APG - Earnings call transcript Q3 2020

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Operator

Good morning, ladies and gentlemen, and welcome to the APi's Group [Third] Quarter 2020 Financial Results Conference Call. [Operator Instructions] Please note, this call may be recorded. [Operator Instructions] I will now turn the call over to Olivia Walton, Vice President of Investor Relations at APi Group. Please go ahead.

Olivia Walton

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

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

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

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

a performance third posted on As reminder, a financial have our quarter our XXXX we presentation detailing website.

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

Martin Franklin

year a well as with our during public pleased company. quarter the our Olivia. as made We're results you, very Thank progress we've as first third

are proven about navigate when growth stress on with quickly. not first its businesses announced our during the before, we The excited stand expected the APi's believe business of As reach has I'll upon help and our goal persevered had our niche call met priorities expansion of and investment record company markets, everyone establish U.S. building expand These the the to our With have that and we highly within I've accretive the recently thesis we services as within and Russ team. tested We're complemented hand acquisitions. of we we the the this surrounding remain be us. Europe. company on important results over of We that, proud and how difficult focused disciplined support We complementary, beachhead in said out COVID-XX times, M&A. environment continent culture geographical a in track to and market the Russ. organic for are

Russ Becker

Martin. Thank your you, Good morning, I your interest hope are staying in you for healthy you and Thank and safe. everybody. APi. families

M&A financial our reverence and spouses have respect Before values I progress, like you third of thanking and positive the for summary increased with influenced and today as I to provide at in U.S. the quarter call guidance, APi well our the The of results, our strong country women military. veterans sacrifices. their values honor the been our would state, by for by start their across and long of servicemen our as culture our leadership's outlook a being

are hiring veterans. to We nation's committed our

X XXX supporting We of long average veterans years. veterans -- XXX have of and history veterans over a annually have an hiring and past hired the

enthusiasm that in part their also our have spouses. part certain the of will work all and of resurgence to I commitment We you that are in workforce results encourage our the quarter, in our the for alongside value dedication well-being We thank nation. able proud continued customers who have been unprecedented over country. everyone has The to of an of priority. in team to am military considering to third challenging the very and results today the of and fortunate areas all with our thank times. in take for to of the how be veterans efficiently. on today. of invested I particularly #X COVID-XX during to leaders have to I'm constituencies our who have and veterans through years. safely served the pleased safety, APi all veterans and energy the leadership, loyalty our our of are the ongoing who Tom all more like has our serving COVID-XX and and those of experience and their vets team impact are detail. of veterans health show immense family our invest and proud employees We I'd of leaders and place and these is

the be pandemic As the next of with surge evidenced in by recent into cases, we COVID-XX effects will the dealing year.

We on However, confident We our long-term business. in and we goals. continue we continue expense execute we us the believe proactive liquidity conservative and be our climate. to work economic uncertain with well how operate to sheet remain provide early navigate our to that that and hard balance to stable actions, a generation, strong preemptive flow cash profile, well-capitalized reduction foundation are positioned to

variety COVID-XX-related I'd ongoing detail. more a Our which to is disruptions to in factors, testament like a ability of execute cover amidst to

business, is success. In First development key great is of on culture a success our and individual building leadership leadership that a predicated core pillars people-centered believe is our our We of personal both one professional, our growth, leaders. culture. distinct in ingredient differentiated long-term

our organizational gone through that great leaders empower broad our management are Our cross-functional enhance businesses. cohort across believe Many competitive to have shareholder value. are and veterans enable employees platform program. this advantage leadership designed of leadership, of who development and We the next leaders create company independent flexibility cultivate skills,

on more helps recurring believe the moat a service build growing Second is relentless around which business. revenue, our focus to protective we

Service well of our as As work executed represents as we contracts. repair last inspection, revenues. call, I agreements mentioned service XX% on net master and service testing, under approximately as our consolidated our and blanket define maintenance

