Perimeter SolutionsPRM

Key highlights

• Specialty Products scaling fast: Revenue in the specialty products division doubled to $84.7 million compared to $42.4 million a year ago. The division is successfully expanding its scale while maintaining high profitability, as its adjusted profit grew 96% to $26.8 million during the quarter.
• Fire Safety growth slowing: The core fire safety segment saw sales grow 7% to $129.1 million compared to $120.3 million last year. However, profit for this division only increased 1% to $78.8 million, showing that it is becoming harder to turn higher sales into more take home pay for the company.
• Heavy advisory fees: A massive $266.3 million charge for fees paid to the company founders led to a total net loss of $181.6 million. This payment is significantly higher than the $96.9 million paid last year and represents a major cash drain that offsets the money made from selling products.
• Significant debt increase: The company issued $550 million in new long term debt to help pay for its recent expansion and business purchases. This move increased total long term debt to $1.21 billion, up from $669 million at the end of last year, which adds to the interest costs the company must pay every month.
• Future profit outlook: Perimeter expects the newly acquired Monaco business to add more than $11 million in annual profit, which is the money earned before interest and taxes. Management paid $120 million for this business and expects it to provide a steady stream of income from government life safety contracts.

Our take: The business missed expectations on both sales and earnings, making this a soft quarter. While the specialty division is growing rapidly, the core fire safety unit saw profit growth stall at just 1%. The new acquisition provides a needed boost, but high debt and massive advisory fees remain hurdles for long term owners.