APG - Earnings call transcript Q2 2020

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Operator

Good morning, ladies and gentlemen, and welcome to APi Group's Second Quarter 2020 Financial Results Conference Call. All participants are now in a listen-only mode. Later you will have the opportunity to ask a question during the question-and-answer session. Please note this call maybe recorded. I will be standing by should you need any assistance. the Relations to at turn President Walton, now Investor of APi will call Olivia over Vice I Group. Please go ahead.

Olivia Walton

Thank you for earnings everyone, and second morning XXXX conference you. quarter call. joining Good our thank

Lillie, Tom the on our Sir and Russ today Joining Chief our CEO; Financial me co-Chairs; and call Board and our Martin are Franklin Jim Lydon, President Becker, Officer.

earnings, unknown statements, of this results would future that and SEC, expectations, by projections certain and press cause to risks, are the events not not differ material company's These cause are Before that filings call on from you statements differ other to on historical such or that and future our forward-looking risks remind we statements the are results that performance, expressed press actual could like factors begin, expectations. forward-looking guarantee intentions, and and are announcement, or to and a regarding release from our with which known uncertainties future those materially In I based the trends implied are release performance, our facts. detail matters in statements. subject and other we company's may anticipated to

of as Our statements no statement we and we make. to have August are today, update XX, obligation may forward-looking any

our reminder, have on quarter site. Web posted performance we a financial As a second presentation our XXXX detailing

reconciliation metrics. turn release to is found will It Our and be call and pleasure The operating today also information comments of my to presentation. key regarding measures include now our financial press Martin. items over other other non-GAAP our in can the these and

Martin Franklin

on completed XXXX, the you, in has X, Thank October the much world. Since acquisition of transpired we APi Olivia.

evolution intact. on am economy. company following focus in to during across more focused itself. the original However, headwinds model of protective leadership business services the the result sacrifices the say We company the a the these of that resilient when has for remains began XXXX, recession more our as I that around the recurring building such times. towards I economically recurring as us am grateful a revenue organization unprecedented hit a built This believe thesis moat investment happy that our and makes pandemic COVID-XX

we As to success. is that APi we look the future, well-positioned believe for very

While of know our we on may to long-term we pre-COVID-XX opportunities hand focused over call don't future in will objective and what us. of the impact Russ. COVID-XX front that, Russ? remain I the With be,

Russ Becker

The continued in you, you good employees safety, interest Thank customers and constituencies priority. headwinds our Martin, Thank and I of the all hope has staying and how healthy one has times. APi. before and to serve update wellbeing your I together morning families commitment health, our during for and am your of will are their The sacrifices, quarter the you everyone. of team and our they despite who are walk through I financial to will and start detail. our efforts shown by more you were a business in and I it turning by second facing. summary providing resiliency, these over for results Tom, them been XX,XXX combat is number continued team and to inspiring. results focus leadership our the proud unprecedented thank challenges COVID-XX ongoing approximately safe. members rallied

cost top the you on impact to of onset the initiated potential As pandemic plan many results. of following reduction a the counteract know, we in March, line negative

business as revenue our While services the proactive three to did net yielded managing strength on across expected, segments revenues results. recurring of pandemic across have model impact risk a and the our focused our approach negative platform our

in our executed million that define months net net period, ended from ongoing focus impact contracts. year COVID-XX, prior achieving Primarily declined of quarter earnings highlights service per prior $XXX adjusted our XX% the in revenue, for represents revenue. the a due XXXX of estimate the compared XX, following. growing to EBITDA, and master adjusted with profile exceeded repair success XXXX, towards second our consolidated in continuing Service our service we well share. and as evolution acyclical of June the blanket to nature three the testing, to compared inspection, on revenues consensus the recurring Key $XXX is to as million service agreements For a XX.X% and We year more and as $XXX by maintenance, first-half million approximately performance under the Street include for revenues. or

Adjusted weather Services we with continue of where I estimate primarily points $X.XX, work, Specialty of strategic all yielded was margin productivity, per revenue to that margin Services expansion management opposed new service the which diluted three driving gross as volatility XX%, primarily consensus conditions. of our Safety successfully As gross of on pricing. of our to driven is share. environment basis mix Adjusted COVID-XX. and expected, segments by The impacts as early and XXX to efforts the per our Industrial In segment our counteract XXX improved the increased Adjusted temporary increase of expansion basis well. growing our see margin of result am results. increase held containment EBITDA points line a exceeding of margin is by of segment, up cost challenging improvements. execution XXX% driven a labor favorable pleased earnings margins improving largely by our margin combined normal, & is $X.XX expansion Street negative with very or share In project focus improved and an top with

service flex build a with us and the is growing customers ability of the and to quickly variability amidst on our geographically a a and changing testament the U.S. of end our strength to the within business with moat to Canada, structure resiliency variety our emphasis ongoing across a that of helps protective relative revenue the believe markets, cost related execute the Our on to market. business. COVID-XX inspection our We more recurring and disruptions employees, relentless well-capitalized focus model benefits around of allow diverse

