Q2 2024 Perimeter Solutions SA Earnings Call

Greetings and welcome to the Perimeter Solutions 2nd Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: for Earnings Call. At this time, all participants are in a listen-only mode. A question and an answer session will follow the formal presentation.

Operator: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Seth Barker, Head of Investor Relations for Perimeter Solutions. Thank you, sir. You may begin.

Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: As a reminder, this conference is being recorded.

Seth Barker: I would now like to turn the conference over to your host, Mr. Seth Barker, Head Investor Relations for Perimeter Solutions.

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Seth Barker, Head of Investor Relations for Perimeter Solutions. Thank you, sir. You may begin.

Operator: Thank you, sir. You may begin.

Seth Barker: Thank you, operator.

Seth Barker: Thank you, operator. Good morning, everyone, and thank you for joining Perimeter Solutions' second quarter 2024 earnings call. Also, today's call may contain forward-looking statements. The company would also like to advise you that during the call, we will be referring to non-GAAP financial measures, including EBITDA. 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 and on the SEC's website. With that, I will turn the call over to Haitham Khouri, Chief Executive Officer.

Seth Barker: Good morning, everyone. And thank you for joining Perimeter Solutions, Second Quarter, 2024 Earnings Call. Speaking on today's call, 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, August 1, 2024, 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 and the environment in which we operate, and our actual results may materially differ from those expressed or implied on today's call.

Seth Barker: Thank you, operator. Good morning, everyone, and thank you for joining Perimeter Solutions' second quarter 2024 earnings call.

Speaker Change: Speaking on today's call are Haitham Khouri, Chief Executive Officer, and Kyle Sable, Chief Financial Officer.

Speaker Change: We want to remind anyone who may be listening to a replay of this call that all statements made are as of today, August 1st, 2024, and these statements have not been, nor will they be, updated subsequent to today's call.

Speaker Change: 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 and the environment in which we operate, and our actual results may materially differ from those expressed or implied on today's call.

Seth Barker: Please review our FEC 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. The reconciliation of another information regarding these items can be found in our earnings, press release, and presentation, both of which will be available on our website and on the SEC's website.

Speaker Change: Please review our SEC filings for a more complete discussion of factors that could impact our results.

Speaker Change: The company would also like to advise you that during the call we will be referring to non-GAAP financial measures including EBITDA.

Speaker Change: 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 and on the SEC's website.

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

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

Haitham Khouri: Thank you, Seth.

Haitham Khouri: Good morning, everyone. Thank you for joining us. As always, I'll start on slide three with summary comments on our strategy. Our stated goal is to deliver private equity-like returns with a 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 the following five very specific economic criteria. Number one, recurring and predictable revenue streams. Number two, long-term secular growth tailwinds. Number three, products that account for critical but small portions of larger value streams. Number four, significant fee cash flow generation with high returns on tangible capital.

Haitham Khouri: Thank you, Seth. Good morning, everyone. Thank you for joining us.

Haitham R. Khouri: As always, I'll start on slide three with summary comments on our strata.

Haitham Khouri: As always, I'll start on slide 3 with summary comments on our strategy.

Haitham R. Khouri: Our stated goal is to deliver private equity-like returns with the liquidity of a public market. We define uniquely high-quality businesses through the following five very specific economic criteria. Number four, significant free cash flow generation with high returns on tangible capital. And number five, the potential for opportunistic consolidation.

Haitham Khouri: Our stated goal is to deliver private equity-like returns with the liquidity of a public market.

Haitham Khouri: We plan to attain this goal by owning, operating, and growing uniquely high-quality businesses.

Haitham Khouri: We define uniquely high-quality businesses through the following five very specific economic criteria.

Haitham Khouri: Number one, recurring and predictable revenue streams. Number two, long-term secular growth tailwinds.

Haitham Khouri: Number three, products that account for critical but small portions of larger value streams.

Haitham Khouri: Number four, significant free cash flow generation with high returns on tangible capital. And number five, the potential for opportunistic consolidation.

Haitham Khouri: And number five, the potential for opportunistic consolidation. We believe that these five economic criteria are present at our current businesses, and we use these criteria to evaluate potential new acquisitions. As described on slide four, we seek to drive long-term equity value creation via consistent improvement in our three operational value drivers, which are number one, profitable new business. Number two, continual productivity improvements. And number three, pricing our products and services to the value they provide. In addition, to our three operational value drivers, we seek to maximize equity value creation through a clear focus on the allocation of our capital as well as the management of our capital structure.

Haitham Khouri: We believe that these five economic criteria are present at our current businesses and we use these criteria to evaluate potential new acquisitions.

Haitham R. Khouri: We seek to drive long-term equity value creation via consistent improvement in our three operational value drivers. In addition to our three operational value drivers, we seek to maximize equity value creation through a clear focus on the allocation of our capital as well as the management of our capital. Turning to our financial results on slide 5, and starting with Firescape, our fire safety business's sustainable earnings power has increased significantly due to the rigorous implementation of our operational value.

Haitham Khouri: which are, number one, profitable new business, number two, continual productivity improvements, and number three, pricing our products and services to the value they provide.

Haitham Khouri: In addition to our three operational value drivers, we seek to maximize equity value creation through a clear focus on the allocation of our capital, as well as the management of our capital structure.

Haitham Khouri: Turning to our financial results on slide five and starting with Fires. Safety. I've repeatedly emphasized the belief that our fire safety business's sustainable earnings power has increased significantly due to the rigorous implementation of our operational value drivers. I've also repeatedly suggested that this earnings power should be evident when comparing reporting periods with roughly similar levels of wildfire activity in our core North American market. While Q2 of 2024 experienced slightly lower U.S. A.K.s burned ex Alaska versus Q2 of 2023, fire safety's increased earnings power is evident in the year over year from Parison. That can quarter fire safety revenue increased 85% while adjusted EVDA more than crippled year over year.

Haitham Khouri: Turning to our financial results on slide 5 and starting with fire safety.

Haitham R. Khouri: I have also repeatedly suggested that this earnings power should be evident when comparing reporting periods with roughly similar levels of wildfire activity in our core North American market. Second quarter fire safety revenue increased 85% while adjusted EVDA more than tripled year over year, on the external front, and focus this R&D spend on fluorine-free technologies, which we expect to drive significant customer value and, therefore, significant profitable new business. A meaningful portion of airports have converted to fluorine-free aircraft rescue foam this year, and, to date, 99% of these airports have selected Perimeter Solutions, including 10 of the 25 most-traveled airports in the United States, as an example of suppressant productivity, replacing the existing 10,000-gallon tanks with new 25,000-gallon tanks.

