7 million or $0.36 per diluted share in the prior year. On an adjusted basis, the adjusted net income was $9 million, up from $4.1 million, while adjusted earnings per diluted share was $0.06, up from $0.03. Our consolidated results reflect disciplined execution of our operational value drivers, supported by contributions from recent acquisitions.

Moving into the details of Fire Safety. Revenue for the quarter was $45.4 million, up 22% year-over-year, and adjusted EBITDA was $18.7 million, nearly double the $10.1 million in the prior year. This performance was driven by continued execution of our operational value drivers with strength across both our international retardant markets, notably Australia and our suppressants business, each contributing meaningfully in the quarter. Despite North American retardant volume headwinds, Fire Safety delivered strong results, demonstrating that the business can generate meaningful growth in earnings even in periods of weaker retardant demand, a dynamic that would not have been present historically.

This quarter is another example of reported acres burned having low correlation with our U.S. retardant business' performance, given the low acreage but high impact of last year's Southern California fires and the inverse this year, with nearly 900,000 acres burning in Nebraska with minimal retardant used. We increasingly view acres burned as a poor indicator of our financial performance and expect that relationship to continue to weaken over time, given our effort to reduce variability and increase the contribution from our own execution.

Looking forward to the rest of the year, wildfire activity to date is within a range we would consider normal for this point in the season with conditions that remain conducive to fire activity and the full range of outcomes from mild to severe remains possible. As always, we will be prepared to accommodate a more severe than normal fire season should such a season ultimately materialize.

Our capacity planning also integrates recent comments from the Secretary of the Interior and the Secretary of Agriculture, indicating that the aggressive initial attack strategy employed in 2025 is expected to continue in 2026. We view this as an important development as that strategy drove more proactive and consistent use of retardant last year and helped support demand even in a lower acres environment and if sustained, should continue to reduce the downside sensitivity of our business to variability in fire activity while supporting more consistent and growing demand over time.

As we look ahead, we remain focused not only on demand drivers, but also on ensuring our supply chain is well positioned. We have seen recent increases in fertilizer prices and lead times, but our contracts include mechanisms to address meaningful input cost movements. And combined with our inventory position, we believe that we are well prepared to effectively manage these changing dynamics.

As we exit the quarter, our Fire Safety business is well positioned, driven by continued execution of our operational value drivers, supported by the stability of our contract structure and the diversification of our revenue streams and reinforced by the ongoing shift to more proactive wildfire response.

Turning now to Specialty Products. Revenue for the quarter was $79.6 million, an increase of 128% year-over-year and adjusted EBITDA was $22.5 million, up from $8 million in the prior year period. The year-over-year increase was driven primarily by contributions from recent acquisitions. Importantly, the base business also delivered growth in the quarter despite increased operational disruption at the Flexsys-operated Sauget facility. As Haitham discussed, downtime at that facility was more severe this quarter than in prior periods, creating a headwind to both revenue and profitability. Despite those challenges, the underlying demand environment for PDI remains solid, and the team continues to work through these operational issues while delivering financial growth.

Turning to MMT and building on Haitham's remarks, we are encouraged by the early performance of the business. Integration is progressing well, and we are seeing early benefits from the application of our operational value drivers. As we spend more time in the business and deepen our understanding of its customers and end markets, our conviction in the underwriting case has increased, and we currently expect MMT's full year results to exceed our initial expectations. Taken together, Specialty Products results reflect both the resilience of the base business in the face of operational headwinds and the growing contribution and momentum from recent acquisitions.

I'll now turn to our long-term assumptions. Our assumptions are unchanged and with normal quarterly variation, first quarter results are consistent with those expectations. Our framework contemplates annual interest expense of approximately $75 million. And in the first quarter, cash interest expense was $24.4 million. The first quarter includes $6.25 million of cash interest expenses related to the bridge facility commitment provided to close the MMT deal, which will not recur in subsequent quarters.

We expect tax deductible depreciation and amortization in the range of $60 million to $65 million annually, and first quarter taxable depreciation and amortization was $10.4 million. We expect our cash tax rate to be approximately 20% or better over time. And in the first quarter, cash taxes were a net benefit of $2 million, primarily reflecting timing dynamics. We expect capital expenditures of $30 million to $40 million per year and capital expenditures in the first quarter were $5.8 million, below run rate due to timing. As we look to the balance of the year, we are accelerating investment in areas, including suppressants capacity expansion and MMT productivity initiatives, which we expect will bring full year capital expenditures towards the higher end of our range.

Finally, we expect working capital investment of approximately 10% to 15% of revenue growth and working capital performance in the quarter was consistent with that framework, reflecting seasonal dynamics and the impact of recent acquisitions. Turning to capital allocation. As previously announced, we completed the acquisition of MMT on January 22 for approximately $682 million, funded through a combination of cash on hand and new debt issuance. MMT represents an important addition to our portfolio and aligns directly with our strategy of acquiring high-quality businesses where we can apply our operational value drivers to drive meaningful value creation.

We also continue to invest organically in our business through capital expenditures. These investments are focused on projects that enhance our ability to serve customers while driving productivity improvements and supporting profitable growth. As with all our capital decisions, we underwrite these investments to generate returns above our targeted thresholds, and we see a growing pipeline of opportunities across the business.

Looking forward, we have ample capital to allocate even after our robust capital expenditure pipeline is fulfilled. Once CapEx needs are met, our primary focus is M&A. Our M&A framework remains consistent. We target businesses that provide a small but essential component within a broader solution to a critical customer need, operate in niche markets with strong competitive positioning and exhibit characteristics such as recurring revenue, high returns on capital and opportunities for reinvestment in add-on M&A.

Importantly, we believe our value creation comes not from the acquisition itself, but from the disciplined application of our operational value drivers post close as we are already demonstrating with MMT. Our model allows us to repeatedly identify and improve businesses using the same operational value driver playbook, creating a repeatable engine for value creation. From a capital standpoint, we retain significant flexibility. Even after the MMT acquisition, we remain modestly levered and have ample liquidity with meaningful capacity to deploy additional capital into value-creating opportunities. We remain active in evaluating a robust pipeline of potential acquisitions and are focused on deploying capital into opportunities that meet our returns threshold and strategic criteria.

Turning to our capital structure. We maintain a disciplined and flexible capital structure. During the quarter, we issued $550 million of 6.25% senior secured notes due 2034 to fund the MMT acquisition, complementing our existing $675 million of 5% senior secured notes due 2029. As a result, we have a long-dated fixed rate debt structure with no near-term maturities. At quarter end, we were approximately 3.2x net debt to LTM adjusted EBITDA, remaining below our target leverage level and preserving substantial financial flexibility.

We also retained strong liquidity, including approximately $92 million of cash on the balance sheet and a fully undrawn $200 million revolving credit facility, providing significant flexibility to continue investing in the business while pursuing additional M&A opportunities. We ended the quarter with approximately 163.1 million basic shares outstanding.

Overall, the quarter highlights the strength of our operational value driver model across both segments. Fire Safety delivered solid performance despite volume headwinds in retardant and Specialty Products demonstrated both resilience in the base business and strong contributions from recent acquisitions, particularly MMT. These results reinforce the increasing consistency and predictability of our earnings power. A growing portion of our earnings is driven by execution and capital allocation rather than external conditions, which we believe improves the quality of our earnings stream and position the business to compound earnings at attractive rates over time.

We will continue to apply our operational value driver strategy across the portfolio and allocate capital towards opportunities that are well aligned to that strategy, further enhancing both growth and earnings stability over time.

With that, I'll turn the call back to the operator for Q&A.

[Operator Instructions] Our first question comes from Josh Spector with UBS.

This is Gaurav Sharma filling in for Josh. Congrats on the solid quarter. Can you talk about the new suppressants contract a bit more? Is this effectively you winning share at more military bases? And then you framed this as an incremental $300 million sales opportunity, but how should we layer that in over the contract period?

Gaurav, it's Haitham. Let me take the first part of your question, and Kyle will handle the second part of your very good question. So yes, this is us taking share in the suppressant space. It's a continuation of a trend, which has been quite pronounced to us taking share in the suppressant space, both with the DLA and with commercial customers over the past 3 or so years. If you rewind 3 years, we did almost no business on the foam side with the DLA. We identified that as a commercial hole and spent a tremendous amount of time, effort and capital addressing it.

As we typically do, the crux of that is listening very closely to our customers, understanding their needs very clearly and then moving heaven and earth internally to be responsive and meet their needs. And the hope is that, that ultimately translates into profitable new business. And that's exactly what you're seeing here. Again, we went from almost no business with the DLA. We listened to their needs. Our R&D team, which is an excellent R&D team in Green Bay, delivered a completely unique and bespoke formulation to meet the DLA's existing needs.

We invested significant CapEx in our Green Bay facility to build capacity and redundancy required by the DLA. We spent a lot of capital, OpEx and effort building a vendor-managed inventory service from scratch, which we never had before for the DLA. As you can imagine, the logistics needs of the DLA are very complex and therefore, standing up the vendor-managed inventory to manage $500 million of product is a very complex undertaking. We have that up and running and humming. We upgraded our packaging to meet the DLA's needs, and we staffed up on the customer service side to best serve the DLA.

And when you do all of that, you end up with a customer that very much wants to work with you that shifts meaningful share to you and that's ultimately not only willing, but eager to enter into this kind of long-term framework agreement that gives us the visibility into future volumes that allows us to continue to invest. So that's sort of the history there, and I'll let Kyle handle the second part of the question.

Yes, Gaurav, as Haitham mentioned, we've already been doing business with the DLA, and so we're trying to frame our guidance to you as the amount of uplift. So we'll have another strong year with the DLA this year, but there will be minimal uplift relative to last year. As we look forward to 2027, we expect roughly $50 million of incremental revenue above our current run rate with the DLA in 2027. And then the balance of the contract value will come over the remaining years.