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

is having contractual us of services-focused for service business across a stable benefits and Maintenance the markets, is customers arrangements. well This organic revenues any platform are predictable with a model through growth. that and Third cash and provides flows projects. diversified

resiliency Our client of whether inspection that tend operations Services us opportunities. leads believe The size broad high by often business revenue, capital cycle and average we us recurring differentiates requirements customers utility often a business. work telecom focused the private that is end believe our well as project agnostic. is markets structure. segments. the or in as cost contributes less with expand and million macro the or focused $X our us on touch provide of contract long-term being that conditions relationship, of this made we inspections are visibility In costs relative we are moat work be to of first the large around required The than our more last allows are investments our facilities of to APi's with our our all ultimately on technology is degree that or have statutory selling law economic I'd economically go-to-market resilient. projects public like higher-margin of variability growth incurring to cost and strategy our partnering segment, built our facility and services We with geographic protective variable filled industry are is business. have in that customers to required to from and nature our stickier our believe our dictate another already sector Fourth the and dynamics. programs. significant committed Safety our of market severance. of is across XG This segment, capacity Fifth compelling the without to peers is customers empty. trailing a In our customers economic Specialty regardless workforce and These creates Such Services by aspect footprint. with on expanding are point

us and This national primarily maintain footprint multi-site allows U.S. while execute in relationships We to have ability Canada XXX-plus expanding Europe. locations, having and with an decision-makers, the services account in customers. with also the local to platform for

leveraging procurement resulting enhanced margin scale savings from purchasing support we by from our addition, In to benefit power. growth

invest services model. shared that leverage we us infrastructure scale help will of back-office more continue our in further a anticipate towards We as to we move

While realistic. know being impact may what COVID-XX we don't while future be, the of we optimistic cautiously remain

the With perhaps bill behind hopeful an that might election a us, infrastructure become we reality. are

markets established investments. themselves Group, would to this which recently markets the the front expect opportunistic believe in provider FireSafety fire services our from pre-COVID-XX SK infrastructure for we Scandinavia. Benelux in active a continued fragmented We Through acquisitions. remain acquisition our and platform lend any a benefit opportunities and in life we objectives focused not European in of highly and that the U.K. and to and the announced We of on critical position have We we safety in us. are complement certainly acquisition expansion organic to operate safety international forecast, of While in leading acquisition,

While close the acquisitions in these we Services also track Safety all our segments, announced X of additional Services planned end remain the by to year. of on we and Specialty

the family. We APi businesses of are to leaders these the welcome excited to

proven strong flow Our fits; recent growth service record; the generated; to management key include component cash accretive culture profile. acquisition team following: and which alignment experienced for APi's strategy, APi's with the criteria values acquisitions meet of of and history free financial

and explore is the the of to year we expect robust, to move into M&A as opportunistic pipeline Our continue incremental XXXX. balance and through of we opportunities acquisitions

debt-to-adjusted quarter capacity absorb Our have X.Xx, and net and the with balance EBITDA is accretive strong. to sheet bandwidth ended transactions. We ratio plenty additional a of we of

and adjusted four, to to cash in the reminding long-term Before to year call include earnings like you Tom, average; my plus; expand two, detail. ratio our our call hand leverage generate above like three, organic XX% would discuss following: to fiscal XXXX; target X targets. five, financial flow to average Tom? These single-digit I adjusted one, of of -- to the the growth; EBITDA our to discuss sixth, Tom deliver conclude to more long-term industry I'd I plus continue to our the long-term now financial remarks over turn net margins free results of XX% revenue over by value creation SG&A; growth high leverage results X.Xx. by conversion

Tom Lydon

decline to Adjusted by impacts the net of with compared update ended X.X% level balance our declined attributable prior XXXX, an segment start the strong will $XX remainder liquidity, to by of X and I or negative as year primarily COVID-XX. reviewing million in morning. good consolidated sheet The and period. for our of performance our and million $XXX results, expectations financial well XXXX. $X the Russ, billion to months was revenues for XX, September the as providing Thanks, conclude

COVID-XX, was ended our due to net which months prior attributable with XXXX, on primarily segment expansion X September a projects. $X.X XXX XX, months point to labor $XXX and as our by Safety million increase Specialty $X.X work, productivity combined project project decline Adjusted segments, of mix a pricing. margins the ended Industrial to to compared or year. XX, the the basis the to increase the In primarily the top led decrease adjusted volume compared increased XXXX, improved with customer for to and -- negative the September of Services combined declined For margin line improving X.X%, period. selection, XX.X%, in Services strategic improved of growing execution. The margins in the focus Industrial in segment, the prior opposed representing driven total year improved X billion was was by to gross was revenues billion The impacts and