As evidenced is pandemic by from far our surging over. cases, the recent

of we our margin continue business. of APi's expansion key the facility work remain goals to inspection agnostic. confident a that in achieving are include: a best EBITDA we to operations markets and dynamic us have on often of statutory be Good tend that this on perform are our our on our law filled revenue. service regardless built margin examples facilities, APi's long-term ability inspections in These our and adjusted Services continue the focused Safety in segment. are remain or the services required whether Key drivers number the We by growing to business long-term the for recurring are This of and to services empty. XX%. However, goal execute requirement capacity focused to economic to resiliency is is required one, way and for end success. to cycle already of strengthen

strategy work ultimately peers, higher first relationship go-to-market selling opportunities. creates to and our from a differentiates inspection and us margins Our growth for client that stickier leads

our Services service large committed our and under work with utility example segment. programs is Specialty master private good capital in with customers agreements Another performed public

segments across Our long-term recurring our revenues net revenue. our goal of plus is come all service to from XX% of for

our growth increased proposing actively customers, pricing of and organic demand opportunities. on for work We're across services attracting Second, through repeat all new opportunities increasing segments. from customers

customers us, pandemic our of has We an certain XG. are the such opportunities While national providers to may presented their to as capitalized relationship also we a increase partners have as race presented strong well has in like that believe with a balance and seeking sheet. extend variety it the telecom areas with in working challenges, on be

and Third, selection. project customer improve

of for and than risking We profitability. growth continue sake to thoughtful profitable growth the focus on and rather growing

earnings across to of for I reducing which We industrial XXXX. prior we have area. loss refers divestiture achieve a us difficulty] friendship where businesses robust this businesses individual of go, evolved held with related Fourth, have [technical our as margin, help calls, project services have As we goals rate, stated formal assets leaders on processes no-go sale negative two our we this at selection. classified believe that the end in our will we're

of call, the the in on mentioned last divestiture businesses these our of I quarter. As earnings one first we completed

our completed the are of reflected us the scale. investment of now consolidated Services segment, Industrial second us well is in two our the results. lastly, financials These the we During projects and businesses. July, as leverage sale infrastructure in back that benefit help behind the will anticipate as in for we our and office Fifth, adjusted

foundation business a We to This model. Services multi-year more complete continue world-class our public to effort designed to a transformation of company a move for towards world-class is move forward company. APi's process transformation with to Shared major from private the efforts

had while APi value may to and add-on has continue acquisitions, success I that historically, Jim mentioned, that tool In organic through intend segments as with Martin time. over addition important to strategic we opportunistically M&A. larger We increase answer and core view in acquisitions the which evaluate drivers shareholder complementary small pursue to our pursue and an also with growth to adjacencies working we M&A accelerate to

call actively are Tom our would We hand Tom? to over I financial in fronts. discuss in engaged now results to detail, conversations like more to on the both

Tom Lydon

of color liquidity XXXX. our as providing segment and will and our on strong reviewing well good performance I results, morning. as Russ, financial for with and the level sheet expectations by Thanks, some remainder start consolidated balance conclude

attributable As volume net in million, for to customer million decrease improved June The XX.X% compared revenues COVID-XX adjusted XXXX $XXX combined to year prior a declined or to was period. XX, projects. with primarily mentioned, Russ million impacts $XXX which the ended months $XXX of three project the of the selection, decline and led negative to in

due focus The by with labor the for Industrial expansion the ended to by project second project for management point Safety XX, work mix and segment, revenues to driven representing margins, favorable margin improved Services XXXX increase our XX%, months billion, billion conditions. drivers X.X% and opposed I increased year the in on the compared segments, improved was three productivity improving by six XX, the XXXX, quarter. or prior Adjusted $XXX net to ended June mentioned strategic increase combined In to compared million basis of XXX $X.X weather as gross Specialty total to primarily was in June declined $X.X to growing and period, line a prior top margin months our our Services For pricing. year. due was

XXXX was of execution counteracting our representing a expansion early For the XXX largely drivers aided Adjusted by margin primarily the for compared negative increase year and SG&A increase, prior impacts of for was the the the XX, gross points COVID-XX. containment XX, margin June year, basis XX.X%, June months three temporary I ended compared efforts prior to adjusted representing ended point basis cost quarter. gross the to due to months EBITDA XX%, six second XXXX, XXX margin mentioned

months six in the the adjusted point margin basis XXXX, prior For representing drivers expenses with due for adjusted year savings margin temporary increase, mentioned measures. XXX pleased our operating improvement for the ended EBITDA the was quarter impact June we to the reflect cost COVID-XX While second I compared SG&A of X.X% are EBITDA quarter, XX, to basis point XXX certain

second-half We the the in expect level a of these year. to return expenses of

cash Our balance continued and strong. liquidity our generation profile strong has sheet remained and

$XX six representing months year free adjusted was increase of XX, prior ended compared XXXX, million $XXX to the $XXX cash For June flow million million.