That was super helpful. And then just a follow-up. Is this just a volume element? Or is there an annual price factor that's built in on the suppressants as well? And then on the CAL FIRE deal, the comment in the slide say price increase to align with other major buyers. So does that mean you expect a step up in year 1? And is that material? And then how would you talk about price increases beyond year 1?

Yes, Gaurav, it's Haitham again. We -- both contracts will have annual or do have annual price escalators in there throughout the 5-year term. And for CAL FIRE specifically, there is a step-up in year 1, which is this year to bring them sort of in line with our pricing structure, which they've been a little out of line with historically.

[Operator Instructions] Our next question comes from Dan Kutz with Morgan Stanley.

Congrats on all the progress and updates this quarter. So just wanted to circle back on a few things that you guys have already kind of commented on in the prepared remarks and see if we could get a little incremental color. First one would be on input costs. Again, I know that you guys had commented that there's some level of contractual kind of cost protection or pass-through. But with everything going on in the world and specifically fertilizer or MAP or some of the key cost components in the Perimeter cost structure, seem like they've seen some pretty significant upward pressure.

Just wondering if you could expand a little bit on what types of protections you have in place, how much that could be weighing on margins currently and whether in theoretical scenario where the Middle East conflict came to a resolution and those costs came down, whether that would be a margin tailwind or whether that's kind of already kind of protected in the cost structure and therefore, wouldn't change things too much. But yes, just wondering if you could expand a little bit on the input cost dynamics.

Sure, Dan. It's Kyle. Thanks for the question. You're right. As we alluded to in the script, we have pretty strong contractual protections against these price increases. Our operational team has been running way out ahead of the changes that have been happening on, making sure we have adequate inventory as lead times have lengthened. And as we look forward, we don't see any material impact to our margins from these price increases this year.

Great. That's very clear. Then maybe on the preemptive fight strategy that some of the federal wildfire fighting agencies are alluding to. I was just wondering -- so I think, again, in your prepared remarks, you kind of flagged that this is definitely a hedge against, I guess, a below severity wildfire season. Last year was absolutely a testament to that. But just wondering, across a broader range of wildfire scenarios, below severity, normal trend above severity, is the preemptive strike strategy an incremental earnings tailwind or retardant demand tailwind across different wildfire season severity scenarios? Or is it more kind of a downside hedge? Just wondering if you could expand on that, on those comments as well.

Sure, Dan. Kyle again. And thanks for the question. I think you've hit on 2 important points for the more aggressive initial attack. You're correct in that it can actually drive more retardant usage through a variety of wildfire season scenarios. We think that it will put increased emphasis on growth in the air tanker fleet. And by the way, that same memo that highlighted the initial aggressive attack also highlighted a number of other moves they're doing across the wildland firefighting landscape to support growth in the aerial tanker fleet, which is also a little bit of a tailwind for us. So we think that's a clear positive.

The second element, as you started to hit here to the downside protection, I think you're exactly right. What we experienced last year and if we are again to experience a more mild acre season this year is that, that aggressive initial attack provided an increased retardant usage in that scenario, which did cap the amount of downside from a more mild season.

Dan, the other thing I think I'd be remiss to not mention here as we think about the different scenarios as they play out is that we've really reduced our variability and exposure to that wildfire season. And at this point, if you look at a normalized season to a relatively mild season, that fluctuation in our EBITDA is something like mid-teens percentage. And when we look at the various tailwinds we have across our business, that really means that we should be able to grow EBITDA year-over-year even with a moderate decline in the fire season year-over-year in any given year. There may still be some more extreme scenarios where we can't always grow EBITDA, but for most of the scenarios, we're going to be growing EBITDA.

That's great to hear. And maybe if I could sneak one more in kind of along the same along the same comments there. So I think for the last quarter or 2, the 5-year contract with the U.S. Forest Service, which you guys confirmed today will extend to the new U.S. Wildland Fire Service, which includes the DOI agencies as well. I guess on the service component of that contract, you report product versus service revenue for the Fire Safety segment. And we can see that, that number was in the ballpark of $30 million a few years ago, and it's been trending closer to $100 million in the last couple of years.

The question is basically, first of all, is there a suppressant component to service? Or is the lion's share of that retardant? And then how much does the new contract structure kind of lock in that service revenue at this higher revenue run rate from, I think, what you guys call the full-service air base infrastructure model. And I guess the question would be at the federal level, but then also see on the slide with the CAL FIRE contract that there's a service revenue component to that.

So yes, just wondering if you could -- anything you could share on what has been a pretty substantial ramp in service revenue for the Fire Safety segment? And how much of that should be viewed as a new run rate? And I guess, any potential growth either from the service model expansion or just from kind of the normal growth trend that you guys seem to be putting out despite the wildfire season severity. Yes, anything you can share on that service revenue component?

Dan, so a couple of points on here. One, the majority -- in fact, virtually all of that service revenue is, in fact, tied to retardants. There's a little bit of suppressants, but largely retardants. The second point I would make in there is that, that includes all service revenue for all of our various contracts, Forest Service, CAL FIRE and others. And then when you think about that uplift in the run rate, I think you're right, we've gone from $30 million to a little over $100 million in the run rate, and we do believe that is a new and sustainable baseline.

Within that, the vast, vast majority of it is contractually fixed in any given year. And then we do expect to see another uplift, although not of the same magnitude that you just saw over the last few years going forward as we continue to convert more of the bases in the Forest Service contract from government run to Perimeter run.

Awesome. Sorry, one last real quick one. Product versus service margins, are they similar ballpark, one meaningfully different than the other?

Yes, Dan, we think about those as just as a bundled suite when we think about margins. So while we separate them out for reporting purposes, we think of it all as kind of like one consolidated solution with one margin.

Thank you. At this time, I would like to turn the floor back to Haitham Khouri for closing comments.

Thank you, LaTanya, for running a great call. Gaurav and Dan, thank you for the excellent work you do, and thank you to all our shareholders, as always, for all your support.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.

Greetings, and welcome to the Perimeter Solutions Q4 2025 Earnings Call. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Seth Barker, Head of Investor Relations. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining Perimeter Solutions' Fourth Quarter 2025 Earnings Call. Speaking on today's call are Haitham Khouri, Chief Executive Officer; and Kyle Sable, Chief Financial Officer. We want to remind anyone who may be listening to a replay of this call that all statements made are as of today, February 26, 2026, and these statements have not been nor will they be updated subsequent to today's call.

Today's call may contain forward-looking statements. These statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate, and our actual results may materially differ from those expressed or implied on today's call. Please review our SEC filings, particularly any risk factors included in our filings for a more complete discussion of factors that could impact our results, expectations or assumptions.

The company would also like to advise you that during the call, we will be referring to non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, LTM adjusted EBITDA, adjusted EPS and free cash flow. The reconciliation of and other information regarding these items can be found in our earnings press release and presentation, both of which will be available on our website.

With that, I will turn the call over to Haitham Khouri, Chief Executive Officer.

Thank you, Seth. Good morning, everyone. I'll start on Slide 3 with key observations from 2025. First, structural earnings power expansion. Our 2025 results demonstrate the sustainability of our higher earnings power. This higher baseline profitability first exhibited in 2024 is the direct result of the rigorous application of our operational value drivers.

Second, financial consistency. In addition to increasing our structural earnings power, we've transitioned Perimeter towards greater financial consistency. The primary driver is the change in our retardant contract structures, which have shifted from purely volume-based models towards more fixed and recurring structures, significantly reducing our sensitivity to fire season volatility.

This greater consistency is further reinforced by the growth and diversification of our international retardant business, growth in our non-retardant businesses, including our suppressants business and the impact of our operational value drivers on our results regardless of external conditions.

The third observation, M&A. 2025 established our M&A strategy with the acquisitions of IMS and MMT, both of which we feel excellent about and both of which we'll discuss later in our remarks.

Turning to a summary of our strategy on Slide 4. Our goal is to fulfill our critical mission by providing our customers with high-quality products and exceptional service while delivering our investors private equity-like returns with the liquidity of a public market. Our strategy is built on 3 key operational pillars.

First, we own exceptional businesses. These are niche market leaders that play critical roles in solving complex customer problems, qualities that support high returns on invested capital and durable earnings growth.

Second, we rigorously apply our 3 operational value drivers to the businesses we own. We drive profitable new business, achieve continual productivity improvements and provide increasing value to customers, which we share in through value-based pricing.

Third, we operate our businesses in a highly decentralized manner, granting our business unit managers full operating autonomy paired with the accountability to deliver results with a tightly aligned incentive structure for our managers to think and act like owners.

We believe that our operational pillars will optimize our durable long-term free cash flow. We then seek to maximize long-term per share equity value through a clear focus on the allocation of our capital as well as the management of our capital structure.

Turning to our fire safety operations on Slide 5. Fire Safety delivered a strong year, primarily driven by execution on our value drivers. We continue to win profitable new business, including entry into preventative rail applied retardant in Europe, expansion of our air-based services in multiple geographies and ongoing penetration of our fluorine-free products globally.

We continue to realize productivity benefits, including from our new retardant manufacturing facility outside of Sacramento, and we continually increase our customer value proposition across products, for example, in suppressants with our new multipurpose AD foams and in our Canadian retardant operations with enhanced air-based service and manufacturing capabilities and share in this value creation through value-based pricing. Combined, these actions increased structural earnings power, compound each year while strengthening our customer relationships.

Fire Safety's 2025 results also showcased our transition towards greater financial consistency with higher year-over-year revenue and adjusted EBITDA despite a notably less severe North American fire season. We renewed substantially all of our key retardant contracts over the past 2 years, culminating in our cornerstone 5-year U.S. Forest Service contract. Our contracts have shifted away from purely volume-based models towards more fixed and recurring structures, notably reducing our sensitivity to fire season variability and increasing our business' consistency.

As I mentioned prior, this increased consistency is further reinforced by the growth and diversification of our international retardant business, growth in our non-retardant businesses, including our suppressants business and the impact of our operational value drivers on our results regardless of external conditions.