Haitham Khouri: I have also repeatedly suggested that this earnings power should be evident when comparing reporting periods with roughly similar levels of wildfire activity in our core North American market.

Haitham Khouri: Second quarter fire safety revenue increased 85% while adjusted EVDA more than tripled year-over-year.

Haitham Khouri: Both are global retardants and global suppressants businesses contributed to this growth. The significant improvement in fire safety's financial results was driven by a combination of external and internal factors. On the external front, our retardant customers are increasingly utilizing aerial attack in their battle against wildfires. This was evident preseason with robust air tanker contracting by our customers, as well as during the season with the active utilization of these aerial assets and by extension of our fire retardant. As I have referenced repeatedly, we believe that our customers' increasingly proactive posture towards aerial attack, coupled with steady growth in the air tanker fleet, are two of the long-term secular volume drivers of our business, along with longer fire seasons, increasing acres burned, and growth in the wild land urban interface.

Haitham Khouri: Our retardant customers are increasingly utilizing aerial attack in their battle against wildfires.

Haitham Khouri: As I have referenced repeatedly, we believe that our customers increasingly proactive posture towards aerial attack.

Haitham Khouri: coupled with steady growth in the air tanker fleet are two of the long-term secular volume drivers of our business.

Haitham Khouri: along with longer fire seasons, increasing acres burned, and growth in the wildland-urban interface.

Haitham Khouri: The external environment was also supportive in our suppressants business in Q2, with strong conversion activity from fluorinated to fluorine-free foams where Perimeter is a clear market leader. On the internal front, fire safety's second quarter financial results are directly tied to the rigorous implementation of our operational value drivers. To further illustrate this point to our investors, I'll provide examples that directly tie our Q2 financial results in each of our retardants and suppressants businesses to each of our individual value drivers, starting with suppressants and profitable new business. We've significantly increased R&D investment into the business, and focus this R&D spend on fluorine-free technologies, which we expect to drive significant customer value and therefore significant profitable new business.

Haitham Khouri: The external environment was also supportive in our suppressants business in Q2.

Haitham Khouri: To further illustrate this point to our investors, I'll provide examples that directly tie our Q2 financial results in each of our retardant and suppressants businesses to each of our individual value drivers.

Haitham Khouri: This strategy is clearly working. For example, we recently certified a fluorine-free foam for aircraft rescue firefighting at FAA-139 compliant airports. A meaningful portion of airports have converted to fluorine-free aircraft rescue foam this year, and to date, 99% of these airports have selected perimeter solutions, including 10 of the 25 most traveled airports in the United States. We expect the majority of the 517 FAA 139 compliant airports to convert to flooring free over the next several years, and we also expect to capture an outsized portion of these opportunities. As an example of suppressants productivity, we've worked very diligently to improve our cost structure and believe that America's suppressants average raw material cost per unit has decreased roughly 20% over the past 18 months.

Haitham Khouri: For example, we recently certified a fluorine-free foam for aircraft rescue firefighting at FAA 139 compliant airports.

Haitham Khouri: as an example of suppressants productivity.

Haitham Khouri: and believe that America's suppressants average raw material cost per unit has decreased roughly 20% over the past 18 months.

Haitham Khouri: Finally, our flooring free products are highly differentiated and aligned with our customer's objectives, and we price these products to reflect this unique value. Moving on to retardants and again starting with an example of profitable new business. We're investing heavily in our air bases, including upgrading existing bases, building new bases, and converting both bases to full service. These investments increase the amount of retardant we deploy in support of our customer's mission. For example, we significantly upgraded our Albuquerque, Mexico air tanker based prior to the 2024 fire season, replacing the existing 10,000-gallon tanks with new 25,000-gallon tanks, upgrading the pumps, variable speed frequency drives, and electrical infrastructure, building the capability to simultaneously load two air tankers versus previously only being able to load a single air tanker.

Haitham Khouri: moving on to retardants and again starting with an example of profitable new business.

Haitham Khouri: These investments increase the amount of retardant we deploy in support of our customers' mission.

Haitham Khouri: building the capability to simultaneously load two air tankers versus previously only being able to load a single air tanker, and introducing the capability to load VLATs versus previously only being able to load LATs.

Haitham Khouri: And introducing the capability to load VLATs versus previously only being able to load LATs. The results of this investment are reflected in our Q2 results. On June 18th, our Albuquerque air tanker base loaded over 100,000 gallons in support of our customer's efforts against the Salt and South Fork fires. This one day, 100,000 gallons throughput compares to Albuquerque's average annual throughput of our approximately 144,000 gallons over the prior five years. This 100,000 gallon daily throughput would not have been possible without our significant preseason investment into our base at Albuquerque. Albuquerque is one of several air bases we upgraded prior to the 24 season, and we plan to upgrade several additional air bases, fire to the 25 fire season.

Haitham Khouri: This 100,000 gallon daily throughput would not have been possible without our significant preseason investment into our base at Albuquerque.

Haitham Khouri: Albuquerque is one of several airbases we upgraded prior to the 24 season and we plan to upgrade several additional airbases prior to the 25 fire season.

Haitham Khouri: Moving on to an example of retardant productivity. We recently introduced a new and proprietary retardant mixing system to our McClellan and Redding air bases. This technology increases daily a retard throughput while improving base labor efficiency and eliminating logistics and repackaging costs. We're rolling out this technology to additional air bases and expect to realize additional productivity benefits as we do so. Finally, on retardants, we have more people spending more time with more retardant customers than ever before. for building an ever deeper understanding of our customers' wants and needs and working diligently to deliver the products, services, and solutions to best address these diverse customer objectives.

Speaker Change: Moving on to an example of retardance productivity.

Haitham R. Khouri: We recently introduced a new and proprietary retardant mixing system at our McClellan and Redding airbases; we're building an ever deeper understanding of our customers' wants and needs and working diligently to deliver the product. As long as we maintain the intensity with which we chase each point of opportunity at each of our individual business units, I'm confident that we'll continue to drive Perimeter's long-term earnings power sustainably higher. On the external front, the market continues to emerge from last year's inventory destock, starting with Prophets from the Episcopal Church.

Speaker Change: We're rolling out this technology to additional airbases and expect to realize additional productivity benefits as we do so.

Speaker Change: We're building an ever-deeper understanding of our customers' wants and needs and working diligently to deliver the products, services, and solutions to best address these diverse customer objectives.

Haitham Khouri: As long as we consistently deliver ever greater value to our customers, we should share in this value creation. I hope these examples give our investors a sense for the amount of rigorous operational value to drive our activity throughout our company. I also hope that our recent financial results provide a sense for how these initiatives are driving our financial performance. Optimizing our financial performance via rigorous value drive implementation is a journey rather than a destination. As long as we maintain the intensity with which we chase each point of opportunity at each of our individual business units, I'm confident that we'll continue to drive Perimeter's long-term earnings power sustainably higher.

