Kyle Sable: Dan I think you just said it extremely well. We’re in the same place we were a quarter ago as regards to our working capital view for the year. The important point to recognize our working capital and the difference from our long-term assumptions is that inventory position. We entered the year with a substantially more robust inventory position than you normally would. When you look at the use of working capital specifically as it relates to inventory typically Q2 is a reasonably meaningful use of cash for that as we build that inventory into the fire season. That trend in Q2 will be muted this year. And then we will see we’re likely to see a reduction in that inventory in Q3 as the fire season gets going.
Dan Kutz: Got it. Super helpful and very clear. Thank you. Maybe if I could just sneak one last one in and Haitham this might be for you. But I know sometimes some investors aren’t huge fans of special dividends or special dividends versus buybacks. I was just wondering if you could talk us through what scenario or what the situation would be, where special dividends might rank the highest in your capital allocation framework. Just broadly what kind of would be the circumstances where that might be the preferred capital deployment method? Thanks.
Haitham Khouri: Another very good question. So let me walk you through a principle Dan, and then let me walk you through essentially the process by which we, sort of express the principle. The first principle is cash on our balance sheet is capital that belongs to our shareholders. And we have an obligation and a duty to put that capital to work on their behalf at appropriately high IRRs. That’s literally how we think about and talk about cash on our balance sheet. And cash sitting on the balance sheet earning a couple of percent interest rates is woefully insufficient for what we — or our shareholders as far as the return on their cash, which begs the question, all right, if you’re not going to stockpile cash on the balance sheet, what are you going to do with it?
And the answer is, we are very focused on deploying it at high IRRs. And I think there’s a clear waterfall. There is no company we know better than Perimeter. There’s no company we believe in more than Perimeter. There’s no company where we have a better and more specific view on future value than Perimeter. And therefore, when we believe the IRR on share buybacks is above our long-term return hurdle, which we describe at the opening of every call this private equity-like return to the liquidity of public market, we’re going to deploy cash into buybacks as priority one. Number two is M&A. We are very and increasingly confident that we can take our 3P’s playbook based on driving profitable new business, driving constant measurable productivity and pricing our products to the value they provide and meaningfully improve margins and cash flows at acquired businesses.
We believe we’re three for three — with our three businesses at Perimeter. I think the results are clear on two and hopefully will be on our retardant business when we have a more normal season. And we think we can apply it again and again and drive real value. And therefore, when there is an acquisition opportunity on the table, where we believe the playbook applies, we can get the deal done and again the IRRs are above our status threshold, we’re going to do that. Now we ever find a scenario where we are not buying our stock back because the IRR doesn’t justify it. And we don’t believe we’re going to find actionable acquisitions over the near medium-term that hit our return threshold then our options simply becomes forward cash on the balance sheet or return it to its owners, in which case the answer is very clear.
We’ll return it to its owners, our shareholders, and they can decide how to allocate it.
Dan Kutz: Very clear and nice. Super helpful. Thanks a lot guys. I’ll turn it back.
Haitham Khouri: Yes. Thanks, Dan.
Operator: [Operator Instructions] Our next question is from Josh Spector with UBS.
Chris Perrella: Hi, guys. It’s Chris Perrella, again. Just a quick one. Can you comment on fire — your outlook for fire return pricing for the year?
Haitham Khouri: The short answer Chris, and I’m sorry is, no. We just don’t talk about current year pricing. What I — what I will point you to which I think, will be quite responsive is our very, very consistent philosophy on pricing. I mean this is unwavering, has never changed will never change. We are truly obsessed — obsessively focused on listening to our customer, understanding where their pain points are, understanding what they perceive as max value and working really hard be it with our R&D team, with our service team, whatever it may be to improve our product and service and drive more value to the customer. And we think — we think we’re really good at that. Once you do that and you offer the customer more value it moves us to then take price, so we continue to price our product commensurate, with the value it provides customers and everybody wins in that case.
You saw your customers’ biggest pain point, you provided them with material value, they’re typically more than happy to pay some premium for that incremental value and we’re also thrilled. We’ve delighted our customer and we’ve done good work for our bottom line and our shareholders. And therefore, while we’re never going to comment on pricing in any given year, we are simply not doing our jobs, if we deviate from that playbook. I think the direction that the playbook suggests our pricing should go year in year out, is crystal clear.