working driven flow by adjusted positive net reductions fluctuations in increase accounts resulted was rate goal cash The levels, approximately in capital the of flow in XXX%, in primarily working drove cash balances decline in XX%. Our that exceeding our flow cash our as our the and change generation. receivable in revenues free was capital conversion

liquidity, available equivalents, XXXX, $XXX total XX, of and million had cash borrowings cash we under revolving As $XXX credit million June of comprising our million in of $XXX and facility.

outstanding XX, we outstanding and under billion June $X.X XXXX, loan term of no credit our under had revolving amounts indebtedness facility. of As the

Safety negative was June the detail debt credit to accordance adjusted ended $X.XX our Services. each more for $XX segments net place mechanical net along of XXXX. declined discuss services. million, COVID-XX, $XXX to or the and timing access our due XX, XX.X% for results of Safety I of beginning our now months of shelter three XXXX, Our of The building in impacts ratio with calculated was XX, the prior restrictions the revenues million as in year with as demand Services compared with in in to EBITDA $XXX will facility to three June orders such period. million decline primarily

Service with XX, prior million, the XXXX, For XX, ended the approximately previously segment's net million timing $XX to factors the the due relative or year revenues year X.X% revenues three by declined to the net $XXX mentioned Service matters. revenue along approximately million I period to six for of to Due declining revenue. in or XX% to XXXX, million months ended as period. in $X million represented million, X.X% outperformed of the June months prior $XXX the to the related contract XX% by compared prior period. year up from expected, $XXX to for June $XXX compared COVID revenue contract

increased improved compared was ended the revenue, prior of in June segment XX% period. million the net to in to months year or June months year million three gross represented compared increased Adjusted impact due work, point from service revenue the to the margins service approximately of increase representing six the XX, X.X% XXXX For period. ended XX% efficiencies. and XXXX, XX, $XXX prior million to prior $X up year XXX-basis for The due the by mix XX.X%, a to $XXX service --

months the For compared inspection six gross that and primarily are by expenses June adjusted margins and EBITDA XX% margin service business Adjusted fast continue Selling, representing XX, higher we margins than revenue. our representing in as inspection a in gross ended continued and compared average, XX-basis of point ended was gross XXXX, not growing decline did driven prior invest decline, net three margins contract On XXXX niche prior this approximately to inspection XXX-basis on revenue. revenues the XX.X%, service general, for a we year, as to as months XX, the work towards service on model. estimate administrative point shift XX.X%, to and in increase expected. as revenues, segment year June was

XX, XX.X%, margin XX-basis compared For point the a project $XXX six to June the prior year years. $XX for of Specialty projects. EBITDA $XXX disruptions of was adjusted ended COVID-XX, or the XX.X% jobsite impacts net timing decline, months ended declined the June to along months from with in three revenue such customers decline XX, XXXX, deferrals, services representing primarily was timing XXXX million million compared our million The as prior negative to and period. due demand of and to

June increase to million factors improved million XXXX, XX, XXXX $XXX prior for For $XXX XX.X%, X.X% pricing. declined net compared six the ended due XXX-basis due for months to the the three labor revenues I the or million year $XX in largely XX, period, to mentioned ended months and Adjusted compared year the increased representing quarter. margin second a gross to were June point to prior productivity

efficiencies representing months to six XX.X% improved XXXX, increase margin XXX-basis XXXX XX, execution June point margin increased the for XX, ended compared the primarily June For XX.X% three and pricing Adjusted the compared months was due ended adjusted for EBITDA gross I prior quarter. to mentioned year second the increase a was XXX-basis to due to factors prior representing services. our in year, of the point a largely

was quarter. point mentioned, increase to representing adjusted months XX.X%, the ended I XX, a For EBITDA the year for due compared to prior margin factors second XXXX, six the June XXX-basis

Industrial as revenues $XXX the on businesses or industrial held Moving to year services X.X% $X XXth for to ended period. June to classified three of adjusted excluding million months sale for June as XX, declined divested the Services, prior or in million net million $XXX compared XXXX,

on million, $XX $XXX prior or XX, primarily the focus as a driven ended was productivity compared For Adjusted The by XX%, volume to a year, of declined selection, XXXX $XXX XXXX, period. decreased million margins, million conditions. to months in gross improved XX, increases project to revenues result due XX.X% and June representing net the improving management by to customer to for job as ended June six decline adjusted months increase to and strategic project different prior the point favorable X,XXX-basis opposed primarily compared due was line. margin top growing three site year

as due the ended of compared to months for growing result XXXX XX, improved strategic prior the XX.X%, EBITDA For second gross points year, Adjusted representing opposed increase line. XXXX increase to margins, margin as year X,XXX a focus I primarily the XXX our XX, quarter. XX%, representing margin June the June prior six mentioned ended top points for adjusted factors basis three was to the the was months basis on a

months to June margin a earlier. six gross EBITDA the compared adjusted XX.X%, points prior X,XXX year XXXX, XX, ended largely representing mentioned For increase to the was improvements basis due margin