Speaker Change: As long as we consistently deliver ever greater value to our customers, we should share in this value creation.

Speaker Change: I hope these examples give our investors a sense for the amount of rigorous operational value driver activity throughout our company. I also hope that our recent financial results provide a sense for how these initiatives are driving our financial performance.

Speaker Change: Optimizing our financial performance by a rigorous value drive re-implementation is a journey rather than a destination.

Haitham Khouri: Turning to specialty products. Like fire safety, specialty products year-over-year financial performance is markedly improved, with adjusted EVDA roughly doubling in both the second quarter and the first half of 2024. Also, much like fire safety, the improvement was driven by a combination of external and internal factors. On the external front, the market continues to emerge from last year's inventory destock period. On the internal front, the rigorous implementation of our operating model is paying off. As I just did with Fire Safety, I'll provide specific examples tying specialty products' financial results to specific three fees initiatives, starting with profitable new business.

Speaker Change: Like fire safety.

Speaker Change: On the internal front, the rigorous implementation of our operating model is paying off.

Haitham Khouri: Our R&D team, driven by feedback from a key customer, developed a novel P2S5 SKU for wind turbine applications. This difficult to replicate product expands P2S5's addressable market and drives profitable new business. On specialty product productivity, one of specialty products is key raw material input is elemental phosphorus. We have invested significantly in logistics, plant capability, and process technologies to utilize elemental phosphorus from various sources. This has reduced our raw material costs and increased security of supply while maintaining the industry's highest quality standards. And finally, an example of pricing our products and services to the value they provide in our specialty products business.

Speaker Change: starting with profitable new business.

Speaker Change: Our R&D team, driven by feedback from a key customer, developed a novel P2S5 SKU for wind turbine applications.

Haitham R. Khouri: One of the key raw material inputs for specialty products is elemental phosphorus, as well as the incremental leverage capacity we expect to generate through organic EBTA growth towards the highest expected IRR combination of M&A, share repurchases, and special dividends, quality of our service, for the passion, dedication, and integrity of our team, in their life-state material.

Speaker Change: on Specialty Product Productivity.

Speaker Change: One of Specialty Products' key aromaterial inputs is elemental phosphorus.

Speaker Change: This has reduced our raw material costs and increased surety of supply while maintaining the industry's highest quality standards.

Haitham Khouri: Customer feedback pointed to operational challenges associated with the industry's most common bin closure valve. Our specialty products engineering team created a new patented closure valve, which is now standardized across our bin fleet. Customer feedback on our new valve technology and fully refreshed wheat bin is extremely positive, and we've shared in the value creation through value-based price.

Speaker Change: Customer feedback pointed to operational challenges associated with the industry's most common fin closure valves.

Speaker Change: Our specialty products engineering team created a new patented closure valve, which is now standardized across our bid fleet.

Haitham Khouri: Turning now to M&A, we're confident that our operational value driver-focused operating strategy creates significant value when applied to the right businesses, as defined by the five target economic criteria articulated on slide three. This confidence is reinforced by our progress over the past 18 months at all three of our businesses: perimeter, suppressants, retardants, and specialty products. We're actively searching for the right M&A targets while also constantly evaluating the IRR credo between our various capital allocation alternatives. As I stated previously, and consistent with our brief track record as a public company, we expect to deploy all of our excess cash flow, as well as the incremental leverage capacity we expect to generate through organic EPA growth towards the highest expected IRR combination of M&A, share repurchases, and special dividends.

Speaker Change: Turning now to M&A.

Speaker Change: We're confident that our operational value driver focused operating strategy creates significant value when applied to the right businesses.

Speaker Change: We're actively searching for the right M&A targets, while also constantly evaluating the IRR tradeoff between our various capital allocation alternatives.

Haitham Khouri: I'll end my remarks by reasserting in the conviction that perimeter is the gold standard as far as the efficacy and safety of our products, the quality of our service, and the passion, dedication, and integrity of our team. I'll also reassure that we will never take our market leadership positions for granted; rather, we will always relentlessly push to raise the bar on ourselves. Many of the examples I provided today are evidence of this always strive for better mentality. We serve our customers better each and every day, and we earn the privilege of serving them in their life-saving missions.

Speaker Change: I will also reassert that we will never take our market leadership positions for granted. Rather, we will always relentlessly push to raise the bar on ourselves.

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

Speaker Change: in their life-saving missions.

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

Kyle Sable: Thanks, Haycomb. We'll stay on slide five. We're growth figures shown are versus the prior year comparable period. Second quarter sales in our fire safety business were 98.5 million dollars, up 85 percent, and 123.7 million dollars year-to-date of 72 percent. Second quarter adjusted EBITDA in our fire safety business was 55.6 million dollars, up 237 percent, and 55.4 million dollars year-to-date, up 321 percent. Haycomb noted both our global retardants and global suppressants businesses contributed to the improved year-over-year results. Second quarter sales in our specialty products business were 28.7 million dollars, up 25 percent, and 62.6 million dollars year-to-date, up 30 percent.

Kyle Sable: Thanks, Haitham. We'll stay on slide five where growth figures shown are versus the prior year comparable period.

Unnamed Speaker: Second quarter sales in our fire safety business were $98.5 million, up 85%, and $123.7 million a year to date, up 72%. As Haitham noted, both our global retardants and global suppressants businesses contributed to the improved year-over-year results.

Kyle Sable: Second quarter sales in our fire safety business were $98.5 million, up 85%, and $123.7 million year-to-date, up 72%.

Kyle Sable: Second quarter adjusted EBITDA in our fire safety business was $55.6 million up 237% and $55.4 million year-to-date up 321%.

Speaker Change: As Haitham noted, both our global retardants and global suppressants businesses contributed to the improved year-over-year results.

Speaker Change: Second quarter sales in our specialty products business were $28.7 million, up 25%, and $62.6 million year-to-date, up 30%.

Kyle Sable: Second quarter adjusted evita in our specialty products business was 9.3 million dollars, up 108 percent, and 21.6 million dollars year-to-date, up 98 percent. The market recovery we experienced in the first quarter continued in the second quarter, and again drove improved year-over-year quarterly financial performance. We're increasingly comfortable that the market is steadily emerging from last year's destack period, and we're confident in the financial prospects for our specialty products business.

Kyle Sable: Second quarter adjusted EBITDA in our specialty products business was 9.3 million dollars, up 108%, and 21.6 million dollars year to date, up 98%.

