Perimeter Group (PRM), which completed its name change from Perimeter Solutions this quarter, delivered a third quarter in which the operating rebound was real but did not reach the per-share line. Adjusted earnings of $0.85 per share missed the $0.95 consensus by 10.5%. Revenue of $389.87 million beat expectations by 1.5% and grew 23.6% year over year. Adjusted EPS rose only 3.7% from a year ago. The central tension is clear: consolidated Adjusted EBITDA accelerated to 20% growth, up from 16% in the second quarter, yet acquisition-driven debt, amortization and a larger share base absorbed most of that gain before it reached shareholders.
The headline GAAP figures need careful handling. Net income of $304.5 million, or $1.74 per diluted share, swung sharply from a $90.7 million loss a year ago. Most of that swing came from a $239.5 million non-cash gain on the change in fair value of the founders advisory fee liability, which reversed a $247.7 million charge in the prior-year quarter. The more telling numbers sit below EBITDA. Adjusted net income rose to $144.3 million from $125.5 million, but net interest expense roughly doubled to $20.4 million. Long-term debt climbed to $1.21 billion from $669 million at year-end after $550 million of new issuance funded nearly $800 million of acquisitions this year. Adjusted diluted shares also rose to 170.2 million from 153.7 million. The beat-versus-miss split is therefore less about demand than about the cost of the company's expanded footprint.
Operationally, Fire Safety delivered the snapback management promised on the second-quarter call. Segment Adjusted EBITDA rose 14% to $201.6 million, a sharp acceleration from 1% growth in Q2. Margin recovered to 64.5%, flat year over year despite the federal price step-down and up from roughly 61% in the second quarter. Growth was broad-based. International retardant, North American retardant and suppressants all contributed. The North American season ran toward the high end of normal, and DLA foam deliveries resumed under the five-year, $500 million maximum-value contract. Specialty Products revenue rose 84% to $77.3 million, and segment EBITDA increased to $21.9 million from $9.1 million, largely on acquisitions. However, segment EBITDA fell sequentially from $26.8 million in Q2, and that is where bears have legitimate ammunition.
The PDI story has deteriorated. On the second-quarter call, management framed supply disruptions as diminishing progressively through the second half. Perimeter is now abandoning the Flexsys contractual path in favor of expanded in-house production and alternate suppliers. That shift brings higher near-term costs and minimal expected PDI EBITDA in the fourth quarter. Management guided Q4 Specialty EBITDA modestly below its year-to-date quarterly average of roughly $23.7 million. Key details of the supply fix were not disclosed, which leaves execution risk. Working capital is a second soft spot. A very mild September left excess retardant inventory that management expects to work down by the second quarter of 2027. As a result, fiscal 2026 working capital investment will exceed the company's 10-15%-of-revenue-growth framework. Year-to-date operating cash flow fell to $73.5 million from $219.5 million, reflecting the receivables and inventory build and a $95.7 million cash settlement of founders fees. Canadian fire activity stayed below normal, and air tanker capacity remains an industry bottleneck.
The balance sheet offered some reassurance. Management cited third-quarter free cash flow of $150.4 million, the revolver was fully repaid, and net leverage fell to 2.7x from 3.1x. Liquidity rose to about $316 million from just over $150 million after the Monaco deal. Early Monaco results were described as "directionally very much good." Forward catalysts include the first full season under the federal retardant contract, conversion of more bases to the full-service model, a Texas airbase build and growing state programs. No formal guidance was raised, and long-term cash flow assumptions were left unchanged.
Investors entered the report in a sour mood. Earnings Whispers sentiment fell from roughly neutral at -0.03 to -0.39, a meaningful deterioration. Shares closed at $28.10 the day before the release, 9.9% below the $31.20 open following the July report and 5% below the 200-day moving average. The stock has surrendered most of its post-Q2 spike to $38.17 in early August and sits about 11% above its October 1 low of $25.29. Trend readings are mixed, with price and AVWAP negative while momentum is positive.
The bottom line is that Perimeter's core Fire Safety franchise looks healthier than it did three months ago, with margins restored and growth reaccelerating. The per-share miss reflects leverage, amortization and dilution from an aggressive acquisition push, and the PDI supply reset adds near-term earnings risk. With sentiment already negative and the stock below its long-term average, the next test is whether Fire Safety strength and deleveraging can outweigh a soft Specialty fourth quarter and an elevated inventory position.