Looking forward, we will continue to rigorously apply our value drivers and paired with the secular growth drivers aiding our fire safety business, including higher acres burned and expanding air tanker fleet, continued growth in the wildland urban interface, new retardant application methods and the global transition to flooring-free foams, our Fire Safety segment is well positioned for profitable growth.

Switching to Specialty Products and starting with our P2S5 business, PDI. The operational and safety challenges at the Sauget, Illinois facility operated by Flexsys continued in the fourth quarter and into 2026. As we have previously discussed, since the Flexsys assets were acquired by One Rock Capital in 2021, the plant has experienced a sustained deterioration in operating reliability and safety performance relative to its historical levels and relative to our owned and operated P2S5 facility.

During the fourth quarter, unplanned downtime once again materially reduced production volumes and negatively impacted PDI's financial results. More troubling are the recurring safety incidents at and around the plant. These are not isolated events. They reflect a pattern of declining operational performance and safety standards under One Rock's ownership.

We believe these incidents are likely to continue and may worsen so long as the current ownership and operating structure remain in place. In our view, One Rock as the controlling owner of Flexsys is directly responsible for the strategic, financial and operational decisions that have led to the plant's instability and troubling safety incidents.

We believe that decisions made under One Rock's ownership have prioritized short-term financial considerations over sustained investment in operational integrity, reliability and safety. The result is a facility that is underperforming operationally, financially and most importantly, from a safety standpoint. This is unacceptable. We believe that the fastest and most responsible path to stabilization is a change in operational control.

As previously disclosed, in 2025, we exercised our contractual right to assume operation of the Sauget plant. Flexsys and its owner, One Rock, have refused to permit that transition. Instead, they have engaged in bad faith negotiations and obstructive conduct designed to delay and frustrate the transfer of control. We believe these actions have unnecessarily prolonged operational instability and increased risk exposure for employees, customers and the surrounding Sauget community.

Every month of delay has consequences. We are pursuing every available legal remedy in our ongoing litigation, and we'll continue to press our claims aggressively. We intend to hold Flexsys and One Rock fully accountable for their actions and for the operational and financial damage that has resulted from the refusal to honor the contractual framework governing this facility.

In parallel, we are evaluating strategic and legal alternatives available to ensure continuity of supply for our customers, safeguard the employees and communities affected by the plant's performance and return to prior levels of financial performance with respect to the operations at Sauget. We will not agree to economically unreasonable proposals or course of tactics. Our commitment to regaining operational control of this facility is absolute.

Until this matter is resolved, investors should expect continued variability in our P2S5 business. However, our track record of owning and operating P2S5 facilities safely and reliably ourselves is well established. If we assume control of Sauget or a separate P2S5 plant, if that's where this path ends, we are confident we can restore operational discipline, materially improve safety standards and return the facility to stable, efficient production.

Our priority here is clear: serve our customers, protect workers, support the Sauget community and preserve the long-term value of this asset. Ownership carries responsibility. We intend to ensure that responsibility is met.

Moving to IMS. IMS focuses on acquiring proprietary product lines and driving profitable growth through operational value driver implementation. In 2025, we executed on this strategy successfully, closing several product line acquisitions, including one in the fourth quarter. We expect IMS to deploy tens of millions of dollars annually into high IRR product line acquisitions and for IMS to represent an increasingly material portion of our company over time.

Finally, I'll turn to MMT, which closed in January. MMT manufactures engineered machinery and proprietary aftermarket components used in the production of complex minimally invasive medical devices, specifically catheters and guidewires. MMT aligns with our operational value driver strategy based on 4 specific attributes.

First, MMT is a leader in a highly specialized industry where quality and reliability are paramount to customer success. Second, MMT has a track record of high single-digit to low double-digit organic growth, driven by increasing adoption of minimally invasive procedures, increasing device complexity and a trend towards engineered machinery outsourcing. Third, MMT has a large and growing installed base, which must be serviced with aftermarket consumables, spare parts and services, which are almost always proprietary. Fourth, MMT has a successful track record of tuck-in M&A, which we expect to continue.

MMT recorded approximately $140 million in revenue and $50 million in adjusted EBITDA in 2025. One month into our ownership, initial value driver implementation validates our investment thesis, and we expect MMT's 2026 results to reflect meaningful year-over-year growth as these operational changes take effect.

With that, I'll turn the call over to Kyle for a more detailed review of our financials, earnings power and capital allocation in the quarter.

Thanks, Haitham. Our results in 2025 reflect our higher structural earnings power and highlight our improved financial stability. I'll start on Slide 8, where all growth rates are shown versus the prior year comparable period.

Consolidated revenue reached $652.9 million in 2025, up 16%, while adjusted EBITDA increased 18% to $331.7 million. In the fourth quarter, revenue grew 19% to $102.8 million and adjusted EBITDA rose 9% to $36 million. For the full-year, this performance translated to a GAAP loss per share of $1.37 compared to a GAAP loss per share of $0.04 in the prior year. Adjusted EPS for 2025 was $1.34, up from $1.11 last year, representing an increase of approximately 21%. In the fourth quarter, GAAP loss per share was $0.94 compared to GAAP EPS of $0.90 in the prior year quarter. Adjusted EPS for both Q4 2025 and Q4 2024 was $0.13.

The 2025 results were achieved with minimal contribution from M&A. With the acquisitions of IMS product lines and MMP, we are introducing a new value creation lever that complements and expands our operational value driver strategy that we expect will contribute growth in structural earnings power in 2026 and beyond.

Moving into the segment results and starting with Fire Safety. Full-year revenue totaled $488.9 million, up 12%, while fourth quarter revenue was $58.1 million, down 4% year-over-year. Adjusted EBITDA was $290.5 million for the full-year, representing 21% growth, with the quarter producing $25.5 million, a 6% decline. The full-year improvement reflects disciplined execution of our strategy across a broad range of products and geographies.

Within suppressants, we expanded sales by winning new sales volumes at attractive pricing, resulting in $21.8 million of incremental revenue versus last year. We made strong progress converting airports to our latest products while also building replacement volume across our installed base.

In retardants, performance was particularly strong outside North America, with sales increasing $18.3 million year-over-year. Larger markets such as Australia and France delivered robust results, while we also made progress in penetrating earlier-stage markets like Italy, where we focused on new applications, including retardant deployments along rail lines.

In North America, retardant revenue increased $12.6 million for the full-year despite a pronounced decline in acres burned in the U.S. This performance underscores both the strength of our operational value drivers model and the reduced sensitivity of our revenue base to fire activity. We saw strong execution across all 3 operational value drivers, driving new business as we expanded our footprint to additional bases and faster loading equipment, improving productivity across sourcing and logistics and applying value-based pricing where we've earned the right to share in the value created for our customers.

We continue to decouple our revenue from fire activity through contract renewals, intentionally shifting sales towards fixed fees and away from more variable revenue. The net effect has been a revenue base that is less sensitive to volume swings, improving overall revenue quality and supporting our strong 2025 performance.

Finally, on North America retardants, more aggressive initial attack strategies by our customers, combined with a more even distribution of acres burned across time and geography, largely offset the impact of fewer acres burned in the U.S. Taken together, Fire Safety's adjusted EBITDA growth highlights the structural earnings power created by our operational value drivers and improved contract mix.

Turning to Specialty Products. Revenue for the year reached $163.9 million, an increase of 31%, driven by $41.2 million from acquisitions, partially offset by a $2 million decline in our base business, which was impacted by ongoing unplanned downtime at the Flexsys-operated Sauget plant. Fourth quarter revenue was $44.6 million, up 75% year-over-year, driven by an increase of $13.4 million from recent acquisitions and $5.7 million from the base business.

Full-year adjusted EBITDA for Specialty Products rose to $41.2 million, an increase of 3%, while the fourth quarter increased to $10.4 million, up 85%. As Haitham discussed, results in our P2S5 businesses continue to be affected by instability at the Sauget facility. Absent that disruption, we believe the underlying earnings power of this segment is higher than reflected in 2025 results.

As previously announced, we acquired Medical Manufacturing Technologies, LLC in January 2026 for $685 million in cash, funded with a combination of cash on hand and the issuance of $550 million of new senior secured notes. MMT is a high-quality platform with attractive returns and strong aftermarket dynamics. As with the other businesses we own, we see meaningful opportunity to compound value through the application of our operational value drivers.

If Perimeter had acquired all of MMT on January 1, 2025, we estimate that it would have contributed approximately $140 million of revenue and $50 million of adjusted EBITDA. We expect MMT to deliver solid year-over-year growth in 2026 as we implement our operational value driver strategy.

Taken together across the portfolio, our results demonstrate continued structural earnings expansion, improved predictability and the ability to deploy capital into value-creating M&A. We've updated our long-term assumptions as shown on Slide 9 to reflect the business' evolution, the largest impacts being driven by our acquisition of MMT. We now expect annual interest expense to be approximately $75 million, driven by the MMT acquisition funding, which closed in January.

Interest expense in Q4 totaled $9.7 million. Tax deductible depreciation, amortization and other items are expected to be in the range of $60 million to $75 million annually going forward and was $19 million in Q4 2025. Capital expenditures are expected to run $30 million to $40 million per year, focused on projects with attractive returns. Capital expenditures for the quarter were $7 million.

Our working capital needs fluctuate seasonally and Q4's working capital levels are consistent with our expectations given the level of activity in Q4. We expect that the annual change in working capital will be approximately 10% to 15% of revenue growth going forward, reflecting the increasing size of our non-wildfire-driven businesses in the portfolio. We paid cash for income tax of $20.6 million in Q4 as compared to $43.1 million in the previous year. Going forward, we expect our cash tax rate to be 20% or better.

