Tariq Barma pitches Perimeter Solutions at Sohn 2026

Please welcome Tariq Barma, co-founder and managing partner, Balance Capital Partners.

Some people have asked, so I just wanted to correct the record: My photo was not my prom picture.

Thank you to the Sohn Conference Foundation and host committee for inviting us to present. I’m Tariq Barma, and I’m excited to share one of our favorite ideas with you today. Here’s our disclaimer: Please don’t sue us.

1. Balance Finds Misunderstood Winners

I co-founded Balance in 2022 with Ali Karim. At Balance, when we look for long investments, we focus on misunderstood winners. The misunderstood part means we have a meaningful variant view on earnings 2 years out. We look for several characteristics listed here that end up filtering out most of the ideas we come across.

The simple formula is 15% value growth, upside estimate revisions, and a multiple re-rate, which brings the return into the 20s. We think Perimeter Solutions is a misunderstood winner.

2. Perimeter Wins On Service

If you’ve ever seen a plane go by and drop red powder to stop the spread of a wildfire, you are familiar with Perimeter. They handle everything from manufacturing to managing the supply chain and staffing air bases. The value is not in manufacturing retardant, but in reliably servicing customers nationwide with 100% success during short windows of time when every second matters and errors have severe consequences.

The other segments include foam suppressants, P₂S₅ oil additives, IMS, which produces printed circuit board assemblies and optical components, and MMT, which makes machines and aftermarket parts for medical devices in the catheter technology space. These are businesses where quality and service matter most.

Every single one of Perimeter’s business lines has a favorable industry structure within the specific niches that they focus on. They are trying to solve difficult and unique problems for their customers in areas with limited competition.

Perimeter has had a bumpy road since coming public in 2021. In its first few years, the stock declined from 14 to 3. Investors tossed out any company that came public via SPAC. A new competitor entered the scene. Weak wildfire seasons caused investors to question long-term secular growth, and the capital allocation story investors were excited about failed to materialize.

In the last 2 years, the company has overcome each of these, and the stock has risen to new highs. So, where do we go from here?

3. The Earnings Power Upside

Our thesis is that normalized earnings power is still materially underappreciated. We expect the company will grow pro forma EBITDA north of 30% in the coming years while handily beating estimates and seeing positive revisions.

The underlying business has structurally improved, and competitive dynamics have progressed to the point where Perimeter has already hit escape velocity. The next chapter will come from the company executing on value-creating M&A. We expect them to deploy significant amounts of capital at attractive returns.

This will result in a base-case double over the next 2 to 3 years. Most of the return comes from earnings growth. In a bull case, multiple expansion will drive further upside. In a scenario where market perception dramatically shifts and the company is viewed as a declining commodity chemical supplier, we think there’s about 20% downside.

We have a variant view on every single business line. Our 2028 EBITDA estimate is 15% ahead of the Street. Including the M&A, we expect our numbers to be much higher.

Why is that? In the newly acquired MMT business, our calls with former employees suggest there’s a material margin opportunity, while the Street models minor expansion. The retardant business should see upside under the new U.S. Forest Service contract. They also announced a renewed contract with CAL FIRE last week, and the pricing impact drives upside as well.

In a normalized fire season, we think the business was already under-earning. Lastly, there’s upside from resolving one-time issues in oil additives, continued suppression growth, including a recent contract win, and from executing in the IMS business.

4. Management Proves The Playbook

I want to make a few points about the jockeys we’re betting on. As an aside, I’ve heard the CEO is in the audience today.

First, the management team includes several former investors, some of whom the audience may already be familiar with. When we look at the body of evidence, they have objectively done an excellent job, as I’ll shortly demonstrate.

Second, many of these folks are talented short sellers. When short sellers are betting their careers on a company, it is worth paying attention to.

The board is made up of senior TransDigm alumni who created and successfully implemented the operating playbook that Perimeter employees use.

The fire retardant business has structurally improved under management’s leadership. We FOIAed the historical 2024 contract and the prior historical contracts and did a base-by-base analysis. We found that the percentage of higher-priced Tier 1 gallons has nearly tripled, which reduces revenue sensitivity during weak wildfire years.

