Greetings. Welcome to Perimeter Solutions' First Quarter 2022 Earnings Call. [Operator Instructions]. Please note that today's conference is being recorded. At this time, I'll turn the conference over to Nori Yokozuka. Nori, you may now begin.

Thank you, operator. Good morning, everyone, and thank you for joining Perimeter Solutions First Quarter 2022 Earnings Call. Speaking on today's call are Haitham Khouri, Vice Chairman; Edward Goldberg, Chief Executive Officer; and Chuck Kropp, 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 9, 2022, and these statements have not been nor will they be updated subsequent to today's call. Also, 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, the environment in which we operate, and that actual results may materially differ from those expressed or implied on today's call. Please review our SEC filings for a more complete discussion of factors that could impact our results. The company would also like to advise you that during the call, we will be referring to non-GAAP financial measures, including EBITDA. Please refer to our earnings press release and presentation as well as our SEC filings, both of which will be available on our website and on the SEC's website. With that, I will turn the call over to Haitham Khouri, Vice Chairman.

Thanks, Nori. Good morning, everybody, and thank you for joining today. As usual, I'll begin with summary comments on our strategy. Then, I'll touch briefly on our performance before turning the call over to Eddie to review our Q1 results more fully, starting with our strategy on Slide 3. As you've heard from us before, our goal is to deliver private equity-like returns with the liquidity of a public market. We plan to attain this goal by owning, operating and growing uniquely high-quality businesses. We define uniquely high-quality businesses through 5 very specific economic criteria: one, recurring and predictable revenue streams; two, long-term secular growth tailwinds; three, products that account for critical but small portions of larger value streams; four, significant free cash flow generation with high returns on tangible capital; and five, the potential for opportunistic consolidation. We believe that these economic criteria are present at Perimeter as described on Slide 4, and we also use these criteria to evaluate potential new acquisitions. As described on Slide 5, we seek to drive long-term equity value creation via a consistent improvement in our 3 operational value drivers, which are as follows: profitable new business, continual cost improvement, and pricing to reflect the value we provide as well as a clear focus on the allocation of our capital and the management of our capital structure. Moving on to our first quarter results and starting with Fire Safety. We're pleased with our first quarter performance in fire safety, though I'll reiterate how modest the first and fourth quarters typically are in this business and I'll caution investors against reading too much into annual variations in our Q1 and Q4 Fire Safety results. Moving on next to oil additives. On our prior earnings call, we noted that we've been encouraged by our initial findings in this business and believe that we are likely to see some upside in 2022 relative to our expectations of flat revenue and adjusted EBITDA. This upside is clear in our Q1 results, with adjusted EBITDA almost doubling versus the first quarter of 2021, which itself was a very solid quarter for the Oil Additives business. For now, we'll stick to what we've already said around potential 2022 upside in our OA business relative to our initial underwriting expectations. That said, I'll observe that we continue to be encouraged by what we learn and are constantly focused on enhancing our operating results. I'll close by reiterating the 2022 framing I walked through on our prior call, assuming a roughly on-trend line 2022 fire season, and incorporating our best assumptions around all other aspects of our business. We expect consolidated 2022 adjusted EBITDA growth, consistent with and perhaps above our long-term framework of mid-teens growth. And with that, I'll turn the call over to Eddie.

Thanks, Haitham. Before I address the quarter, I'll briefly touch on 2 high-level topics, primarily for the benefit of new investors who aren't as familiar with Perimeter. First, I'll briefly summarize the long-term growth framework for our Fire Safety business, starting with volume growth. Using the 5-year trailing average, U.S. acres burned excluding Alaska, have increased approximately 5% per year over the past 25 years from a 5-year trailing average of approximately 2 million acres in 1995 to a 5-year trailing average of approximately 7.3 million acres in 2021. Assuming this trend continues, we expect this mid-single-digit growth in the U.S. acres burned, excluding Alaska, to form the baseline for growth in Perimeter's retardant volumes. In addition to growth in acres, we've also experienced consistent historical growth in retardant use per acre. This is due to a combination of factors, namely an increasing wildland-urban interface that puts more lives and property at risk from wildfires, a behavioral shift by our customers toward more aggressive initial aerial attack and a larger air tanker fleet. We generally expect these trends to continue going forward, and we, therefore, expect to continue to grow retardant used per acre in addition to the growth in acres burned. Finally, we expect to grow our international volume faster than our U.S. volume as more countries build out aerial attack capability and become Perimeter customers. In conclusion and looking forward, combining our expectations for: one, increasing acres burned; two, increasing retardant use per acre; and three, our strong growth in our international markets, we expect to deliver high to mid-single-digit annual volume growth in our Fire Safety business. In addition to mid- to high single-digit volume growth, we expect to deliver consistent price growth in our Fire Safety business to reflect the increasing value we provide to our…

Thanks, Eddie. Turning to Slide 7. First quarter sales in our Fire Safety segment increased 141% to $18.5 million compared to $7.7 million in the prior year quarter. Substantially, all of the revenue growth in the segment was organic. The adjusted EBITDA loss in our Fire Safety segment shrunk to $3.3 million in the first quarter compared to a loss of $4.6 million in the prior year quarter. As Eddie observed earlier, our fire safety business typically produces negative adjusted EBITDA in the first quarter. Switching to OA. First quarter sales increased approximately 50% to $39.3 million compared to $26.3 million in the prior year quarter. First quarter adjusted EBITDA increased 97% to $15.3 million compared to $7.8 million in the prior year quarter. Moving on to the consolidated entity. Sales increased 70% to $57.8 million during the first quarter compared to $33.9 million in the prior year quarter. Adjusted EBITDA increased to $12 million during the first quarter as compared to $3.1 million in the prior year quarter. Interest expense in the quarter was approximately $10 million, which is a good quarterly run rate. Depreciation was approximately $2 million in Q1 while amortization expense was $14 million. Taxes were an approximately $10 million benefit in the quarter. CapEx during the quarter was approximately $1 million. Our prior expectations around 2022 interest expense, depreciation, taxes, CapEx and working capital are unchanged and are summarized on Slide 8. We ended the first quarter with approximately $675 million of senior notes, cash of approximately $153 million and approximately 163.2 million basic shares outstanding. Finally, I'll spend a moment on our diluted share count calculation which is described in the table on Slide 9. The table's top row shows our first quarter weighted average basic shares outstanding of 160.3 million. The next row,…