Turning from operations to capital allocation on Slide 10. We deployed approximately $149 million of capital in 2025 across organic reinvestment, bolt-on M&A and opportunistic repurchases, each evaluated against our minimum targeted equity returns of 15% and underwritten to drive durable value creation. Our objective remains maximizing long-term per share equity value through disciplined capital allocation and thoughtful capital structure management.

We invested $26.5 million in capital expenditures in 2025, focused on initiatives that support our customers' missions while driving profitable new business and productivity. Our project pipeline continues to build, and we view this reinvestment as a core enabler of our long-term organic adjusted EBITDA growth trajectory. In Q4, we invested $7 million, primarily supporting growth and productivity initiatives.

We were active in M&A in 2025, having invested $82 million to acquire product lines for our IMS business as well as select fire safety assets from Compass. In Q4, we acquired our largest set of products yet in a $40 million expansion, validating our belief that we can deploy tens of millions of dollars annually at attractive IRRs for many years to come.

Looking forward, our M&A capacity exceeds what we expect to allocate to tuck-in product line acquisitions, and we're actively evaluating additional platform opportunities. The acquisition of MMT is a good example of the type of high-quality businesses we want to own, where we can apply our operational value drivers to drive meaningful post-acquisition improvement, consistent with what you have seen across our portfolio over the past several years.

As we've noted before, our acquisition strategy is not industry-specific, it is strategy specific. What ties our businesses together is quality and the applicability of our operational value drivers, not whether a company is chemical, fire or safety by label. As a result, we expect future deals may come from new sub-verticals within the broader industrials landscape.

Let me reiterate what we look for. First, we prefer businesses that provide a small but essential component within a larger solution to a critical complex customer problem, often serving a niche need where alternatives do not deliver comparable value. That positioning supports our value creation model, winning profitable new business, driving productivity through operational efficiencies and earning the right to implement value-based pricing. In addition to those core elements, we favor businesses with recurring revenue, secular growth, strong free cash flow generation and high returns on capital and the potential for add-on M&A.

Finally, earlier this year, we repurchased $40.4 million of shares when we view the risk-adjusted return is compelling and believe repurchases would not preclude value-creating M&A. As the year progressed, our focus shifted towards pursuing M&A targets. MMT is an important step on that journey, but it's not the end point, and we believe we have capacity and momentum to continue building the portfolio via M&A.

Turning to Slide 11. The second half of our capital strategy is to maintain moderate leverage to enhance equity returns. Our debt profile remains attractive with no financial maintenance covenants and substantial liquidity. In addition to our existing $675 million of 5% fixed rate notes due in the fourth quarter of 2029, we also closed $550 million of 6.25% notes due 2034 in January of this year.

At quarter end, we were levered 1.1x net debt to adjusted EBITDA with LTM adjusted EBITDA of $331.7 million. We ended the year with $325.9 million of cash and equivalents and an undrawn $200 million revolver. On a pro forma basis, accounting for the closing of MMT and the $550 million notes offering, we were levered 3x net debt to adjusted EBITDA. This leverage level remains below our ideal 4x leverage level, leaving ample financial capacity to pursue value-creating M&A.

Lastly, on our capital structure, we amended and extended our revolving credit facility in Q4, doubling the size of the facility to $200 million and keeping in place its attractive spring covenant structure, where we face no maintenance covenants if the facility is less than 40% utilized. The facility has never been used and remains fully available as of today, providing flexibility that supports our goal of deploying capital into value-creating activities while reserving adequate liquidity to support the organic needs of our business.

To summarize 2025, we advanced our dual objectives of serving our customers and driving shareholder value. We introduced new products and expanded our solution offerings. We grew adjusted EBITDA through the implementation of our value drivers across each of our businesses. We improved the quality and predictability of our earnings stream through contracting and by diversifying the sources of adjusted EBITDA growth. We leverage our financial strength and value-focused underwriting to deploy over $830 million of capital, including MMT.

Looking ahead, our priorities are straightforward: execute on our commitment to our customers, integrate MMT and apply our operational value drivers with urgency and rigor across the entire portfolio of businesses and remain disciplined allocators of capital. We are proud of what our teams delivered in 2025, and we believe we entered 2026 with stronger and more consistent earnings power, strong acquisition momentum and a clear set of priorities for the future.

With that, I'll hand the call back to the operator for Q&A.

[Operator Instructions]. Our first question today comes from Joshua Spector of UBS.

I guess first, I have to say congrats on a strong 2025, and I certainly hope that P2S5 ownership issue is resolved sometime in the near term. For my first question, I just wanted to ask on -- you guys made pretty clear points around fixed versus variable mix shifting within fire retardants. Obviously, you have the new contracts layering in next year. When you look at earnings in '25 for the fire retardants business and into '26, how much of that would you say is now under a fixed type contract or a service type payment versus variable? How does that compare versus history?

Josh, thank you for the questions. We haven't broken out and are reluctant to break out a specific fixed variable split. That said, to answer the latter part of your question, the consistency and predictability of the cash flows that come out of each of these contracts and therefore, our retardant fire safety business in general are dramatically more predictable than they were historically and should actually get incrementally more predictable in '26 versus '25, given that the most recent Forest service contract that has kicked in this year adds yet more consistency to those contractual cash flows.

Let me try maybe one other way, I guess, around this in that if we look at this last year, I mean, you talked about a more spread out fire season helped deployment. I think also a more aggressive U.S. stance around firefighting also led to more deployments. I guess when you think about the amount of gallons that you sold, clearly, we can't really look at acres burned as the indicator anymore for what would be that variable piece of it. What would you suggest that we look at? Should we be looking at fire starts? Or is there something else in terms of how we're deploying fire retardants that we should be looking at to think about what's going to drive volumes up or down year-over-year?

It's a good question because it's a very hard one to answer. There's no great metric to accomplish what I believe you're trying to accomplish. The best one of an admittedly not amazing set of metrics, I still think remains U.S. and North American acres burned. I would just say the percent change in our revenue and EBITDA relative to the percent change in acres burned is just dramatically muted relative to what it was in our historical financials.

If maybe I pivot for one last one. Just the $40 million cash deployment into the electro-optical assets and product lines, how should we think about the accretion of those types of deployment? Is it higher or lower than your typical M&A? I don't know if you can give us an EBITDA multiple or how that flows through so we could think about what that's going to mean as you do more of those?

Yes. We think the product line acquisitions at IMS are higher returning than our typical M&A. The beauty of the IMS business model is you can buy very attractive, fully proprietary spec in, very aftermarket heavy, if not exclusively aftermarket product lines at much more attractive multiples and therefore, higher IRRs than you can buy whole companies.

We did make a whole company acquisition as our platform when we bought the actual IMS business in late '24. All the acquisitions in '25, and we expect the majority going forward are going to be these very attractive product line acquisitions. Josh, if we say that we won't deploy capital without seeing at least a 15% long-term IRR into any form of capital allocation, and we're telling you the IRRs on these product lines are nicely higher than other forms of capital allocation, I think you can safely infer that the IRRs are very attractive on these acquisitions.

The next question is from Dan Kutz of Morgan Stanley Investment Management.

I just wanted to ask, as you're thinking through, I guess, the 5 broad product lines that you have now and you're thinking through growth drivers and growth prospects across those different business lines, is there any -- would it be possible to stack rank where you see the most long-term growth or where you see relatively more or less long-term growth across the different product lines? Anything you could share to help us think through, I guess, the relative growth prospects would be great.

We hesitate to stack rank them. That said, we think there is very solid organic growth throughout our portfolio. Clearly, the fire safety businesses we initially acquired with Perimeter, both retardant and suppressants, individually and combined have very nice long-term secular volumetric growth profiles.

The other business in our portfolio generally have been acquired by us thereafter, and we're only going to acquire businesses with attractive long-term secular growth profiles. It's one of our target economic criteria. Therefore, our Specialty Products segment also has, we think, excellent long-term organic growth potential with strong secular drivers. Therefore, we think this is a solid long-term growth portfolio.

Then maybe on MMT, and you guys have already commented on some of this, but now I guess that the deal is closed and you've been able to look even deeper under the hood for a month or 2 now. As you think about the opportunities to implement your operational value drivers, where do you see bigger opportunities between the OEM and the aftermarket? Where do you see near-term opportunities? I guess, maybe could you talk through which of the operational value drivers could potentially be most applicable to MMT?

As far as the value drivers, we feel very good, Dan, that all 3 of them are going to be solidly applicable. This is a high innovation, high-growth space in which MMT is a clear leader, which is a beautiful setup for aggressive internal reinvestment into R&D, innovation, engineering, which should drive meaningful long-term profitable new business. That lever is particularly attractive here given the end market.

The ability to add value to customers and share in that value through value-based pricing is also clearly present given the absolute mission criticality and relatively low cost of MMT's products. We just always find productivity opportunities at businesses. All 3 are applicable. I just emphasize the profitable new business opportunity here.

Then as far as OEM versus aftermarket, value-based pricing opportunities tend to more often exist in the aftermarket. Our experience tells us the aftermarket tends to be underpriced more so than OEM. That said, if you innovate and add value, you earn the right to value price in both segments.

Then maybe one last quick one. We're almost 2 months into the quarter. You guys obviously have a lot more visibility and a lot more resources to track wildfire activity globally. Wondering if you could just talk through any trends you're seeing in international retardant quarter-to-date in the Southern Hemisphere where they're in the peak wildfire season?

Sure, Dan. As always, we wouldn't comment on intra-quarter results. We're going to have to wait until March to see what those look like. That said, you're generally right that there's been a long-term secular trend across the globe of having more fires and more intense firefighting activity. When we look at those secular growth drivers over the long term, we continue to think that they're intact, both in the North American markets and in the international markets.

Additionally to that, when we think about the international markets, there's a real opportunity for us to expand usage, and we've seen a lot of great applications of that across both geography and application method where we've tried to branch out from just aerial deployment to broader waste apply, including rail applied in some of our new emerging geographies.

[Operator Instructions]. There are no additional questions at this time. I would like to turn the floor back over to Haitham Khouri for closing comments.