The company has restructured its contracts to include more service- versus volume-oriented revenues, and this will further increase when 2026 contracts go into effect. They’ve also struck longer-duration contracts.

Lastly, we observed the U.S. change its approach to fighting wildfires with more aggressive initial attack. The proof is in the numbers. 2022 and 2025 had similarly weak acres burned, and we can see profitability has significantly improved.

It is not just the retardant business. Every single business line has seen material margin expansion of over 1,000 basis points. The reason is that management has successfully implemented the 3P operating playbook.

These are not just platitudes. It’s easy to say, “Just cut costs, just raise prices,” but these are simple ideas taken seriously, and the proof is clear in the numbers and new business wins.

They do run lean on costs. They get close to customers to solve their unique problems and drive new business, and they price to value, not cost. Each business unit is empowered to operate autonomously, and those closest to the customer are able to make decisions and then be held accountable for those decisions.

5. Competition Cannot Catch Up

The fire business is difficult. Every new attempted entrant has failed or been acquired. The industry structure is highly favorable. If you pass Go, collect $200.

We think residual competitive concerns in the market are misplaced. Perimeter has already hit escape velocity. In a best-case scenario, even if a competitor had a viable product, they would not be able to compete until 2028 or 2029 at the earliest, and more likely 2030 or 2031.

Even then, they would need to overcome Perimeter’s long track record of 100% success and reliability. By the time any of this even matters, the potential impact to Perimeter’s earnings will be limited.

6. M&A Builds A Better Company

That is because Perimeter is evolving. They have begun to deploy capital into high-return M&A. They are buying great businesses with limited competition. We’ve seen this with IMS and MMT, and expect M&A to accelerate from here.

By 2030, we think retardant will be 30% of EBITDA. The market sees a cyclical fire company with no clear comp set, so it gets lumped in with chemicals or oil services. We see a growing collection of niche-advantaged businesses with a repeatable playbook to structurally improve.

We have confidence because we’ve already seen evidence of smart capital allocation. Management opportunistically repurchased 16% of the company over the last 5 years at attractive prices. They’ve improved every business line they’ve operated, which supports the idea that they can do the same on acquired businesses to create value.

Early M&A has been promising. At IMS, the company is running a similar strategy to one TransDigm has already run successfully at Extant, and it is being led by former Extant employees. The recent MMT deal is already exceeding expectations.

This is a strategy we have seen work outside in. TransDigm has been a programmatic acquirer with nearly 100 acquisitions to date. Their goal is to double profits at acquired companies over 5 years, and their hit rate is extraordinarily high.

Former employees have talked about never seeing them fail and how the company excels at disciplined decision-making, pricing, contracting, and operating lean. It generates meaningful alpha.

While each company shown here has a different strategy, they demonstrate that individually, a strong operating skill set, niche businesses with limited competition, and programmatic acquisition at good prices each result in outperformance.

Some market participants have questioned whether the operating playbook can be applied outside of aerospace, but we do not need to wonder. A senior former TransDigm employee suggested that it has already been successfully applied at noncore businesses that have come along with acquisitions. They have proven it works.

7. The Edge And The Risks

We think there’s an edge for 3 key reasons. We are meaningfully ahead of the Street on earnings power, and this is because we’ve gone out and done unique research.

Second, there is still skepticism about the management team and the retardant competitive environment. As the company continues to execute, we think these concerns will subside.

Lastly, there is dislike of the incentive compensation structure. Perimeter founders effectively receive a management fee, which will expire in 2027, and an incentive fee, which will expire in 2031.

Everyone on the Street hates it. We think this is silly because that’s not something that needs to be debated or hated. You can easily do the math and evaluate if you like the net return.

We think the biggest real risk is empire building and evidence of poor capital allocation. There’s also a potential competitor that’s litigating the award of Perimeter’s Forest Service contract. While that brings mark-to-market risk, we think this will prove moot.

Lastly, technological developments could turn wildfires and retardant usage into a secular decline. There are several mitigants that make this hard in practice, but it is something important to monitor.

In conclusion, we think Perimeter is a misunderstood winner. We like the stock. Thank you.