XX, including margin, margins, for due corporate, which temporary the point year early adjusted September point company the representing the certain XX.X%, expansion XX, largely Adjusted SG&A a associated due was XXXX, margins of ended to containment was prior was Adjusted the increase is impacts to with year, gross months XXX prior margin EBITDA and public of a prior For compared quarter. efforts, the our to compared ended costs the the I XXXX, execution X driven COVID-XX-related third counteracting expenses. and mentioned corporate, COVID-XX. cost compared negative basis representing X relatively September increase year increase a our transition drivers flat in gross period XX%, XX.X%, EBITDA the XXX by months to to basis for to excluding

corporate, representing a Adjusted year COVID-XX. mentioned. drivers containment expansion I excluding increase For including corporate, was temporary to XXXX, basis the of a of basis XX, point was prior impact ended efforts, compared margin, months prior execution to year, X our representing the compared XX XXX negative SG&A to the EBITDA EBITDA cost September counteracting XX.X%, and by early driven adjusted largely margins, the gross XX.X%, point due margin increase

had continued execute as third June to million began of We throughout the in The to year-to-date $XX to XXXX million. were salary, cost that in third mitigation efforts unwind continued total due $XX our and and bringing compensation-related the cost benefits SG&A approximately quarter to XXX(k) quarter. on majority these temporary savings, our COVID-XX-related actions we such of approximately and

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

receivable exceeding the X million, year of our $XXX XX, goal months working conversion in resulted XXX%, to that flow ended drove working accounts our compared XX%. the adjusted capital as increase XXXX, representing primarily For fluctuations free generation. cash flow increase prior in in balances decline cash cash period was levels revenues $XXX reductions $XXX free positive flow rate September million net the changes by in million. our adjusted approximately of approximately was The was and cash And our in capital in flow driven

Our $XX operating benefits payroll the million cash taxes Act. X of of flow included ended months from deferral for under September the certain resulting approximately XX, the CARES XXXX,

$XX tax XXXX additional X estimating $XX total and in installments quarters The million fourth approximately the the of repaid in benefit are XXXX. deferral quarter. fourth of in will payroll equal be We of an million

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

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

accordance as Our calculated in ratio, net was of debt-to-adjusted facility, credit EBITDA with our XX, X.Xx September XXXX.

the our the $XXX to in segments, an will third more net to we sheet maintains term access revenues the the orders, as million Services. due end XX, declined position. restrictions I ended cash for Services the each now year with to $XX our for $XXX strong facility, detail with impacts period. such start by incremental X mechanical balance and which services. was decline building loan million liquidity in utilized Safety months to COVID-XX, million of of place The and of I'll quarter results acquisitions, discuss entered of replenish Following along XXXX, demand primarily in negative million compared September prior the XX.X% timing X Safety for or recent our $XXX shelter-in into

XXXX, as million year. net the prior $X of Service to period. revenues prior in months from X million $X.X mentioned outperformed I by ended September -- declined approximately revenue about September revenue contract X.X% XX% up by X increasing the factors the million period $X.X to XX, Service $XXX ended represents XX.X% due of revenues prior the with to revenue XXXX, compared net previously, or XX% XX, For contract billion $XXX months in the to year billion the timing in expected, for along $XXX to revenue. to the year relative segment's million or compared

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

X inspection primarily increase in the shift revenue. and basis XX, was adjusted mix by service point driven of gross work representing compared to September months For towards prior the XX.X%, margin year, XXXX, ended XXX continued

margins increase the estimate was than prior the September XX.X%, point mentioned drivers XX% to to year that revenue XX, a months ended XXXX, factors representing X gross approximately prior As we service higher margins on EBITDA calls, inspection and are on basis margin gross average, the I improvement. XXX compared due revenue. mentioned Adjusted margins contract as of gross we on on have for

to the for compared mentioned September million projects. revenue prior The decline quarter. due I've XXXX, was XX COVID-XX, For timing year. $X year to such adjusted disruptions, declined Services customers X.X% to in from XX.X%, impacts as basis timing to by due XXXX, million the $XXX months XX, or project job third the site largely representing compared factors the to deferrals of the $XXX for increase were EBITDA Services. months Specialty million of X an the with September negative Specialty ended prior net primarily the ended margins of point demand and and along our X XX,

