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3Q26 Recap.
Perimeter reported 3Q26 earnings and the stock was up +4% the following day and now are up about +7% YTD. Since 2025 though they shares have appreciated 137%.
Net revenues were up +24% y/y to $390mn. Operating income (after adjusting out the Founder’s Advisory Fees) was up less at +11% y/y to $177mn. However, adjusting out higher acquisition costs and a step-up in amortization from acquisitions, the figure is closer to +19% y/y.
Fire Safety revenues grew +14% in the quarter and their EBITDA rebounded to +14% y/y from +1% y/y last Q. 3Q marks the first full season under their 5-year federal retardant contract. As a reminder, the reason why their Fire Safety segment was under pressure was because of two temporary headwinds: 1) under their long term federal retardant contract their pricing went down in exchange for more consistent revenues and 2) there was a pause in foam deliveries to the Defense Logistics Agency (DLA). On the call, they mentioned that the foam deliveries to the DLA have now resumed.
They noted several factors that help drive their fire safety business: 1) strong retardant sales in Europe, Australia, and North America, 2) strong international suppressant sales, and 3) a more severe fire season in North America with July and August. It’s important to note that they have been renewing contracts to shift sales toward a fixed service fee and away from pure volume-based pricing, so sensitivity to fire activity will continue reduce over time, but it isn’t eliminated. In addition, their new acquisition of Monaco started to contribute in the quarter.
Turning to Specialty Products, revenues grew +84% y/y, and Adjusted EBITDA grew +140% y/y. Their PDI (oil additive) business continues to experience production disruptions from their Sauget plant operated by Flexsys. (This is the subject of current litigation as they try to remove the Private Equity operator from operating this business, which they have mismanaged). As a result, they are looking to bring other supply sources online by in-housing PDI, therefore controlling more of the supply. In effect, the Specialty Product segment will temporarily have higher costs running through it as they adjust their supply chain and move the PDI more in-house. They didn’t mention how long this process would take, but they believe this short-term headwind will lead to higher profitability for the PDI business.
Moving on to MMT and IMS, they continue to see good progress for both overall. They didn’t mention much, other than they are happy with those acquisitions and their progress. Looking at their EBITDA growth for the quarter, we can infer that both are likely doing well.
In terms of capital allocation, they acquired Monaco for $117mn in the quarter. You can read more about the Monaco acquisition in our last update (which was announced but not closed). This brings YTD acquisition spend to $799mn. In the quarter they didn’t repurchase any shares, but they continue to reinvest back into the business with new retardant bases in Texas and Wisconsin, as well as sorting out the PDI supply constraint. As a result, capex in the quarter was up +152% y/y, but is still in line with their annual guidance of $30-40m. It is still a relatively capex-light business with LTM capex running at around 4.5% of revenues.
They recently changed their name from Perimeter Solutions to Perimeter Group to signal how they operate the business as a decentralized entity and how they have diversified beyond their legacy fire safety business. CEO Haitham Khouri talks about how they instead of looking for theoretical synergies by putting more business groups together, they instead split them apart to make sure each group can focus on the things that matter most for their customers. We are a big fan of the push to decentralize and the autonomy given to each business unit, which is a bit reminiscent of Constellation Software.
Valuation.
They currently generate net operating profit of $121mn LTM, however this figure is impacted by $122mn in advisory fees, which we will account through with dilution instead of a P&L charge. While this is a significant payment, it is worth noting that most of the payout is tied to the stock price. The fixed portion of the fees ends in 2027 and variable runs until 2031 (see our prior writings for more on it). After adding that back as well as adding back amortization of $87mn, that gets us to $330 in LTM earnings.
We will then account for their new acquisitions. MMT was estimated to have contributed to $50mn in EBITDA for 2025. If we estimate depreciation at 5% of sales and assume full year ownership, that would be an additional $13mn of EBIT (there was already ~8 months in the LTM figures). Their Monaco acquisition is expected to add another $11mn of EBITDA for 2026, but if we assume depreciation of 5% of sales, like we did with MMT, that results in $8mn in EBIT (~2 months are already in their LTM figures). Together that gets us to $351mn in operating profits. If we subtract their LTM interest expense of $81mn, that gets us $270mn of pre-tax profits. Assuming a 20% tax rate, that is $216mn in after-tax earnings. This is down $3mn from last quarter when we ran this math because interest expense went up.
With 175mn shares outstanding (including 13.8mn in options granted that are not included in diluted shares outstanding because they are anti-dilutive), that is an LTM EPS of $1.23. This is up 2% from last quarter when we ran this calculation, entirely driven from the drop in share count (it was 180m last Q when the stock price was higher). Generally speaking, though, the Founders Share agreement has been taking most of the incremental gains that Perimeter Group has enjoyed, which is no doubt annoying for investors. However, this is largely because of the very strong stock price performance they have enjoyed—and is also worth noting it will end (although many investors will say not soon enough).
At today’s stock price of $30, that is a LTM adjusted earnings multiple of 24x. It should be emphasized though that this is a LTM figure that doesn’t capture any operational improvements that they will undergo under their ownership. They are targeting long-term mid-teens earnings growth, but over the past 4 years they have been closer to the mid to high 20% range.
Overall, Perimeter continues to execute on their operating model. They are seeing success with their new acquisitions in MMT and Monaco. Their Specialty Products segment will face temporary cost headwinds as they reconfigure their PDI supply, but the momentum they are seeing with MMT should help offset this by some degree. We have been pleasantly surprised by how much capital they have deployed so far and the seemingly high quality of businesses they have been able to acquire.
For further reading, check out our Perimeter Solutions Extensive Research Report here. (First half has no paywall).
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