Thank you, operator, for the good work. Thank you, Josh and Dan, for the great questions. Thank you to our investors for your support, and we'll speak again in a couple of months.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Greetings, and welcome to the Perimeter Solutions Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Seth Barker, Head of Investor Relations. Seth, please go ahead.

Good morning, everyone, and welcome to Perimeter Solutions conference call to discuss our acquisition of Medical Manufacturing Technologies, LLC, also known as MMT.

Before we begin, I'd like to remind you that today's remarks may include forward-looking statements. These statements are subject to various risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For a discussion of these risks, please review the cautionary language in our press release as well as our filings with the SEC. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

The company would also like to advise you that during the call, we will be referring to non-GAAP financial measures, including adjusted EBITDA. The reconciliation of and other information regarding these items can be found in our press release and investor presentation, both of which will be available on our website.

Today's call is being recorded. A replay of this call will be available on the Investor Relations section of Perimeter Solutions website.

At this time, I would like to turn the call over to Perimeter Solutions' Chief Executive Officer, Haitham Khouri.

Thank you, Seth. Good morning. We appreciate everyone's time on shorter notice this morning to discuss our agreement to acquire MMT.

I'll start with key transaction points on Slide 3. We're acquiring MMT for $685 million in cash, including certain tax benefits. MMT is a leading provider of precision machinery and associated aftermarket consumables, parts and services used in the manufacturing of minimally invasive medical devices, including advanced catheters and guidewires.

Nearly all MMT's revenue is from proprietary products and approximately half of MMT's revenue is generated from the aftermarket. MMT is expected to generate approximately $140 million of revenue and $50 million of EBITDA on a full year basis in 2025.

We expect to fund the transaction with $500 million of new senior secured debt financing and approximately $185 million of cash on hand. And the transaction is expected to close in the first quarter of 2026, subject to regulatory approval.

I'll use most of my time this morning to discuss MMT's fit with Perimeter's three key operational pillars, summarized on Slide 4. Our first pillar is business quality. Our goal is to build Perimeter into an owner of exceptionally high-quality industrial businesses with specific target economic characteristics. MMT checks this box. First, MMT is a leader in a highly specialized industry where quality and reliability are paramount to customer success.

Second, the business has a track record of high single-digit, low double-digit organic growth driven by increasing adoption of minimally invasive procedures, increasing device complexity and a trend towards machinery outsourcing.

Third, MMT has a large and growing installed base, which must be serviced with aftermarket consumables, spare parts and services that are almost always proprietary. And fourth, MMT has a long, successful track record of tuck-in M&A, which we expect to continue. These characteristics have driven MMT's strong margins and returns on tangible capital.

Our second pillar is the rigorous application of our value driver operating strategy. This strategy is built on constantly providing our customers with increased value and, in doing so, earning the right to drive profitable growth with our customers. These results are evident at our existing Fire Safety and Specialty Products businesses, where we've invested heavily to maximize the value we provide customers and earn the right to drive profitable new business, productivity improvements and value-based pricing.

MMT is an excellent fit with our strategy. The company's machinery, parts, consumables and services are critical to zero defect customer workflows and compliance with stringent regulatory standards. Despite their critical and highly engineered nature, MMT's average consumables price is approximately $70 and its average spare parts price is approximately $160, modest relative to their value. We expect to accelerate investment into MMT, deliver excellent service to our customers and earn the right to share in the resulting value creation.

Our third operational pillar is our decentralized operating structure. MMT will operate as a stand-alone business within our decentralized structure where managers have operating autonomy to run their businesses, accountability to deliver results and incentives to think and act like owners because they are compensated like owners.

Moving to Slide 5. Our approach to MMT will mirror our approach at Perimeter, where we applied our value driver-based operating strategy to a high-quality business in a decentralized structure. As illustrated on the left-hand side of the slide, this drove significant adjusted EBITDA and cash flow growth at Perimeter between the end of 2021 and the LTM period.

MMT represents a very similar opportunity: first, an exceptionally high-quality business with clear industry leadership, strong organic growth and an attractive starting margin profile; second, an excellent fit for our value driver based operating model with highly engineered proprietary products that are critical to customer success but represent a de minimis portion of customer costs; and third, a natural fit into our decentralized operating model built around autonomy, accountability and alignment.

As such, we're confident that the outcome in MMT will mirror that at Perimeter and result in meaningful equity value creation for our shareholders.

With that, I'll turn the call over to Kyle.

Thanks, Haitham. I'll start with an overview of MMT before we move into transaction details. MMT is an end-to-end manufacturing solution partner to the world's leading medical device OEMs. The company supports the manufacturing of life-saving interventional devices such as catheters, guidewires and stents. MMT serves its customers through the entire device life cycle, from conceptualization to commercial ramp and through high-volume production.

In the design and development phase, MMT's application engineers partner with customer engineers to iterate on medical device designs, support the manufacturing of prototypes and ensure upfront validation and regulatory compliance. The engineered machinery MMT develops and the manufacturing process they help design are then often specified into the regulatory filings with the FDA.

MMT then assists its customers for the commercial production ramp by supplying highly engineered manufacturing machinery with rigorous quality control to ensure regulatory compliance and scale production. In the high-volume production phase, MMT serves this engineered machinery installed base with consumables, parts and services.

The company's customer base includes the largest blue chip medical device manufacturing OEMs with whom MMT enjoys long tenured, deep and broad relationships. For the company's top 10 customers, MMT enjoys a 15-year average relationship tenure, sells multiple solution types into each customer and sells to an average of 15 sites per customer.

Turning to the next slide. Approximately 50% of MMT's revenue is generated by OEM engineered machinery and approximately 50% is generated from the aftermarket. On the machinery side, MMT's highly engineered systems typically have useful lives of 10 to 15 years and the installed base has grown to roughly 12,000 units across MMT's product lines.

On the aftermarket side, MMT's proprietary aftermarket components are specified in the OEM machineries manuals which, in turn, form an important element of the customers' quality management systems. The company's consumables typically average around $70 and the parts around $160. The aftermarket opportunity tied to an initial equipment sale provides a long tail of parts and consumables revenue.

Turning to the installed base, which grows from OEM sales of new machines that, in turn, serves as the basis of aftermarket sales. Since 2016, MMT's installed base has grown at a roughly 5% CAGR, which we believe is a reasonable approximation for volume growth. As Haitham noted earlier, this organic growth has been driven by increasing adoption of minimally invasive procedures, increasing device complexity and a trend towards machinery outsourcing. We believe these trends are likely to continue going forward.

Turning to the transaction economics on Slide 9. The purchase price for MMT is $685 million in cash. MMT is expected to generate approximately $50 million of adjusted EBITDA, which implies a purchase price multiple of approximately 14x adjusted EBITDA. We believe this is an attractive entry point relative to the growth we expect going forward. We plan to fund the transaction with $500 million of new secured debt and $185 million of cash on hand.

On a pro forma basis at closing, we expect total debt will be roughly $1.2 billion and net debt will be just over $1 billion. We expect pro forma leverage of approximately 2.7x net debt to combined adjusted EBITDA, which we believe will be well supported by the cash generation capability of our combined business. We note that the transaction is being financed without the issuance of equity and that we expect to retain ample liquidity and balance sheet flexibility following closing. Overall, the company's financial posture remains strong post acquisition.

We are excited about this transaction and its potential to provide a new asset on which we can drive value creation through our operational value drivers. We expect it will be meaningfully value-creating for Perimeter shareholders that will further strengthen our long-term strategic positioning. And most importantly, the entire Perimeter team looks forward to welcoming MMT's teammates to Perimeter and working with them to invest in and support their customers' missions.

With that, I'll turn it over to the operator for Q&A.

[Operator Instructions] Our first question today is coming from Josh Spector from UBS.

It's Chris Perrella on for Josh. A couple of questions on the deal. As I think about both parts of MMT, the equipment and the aftermarket, is there an appreciable difference in the growth outlook for that and also the margin profile?

Chris, it's Haitham. Growth outlook-wise, they're quite similar because one drives the other. Engineered machinery sales, which is the OEM portion of the business, grows your installed base. And on a volumetric basis, your aftermarket sales grow with growth in your installed base primarily. On a margin basis, generally speaking, with this type of business, folks are earning higher margins in the aftermarket than the OE side. That's consistent here, although not dramatically appreciated.

Okay. And then a question on the capital intensity of the business. I know you guys are relatively capital light. Does this transaction fit into that? Or is there some spend that needs to happen on the MMT side once you get it within the portfolio?

Chris, this is Kyle. Thanks for the question. I think you actually framed this correctly that we are relatively low capital intensity, and we believe that MMT largely fits that model as well. This is going to be a few million dollars of CapEx against the $50 million of EBITDA, and we don't see any need to put a large step-up of CapEx initially into the business.

All right. And then one final question just on the FDA specifications. Is all the material, including the aftermarket spec-ed in? And then -- and how big of a moat does that drive around the business? And also, is there any cross-selling opportunity with the printed circuit board business you guys had acquired earlier or building up?

Chris, substantially all of the aftermarket component business, both consumables and the spares, are spec-ed in to the machinery, and that ultimately all does tie back to regulatory specification driven by the FDA. On the second part of your question, no. MMT is completely distinct from IMS and will certainly remain that way in our decentralized model.

[Operator Instructions] Our next question is coming from Dan Kutz from Morgan Stanley.

Congratulations on the deal.

Thanks, Dan.

So just kind of looking at the slide with the installed base, it looks like a pretty kind of steady growth market. But I'm just wondering if there's any kind of OEM cyclicality where maybe the customers are building and then kind of the market's absorbing that capacity or their customers are absorbing that capacity. It was really -- if we're thinking about the growth driver of the installed base, will that pretty closely track, I guess, like the number of procedures that are happening? Yes, just wondering if you can help us a little bit more to think about some of the macro drivers for the longer-term growth outlook.