$X billion $XX the September or largely I've months X XXXX, due to point mentioned Adjusted billion prior months margins to improved by net labor gross due million XX revenues pricing. ended $X.X representing year year the were the the quarter. prior factors compared third the basis ended September increased For X.X% XXXX, a XX, to the in compared to XX.X%, and declined for increase X for XX, to productivity

was for XXXX, months gross point for third factors compared due X the the year to XX.X%, a margins representing largely ended prior XXX increase the September XX, representing period, the compared margin XX Adjusted mentioned quarter. For adjusted basis EBITDA basis to the year. XX, XXXX, in being timing the the the XX.X%, stronger ended income point due ventures from decline of were primarily months joint prior X to to September prior a

basis Industrial was we Services project stronger in to For ended year-to-date net X September period. that declined focus and X -- $XX earlier XXXX, compared the period. that compared pricing for businesses XXXX, ventures XX, our to prior adjusted the increase XX%, end $XXX million XXXX, divested improvements XXXX the continued for Industrial as we ended to or in held representing year XX.X%, XX, September revenues year excluding $XXX million divested months year, on million months classified EBITDA by from prior XX Services, the adjusted to contribution an point margin due selection, sale the at X of we joint this

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

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

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

provide turning Before for like call to to our the remainder I'd of latest XXXX. expectation the over Jim,

a of uncertain. our are COVID-XX outlook. Market realistic as optimistic, As earlier, yet conditions remain result Russ in stated cautiously we

that adjusted $XXX to pleased for per will year billion revenues million and our both $X.XX from from our $X $X.XXX $X.X $X.X $X.XX will million, will adjusted are up range we between $X.XX, We billion, billion. XXX guidance. of net up share million. $X.XXX from range to comfortable, raising EPS the to range $XXX XXXX and believe EBITDA to Adjusted However, diluted count adjusted to up million, from $XXX share-based million on $XXX between to our

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

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

James Lillie

good and everybody. Tom, Thanks, morning,

difficult you macro particularly As our results pleased this with light environment. are of we a heard in today, quarter,

facility revenues While proactive a continues yielded to our negative to by the quarter, for model following flexibility accessing managing the net services term provide our across business creating opportunistically of us of risk the focused as our expected, and our proactively and million structure additional shareholder revenue the recurring have segments, results. platform impact our managed $XXX Shortly market end the growth of value. we with pandemic to X has across an capital continue on debt capital approach incremental strength financial driving loan

a As which million can outstanding that additional the be will are company, $XXX into approximately warrants cash coming corporate there acquisitions in used of accretive for result other needs. or reminder,

strategy the well in will the creation to our business. our focused continue confident mentioned a As managing existing earlier execute optimizing allowed of long-term our as structure. business value businesses, acquisition believe believe stated have that our our we in We the recurring remain for long-term deliver people consistent previously the shareholders us disciplined model call, and for results and by we goals Russ capital resilience to drive to targets positioned effectively growth our performance revenue services profitable to are well and pursuing our as

for with to the like and towards time. question-and-answer share we plans for I host we for our with CJS to a as the couple remaining Barclays our participate yet virtual Baird an additional spring in analyst our operator as will their to As Day Industrial would forward tomorrow, the and in and also turn now Conference We investor plan December January. non-deal with call conference calendar look over spring the and move in at and NDRs and we to plan we outlook Operator? engagements roadshow, open participating the again well back to sometime of the months, over in Investor where early the the call next in expansion. look conferences XXXX

Operator

line your of And Instructions] question Mittermaier is from [Operator the with coming first Markus UBS.

Markus Mittermaier

of little If thinking for high lot math it basically I here, us is Maybe Quick that, Q-on-Q, single-digit impact you What's better? implies line a us your of thanks the Again, what question maybe with your is plan? bit if look that do what year, through talk guide, that a saw down I on you're here. do they then it's you implies. and kind through can a normal maybe you on of seasonality, kind in the it last margin. And it looks towards cautiously How temporary that modeling can gearing cost-out? current Or at the you're the still here? back? QX us cadence a roughly COVID margin, walk like come implied, XX% the

So the costs just and here maybe thinking through and puts the line guide, top various start takes on let's coming there. back

Russ Becker

UBS' coverage we company And the well. appreciate as of

revenue you about as when kick see the think So as right, start quarter to some both a we it, perspective. from SG&A typically, an well seasonality all in, from fourth is perspective

as existing revenues consistent businesses. fairly the will within So remain SG&A slow,

The back well purposes we're other continuing intents I cost for play And containment as aspect XXX%. bring that in are and the it all of measures that say, we temporary almost to is to would businesses. the into back

our cost structure. And so that's going some incremental be to adding to overhead