Kyle Sable: We're increasingly comfortable that the market is steadily emerging from last year's de-stock period, and we're confident in the financial prospects for our specialty products business.

Kyle Sable: Moving on to the consolidated business. Second quarter consolidated sales were 127.3 million dollars, up 67 percent, and 186.3 million dollars year-to-date, up 55 percent. 2nd quarter consolidated adjusted EBITDA was $64.9 million, of 209%, and $77 million year-to-date of 220%. Moving below the bust of EBITDA, interest expense in the 2nd quarter was $10.6 million, in line with our regular quarterly run rate. Depreciation was approximately $2.6 million, while amortization expense was $13.8 million. Cash paid for income tax was $3.6 million in Q2. CapEx was also approximately $3.6 million in Q2.

Unnamed Speaker: Second quarter consolidated sales were $127.3 million, up 67%, and $186.3 million year-to-date, up 55%. Second quarter consolidated adjusted EBITDA was $64.9 million, up 209%, and $77 million year-to-date, up 220%. Depreciation was approximately $2.6 million, while amortization expense was $13.8 million. Our long-term expectations for interest expense, depreciation, and CapEx are unchanged. And it is summarized on slide six.

Kyle Sable: Moving on to the Consolidated Business.

Kyle Sable: Second quarter consolidated sales for $127.3 million, up 67%, and $186.3 million year to date, up 55%.

Kyle Sable: Second Quarter Consolidated Adjusted EBITDA was $64.9 million, up 209%, and $77 million year-to-date, up 220%.

Speaker Change: Moving below with Perseverita.

Kyle Sable: Interest expense in the second quarter was $10.6 million, in line with our regular quarterly run rate. Depreciation was approximately $2.6 million, while amortization expense was $13.8 million.

Kyle Sable: Cash paid for income tax was 3.6 million dollars in Q2.

Kyle Sable: Our long-term expectations for interest expense, depreciation, and CapEx are unchanged and summarized on the slide sticks. We hope to spend between $10 million and $15 million in CapEx this year, on the that all incremental capital spend above our historical, high single-digit millions run rate is tied to incremental productivity or profitable new business projects with IRRs at or above our long-term return target. Our long-term expectation for networking capital is also unchanged. Although, as I've noted previously, we expect to receive a benefit from working capital in 2024, given our significant inventory position entering the year. We expect to generate the majority of this benefit in Q3.

Kyle Sable: Our long-term expectations for interest expense, depreciation, and CapEx are unchanged and summarized on slide 6.

Kyle Sable: We hope to spend between $10 million and $15 million in CapEx this year. I'll note that all incremental capital spend above our historical high single-digit millions run rate is tied to incremental productivity or profitable new business projects, with IRRs at or above our long-term return target.

Kyle Sable: Our long-term expectation for net working capital is also unchanged, although, as I've noted previously, we expect to receive a benefit from working capital in 2024, given our significant inventory position entering the year. We expect to generate the majority of this benefit in Q3.

Unnamed Speaker: We expect to generate the majority of this benefit in Q3. Furthermore, according to our corporate structure, we've begun the process of seeking shareholder approval to redomicile our parent company from Luxembourg to Delaware. This move will better align our legal structure with our U.S. operations, which generate the majority of our revenue in EBITDA. We expect the transaction to reduce our regulatory and reporting complexity. We ended the quarter with approximately $675 million of senior notes, cash of approximately $43.2 million, and approximately 145.2 million basic shares outstanding.

Kyle Sable: Learning to our corporate structure, we've begun the process of seeking shareholder approval to redomicile our parent company from Luxembourg to Delaware. This move will better align our legal structure with our US operations, which generate the majority of our revenue in EBITDA. We expect the transaction to reduce our regulatory and reporting complexity, streamline legal, accounting, and cash management, and generate and improve DEX profile. We will seek shareholder authorization for the transaction upon completion of the final proxy statement and expect the transaction to close in Q4. We ended the quarter with approximately $675 million of senior notes, cash of approximately $43.2 million, and approximately $145.2 million basic shares outstanding.

Kyle Sable: This move will better align our legal structure with our U.S. operations, which generate the majority of our revenue in EBITDA. We expect the transaction to reduce our regulatory and reporting complexity.

Kyle Sable: streamline legal, accounting, and cash management, and generate an improved tax profile. We will seek shareholder authorization for the transaction upon completion of the final proxy statement and expect the transaction to close in Q4.

Kyle Sable: We ended the quarter with approximately $675 million of senior notes, cash of approximately $43.2 million, and approximately 145.2 million basic shares outstanding.

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

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

Operator: Thank you.

Operator: At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in question Q. You may press star two if you'd like to remove your question from the Q.

Speaker Change: Thank you. At this time we'll be conducting a question and answer session. If you'd like to ask a question please press star 1 on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in question queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Kyle Sable: You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Daniel Kutz: Our first question comes from the line of Dan Kutz with Morgan Stanley. Please proceed with your question.

Kyle Sable: Our first question comes from the line of Dan Kutz with Morgan Stanley . Please proceed with your question.

Daniel Kutz: Hey, folks. Good morning. So I just wanted to pick it off with and about high level question about the relative intensity of suppression spending in the lower 48 given that, you know, in the first month of the third quarter, we've seen pretty significant acres burned in California and also in the broader U.S. lower 48.

Kyle Sable: [inaudible]

Dan Kutz: The relative intensity of suppression spending in the lower 48, given that, you know, in the first month of the third quarter, we've seen pretty significant acres burned in California and then also...

Daniel Kutz: We can kind of, based on disclosure from you guys and from NIOC and Cal Fire, we can kind of triangulate to what seems to indicate that, you know, California is significantly more suppression spent intensive per fire or per acre burned versus the rest of the lower 48. But you know, there's a lot of guesswork involved in that. So I just wanted to ask the question, could you kind of talk us through just kind of the relative spending per acre burned across the different regions in the U.S. or at least maybe California and the rest of the U.S.

Speaker Change: and the broader U.S. lower 48, we can kind of, based on disclosure from you guys and from NIFC and CAL FIRE, we can kind of triangulate to what seems to indicate that, you know, California is...

Dan Kutz: Significantly more

Speaker Change: Suppression's been intensive per fire or per acre burned.

Dan Kutz: versus the rest of the lower 48.

Speaker Change: But, you know, there's a lot of...

Speaker Change: There's a lot of guesswork involved in that, so I just wanted to ask the question, could you kind of talk us through just kind of the relative...

Speaker Change: pending

Daniel Kutz: As we're trying to kind of convert these acres burned numbers to, you know, financial estimates for the quarter. Thank you.

Haitham Khouri: Yeah, thanks, Dan.