salary, $XX the which Before June. turning A compensation began we of in Jim, during expectations the temporary on XXXX. to quarter. to the approximately for benefits that provide We unwind call actions related of remainder I related had over to were as majority such cost SG&A color would some XXX(k), COVID-XX due like million to of and savings

see the a year. the result, As incremental the business expenses you results will of likely back-half in in

consensus Regarding $X.X per XXXX full-year street share of revenue for EBITDA million estimates adjusted guidance, billion, and approximately are current earnings $XXX of of $X.XX. adjusted

balance the a ongoing modify move we COVID-XX, As outlook the the year, our impact basis. of will we through regular on engage of

our revenues on to we of will million to-date million diluted adjusted of to $XXX and will progress net Adjusted count to million EBITDA share based year range warrants. XXXX, that excluding adjusted per range on fully billion in will billion. based $X.X from $X.X between any $X.XX impacts the between share adjusted per share, $X range However, earnings believe $XXX for $XXX

approximately million We expect capital to year be million. and expenditures depreciation the for approximately be to $XX $XX

call of long-term effective I'll is and rate approximately our turn cost and XX%. now capital approximately mid over Jim. the X% tax Our remains adjusted to

Jim Lillie

invest to flexibility continue and to providing API's strong economic believe with also strategic reduction us while liquidity provide to the expense on in generation, climates, with recovery actions, profile uncertain and opportunities. capitalize sheet navigate balance a the foundation everyone. morning, that Good early Tom. cash conservative flow Thanks, us stable We

are shown shown a has that we long-term remain business of still The and addressing result has business cultural COVID-XX know to that strength a conditions as challenges. has and the It's Although its shown those to very and believe us running resiliency believe business to environment. positioned execute proud and that you in to on the we of shown We to protective the preemptively moat, and visibility of used approach approach has proactive to-date to a uncertain, for it the somewhat company, market resiliency getting and hands challenging that our that its continue are limited, the we of. proactively is on well leadership the goals.

test not a company, we the While we have thesis when had support believe team. expected the stress investment the as quickly first this Russ our public and that met we results we

the making plus XX% on Q&A. six, you right the As shareholder earnings of organic generating finally, creating targets, SG&A; over that creation focused digit five, by focused operator the to one, conversion the our choices three, for a long-term average; on by flow plus; value ratio opportunistic XX% the health and value business, growth; average net and long-term number fiscal growth XXXX; cash debt-to-EBITDA turn having to two, update, high two M&A, being focusing With half EBITDA and above long-term know, back call call of times. remaining four, to free year open two the our and adjusted leverage on standing we'll for single to of industry delivering which adjusted we're on continue the revenue long-term margins are; sustainable

Operator

question from floor of Wittmann line comes The of now you. Our Instructions] the open for Andrew Baird. [Operator Thank first is questions.

Andrew Wittmann

thanks. everyone, you for to my and taking Great, questions. Good thank morning

to in little then, and or an halfway that seen bit it's want bit to you could more Russ kind about Just happened hoping quarter update but you just that you've during revenue understand as quarter here, that the us update, gave the you saw kind was the cadence about either or progress. organic an month-over-month the the I business quarter a of a Tom, trends see of trends, the Obviously, talk certainly what what little better, July. to

or happening particularly deferrals segment even into to with some in action deferred? around quarter. still everyone mentioned they be helpful You today? some commentary Are for think the would deferrals those by the I business what's understand coming that,

Russ Becker

Yes.

for your you question. thank So,

have across We man all fashion business know, seen hours in of really we've hours track man you to seen tick an most we upward by slowly things, our business. and continue

sign and specifically that our our If for as or in we're so the of the we that continues X% up, we at business X%, service you and are inspection so, orders expect start service and work of man actually as hours, to building, Safety us, watch the of closely because to things about component positive the open we year-to-date will focused place one business up the closely, which inspection shelter will is watch our and man relax Services, look very hours component on inspection a follow.

us indicator it very the of in that key So, show continue relates and acyclical to opportunities optimistic If remain in a front us, know, backlog itself. that that's that the contract as we work the Services. for positive to and our we Safety work Services, our going business results good come. positive we as nature you are there of at about Specialty the continues to have that to we other see well, associated look

something Services, Industrial to we're concur drive seeing services on. to out, side see that slide push but year the continue to business, progresses to we're starting that and year, just volatility as on I that's which with to of seems see starting group, smallest with. of then, it -- we normalizing continued our I moves folks that our going piece need the next some would most the to the some and we're throughout to to that still still of like, emphasis going think us forward, focus You course our right, effort a going that's And executing to and opportunities work flatten and to continue that is continue think of to the the that be probably we we're have that but which

Andrew Wittmann

as that awards answer I add ability helpful. in I of backlog, in that color pace another is backlog, bidding question, put you into to on Great, a the segments, touch follow-up your wanted bit that little to more slowed down my has one mentioned but terms there Maybe think to on that's in the not of Could maybe be That would and able backlog put to to down? the during has well? way you it quarter, talk would helpful. quarter execute to the Are be from you backlog kind how sequential performance quarter things this about talk in still it? to best last into of the way just answer your and up, this is held-up