We businesses become I'll exception are on, and compensation. a have with any at handful wages. not reduced to of working has that remain us still the now, corporate some that But taking just reduced say, there's that just are continuing

Markus Mittermaier

that, maybe cash that conversion the your M&A. Okay. Got on thoughts from Jim, And warrant I cash contribution sort or you and contribution the tie potential then, can it. overall mentioned of

You've talked about, bolt-ons. obviously, continuation of

extent kind nature about transactions towards thinking you're would Is To that what thinking about? -- situation? going past. how is your transaction SK other the given Is transition to think there you us larger you bolt-ons? You've transformation you're that Or of about talked say in more strategy FireSafety talked Or the there that also leaning that you forward? of more about? is -- leverage advise would it that transformational acquisitions about

James Lillie

running we're Markus, a parallel path.

at historical if small third just the the done companies, M&A companies, announcement local with that think continued you regional end the has acquisition quarter. the the we've of So of has company made

year. transactions the have by of X of those We the will little that end close bolt-on

million of in of I conversations was around continue, transformational; scale. We that to U.S. things I say though, wouldn't revenue dollars. opportunistic. $XXX think is have It's SK it of

you I look an transaction. prior at so things appropriate-sized we're that larger, to think our And much billion, from $XXX willing know that, But $XXX $XXX is billion, billion. as conversations,

We one-for-one the do certainly bandwidth warrants. on But the a We of within what markets. relying we debt really the on a conversion size. represents intellectual in the not organization the that larger to have did liquidity. have We're almost the

so ratio And leverage be low. our will

confidence ability in to our have continue We cash. to generate

we that. So feel pretty about good

And M&A in of will through line go actually sight. Martin and so couple in M&A the certainly larger of of is days some our transactions. next Russ be to the I with

And be confident what as about of squeezed then through that the end. we're to the going XXXX. ultimately, into of just the fourth year back calendar So we'll jump all could that kind And quarter. to is off execute be to able you're on to we because move shifting We've the right. pandemic Russ going the revenue is the to was said I and balance if just talking along since of the beginning revenue the

in that's We're than our high that, out where focus. quarter customers' holiday business's we of heading simply the time. change And so reflective think really I see any activity. rather running the We're outlook, fourth into just of more

more days calendar. So discussed fall nothing the things the than But will challenging we've out of business other there's systemically already. the within

Markus Mittermaier

it. Got helpful. That's Okay. very

in mentioned be may you mechanical that had Safety quarter, windows access you've the So drop basically, shifting. in XX.X% service restrictions, Services,

sort you evaporate? think would we projects a really being out about Is not Or So as of you is? pushed COVID really more next about it that of these of that? think possible to that how delay, the this should impact that think whenever window

James Lillie

comp tough also, I last a But fair that's had in good We think fourth basis. quarter that, it's a segment. statement. this very a on year-over-year year a

a last And track so just the terrible the favorable of people great knowledge you hasn't that a are and those the don't tough things mentioned. year, was so while all company, the the But comp, year. this been far record weather It's have weather of drivers. really primary

Russ Becker

of a Markus, if bit little add I color, could too.

contract last if our by backlog is While slightly we point basis higher very $XXX at a actually consistent contract our is -- was where it this not year-over-year backlog, million. year, don't publish with on about

we just So the truly described, it and spot. had getting really as like in is feel Jim pushed things out, a company good is

Operator

Your Andy with line Kaplowitz the next from is question Citigroup. of

Andy Kaplowitz

follow on can I maybe up comment. your last Russ,

about the backlog. talked You

especially service like time, early bit your mean in turn a business do the at to was the it's 'XX, pandemic. you to it's looks have safety. service up You the up talk specialty starting I same But that mentioned quarter. in mentioned little about and during you

about and growth the any initial thoughts in another, initial segment the 'XX more you'd but any businesses, maybe X confidence that thoughts have confidence So versus in have? you around level

Russ Becker

Well, budget of haven't as business our figures I put model remain we we forth any those seen this speak. confident But you. the to at that up we're point. rolling in we XXXX really

bellwether And pavement X%. right? up year-over-year the you our to are from in a lot Services, pounding basis, -- inspections a inspections we If inspections, look at is as really just about talked relates On first. how Safety we're right, selling it

call we I of reported end the the quarter at the as well. second that's what think in

of maintained the in And the so that we've quarter middle through pandemics. the third

move for work 'XX. that a in we We've and focus delayed mechanical proving those And And we're see fare Services to And their were should being lot went accurate. some comments so that are we services the as service our a and we into as Specialty continued think fiscal into through talked to in accurate well XXXX. is that, going I businesses this growth of they're move the confident we that believe very of be and resurgence activities about course year. acyclical, as business