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

Congrats on a strong start to the year here. So just wondering if you could give us a little bit more detail on what's going on in Oil Additives. I mean, pretty meaningful step-up in sales, EBITDA and margins. So just trying to think about how much of that is pricing, if you could share that? And then is there anything abnormal in the quarter? I guess my assumption is raw materials probably move up and you maybe price a little bit ahead of that. But you're so far above where you've been in the past couple of years, trying to assess how much of this is sustainable and where things kind of normalize too as you move through the balance of the year?

Yes. Sorry. Thanks for the question. Can you hear me okay?

Yes.

Okay. As we mentioned in our prepared remarks, we did focus very intensely over the past couple of quarters on our key operational value drivers. We worked very hard on adding profitable new business. We worked very hard on our cost structure to reduce our overall cost and worked on pricing that reflects more of the value that we provide. And you can see those results in the numbers. It's the result of a lot of hard work over the last couple of quarters. And while we don't really talk about specific volume or price or cost information, we're very pleased with the progress that we've made on all of these fronts.

I apologize. You cut out there at least for a second on my end. In terms of those various dimensions, is there any one that was more dominant? I guess I don't think about Oil Aditives' as having a lot of volume driver. Did you win a lot of new business? Or was it the other factors, productivity and pricing more so?

Again, we don't really discuss the details between volume, price and cost. But I'll say we've made progress on all 3 of those. And I think the team is doing a great job driving new business, reducing our overall cost structure and really driving price for value.

Okay. All right. And I guess just a second question here is, since we launched coverage of you guys, we received a lot of questions about the competitive dynamics in U.S. fire retardants. So wondering if you could provide some thoughts on your positioning today and if there's been any evolution in the competitive environment.

I will say that really, from our perspective, nothing has really changed. We remain extremely confident in our long-term competitive position. I think I've said this before, but it's worth repeating. I've been doing this for about 20 years now. And there's just hardly been a day that someone hasn't been trying to compete to get into this business. And I expect there'll always be somebody trying to do it. I don't expect that to change. At the same time, we're the only company to sell commercially significant amount of retardant over the last 15 years, and I don't see that changing going forward.

The next question comes from the line of Brian DiRubbio with Baird.

In your prepared remarks, you had mentioned that you're seeing some growth -- faster growth internationally than in the U.S. Is that Northern Hemisphere countries? Is that Southern Hemisphere? I'm just trying to get a sense of how much your seasonality is either going to be a little bit more balanced out? Or it's going to be even more exacerbated between the second and third quarter versus the first and fourth.

Sure. It's a great question. So we continue to see the same kind of fire issue that we see in North America spreading around the world. And we see that in all of the countries that we do -- that we've traditionally served. So that's in Europe, South America and Australia. Of course, those markets have been traditionally smaller. So when we see increases in those businesses, they tend to be bigger on a percentage basis. These are countries that are really building out and expanding their program. So I can't -- don't know that I would say it's going to be one region versus another where we're seeing general growth both in our traditional businesses around the world, Northern and Southern Hemisphere and the addition of new customers as the wildfire problem continues to grow around the world.

Got it. And then just during the last quarter call, we had a conversation, talked about some of the inflationary pressures that you're seeing across the business. Those remain the same? Are you seeing new pressures? Are you seeing relief from other areas? Just trying to get a sense of what that -- how that overall environment is evolving for you on the inflation front.

Yes. We continue to see the same kind of inflation that the rest of the world is seeing across our businesses in terms of raw materials and other costs. But we do have contractual mechanisms across our contracts to be able to pass those costs through. So we don't really believe that we will see an impact on our financial results based on those cost increases.

Our next question is from the line of Matt Pickering with Select Equity.

Just wanted to go back to a comment you made about the hard work around supply chain initiatives, given the seasonality of your business. Is there any detail you can share there, maybe contextually about kind of what you've done and kind of what it means for your outlook? Clearly, supply chain can be disruptive, and I know you guys are doing a good job there, but any more detail would be helpful.

Yes. We have one mission in this business. That's to make sure that we serve our customer with 100% reliability. And as we go into each season, and look at some of the challenges that we might be facing from a supply chain standpoint, we make sure to react very early to what we're seeing so that we ensure we have no disruptions. And this year, is certainly no different, although it's a little bit more extreme than we've seen in the past. So we went through a lot of efforts to bolster our raw material supply to make sure we were ordering materials earlier. We have a good, diverse group of suppliers across all of our key raw materials. So we made sure that to -- make sure those relationships were strong and then our supply chain was serving our needs on a real-time basis. And we've also expanded our transportation network to ensure that we can deliver the products to our customers in real time as we have always done. It's really the result of that whole team effort across all facets of the supply chain that let us be comfortable that we'll be able to support the business regardless of how busy the season is.

Thank you. At this time, there are no additional questions. I'd like to turn the floor to management for any further or closing remarks.

Well, I want to thank everybody for joining the call. We look forward to talking to you again next quarter and reporting our results. Thank you very much. Have a good day.

This will conclude today's conference. You may disconnect your lines at this time and log off your computers, and have a wonderful day.