Russ Becker

Yes.

one do at So, be is want do we propose use price, our not number we we and APi, that word based our the opportunities, selected of so, on and to any "Bid" not customers because on by I sincerity. mindset not that that sarcasm, and have told our work, that. people I when you think don't have say do I about a there's good say that literally mean we in with difference I with

in funnel. we to comfortably and with selection going forward, our at aspects, as answer last that seeing to of pursue, we're from really that, my in just decision opportunities to has contract implemented I that very, client were up is holding to as call this which of more is our been of, and that and our year, positive, we've slowing you for makes client that in a very remarks go, time I'd it continue a where ahead so, is to slightly had see been decision-making tell to when backlog maybe, positive no-go alluded holding robust well we your and up. the and under all and In well, for very, our which some we've improved proposal backlog very our the that so, So, robust has pipeline quality backlog for us, gets seen solid can move in our but a question, contract, our I general, us, process opportunities

positive about we're that. So,

Andrew Wittmann

Great, you the the year kind get I much the kind technical as that are as for can the but model for and as working the makes just amount capital question good deferral, and that quarter, the obviously wanted tax cash and so thanks. and in paid after? this you result before were flow Tom being to of on as generate very a cash down, flow; result curious free how off, I a sense, that here was expectations just what back mentioned that of year of jump regarding of just ask to appropriately revenues free next quarter to Federal the able that it your year we payroll one

Tom Lydon

Yes, about and million in the $XX quarter. quarter, each ballpark it's that roughly can you

Andrew Wittmann

you. Thank

Operator

Our of line of Markus next from question comes UBS. the Mittermaier

Markus Mittermaier

Yes, hi, morning everybody. good

Russ Becker

Good morning.

Tom Lydon

Good morning.

Markus Mittermaier

giving top the start your did so first-half/second-half, If with cadence I'll many sort on guidance. the done sort not briefly, have Maybe for of at I what's like Thanks that, of line, look because companies assumption that. under I wonder you just X.X.

So, the implied the second-half top line roughly same. number is

backlog of start trying a that you a implied Let's okay? mentioned conservatism is just to second-half come is sort bit looking there. the the assumptions for industrial, you around sense guide? the I'm sort of with to up selectivity that is of So, took get

Russ Becker

this with headwinds of based go the ground very on of and we back that at and given out a the what time, seeing from coming together COVID that time still were at we and at are and So, spikes macro in some building the general that our guidance, be to for up, up, the believe build appropriate and putting economy. place the up with look they it some of that's us to businesses that that we

Markus Mittermaier

fair that than an of seasonality, is second-half from it but to it, got assume fair? would the better the be usually underlying sort that Okay, ex-COVID, first-half, be would

Russ Becker

fair. Yes, would that be

Markus Mittermaier

then… and great, Okay,

Jim Lillie

give front-half given is about back-half XX%, any in Jim. is Basically about and it's year the the Markus, take. XX% or

Markus Mittermaier

Yes, got it.

ahead is obviously then, back, business that, maybe the second-half Okay, medium that, understand sort there's around to the the flow, the that longer-term, on is tax great. regular the to we stabilizing, that exclude and but if if get was target of we point even sort I impact reasonable the deferral of also still you like conversion some of coming we And margin like strong previously on just get very I increments very about whether communicated? in long-term number about the XX% and sort cash of the we the How think because margin already in cost kind should close what in earlier quarter, longer-term assume XX% but how a XX% should to and also this there's I target, first than cash but conversion, of you're have think chance a your really quarter. maybe both like margin in now about also guide can think side your and

Jim Lillie

I'll to answer long that, goals our you're XX% Nobody have and appreciate that so, we and position our and change and plus we're that the sure of in I'll under make over pandemic let the range but laid getting on delivering, to we've range gave promising long change to that, the micro obviously we respond out expected Markus, want Tom initially and of let that not question. with part guidance but guidance, the be going Russ rather in Tom a we when would to guidance, that I to a deliver given, by including comments, XXXX. we Russ I trying out

Russ Becker

quarter, and out, what the quarter. the were the that net margin, XX.X%. made there, EBITDA things in with back in range the were we we things Markus progress but in we So XX% in there We're on temporary the happy back versus those when we're did

expect we'll with it wouldn't consistent think that you because that decline long-term I that and a the XXX% and With we revenue as happened, XX% basis. we're in to continue second-half, comfortable it's has make to XXXX. but conversion cash conversion, So be way on think mid planned regards us we to and in the to fair for that to about progress think

Markus Mittermaier

queue. thanks Okay, that. get in it, will got for back I

Operator

Our Kaplowitz next Andrew comes the of line question Citigroup. from of

Andrew Kaplowitz

morning all good Hey, well. guys. are Hope

Russ Becker

Good morning.