Dan, it's Kyle. I think you've identified exactly the right drivers here. When you think about the ultimate end market for this business, it is the procedures that's going out there. And those are relatively steady over time.

Awesome. And then it's kind of my understanding that the components and the equipment that you're selling to your customers, that MMT covers a lot of what's needed for the customers to ultimately manufacture their products. But it's also my understanding that maybe it's not the fully comprehensive suite of everything they would need. So I guess the question is around any appetite to potentially look for opportunities to acquire some of the parts or components or machinery that could broaden the suite of products that MMT offers? I think I've seen that there is another competitor that they'd acquired somewhat recently. So yes, it's really a question around, similar to the IMS business, any appetite to potentially broaden the product suite at MMT and kind of drive towards a more full suite portfolio offering?

Dan, the short answer is yes. The team at MMT has done a very nice job over the past years with tuck-in M&A, broadening their suite of products, delivering customers with a more comprehensive offering which is quite valuable customers, and we absolutely would love for them to keep doing that going forward, and we feel pretty good that they're going to be successful at it.

Awesome. And then maybe just one last quick one on kind of the transaction economics. Anything you'd share around the calculus around the cash versus debt mix? I know you guys have a lot of -- you have a heavy cash balance on the balance sheet, but it's also a big component of the deal. So yes, just anything you'd share around the cash versus debt mix?

And then also the company was arguably pretty underlevered before. Leverage looks a little bit healthier now. How do you think about where the capital structure and where the balance sheet is as it pertains to incremental M&A? Sorry to ask about the next -- the potential for the next deal of the day you just announced the big deal. But yes, just any thoughts you can share there?

Yes. Dan, it's Kyle. On the mix of cash and debt, we were really managing to what we thought was an appropriate cash balance that would give us all the flexibility we needed going forward. So that was a pretty simple calculus for us. On the leverage front, this does bring us to a point where we feel like we're more in the appropriately levered camp at this point. We're pretty clear, I think, that 1x net leverage was lower than we wanted to be. At this leverage area, we're in a very comfortable spot where we feel good about it while maintaining flexibility if something comes up, that looks just really good.

I'll actually take that out into two pieces. We have add-on acquisition opportunities particularly in the IMS business that we talk about frequently. And that will continue at pace. If we think about the platform piece, we have some work to do here at MMT, which we're super excited about, and so that will probably be our focus. But we'll always look at anything that comes our way opportunistically.

[Operator Instructions] Our next question is a follow-up from Josh Spector from UBS.

It's Chris again. Just a quick one. With the number of tuck-ins MMT has done, how tightly integrated from your perspective is that? And is there plenty of wood to chop there in terms of fully integrating those tuck-ins?

Yes. Chris, the team at MMT has done a very nice job, I would say, appropriately integrating the acquisitions while not losing, I call it, the entrepreneurial spirit at each that allows them to serve the customer best. And therefore, we'll go in and we'll look at it. But our bias is to not do a whole lot incremental because, again, these guys have done a very nice job.

Thank you.We reached the end of our question-and-answer session. I'd like to turn the floor back over to Haitham for any further closing comments.

Just thank you to everybody for joining us on relatively short notice. Thank you, as always, to our investors for support. And thank you, and welcome to the MMT team.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Ladies and gentlemen, greetings, and welcome to the Perimeter Solutions Q3 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host for today, Seth Barker, Vice President. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining Perimeter Solutions' Third Quarter 2025 Earnings Call. Speaking on today's call are Haitham Khouri, Chief Executive Officer; and Kyle Sable, Chief Financial Officer. We want to remind anyone who may be listening to a replay of this call that all statements made are as of today, October 30, 2025, and these statements have not been nor will they be updated subsequent to today's call.

Today's call may contain forward-looking statements. These statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate, and our actual results may materially differ from those expressed or implied on today's call. Please review our SEC filings, particularly any risk factors included in our filings for a more complete discussion of factors that could impact our results, expectations or assumptions.

The company would also like to advise you that during the call, we will be referring to non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, LTM adjusted EBITDA, adjusted EPS and free cash flow. The reconciliation of and other information regarding these items can be found in our earnings press release and presentation, both of which will be available on our website.

With that, I will turn the call over to Haitham Khouri, Chief Executive Officer.

Thank you, Seth. Good morning, everyone. Thank you for joining us. We're pleased to report Perimeter's third quarter and year-to-date results. Third quarter adjusted EBITDA was $186.3 million and year-to-date adjusted EBITDA was $295.7 million. The 3 primary drivers of these results were: number one, execution on our operational value drivers with particularly strong results in our international retardant business, our suppressants markets and IMS; two, the impact of our efforts to drive more consistency and predictability in our retardant business with reduced dependence on the North America fire season; and number three, a more proactive initial attack strategy by our customers, which drove greater retardant use. We continue to deploy capital during the third quarter, investing nearly $17 million across capital expenditures and the purchase of product lines at IMS.

I will provide a summary of our strategy, followed by an operational update, then discuss our new forest service contract. Kyle will then walk through our financial results and recap our capital allocation in the quarter.

Starting on Slide 3 with a summary of our strategy. Our goal is to fulfill our critical mission by providing our customers with high-quality products and exceptional service, while delivering our investors private equity-like returns with the liquidity of the public market. Our strategy is built on 3 key operational pillars. First, we own exceptional businesses. These are niche market leaders that play critical roles in solving complex customer problems, qualities that support high returns on invested capital and durable earnings growth.

Second, we rigorously apply our 3 operational value drivers to the businesses we own. We drive profitable new business, achieve continual productivity improvements and provide increasing value to our customers, which we share in through value-based pricing.

And third, we operate our businesses in a highly decentralized manner, granting our business unit managers full operating autonomy, paired with accountability to deliver results with a tightly aligned incentive structure for our managers to think and act like owners. We believe that our operational pillars will optimize our durable long-term free cash flow. We then seek to maximize long-term per share equity value through a clear focus on the allocation of our capital as well as the management of our capital structure.

Turning now to our financial results on Slide 4, and starting with Fire Safety.

Fire Safety's strong third quarter and year-to-date results were driven by 3 key factors. First is continued progress on our operational value drivers. We grow our sustainable earnings power through the rigorous implementation of our 3 value drivers. This improvement is evident in our Q3 and year-to-date 2025 results.

Sales increased as we drove profitable new business and earned the right to share in the customer value creation across both retardants and suppressants. Margins expanded as we improved the efficiency of our operations via productivity initiatives, and revenue and margins benefited from our increased operating investments and capital expenditures. We expect the impact of our value drivers to compound over time and drive sustainable growth in our earnings power.

Looking across our products, our international retardants business and our Suppressants business continued their momentum in the third quarter, with particularly strong volume performance from our profitable new business initiatives and meaningful top and bottom line impacts from our productivity and value pricing efforts.

Our U.S. retardant business also saw contributions across all 3 operational value drivers, driving top and bottom line growth, despite a relatively mild North America fire season.

The second driver of our financial results are the structural changes we've made towards greater consistency and predictability in our retardants business with reduced dependence on the severity of the North America fire season. We renewed substantially all of our key retardant contracts over the past 2 years. And in doing so, prioritized contractual adjustments to drive greater consistency and predictability in our business and financial results. These adjustments were well received by our customers who, like us, benefit from greater consistency and predictability.

While the correlation of our fire safety results with the North America fire season is not eliminated, we believe it is notably reduced, relative to history as is evident in our 2025 financial results. The third driver of our 2025 results is a shift in our customers' approach to wildfire response. Our key U.S. customers adopted a more proactive approach to wildfire management this year, which we believe contributed meaningfully to lower acres burned, and to significant associated cost savings.

With support from Secretary Brooke Rollins of the Department of Agriculture; and Secretary Doug Burgum of the Department of Interior, Tom Schultz, Chief of the US Forest Service, issued a wildfire letter of intent in May, which directed the Forest Service to suppress fires as swiftly as possible and to focus on safe, aggressive initial attack. This directive from Chief Schultz drove greater mobilization of resources, including aerial resources deploying retardant to quickly attack nascent fires.

By quickly getting retardant on fires, agencies were able to limit their spread and mitigate the devastation they cause in our communities. This more aggressive initial attack posture helped limit acres burned despite the increase in fire starts while driving meaningful use of retardant. The actions taken this year by Secretary Rollins, Secretary Burgum, and Chief Schultz, and the men and women of our agency partners undoubtedly saved lives, property and our environment. As always, Perimeter is proud to play a part in our customer success.

Moving on from this year's operational development and looking to the future. We were pleased to have signed a new contract with the US Forest Service during the third quarter. This contract, amongst the most significant in our company's history, builds on Perimeter's 60-year legacy of working with the Forest Service to protect lives, property and environment. By combining our customers' unwavering commitment to the mission with the best of private sector efficiency, this contract delivers a win-win outcome by: first, delivering substantial savings to the U.S. taxpayer; second, driving Perimeter's continued financial momentum; and third, enhancing our national wildfire preparedness and response capability.

A key element of the contract is the savings it provides to the Department of Agriculture, the Department of Interior, the US Forest Service, and ultimately, the American taxpayer. The contract lowers the price of retardant in its first year and delivers additional savings by expanding the services Perimeter can efficiently deliver over the contract 5-year term. One example of the contract's mutually beneficial outcome is the transition to our full-service model. Substantially all federal bulk bases, which we serve with product will transition to our full service model, which we serve with our comprehensive solution spanning product, service, staffing, equipment and maintenance.

We capture meaningful operating efficiencies by incorporating these bulk bases into our full-service network and simultaneously drive savings to the customer as well as profitable new revenue streams and incremental productivity opportunities to Perimeter. In a similar win-win, federal bases are transitioning from a mix of liquid and powder product to an all-powder footprint. Our powder product is lower priced and more efficient to handle than our liquid product, which drives direct customer savings. Simultaneously, powder conversion enhances our profitability through a lower cost and complexity manufacturing, distribution and logistics footprint.