Haitham Khouri: I would advise against getting too caught up in exactly where the acres burn from a geographic perspective. I'll just use California as an example. Considerable portions of California fall under the jurisdiction of Cal Fire, typically state lands. Significant portions of California fall under the jurisdiction of various federal agencies via Bureau of Land Management, US Forest Service, Bureau of the Unifairs, typically federally protected lands. So there's a lot more mix, even interstate, than what might expect. Now, that said, California always has been and remains on the cutting edge from a sophistication and technological perspective as far as firefighting in general and certainly aerial firefighting.

Speaker Change: exactly where the acres burn from a geographic perspective. I'll just use California as an example. Considerable portions of California fall under the jurisdiction of CAL FIRE, typically state lands.

Speaker Change: Significant portions of California fall under the jurisdiction of various federal agencies, be it

Speaker Change: Bureau of Land Management

Speaker Change: always has been and remains on the cutting edge from a sophistication and technological perspective.

Speaker Change: as far as firefighting in general, and certainly...

Haitham Khouri: Cal Fire is just a remarkably, remarkably sophisticated, impressive, successful organization, but again I wouldn't over-extrapolate whether an acre burns in Northern California or Southern Oregon or Southern California or Northern Arizona. The differences are relatively minor.

Speaker Change: aerial firefighting. CAL FIRE is just a remarkably, remarkably sophisticated, impressive

Speaker Change: successful organization.

Daniel Kutz: Great, understood. That's super helpful. And then Haitham, I know you've kind of addressed this in the past on earnings calls, and I feel like it does come across here to some folks, but maybe not to others. And as we have more investors, you know, getting interested in the story, I just wanted to ask the question, which I think I've asked in the past, and just give you a chance to kind of remind everyone. So when you're thinking about M&A and you clearly highlight the five-target economic criteria, but then outside of that, the question comes up: are you looking for synergy, for vertical integration, for companies in similar industries to your existing businesses?

Speaker Change: Great, understood, that's super helpful.

Speaker Change: And then, Haitham, I know you've kind of addressed this in the past on earnings calls, and, you know, I feel like...

Speaker Change: [inaudible]

Daniel Kutz: And I was just wondering if you could kind of refresh everyone on what the answer to is, what the answer that is. And then if you could maybe parse it out for like a major transaction versus kind of a smaller like bolt-on acquisition. So I think maybe the answers might be a little bit different between those two types of deals.

Speaker Change: everyone on what the answer to is, what the answer to that is.

Speaker Change: If you could maybe parse it out for like...

Speaker Change: I think maybe the answers might be a little bit different.

Haitham Khouri: Thank you. Yeah, okay. Very, very, very good question; hopefully helpful question to much of the audience. We are, I would say, narrow and deep on our M&A focus in that we have a very strong sense of where we have a right to win. The type of business which we can simply do more with create more shareholder value with long-term than in all humility, virtually anybody else. And we're going to go after that type of business quite aggressively. And that's a very small subset of the businesses that are going to transact over the coming years. And all the rest of the stuff, as interesting as the companies may or may not be, if we don't have a clear and obvious right to win, we're simply not going to participate.

Speaker Change: between those two types of deals.

Speaker Change: I think very, very, very good question, hopefully a helpful question to much of the audience. We are, I would say, narrow and deep.

Speaker Change: on our M&A focus, in that we have a very strong sense of where we have a right to win.

Speaker Change: The businesses that are going to transact over the coming years, and all the rest of the stuff, as interesting as the companies may or may not be, if we don't have a clear and obvious right to win, we're simply not going to participate.

Haitham Khouri: To the question, is where do you guys have a clear right to win? It's businesses where we are highly confident we can implement our operational value driver strategy. If it's a business where we can create our business unit structure, give operating segments and operating segment leaders, lots of economy, drive lots of accountability, get them to truly think act like owners, and then rigorously drive and measure progress on profitable new business, productivity improvements, and pricing to value, that makes a whole lot of sense for us. And again, you can look at our three businesses within Perimeter: retardants, suppressants, and specialty products. Really, three very different businesses, yet the results as far as EVDA and cash flow growth are probably similar.

Speaker Change: If it's a business where we can create our business unit structure...

Speaker Change: And again, you can look at our three businesses within.

Speaker Change: Perimeter, Retardant, Suppressant, and Specialty Products, really three very different businesses. Yet the results as far as...

Haitham Khouri: I think we've done quite well with all three. So we want a business that's fished out profile. The question then becomes, all right, what's fished out profile, and that's why the five target economic criteria are so clearly articulated. If we can find a business that checks those five boxes, we are very confident that we can create meaningful shareholder value with it, via implementation of our operational value driver strategy. That's almost all we care about. What industry it's in matters much less; what geography it's in matters much less. We frankly don't care very much at all about synergies with our existing business because we're not going to integrate anything we buy into our existing business.

Speaker Change: If we can find a business that checks those five boxes, we are very confident we can create meaningful shareholder value with it by implementation of our operational value driver strategy.

Speaker Change: That's almost all we care about. What industry it's in matters much less, what geography it's in matters much less. We frankly don't care very much at all about synergies with our existing business because we're not going to integrate anything we buy into our existing business. We're going to keep it as a stand-alone company.

Haitham Khouri: We're going to keep it a standalone company. We're going to install a very high quality or retain a very high quality management team. We're going to give them autonomy, accountability, incentive, lives of thinking, act like owners, and create value through our three operational value drivers.

Daniel Kutz: Awesome. We're clear and helpful.

Daniel Kutz: If I could speak one quick one, and maybe for Kyle. So you kind of endorsed the long-term 10 to 15 million dollar capex number for this year, but also flagged. What I would assume would be some capitalized investments in air bases that you already completed at the Albuquerque base for 2024. And you said there's probably going to be a few more going into the 2025 season.

Speaker Change: There's probably going to be a few more going into the 2025 season.

Kyle Sable: I thought that you'd kind of said that that 10 to 15 million, I thought of that as kind of the underlying maintenance number, but I wanted to confirm that because it does seem like there were some capital investments that could maybe push that number higher. And I just wanted to square that with the comment that you were still endorsing the 10 to 15 million dollar capex number for this year.

Speaker Change: I thought that you kind of said that, you know, that $10 to $15 million...

Speaker Change: I thought of that as kind of the underlying maintenance number, but I wanted to confirm that because it does seem like you, like there was some, you know, capital investments that could maybe push.

Speaker Change: Thank you.

Kyle Sable: Thank you.

Kyle Sable: Yeah, absolutely.