Andy Kaplowitz

But about off Great. adjusted I $XX almost of temporary million benefits the still And benefits, sort EBITDA if margin. you rolling of did even exclude XX% here. the already sort you of talked

-- office just ERP the during want So target. look, cost I your margin back that know or have business consolidation, to much go is you the we don't it so accelerate versus But us you've reset color to as 'XX, know of more pandemic? us things taken thought we or out possible you you than how give tell able been implementation, on structural like have you to into

James Lillie

but that, going We're Andy. answer right, macro Russ goals. change let to you're not I'll our

Andy Kaplowitz

Jim, other It's color? any answer, a nice short but

James Lillie

Go ahead, Russ.

Russ Becker

takes, about I company. bring -- costs incurring Well, also back, a we relates are when as right? we you And these to some it continue costs there's and becoming think additional the puts it, mean, public as to

manage And we need to those in include our as those as well and so forecast have to we expenses forward. move

it's taken one out were in a all. the not that just So businesses. It's the size fits individual expenses not

a So to you look macro at on basis. it more have

to do know, I to anything don't you So Tom, have add that?

Tom Lydon

No.

well. said you think I it

Andy Kaplowitz

XXXX performance, And pretty free EBITDA almost flow. I XXX% this follow-up still conversion you of guess would there been to quick you maybe obviously, would then, target And be good strong. for Is be I X to seasonally, any unusual is know your much expected highlight Tom, on for year. has XX%? is how good? it way relatively Obviously, QX we because, cash mean,

Tom Lydon

Yes. Well, it has unusual. been

revenue a drop AR, big about in the if way look how that's is of take piece at think driving the kind improved it's to been unusual think I a that's on a that of in just you relative as We the to continue and fourth do cash off it to the the throw has past basis. expect performance, quarter direct cash to connection decline.

Russ Becker

working the think people which for important why you, tell to cash to Andy, that getting want would it's I at And cash of some goal to of work capital, flow use more people putting to more and activity look XX%. conversion to continue I means businesses. our fund we're that we that's within

it just X any look point can't You at at time. in

range a because work. it time at that to over of to look put You some we have to back of wider cash want

Tom Lydon

see cash first start capital go to have typically right growing and as back it out, for revenue, reasons. you'll us come increasing receivables we quarter. through first of needs. months the activity, We're the And Russ our of in said, also typically couple and working the then And we're have growing

Operator

Your the with comes Barclays. next of from line Mitchell Julian question

Julian Mitchell

questions. had We've some long fairly

aggregate couple what I'll expected the of and EBITDA to free help million so or profile of Perhaps collectively of conversion first us handful it those sort what's or due on Maybe the months. also, various keep acquisitions the that is? And of So understand flow X X-year cash transactions? around $XX the ROIC of next concise. the try close that one in are

Russ Becker

model. to of businesses be middle free flow the on would down the cash component. we on percent. conversion the expect all to as They're They're business plus right our it -- recurring Well, those XX focused the fairway revenue relates the services to

target that's be That's in margin -- would we EBITDA expect our to capital. expansion not And our that we so accretive metric whether on conversions We're flow to focused be and the on the Julian, we a going right don't cash don't currently -- range. We track overall to utilize. invested goals. return

Julian Mitchell

balance then around And second enough. sheet. Fair the perhaps would question Okay. my be

of pieces out coming obviously with in, ratio. saw you There's conversion. moving of So QX lot warrant X.Xx the for the a the leverage EBITDA deals, the end now cash

this let's So of played being? position year a maybe once have early end leverage lot do next those things the or where of us you understand, help out, say, see

Tom Lydon

Yes.

to expect year, project So we'll to midpoint net basis, think that on you be place in that end of of kind to good as we the X% in we us look the X.X% through kind of land. a range, right

Martin Franklin

Yes. But target obviously million X.X%. proceeds, about $XXX somewhat is you be question million come the it's million is would -- as know, lower. leverage, outlined -- to ratio $XXX other X% our warrant of that I then warrant of think and the your long-term leverage Tom If $XXX