Andrew Kaplowitz

versus comments for Can guidance Russ, to the I us XX% on the we year? the up the wanted follow-up what 'XX assuming the see man second-half what you of inspection of second-half service the assuming around are X% the about of to revenue in QX? out decline guidance in of the now. for annual you X%, Good tell you can have in as talk decline inspection hours on year, actuals, there. and you saw second-half the Because organic approximately don't you're

Tom Lydon

we've going XX% life safety Yes, is drive like and in that that from and service. think revenue inspection of our man service data in revenue, comes the businesses the specifically hours so I inspection approximately ultimately provided our to past

would be can rocking get as So inspection we the hopeful our component that business in piece service and second-half. we of the rolling of service the

we about continue we're we We that to associated but of work. coming haven't because a any guidance business we've provided that our see the see projections growth revenue as from seen upward with perspective in specifically optimistic the revenue inspection will component where service from,

Andrew Kaplowitz

temporary environment. right, back, the had margin. that so of sort you've follow-up around want of you you that of in All underlying maybe that comment sort also we a XX% you or to made I cost more some and can to on out, but just talk give the Obviously, normalized maybe know have about all

safety coming as and of margin forward, that then temporary Service any services, moving up these margins double-digit Industrial Specialty and be the how do strong up out about quarters, good, in were margins in forward? sustain you this over can last in the cost specialty structural industrial been margins very you sense can we go have these did think couple You costs

Tom Lydon

how to haven't to the businesses, salary million was furloughs necessarily expenses which containment reductions cost was our return. we some Well, saved the associated of inside part of SG&A done we pruning are pruning we've expenses these that of math with shared the the is expect I in some and mean, much that say $XX efforts, done kind and we that of and about and $XX versus that million exact

very, have very we implemented, us traditionally for a that to we little see been project on. margin to selection way that in execute we've pressure So, we've from the important so to into forward into bit that go, our of our maintain see move see pricing and to going the you as there margins that be second-half, discipline pressure its customer economic potential market you it's the is works in no-go a selection going the able we're process space downturn, whenever

disciplined all what it's who we that it's that all and comes in company, a we a of from work but part concept possible, from whole of So, pursue big projects for, around, this and as being doable.

Andrew Kaplowitz

are where from mean costs careful Jim environment, over and think some the I you as obviously, but then, be off with it second-half Russ, have and place. the valuations you you just these balance of about of of in plans, sort one sort Martin, maybe follow-up the is the temporary the me, gives year talked back, for Great, then, dusting you've M&A here, all more and about to of sort M&A of a

out on get you wait back you that? can do here M&A or and of on what you have So see in that the till costs to all going start do terms come these focus there it, we

Russ Becker

back So, and say if have the ongoing two it on that continuing, bolt the there now back if like, gear, is because and businesses, on we -- we I last also session APi is sort in of M&A days, those up of buckets, if that pipe team slowdown have larger M&A that executed is was COVID there you and that a have for into in are Russ additive the more I pipeline, would you the like that smaller had couple really like on you put running. we on opportunities, then slightly a of in a program

with been don't and we like are we've and organization we're opportunities. is business together advantage capacity are for The to of some opportunities cash and going that, for the in in last there'll well-positioned that business take production in you what think have a are lot is Minnesota of the us. my opportunities are gotten good see, there out from of for it. with if that front leadership we pricing consistent there. time plenty process I of of we days conservative be spent in out has news that's what for we the through doing and So, active opportunities sheet, so control the The balance perspective, few the we

Andrew Kaplowitz

it, Appreciate guys.

Russ Becker

you. Thank

Tom Lydon

you. Thank

Operator

comes question Research. of the Kathryn Thompson of next from Our Thompson line

Kathryn Thompson

kind to taking you just deeper my questions of Hi, this the little bit thank just today. just outlook. to a and I on wanted follow-up margin dig for

know more Thank sense earlier a the of the but to call, margin to in in at changes really what you this a and fundamental changes, volume specialty, likely better versus addressed fundamental some is really want improvement? will portion that look back parse sustainable out, what we of segments transitory, could more and and increase really more safety you. like I So have with get would so primarily work you of come

Russ Becker

thank of you XXXX, Kathryn, don't participating, of I long-term I for level so impact one customer stretch selection by march project disciplined the oversimplify EBITDA are of our right, are Well, goal have we mean by XX% and that areas the rate. our want loss to going to any All as and imagination. greatest the towards number reducing

a shared business to and that's still a points, we comment our and inspection of the out Jim and So the to must typically we X% as earlier had a businesses so, why us of achieving that's that's that drive to longer-term our that's knocking this that's cut of scoop, big of the the up to process that increased is that's goal on project, continue to if and singles and of loss can and we're the business we're need allow decisions XX%, businesses services really that's a help going we M&A, better, our perspective, half. driver is to know, that is our We which we move recurring our a continue truly with year it's can be of on going it business, execution going because X.X%, if the the going truly that really versus we where these the costs, we objectives, to I full inside us to fruit guidance if to transformation opinion drives that that not that recall, prove lowest and bunch doesn't to those then that could we and we're and margins portion if it stepping mix to that couple about for each have our those we our rate think hoping and said some focus choices strategic relates sustainability of We've of where our recall, be points to that potentially progress and better hitting to I year businesses growth and we these in to drive in that us. in And be work to you need as about gross we goal need effort published long-term we're continue make evaluate continue all have with this for and made or service to going was is and mix to even have. would margins the that but big, improve plate can of priority return long-term to talk progress of say, last businesses be the X% our park which sustain it that they my that, hanging one are made to in to changing our huge that continue be to SG&A model, you goal. so better, on XX to other business, really successful we're our in growth closer then, you reduce drive making to the a revenue