Finally, this new contract enhances national wildfire preparedness and response. The contract unprecedented 5-year term allows Perimeter and the Forest Service to jointly plan and invest behind meaningful multiyear initiatives, such as the all-powder product conversion. To safeguard future air tanker fleet uptime and reliability, Perimeter has also committed to aiding the Forest Service on the development of retardant testing standards that ensure all retardant products match Perimeter safety standards developed over the past 60 years.

And building off of the supply chain resiliency advanced by our new Sacramento facility, Perimeter is working to build that same continuity, further up the supply chain by enabling more domestic supply of raw materials. Together, these features deliver the safest, most resilient and best-performing retardant solution our nation has ever had. We'd like to acknowledge and thank our agency customers for the collaborative engagement on this landmark contract. We look forward to continuing our successful 60-plus year collaboration over the next 5 years and beyond.

Switching now to our Specialty Products segment. During the third quarter, the significant operational and safety events that have plagued our Sauget, Illinois plant since One Rock Partners purchased the Flexsys assets in 2021, not only continued but escalated. There was once again a substantial amount of unplanned downtime, which significantly impacted Specialty Products' financial results in the third quarter.

While that was disappointing, significant safety events during the third quarter are of greater concern. These events demonstrate the urgent need to get these assets out of Flexsys' control as soon as possible for the safety of workers at the plant. Unfortunately, Flexsys and their parent, One Rock, continue to fight our efforts to take operational control of the plant, despite their clear contractual obligation to do so.

Recently, Flexsys made a bad faith proposal that we lease the land under the plant for more than 10 to 20x the cost to purchase identically zoned and similarly configured and resourced land in the same general vicinity. We will not capitulate to these tactics. We will continue to doggedly pursue our rights under the contract in court as our previously disclosed litigation progresses. We know that it may take an extended period before there is a resolution, and we caution our investors to expect a continued financial impact until this issue is resolved.

Regardless, we remain fully committed to taking over the plant no matter how long it takes or how difficult the path is. We are doing this not only for the benefit of our shareholders, customers and the community where we operate, but also for the safety of the employees at the plant. We are confident that we will eventually operate the plant and consistently and safely produce the highest quality product.

Lastly, IMS. The business continues to perform well, and we again acquired new product lines during the third quarter. Our IMS acquisition team remains active, and we expect to continue to drive IMS' profitability through enhancing our operating value drivers on both existing and newly acquired product lines.

With that, I'll turn the call over to Kyle for a more detailed review of our financials, earnings power and capital allocation in the quarter.

Thanks, Nathan. I'll begin on Slide 8, where growth figures shown are versus the prior year comparable period. Starting with Fire Safety. Revenue for the quarter came in at $273.4 million, reflecting a 9% year-over-year improvement, and $430.8 million year-to-date, a 15% gain. The segment's adjusted EBITDA for the quarter was $177.2 million, representing a 13% increase over last year, and $265 million year-to-date, marking a 24% gain.

Our operational value drivers were the primary driver of the year-over-year increase, with strong performance across our various products and geographies. Our suppressants team was successfully expanding sales, booking new volume wins at attractive pricing with overall suppressants revenue increasing $12.4 million from the prior year quarter. We continue to make excellent progress in winning airport conversions to our newest products while building a base of replacement volumes sold into the installed base.

Meanwhile, our retardant products were strong in our markets outside North America, growing sales $5.5 million from the previous year. Historically larger markets such as Australia and France had robust performance, while our team made progress on expanding into more nascent markets such as Italy, where the team focused on new applications for retardant products deployed along rail lines.

In the U.S., our retardant revenue grew modestly despite the pronounced decline in U.S. acres burned. We saw strong performance across all 3 OBDs in our retardant business, driving new business as we extend our footprint to new bases and faster loading equipment, productivity across a variety of sourcing and logistics areas, and value-based pricing where we have earned the right to share in the value we create for our customers.

As Haitham noted, we worked to decouple our revenue from fire activity as we renewed contracts. We have purposely shifted sales towards fixed services revenue and proportionately away from variable products revenue. The net effect is to make our revenue less sensitive to volume movements as was historically the case, thereby improving the quality of our revenue base and contributing to Q3 strong performance.

Finally, the increasingly aggressive initial attack strategy employed this year by our customers, coupled with an even distribution of acres over time and geography, almost fully offset the decline in volumes from fewer acres burned. The resulting adjusted EBITDA growth demonstrates how the many levers of growth across the business, along with improved contract structures can effectively reduce our sensitivity to acreage burned in any given year.

In our Specialty Products segment, Q3 net sales came in at $42.1 million, representing 15% growth from the prior year quarter. This performance reflects a $10.8 million contribution from IMS acquisitions, which was offset by a $5.3 million decrease from the base business. Year-to-date net sales reached $119.3 million, up 20%, driven by a $27.7 million from IMS acquisitions, partially offset by a $7.6 million decline attributable to ongoing unplanned downtime at the Flexsys-operated Sauget plant.

Specialty Products Q3 adjusted EBITDA fell to $9.1 million compared to $12.9 million in the prior year quarter, and slightly declined year-to-date, down to $30.8 million compared to $34.5 million. Q3's operational challenges are a continuation of the issues initially discussed in Q1, and the ongoing downtime contributed to lower sales and higher costs in the business and dampened adjusted EBITDA.

While it's impossible to predict the plant's performance under Flexsys and their parent One Rock's control, we anticipate a continued drag from operational issues until we assume operational control of the plant. Our IMS business continues to progress well with 4 product lines acquired year-to-date. The business continues to outperform our expectations from the time of the initial deal and the add-on product line acquisition process has already shown to be effective in converting its pipeline into closed transactions.

We expect to implement our operational value drivers to drive adjusted EBITDA on existing product lines as well as continue to expand into new product lines via M&A. Viewing the segments together, consolidated third quarter sales grew 9% to $315.4 million, while adjusted EBITDA also improved 9% to $186.3 million. Year-to-date, consolidated sales reached $550.1 million, up 16%. And adjusted EBITDA rose 20% to $295.7 million.

Finally, bringing our adjusted EBITDA down to EPS. For Q3 2025, our GAAP loss per share was $0.62 versus GAAP loss per share of $0.61 in the prior year quarter. Q3 2025 adjusted EPS was $0.82 compared to $0.75 in Q3 2024. On a year-to-date basis, GAAP loss per share was $0.45 compared to a GAAP loss per share of $1.03 for the same period last year. Year-to-date adjusted EPS was $1.24 as compared to $0.99 for the same period in the previous year.

Turning to our long-term assumptions as shown on Slide 9. Our assumptions are unchanged from Q2, and with normally quarterly variation, Q3 is consistent with those expectations. Q3 interest expense was $9.9 million, while taxable depreciation, amortization and other tax deductions totaled $5.8 million. Cash paid for income tax was $15.4 million in Q3 as compared to $27 million in the prior year quarter. [indiscernible] variation in factors is typically timing related in any given quarter and our full year tax expectation was unchanged. Capital expenditures for the quarter were $5 million. Our working capital needs fluctuate seasonally and Q3's capital levels and the associated source of cash are consistent with our expectations, given the level of activity in Q3. Our year-end net working capital outlook is unchanged. We ended the quarter with about 147.9 million basic shares outstanding.

We define free cash flow as cash flow from operations less capital expenditures. In total, we had free cash flow in Q3 of $193.6 million and free cash flow of $197 million for the 9 months ended September 30, 2025. 2025's cash flow generation seasonality is in line with our expectations and consistent with history, where we invest significantly in working capital in the first half of the year in preparation for the fire season and convert those investments into cash in the second half. Our full year adjusted EBITDA to cash generation conversion is consistent with the assumptions shown on this slide, aside from potential cash tax timing differences.

Finally, I will reiterate that we expect our business to remain well insulated from policy and economic shifts. Trade policy effects are tracking at or below our initial expectations, amounting to less than 2% of consolidated adjusted EBITDA. At the same time, our business is seeing minimal government funding disruption since it's tied to essential federal emergency response initiatives. And more broadly, our portfolio continues to show resilience against economic conditions, given the nondiscretionary nature of most of our products.

Turning from operations to capital allocation. We invested nearly $17 million of capital in the quarter, the returns on which we expect will exceed our minimum targeted equity returns of 15%. We continue to reinvest in our business organically with $5 million allocated to capital expenditures in the quarter. The majority of these capital expenditures supported our growth and productivity initiatives. Our pipeline of projects continues to build and is an important element supporting our long-term organic adjusted EBITDA growth trajectory.

Moving to M&A. As discussed previously, we invested $12 million in Q3 to acquire product lines for IMS, consistent with IMS' original investment thesis. The acquired product lines are being integrated into our manufacturing footprint, and our team is working to implement our operational value driver strategy. IMS product line acquisitions will continue to be an important avenue to deploy capital at attractive IRRs, and we believe we can deploy tens of millions of dollars of capital into IMS product line acquisitions annually for many years to come.

Our M&A capacity far exceeds what we expect to allocate to IMS, and we are actively evaluating larger M&A targets. As Haitham outlined at the beginning of the call, our plan is to own a portfolio of high-quality businesses where our operational value drivers drive meaningful post-acquisition improvement in financial performance as has occurred at Perimeter's portfolio of businesses over the past few years. Our portfolio is not industry-specific, but rather strategy-specific. Business quality and the applicability of our operational value drivers are what tie our portfolio together. Having a chemical, fire or safety aspect of the business does not make a business a potentially good fit for Perimeter, and we expect future deals will come from new subverticals within the broad industrial space.

Let me reiterate the strategic characteristics of the businesses we expect to add to our portfolio. Our first and most important characteristic is that the business produces a small but essential component of a larger solution. We begin by evaluating whether that broader solution addresses a critical complex problem for customers. We further assess whether the target serves a narrow need within that broader solution, creating the niche market. Lastly, we confirm that no alternative offers comparable value to the customer.