Kyle Sable: So when we think back to the historical run rate of high school digital millions that has both our maintenance and a little bit of growth capex, and it historically, when we look at the opportunity set in front of us, we're just very excited about the potential to be able to put some more capital behind the sorts of projects that you heard he's been talking about, such as that Albuquerque air base. The opportunity set there seems pretty rich to us right now. We think that it's an excellent use of capital that both supports our customer's mission and drives a high IRR for the company.

Speaker Change: Yeah, absolutely. So when we think back to the historical run rate of high-school digital millions that has both our maintenance and a little bit of growth CapEx in it historically, when we look at the opportunity set in front of us,

Speaker Change: The opportunity set there seems pretty rich to us right now. We think that it's an excellent use of capital that both supports our customer's mission and drives a high IRR for the company. And so we're going to lean into that opportunity over both this year and hopefully next if we see a similar set.

Kyle Sable: And so we're going to lean into that opportunity over both this year and hopefully next to BCS in more set.

Daniel Kutz: Great. Thank you very much. I'll turn it back in. Any congrats on the quarter. Thanks, Dan.

Speaker Change: Great, thank you very much. I'll turn it back and congrats on the quarter.

Operator: Thank you. As a reminder, if you'd like to join the question, please press star one under the telephone keypad.

Dan Kutz: Thanks, Dan.

Speaker Change: Thank you. As a reminder, if you'd like to join the question queue, please press star 1 on your telephone keypad. Our next question comes from the line of Joshua Spector with UBS. Please proceed with your question.

Joshua Spector: Our next question comes from line of Joshua Spector with UBS.

Lucas Beaumont: Please proceed with your question. Good morning. This is Lucas Beaumont on for Josh. So I'm just going to go back to the performance of fire safety in the quarter. Some in the acres burned out of it with down to 45% versus the 10 year average and down to the high single digit percentage here on here. I mean, you got to do really well on the South Side. So you mentioned potentially some of the drivers there.

Unnamed Speaker: [inaudible]

Haitham R. Khouri: exactly where the acres burn from a geographic perspective. I'll just use California as an example. Considerable portions of California fall under the jurisdiction of Cal Fire, typically state lands. CAL FIRE is just a remarkably, remarkably...

Joshua Spector: The Acres burn data was down 45% versus the 10-year average and down a high single-digit percentage year-on-year, but you guys did really well on the sales side.

Lucas Beaumont: I was just wondering if you could kind of pass us out a bit more. So I'd send it like you were alluding to, maybe higher intensity of usage on the aerial side. With any other sort of factors in the quarter to think about in terms of volumes not related to like the end acres burned out. I mean, is there anything, for instance, that we should have think about like in terms of pull forwards from the main season in 3Q, like stocking in advance or anything like that. Better be proud. Thanks. Yeah.

Joshua Spector: You mentioned potentially some of the drivers there, I was just wondering if we could kind of pass this out a bit more. So it sounded like you were alluding to maybe higher intensity of usage on the aerial side. Were there any other sort of factors in the quarter to think about in terms of volumes?

Speaker Change: Not related to like the Endacres burn data. I mean, is there anything for instance that we should think about like in terms of pull forward from the main season in 3Q like stocking in advance or anything like that? That'd be great. Thanks

Haitham Khouri: Thanks, Lucas.

Haitham Khouri: So there is nothing in Q2 that's sort of anomalous or non-recurring, pull forward or for stocking or run anything like that. And our entire business is essentially just-in-time emergency response. Now you can also hear we have inferred from our prepared remarks that we did quite well from a volume perspective in Q2. I think there's three drivers behind our volume performance. Number one, you reference which is just a very proactive and aggressive posture by our customers throughout the world. By the way, in the US, very evident in Canada, in Europe, towards aggressive aerial attack. And like I mentioned, the prepared remarks, you could see this preseason with really, really robust and widespread and deep, and then these same customers put these aerial resources to active use in the second quarter.

Speaker Change: Yeah, thanks Lucas. So.

Speaker Change: In Q2, that sort of anomalous or non-recurring pull forward or stocking or anything like that. Our entire business is essentially just in time.

Haitham R. Khouri: give operating segments and operating segment leaders lots of autonomy, drive lots of accountability, get them to truly think and act like owners, and then rigorously drive and measure progress on profitable new business, productivity improvements, and pricing to value. That makes a whole lot of sense.

Speaker Change: Emergency Response. Now you can also and you clearly have inferred from our prepared remarks that we are that we did quite well from a volume perspective.

Haitham R. Khouri: And again, you can look at our three businesses within Perimeter, Retardants, Suppressants, and Specialty Products. Really, three very different businesses. Yet, the results as far as EVTA and cash flow growth are broadly similar.

Speaker Change: In Q2, I think there's three drivers behind our volume performance. Number one, you referenced, which is just a very proactive and aggressive posture.

Speaker Change: put these aerial resources to active use in the second quarter.

Haitham Khouri: I say that was the first driver of volume outperformance relative to acres.

Haitham R. Khouri: I think we've done quite well with all three. So, we want a business that fits that profile. The question then becomes, all right, what fits that profile?

Haitham R. Khouri: And that's why the five target economic criteria are so clearly RTE. If we can find a business that checks those five boxes, we are very confident we can create meaningful shareholder value with it by implementing our operational value driver strategy. That's almost all we care about.

Haitham Khouri: The second is the investments we perimeter have very aggressively made over the past, call it, nine months in our capacity and capabilities. I gave the Albuquerque Air Tanker Base a great example, which is a very relevant one. I could have just as usually talked about our brand new air tanker base at Colorado Springs. I could have talked about or completely rebuilt your tanker base at Reading. I could have talked about our converted base in Casper. I could have talked about McClellan. I mean, the list goes on and on. So, on the one hand, our customers have added lots of capacity and capabilities by air tanker, contrasting and then aggressive use of those assets.

Unnamed Speaker: What industry it's in matters much less; what geography it's in matters much less. We frankly don't care very much at all about synergies with our existing business because we're not going to integrate anything we buy into our existing business. We're going to keep it as a stand-alone company, and we're going to install or retain a very high-quality management team. We're going to give them autonomy, accountability, and incentivize them to think and act like owners, and create value through our three operational value drivers, which are super clear and helpful. And if I could sneak one quick one in, maybe for Kyle. So

Unnamed Speaker: We're just very excited about the potential to be able to put some more capital behind the sorts of projects that you heard Haitham talk about, such as that Albuquerque Air Base. The opportunity set there seems pretty rich to us right now. We think that it's an excellent use of capital that both supports our customers' mission and drives a high IRR for the company, and so we're going to lean into that opportunity this year and, hopefully, next year.

Unnamed Speaker: Great, thank you very much. I'll turn it back, and congratulations on the quarter.