Kathryn Thompson

not margin by Okay. headcount. changes, in loss second was the is So it more last is to to that, Two follow-ups I just transitory was where the that today, the fundamental that cutting fair driven and rate upside events? quarter your and year if know say X.X% was it your then

Russ Becker

improved, now. because Well, rises right of I at my basis I that number times, don't we what from just and the tip that's so I… my that most relates it the it's know rate and when if intuitively, I my and that know more of problem to transitory, I necessarily don't to of tongue as on attention a am -- you one, desk, and loss goal, need to have that but evaluate there's we is that perceptive, talk regardless, our sitting most directionally rises are about directionally progress making and a to speaking year-over-year those

Kathryn Thompson

you cuts. improve. just companies, come of There host by back able companies reported cost that to as are where and that cost headcount volumes headcount, cut whole this will So, are services cutting

on So, some from it's separating focused really that as that of you that the fundamentals company. make Does sense? out a

Russ Becker

Yes.

demands XX some that the so able be start a first like more to our we maintain are I rolling evidenced think on market that furloughs could also and us to flex case make were the rocking average and return normal to been So based on as but and our will that's positive of workforce really so just by to where position things ends with salary a we and up took in took again, that we start you to run, we word? business market this the as fact sharing workforce that on so, that's that the up. business, of know, and we the did a seeing used our and tick our we that our as able the in focused our a and eight was sure and performers we we pruning that pandemic for customer's by I -- ability time pruning, could job sure what's we that's to workforce I Preserve returned, wanted and business is beauty we made to the appropriate, we any be the and best do business, that say and year right the opportunity are needs really would less where said to mean advantage the we business so, that than and trying in the man-hours up marketplace, I right, that to earlier, reductions as see down actually

needs is but union work of a with flex no businesses a are and provides individuals flexibility are the more to and force as much work the are down, us primarily union have do flexible and there members cost because field such as well, up field force. within. so us additional Our a some to workforce, that severance that we non-union flex, We primarily for and model gives trailing union, work it

answers So, question. that I hope your

Kathryn Thompson

Yes, Speakers] [Multiple does.

Tom Lydon

I in also, of The offices ongoing continues it just script, to we contributor. is about mix the jump the but the back of consolidation throughout contributor. that's also Kathryn, and maybe so evolve could business a talked a

some got against you. things going You've

forward two and two improvement, headwinds, there vans put come now the salary the to guys there XXXX. taking there a salary, that Russ to then the need process levers in get are up bit but are for comfortable a back margin in, some because pulling improvement, used two obviously guys goals is and temporary reductions, our is including business the we ultimately van, not take to because in. drive a XXX(k) example, and in with and us business to mix service and Russ For of but gone have will COVID, The COVID there're we is those need so, continued expenses back scale reasons, will leveraged come team to

Kathryn Thompson

the looking passing at what or much opportunities at segments what thanks bigger at and Yes, helpful. COVID risk? was very areas see that. a looking post and That's Okay. back for in services could could a and more Stepping be picture question beyond gains world,

Russ Becker

industry, that is to services and trying the the see inspection opportunity look the -- tremendous at one I gains and and guess where continue forward have of the across for focused very we in for going some and is Industrial, disciplined Obviously, and backwards business, margins, the and places focused in revenue space see side company, well, there margin. and making primarily, the seen part we there number as on opportunity aspect being results, disciplined focused and think very and continue grow and telecom business additional so we just in on our are are essentially Well, is successful I Specialty be can service and we very, our the approach that grow XG in and that of on have to be about the that's go opportunities in on is before like we priority also these to opportunities an race where about been then for we Services you as grow you'll we in focused that we and business, the to more industrial us deck. less to sure of safety the that

second. Specialty Services So are places growing Services focused to on in primary first the Safety be going that we're and

Kathryn Thompson

with we the Specialty that Are you some adjust any to COVID. as all type changes Okay. address there of of new world specifically offer a Services that inevitable

So too, understand, be? really inspections we've that, that trying could increased may of seen those with to businesses see because you just but because other with opportunities

Russ Becker

come Well, to we're Services, in of there, Specialty the I'd specifically say I probably front three my talking is if areas mean mind. that just there

them I talked to of is which this race One XG in about, Telecom.

Kathryn Thompson

Yes.