Together, these qualities align with our value creation strategy, solve customers' most important challenges better than anyone else, while sustainably sharing the value created between our business and our customers. This allows us to drive profitable new business, seek out efficiencies that drive productivity, and earn the right to share in value creation through value-based pricing. In addition to the primary criterion of shared value creation, we prefer companies with recurring revenue, secular growth, high free cash flow generation and correspondingly high returns on capital and the potential for add-on M&A.

Successful M&A at Perimeter demands finding targets with these characteristics, confirming the applicability of our operational value driver strategy and diligence in closing the transaction. Then the real work begins, as we work to implement our operational value drivers and strive to replicate the same success we've seen in the businesses we acquired 4 years ago. Our team is actively working to source [ indulgence ] in new targets that meet these criteria, and we are committed to expanding via M&A as a key part of a long-term value creation strategy.

Turning to Slide 11. The second half of our capital strategy is to maintain moderate leverage that amplifies equity returns. Here, we benefit from a favorable debt structure, a single series of fixed rate notes at 5%, maturing in the fourth quarter of 2029 with no financial maintenance covenants. As of Q3, we were levered 1x net debt to LTM adjusted EBITDA, driven by $675 million of gross debt, $340.6 million in cash and nearly $329 million of LTM adjusted EBITDA. We also have substantial liquidity with an undrawn $100 million revolver as of quarter end in addition to our cash.

Before we wrap up, I will share that the company plans to participate in Baird's Industrials Conference in November, where we will webcast our presentation for the benefit of our shareholders.

To conclude, our purpose as a company is to fulfill our mission and drive shareholder value. The US Forest Services’ decision to extend its trust in Perimeter for another 5 years stands as a testament to our colleagues' unwavering commitment to fulfilling our vision. Simultaneously, our increased earnings power in Q3 stems from our team's disciplined execution of our operational value drivers, combined with continued improvement in our contracts, which combined to generate enough improvement to more than offset the headwind from a milder fire season. We are deeply proud of how our team continues to embrace both our vision and the mandate to drive value with enthusiasm, discipline and pride, and we look forward to building on this momentum in the quarters ahead.

With that, I'll hand the call back to the operator for Q&A.

[Operator Instructions] Our first question comes from Josh Spector with UBS.

Congrats on the strong results. So I wanted to try to ask first was really what do you think is the normal, I guess, earnings power within the Fire Safety segment overall? So understanding kind of the more aggressive tactics, pulled more gallons into a weaker fire season. If we think next year would be normal, which would maybe be a 30% to 40% increase in acres burned, will you have any increase in your gallons as you go to that level? Or are you tapped out in terms of capacity?

Josh, it's Kyle. I think there's 2 in there. So let me take them one at a time. When we think about the earnings power of the Fire Safety business, this year is pretty indicative of what the earnings power should be in more or less a normalized environment. That's the first piece. And there's puts and takes to that, as you've highlighted. Our volumes had a headwind, obviously, from the acres side that, as we said in the script, was entirely offset by this more increasingly aggressive tactics.

As we translate to next year, and think about the second half of your question, we would get an additional benefit if acres were to rebound from this year's levels, but with 2 caveats. One, that that acres benefit wouldn't be as strong as it otherwise would have been because of the initial attack posture. And two, we don't know exactly what that posture will look like. Last year -- it was very highly successful this year. We hope that we see a continuation of that trend, but we just actually don't know what that's going to look like quite yet.

Yes. I guess, I mean, related to that is, I mean, did you benefit in terms of the amount that you were able to load, because of maybe a more dispersed and less chaotic fire season in that, if we have more unplanned fires, it becomes harder? Or has your ability to load increased enough where, again, if the activity is maybe slightly more unpredictable, you could load similar to more gallons?

You're hitting on exactly the right factors here, Josh. Disaggregating them is tough. So yes, we definitely benefited from a more even dispersion of acres burned across both geography and timing. There was less, less large fires concentrated in a very tight band where our resources were fully utilized. That said, there is a benefit coming from both the growth in the air tanker fleet, which obviously comes from the agencies and our partners in the air taker community as well as our own ability to load more retardants out of our basis. So there's a tailwind from that. Disaggregating those out, and to be able to quantify them for you is pretty difficult to do, just because they all interact with each other.

But Josh, to be clear, we were not tapped out on capacity this year and wouldn't expect to be tapped out on capacity in a stronger fire season.

That makes sense. And if I could ask just one more broad one, just on the new USDA framework that you have for next year. I don't know if you can give a little bit more framing on 2 components of it is to, I guess, first, between the price down and services up, how do you think about the net impact to your earnings potential '26 versus '25?

And then second, with that, in terms of a split between services, which would maybe be more of a fixed fee versus a dollar per gallon type charge, how has that transitioned in this contract and that does the makeup look materially different in '26 on versus what it's looked like over the last few years?

On the first part, Josh, we expect to grow our various financial metrics, certainly, EBITDA in our North America fire business in a like-for-like acre season in '26, inclusive of this contract. As I mentioned in the prepared remarks, this contract continues our positive financial momentum. As far as your second part of the question, this contract further moves our business towards consistency, predictability, and stability by increasing the proportion of revenue and EBITDA that comes from services and other fixed components, and due to the year 1 price cut decreases the proportion that comes from fewer gallons.

Our next question comes from Dan Kutz with Morgan Stanley Investment Managers.

Congrats on the results. So I wanted to talk about another kind of government update that we got 1 month, 1.5 months ago, and that was around the plans to form the U.S. Wildland Fire Service, which would effectively combined the USDA's US Forest Service and then all of the DOI wildfire agencies.

Just wondering, I know it's early stages, but just any initial thoughts on the implications of this, I guess, merger for lack of a better term, and 2 customers that are previously spaced on acres burned data, they each kind of represent 1/3 of the Lower 48 market. So those 2 organizations coming together, would love any thoughts on potential for debottlenecking and maybe more resources or efficiency, which could lead to more robust firefighting efforts and increased retardant demand.

And I guess the other question we've been getting on this merger is that they mentioned in the press release that one of the goals is joint contracting and procurement. So I've been getting questions around whether the contract that you guys entered with USDA could potentially extend to the DOI agencies as these organizations combine.

So in many ways, our existing federal contract is the template for this new Wildland Fire Service. And what I mean by that is our contract has historically and continues in the new contract to combine all 5 federal firefighting agencies into one contract. We refer to it as a Forest Service Contract, but it really applies to all 5 federal firefighting agencies equally and will continue in that way going forward.

The merger, as you call it, of these agencies is very much in line with the spirit of what our contract has always done, and we view that as a material positive for the industry, certainly for the air tanker companies, certainly for us, most importantly, for national wildfire preparedness and response and our wildland firefighters. It's just much more efficient and effective and streamlined to have one empowered agency and have the industry and our federal partners speak with one voice. So we're very supportive of this change.

Awesome. That's really helpful. So maybe just a broad question on contracting, in general, because it seems like across several of your product lines, you have some large customers or customers that kind of represent a big portion of demand for your products. You had the USDA, and then it sounds like it's actually more broadly the U.S. wildfire agency's contract. You had the PFAS-free U.S. military contract for the present business.

The question is, in the same way that you kind of target economic criteria and operational value drivers that inform your M&A and operational strategies, any general thoughts or tactics or items that you prioritize when you're negotiating big contracts with customers, just kind of the puts and takes between stability and hedges, and durability versus contract term and cost pass-through, pricing or maybe there are some markets where product lines where flexibility or spot pricing or cost exposure could make more sense. Just wondering if you could kind of walk us through generally some of the puts and takes that you think through as you're negotiating larger contracts.

I'm going to have to give you a bit of a high-level answer, Dan, just because there are so many contracts in the different parts of our business. But what I'll say is contracting is remarkably important. You can drive or frankly, destroy a very significant amount of value through optimal versus sloppy contracting.

And so when we take it, we take it really seriously, and we always approach contracting and train our folks to approach contracting in a highly, highly collaborative manner. First thing you do with contracting is you understand the customers' needs, the customers' pain points, the customers' constraints and you try to present them with an optimal outcome for them that, at the same time, touches on what we care most about as far as the stability, predictability, growth, et cetera, of our business. And those principles are extrapolatable across contracting in all of our businesses.

And when you look at our financial results in 2025, and the general, I would call it, outperformance of revenue and EBITDA versus various end market metrics, that reflects to years of applying that contracting attitude or approach across our businesses.

Great. Also really helpful. And then maybe if I could just sneak one more quick one in. So a couple of comments that you guys had about the international retardants business being strong. I think it was a year-to-date comment.

But just wondering if you could kind of unpack the international business results a little bit this year, just kind of relative strength year-to-date versus 3Q? And then just remind us what the key markets are in the northern versus southern hemisphere and kind of the relative strength of those markets and Perimeter's results this year.

Yes. international has been strong for us for the past several years. And given where international retardant is in the very long-term maturity curve, we would expect international retardant to remain very strong for us for the foreseeable future.

Both 2025 year-to-date and Q3 were a continuation, Dan, of that trend. Our business in Europe was excellent in Q3. Our business in the Middle East was excellent in Q3. Our business in Asia was strong in Q3. And then our business in the southern hemisphere, both Australia and South America was strong in Q3.

Our international retardant business really is firing on all cylinders. Part of that is self-help and strong execution, part of it is it should be very strong. It's very early in the adoption cycle. The economics of adoption make a whole lot of sense, and we're riding that wave.

[Operator Instructions] Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Haitham Khouri for the closing comments.

Very good. Thank you for the nice job hosting today, [ Elrick ]. Thank you, everybody, for taking the time to join us. As a reminder, as Kyle mentioned, we'll be at the Baird Industrial Conference in a couple of weeks, and we'll webcast our presentation, and thank you all for the support.

Thank you. Ladies and gentlemen, the conference of Perimeter Solutions has now concluded. Thank you for your participation. You may now disconnect your lines.