Speaker Change: a great example, which is a very relevant one. I could have just as easily talked about our brand new air tanker base at Colorado Springs. I could have talked about our completely rebuilt air tanker base at Reading.

Haitham Khouri: On the other hand, we've very much aided them in their mission by investing in our own capacity and capabilities. And then the third driver of volumes, I would say the distribution of fires from a timing perspective, primarily in Q2, were just more conducive to retard usage. The biggest point there is we had a very mild start to the second quarter and a more severe end to the second quarter.

Speaker Change: The biggest point there is...

Haitham Khouri: There's three air tanker bases open nationally in early September. You're approaching a hundred air tankers, sorry, in early April. You're approaching a hundred air tanker bases open nationally in Le Jun. There's just a lot more capacity to fight these fires aerially.

Haitham Khouri: And that did play some role in Q2 as well.

Lucas Beaumont: Hi, thanks. I mean, I guess like the obvious kind of poem from that then is then just thinking about the third quarter. So, I mean, July has been off to a strong start. I mean, it's sort of 2X, the 10 year average, sort of interacting towards, I guess, 3Q, 21 levels, which was an above average year. So, I mean, with the changes you've made to the business, how should we think about that pulling through to volumes with that sort of a top average activity at all? Yeah, so, first of all, just rough numbers. I think of a million, a million, six give or take acres have burned in the US, X, Alaska, in July. The 10 year average is a million or a million one.

Speaker Change: Right, thanks. I mean, I guess, like, the obvious kind of follow-on from that, Ben, is then just thinking about the third quarter. So, I mean, July has sort of been off to a strong start. I mean, it's sort of 2X the 10-year average.

Speaker Change: sort of in tracking towards, I guess, 3Q21 levels, which was an above-average year. So, I mean, with the changes you've made to the business, how should we think about that pulling through to volumes with that sort of above-average activity level?

Speaker Change: Yes, first of all, just rough numbers, I think a million, a million six, give or take, acres have burned in the U.S. ex-Alaska in July , the 10-year average is...

Haitham Khouri: So, it's certainly been above the 10-year average. I wouldn't, I wouldn't say it's, I wouldn't say it's 2X. Acres, acres clearly matter for our business. A stronger year-over-year, acre comparison of more severe fire season is simply going to increase the need for retardant. I would say it's non-linear on the way up in that you start to hit the constraint of aerial resources. It's unusual to run out of air tankers in a relatively mild month. You are much, much more likely to run out of air tankers and have incident commanders call for air tankers, and they're being unavailable in severe months.

Speaker Change: 1,000,000 or 1,000,001. So it's certainly been above the 10-year average. I wouldn't say it's 2x.

Speaker Change: Acres. Acres clearly matter for our business. A stronger year-over-year

Speaker Change: A for comparison, a more severe fire season is simply going to increase the need for retardant. I would say it's non-linear on the way up in that you start to hit the constraint of aerial resources.

Speaker Change: It's unusual to run out of air tankers in a relatively mild one.

Speaker Change: much, much more likely to run out of air tankers and have incident commanders call for air tankers and there be none available.

Haitham Khouri: So, I'd be careful about linear extrapolation, but certainly directionally, more severe fire seasons increases the need for us to support our customers in their mission with retardant.

Speaker Change: So I'd be careful about linear extrapolation, but certainly directionally more severe fire seasons increases the need for us to support our customers in their mission with retardant.

Lucas Beaumont: Right, and so then just also going back to the second quarter. So, I mean, the EBITDA was really strong in fire, so it was well; you had basically 85% incremental margins in the quarter, which is very high. So, I was just wondering if you could kind of talk to, I guess, what was the driver of that portion of it being so high on the drop through there? And how should we think about the sustainability of that, telling forward as we get high volumes as well?

Speaker Change: Right, and so then just also going back to the second quarter, so I mean the EBITDA was really strong in philosophy as well.

Speaker Change: You had basically 85% incremental margins in the quarter, which is...

Haitham Khouri: Yeah. So, at the risk of being a little redundant and repetitive, that the driver of those incremental truly is all through the operational drivers working in concert. We had tremendous profitable new business across fire safety, clearly much more dramatically so in suppressants. Suppressants gets lost in the shuffle of level in these retardant heavy orders, but we just had fabulous, fabulous performance on all counts, certainly including profitable new business, fire suppressants business in Q2. You know, that's a real reactive chemistry manufacturing business, right? Yeah, we have we have a couple of really serious chemicals plants around the world producing our suppressants, and incremental margins on those are quite high.

Speaker Change: Yeah.

Speaker Change: So, at the risk of being a little redundant and repetitive, the driver of those incrementals truly is all three of the operational drivers working in concert.

Lucas Beaumont: Good morning. This is Lucas Beaumont. I'm here for Josh.

Speaker Change: crossfire safety clearly much more dramatically so in suppressants. Suppressants gets lost in the shuffle a little in these in these retardant heavy quarters but we just had fabulous fabulous performance on

Speaker Change: All count, certainly including possible new business.

Haitham Khouri: So, the profitable new business certainly helped, and then we worked really, really, really diligently across every corner of our business, retardants and suppressants, to just grind out cost. I gave the example in our North America facility. We think our cost per unit on the suppressant side from a raw material perspective or bilimiterials perspective is down about 20%, a little more than 20% actually, over the past 12, 18% months, and it's not it's not one big thing. It's just it's a hundred little initiatives by a team given lots of autonomy and accountability and intent to buy something can act like owners, really delivering productivity savings, and then finally, as long as we're really adding value to our customer, addressing their wants and needs, being responsive, solving their pain points, we should share any portion of that value creation through value based pricing. And when you hit on all three, when you have very strong volume growth at high incrementals, when you're grinding cost out of your business on a per unit basis, and when you're able to provide value and share price, those come together at very high incremental margins, and that's what you're seeing in the second quarter.

Speaker Change: by a team given lots of autonomy and accountability and intent to buy something can act like owners really delivering productivity savings and then finally

Lucas Beaumont: Great. Thanks.

Lucas Beaumont: So I just wanted to go back to the performance of fire safety in the quarters. So, I mean, the acres burned data was down to 45% versus the 10-year average and down to the high single-digit percentage year-on-year. But, I mean, you guys did really well on the sales side. So you mentioned potential some of the drivers there. I was just wondering if we could kind of spread this out a bit more.

Lucas Beaumont: And I guess just lastly, I mean, I just wanted to give you an opportunity to help us maybe frame the third quarter a bit, if you can. So obviously it's off to a strong start. You've had those underlying improvements. It looks like it's set up to be similar to probably the third quarter at 21, the way things are tracking. You know, back then you did 98, 98, but obviously the underlying sort of operating leverage has changed. So I guess how should we think about how much better that would be in a similar volume environment this year?