Russ Becker

a distribution that residential it, that as happened to articles be well, and leaking us space HVAC system upgrades, Obviously, a with so but have some complicated, education secondary that lot driving a it's the systems work to the like That in primarily fact of unfortunately, for upgrade buildings Baltimore not as highly is. natural opportunities had much have is other what and clients had to do area of situations our in and referenced right to there the to successfully in in when do you a that's is that day it's neighborhood seen opportunities and it and about type system the huge to where the the work you number of their sophisticated our us the quality and able of and institutions. their as I we've protocols you need the that creates some existing of air part improve is for business, rising explosion they've expertise opportunity read due gas it COVID

Kathryn Thompson

great. Okay, today. Thank questions taking you my for

Russ Becker

Kathryn. Thanks,

Operator

for question. have and gentlemen, Ladies one we more time

will question of John line the final Securities. come Tanwanteng Our from of CJS

John Tanwanteng

the across relatively more normal versus quarter. trends June line? August to I just might on from answer. morning your be July How My to addressed think want the first guys. you solid activity And but perspective, and seasonality? and around versus what nice a you would in business good one do QX resurgence Congratulations expect and current get into a your stronger Hi, QX are secondly, this, little maybe, maybe Russ, given assumptions COVID I have

Russ Becker

to up, guess John, hold I sort and directionally, we a biggest single sort anything indicator watching that man by for expect watching of know, watch any go us the send that again message our man other mixed alarm. seen is would we hours, business July and sends there I any you the where and us us haven't hours for is we that those and and trends hours man necessarily of there nothing

quarter third be than Our fourth stronger our quarter. will

John Tanwanteng

catch Got that up $X that helpful, service case results the that to the hours to on quite those on inspection $X number is I and wanted follow-up I and implication the and just have the up wondering maybe stale you hours of service period where where and like some that generate you can every to generate man time I'm helpful? Is That's will follows get inspection color level. said think it's comment, number it. didn't the that inspection before dollar talent one maybe that are you on a year-over-year, that, you've another go you of done two? to be that actually I do inspection there that

Russ Becker

in book make that to is our you space, it's I better markets a would for that which hospitality whatever with and not they the mean proposal do it very do to opinion markets. end I've that choose doesn't with inspection are do the can in business because been not a retail has happen and deficiencies Well, we client harder in an do before, much end you the a reason, business, possible in a of we're my lot said hit the this of could position, often serving

put and some that, perspective. it I that to when So, service a to to so, a the feel the from all seeing It's buildings still a is it shelter the in drag, that is we in place work different and you the there in bump matter is because not and in, when. that we way customer of challenge you're efficient base see easy environment better the is our just as trying bump to us It's do of from I difficulty cases, be the suspect a the getting and good we other say of to or orders access -- done. work going and surge really of get all because a little reason for the or bit think so work just that about part is

The to part provide so, is, of to we $X work worth it work, just of is dollar on of every and see $X, off direction there for other service not the driven that typically of and that's $X clarity guess, to everybody $X I better - call. inspection

John Tanwanteng

you. Thank I Got correction. that it. appreciate

are thinking point should any the competing attractive, seeing Lastly, business competitive in from know new or competitors your puts there at on more we in a activity the and competitive comment side that environment, is takes from peers inspection other coming maybe about but aspect? is build this any time I remained trends be probably disciplined, model you've or Are I your field know on down. and

Russ Becker

Yes.

we developed always then that." see client better know, model that get and should the work I see and is the stickier like and build you is for space, on and intangible times try infrastructure move challenge aspect be inspection we and this people the ability they that have think that you should themselves, selling of "Geez, really for into don't you we So have, up focused so, they inspections doing more us, one wake guess And to this, morning relationships. to them the and to the service first

inspection sure and somebody that with the your them their customer you're inspections." to best not can it's want about and a "I if says, don't whether a of XXXX at that segment in force how that's even business, all project inspections In about those branch gazillion so so, their It's across bucks, that in doing and happen. in reputable off average take to not of from difficult making bucks and when for of at they care goes it's people and look it for about work bucks you. the built-in with our properly customers they in on sits and our if is the sales to and somebody you walk developed $XX,XXX, everything street I already it's and and the that we're work the infrastructure a care have just business. functioning, pop, when somebody for and about size do XXX because XX grown and very, just things with "Hey, value, so, say, and touches have walk it's we inspection, place can under very that It's away done quality individuals, bucks," you So, XXX end they're right else, that, and inside do clients somebody the the save often and engaged and measure markets, offices dealing going to like just our in

good forward. and feel continue going have growth moving we to So, and resiliency, the actually that aggressive we are about goals

John Tanwanteng

Got a Russ. lot, Thanks it.

Operator

And ladies final was floor that to gentlemen, remarks. to turn like over question. Becker and any closing the our back I'd Russ for additional

Russ Becker

the behalf Well, shown, like We this that leadership to I share employees a able and morning, that joining and in testament results just for they APi each and continued put our of having on that's sacrifices call to we to you with would that the very has everybody proud have of is our the were businesses of every truly I first each for personal made and one the second, think and morning. of themselves company, thank the the take this interest APi. remain to opportunity and

your So, thank we again, you interest the and in long-term appreciate company.

Operator

Thank and you, gentlemen, this call. ladies conclude does today's conference

disconnect. may now You

APi (APG) 12 Aug 202020 Q2 Earnings call transcript