Speaker Change: All right, thanks.

Lucas Beaumont: So it sounded like you were alluding to maybe higher intensity of usage on the aerial side. Were there any other sort of factors in the quarter to think about in terms of volumes not related to, like, the end acres burned data? I mean, is there anything, for instance, that we should think about, like, pulling forward from the main season in 3Q, like stocking in advance or anything like that? That'd be great.

Haitham R. Khouri: There is nothing in Q2 that's sort of anomalous or non-recurring, pulled forward, or stocking or anything like that. I mean, our entire business is essentially a just-in-time emergency response. Now, you can also, and you clearly have inferred from our prepared remarks that we did quite well from a volume perspective in Q2. I think there are three drivers behind our volume performance. Number one, you referenced, which is just a very proactive and aggressive posture by our customers throughout the world, by the way, in the U.S., very evident in Canada, in Europe, towards aggressive aerial attack.

Haitham R. Khouri: And like I mentioned in the prepared remarks, you could see this preseason with really, really robust and widespread deep air tanker contracting, and then these same customers put these aerial resources to active use in the second quarter. I'd say that was the first driver of volume outperformance relative to acres. The second is the investments we, Perimeter, have made very aggressively over the past, call it nine months, in our capacity and capability.

Haitham R. Khouri: For comparison, a more severe fire season is simply going to increase the need for retardant. I would say it's non-linear on the way up, in that you start to hit the constraint of aerial resources. It's unusual to run out of air tankers in a relatively mild month. You're much, much more likely to run out of air tankers and have incident commanders call for air tankers, and they're unavailable in severe months, so I'd be careful about linear extrapolation, but certainly, more severe fire seasons increase the need for us to support our customers in their mission with requirements.

Lucas Beaumont: Any thoughts? Tell the phone things.

Haitham Khouri: Thanks. I'll say two things while trying not to comment on anything other than a reported quarter. First thing I'll say is, you know, we're 30 days into a 98 quarter, and July are 31 days, I guess. And July is not the most important month amongst the three. And therefore, while acres burned are up in July, and it's been relatively severe. The book on Q3 is very, very far from Britain. So I just, I just be a little careful of the comparisons and the extrapolation until we see probably four to six more weeks. The second thing I'll say is you've just been, and I personally have been, you know, emphatically clear on each and every one of these calls. We've done a tremendous amount of rigorous operational driver work in our businesses.

Speaker Change: Yeah, I'll say...

Speaker Change: I'll say two things while trying not to comment on anything other than a reported quarter.

Speaker Change: among the three. And therefore, wild acres burned are up in July , and it's been...

Speaker Change: The second thing I'll say is we've just been and I personally have been you know emphatically clear on each and every one of these

Speaker Change: Of course, we've done a tremendous amount of rigorous operational driver work.

Haitham Khouri: And the result of that is, in a like-for-like volume scenario, our earnings should be higher. Our unit economics has to be improved. If you're driving profitable new business at high margins, grinding costs out by a productivity and creating value for your customers and sharing in it. So our unit economics should be, should be better.

Speaker Change: in our businesses, and the result of that is in a like-for-like...

Haitham Khouri: But I, we should also hold our horses a little bit and see how Q3 shapes up when it's all said and done.

Unnamed Speaker: Right, and so then also going back to the second quarter, so I mean, the EBITDA was really strong in fire safety as well. You had basically 85% incremental margins in the quarter, which is very high. So I was just wondering if you could kind of talk about what was the driver of that portion of it being so high on the drop through there, and how should we think about the sustainability of that going forward as we get higher volumes as well?

Lucas Beaumont: Right, maybe if I could just ask one more follow-up, just you mentioned earlier that there's some seasons where when the daughter is strong that basically they run out of the arrow capacity. Is there any of those that you kind of point to historically when that happened? And just any thoughts on having the arrow capacity is kind of evolved since then. In essentially, it always happens, Lucas; there is a stat that's published out there by the government. I forget the exact acronym resource, not available or call, not met or something. And it's very, it's very common even during short periods in otherwise mile seasons, short periods of high activity mile seasons to run out of aerial, aerial resources.

Unnamed Speaker: So, at the risk of being a little redundant and repetitive, the driver of those incrementals truly is all three of the operational drivers or Ian Concher.

Unnamed Speaker: All right, thanks. It looks like it's set up to be similar to probably the third quarter of 21, the way things are tracking. You know, back then, you did 98 million in EBITDA. But obviously, the underlying sort of operating leverage has changed. So I guess how should we think about how much better that would be in a similar volume environment this year? Any thoughts? Thanks.

Unnamed Speaker: Right. Maybe if I could just ask one more follow-up. You mentioned earlier that there are some seasons where, and Sam Haverhill.

Unnamed Speaker: in our businesses. And the result of that is, in a like for like volume scenario, our earnings should be higher, our unit economics have to be improved. If you're driving profitable new business at high margins, grinding costs out via productivity, and creating value for your customers and sharing in it, our unit economics should be better. But I think we should all sort of hold our

Speaker Change: Right, maybe if I could just ask one more follow-up, just you mentioned earlier that there's some seasons where...

Speaker Change: When the data is strong, but basically they run out of aerial capacity, is there any of those that you kind of point to historically when that happened? And just any thoughts on how the aerial capacity has kind of evolved since then overall?

Unnamed Speaker: It essentially always happens, Lucas. There is a stat that's published out there by the government, I forget the exact acronym, resource not available or call not met or something. And it's very common, even during short periods in otherwise mild seasons, short periods of high activity in mild seasons, to run out of aerial resources. So that's nothing new. We've seen some of it virtually every year, but we see much more of it in the severe seasons. We've certainly seen some of that so far.

Speaker Change: that's published out there by the government, I forget the exact acronym, Resource Not Available, or Call Not Met, or something. And it's very...

Haitham Khouri: So that's, that's nothing new. We've seen some of it virtually every year. We see much more of it in severe seasons. We've certainly seen some of it so far in July.

Speaker Change: aerial resources. So that's nothing new. We've seen some of it virtually every year. We see much more of it in severe seasons. We've certainly seen some of it so far in July .

Operator: Thank you, ladies and gentlemen. That concludes our question-and-answer session.

Haitham Khouri: I'll turn the floor back to Mr. Kouri for any final comments. Thank you. Thank you, everybody, for joining us.

Speaker Change: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Khouri for any final comments.

Operator: Thank your operator for the good work, and we'll talk again in 90 days or so. Thank you.

Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Operator: This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Mr. Khouri: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.