James Lillie

this -- And kick Julian, just Jim. If could this. Yes. just on I is in

that but really that be about, If Martin the to around Xx, quarter of We year the expect we at range fourth normalized ended acquisitions. that quarter talked about. $X.X we that's fully X.X you did will be of think to on in calendar the function a more a million,

Julian Mitchell

see. I

would or doing no carry implication digestion period year. be from There's of that? you anything on can like acquisitions early the sort So next

James Lillie

fine. No, we'll We'll be fine. be

Operator

from Baird. of next question Your comes Wittmann line Andrew with the

Andrew Wittmann

guess, been good. I it's on lost fine and maybe of profitable good. want on well you all that's not anyone, to that segment. focused start, guess and I expense I And think on I obviously more the margins were revenue guys Services getting The have Industrial quite

I -- think maybe closed the the performance quarter, of terms this projects terms quarter favorably unusual certainly out in exceeded in our expectation. I anything we the of was larger in into wondering, that there's the as Tom, to if of or strong we it perspective aware margin anything performance the way terms extrapolate be relates the accounting in future. that of would should

Tom Lydon

quarter the expected working Yes. No, be of through unusual closing we in the out seasonality. with there quarter that from was fourth smaller, just something What the was out better, normal different delivered nothing quarter for We quarters. Services had the there was expect segment. in do was Industrial to very consistent what

Andrew Wittmann

And was commercial portion just projects. hoping I just a some it markets Safety that sounded understand bit more delays of little of talk mechanical I could key It then, little about Are segment. the was be you are nature Great. That sense. in seen. the makes we you specific by if which of affected like Russ, just the of the those Or wondering more build-outs bit mostly Services you've a offices? today. about could delays like could being those the mostly was so

Russ Becker

some to right. would probably the in saw Services primary we the Safety push care is out health where things say I place

pushed I the their would do have. of of out of outbreak potentially any risk delay the some planned the commercial maintenance operation were not extent. COVID you not I start-up delay But maintenance say whether care we or And because market. real to outage canceled. the didn't delayed it's A primary their anything think had markets of some seen work, have work. want just haven't they outage a market that and mean we're in But I'd end middle that you scheduled those serve, that great clients mean, don't That had mining doesn't end number of Services office of the we think outages. work that that commercial is will, in to developer-led we that's our the if any We about industrial one When a estate. facilities. advantages Specialty of outage health

delays segments. saw we some So really in both

Andrew Wittmann

market opening company, That's new different different certainly, different different different to helpful. growth a Europe are dynamics us important, And that talk here deal. could with the and the then with things could us acquisition comfortable to opportunity. through as labor put a little my set, get was I the new you it. hoping in capital comfortable just themselves. there. you Got decided you similar type, is about little how as that and I but got bit North customer was just regarding think, a with really question in of walk types cultures, customer guess through but those hoping I bit All of I that just last a come customers went process markets you rules. American the regulations, this in new probably certainly you, focused And same businesses, historically up

Russ Becker

Yes.

business in to have U.K. we and some in So U.K. always for the in the of years, that we've number had continuing a Europe, that's we've platform interest based had general. in grow a our in and

the provide, can so the and and the provide spend with safety tell is collaborate the on team services Services. And work services started already we center with the mean, to forth. right I they the And vendors so down business team we great Safety was our our between opportunity. great so in that of our services our SKG on really would that I how us. you synergy do, fairway the SKG for a there's we've and that they leverage

as business. a So like down think of business. fairway. leadership a by stretch huge team like not of the reach I It's the don't or stretch imagination. us right any not it's rock really It's solid. They're for look center SKG there. at I And the a the We big

is then it and Franklin is that other Martin Nomad of -- with involved part the So Foods.

European of to got amount in addition the the experience markets already going we that they've be experience on so And working that well. in lean as able to we're tremendous there to have

SKG, already think to We think exploring going platform We're a we bolt-on a to that's us to of for small with. acquisitions we're forward very and exciting. move great it's comfortable. So couple be

James Lillie

give some we're multiples to Martin, you talking tee do and see on us tomorrow. want just acquisitions acquisitions, of just the color lot up multiples? about to people how a we'll I'm But paid. Martin at we've Andrew, your have we're on asked thinking about conference that you and about since going phone, we have as

Martin Franklin

know space Yes, -- mean, of investors and the who are you familiar. as sure. I probably sort

the some have You late. of of been companies service at other sold look that

know, a not traded them enough are far, I to you with you ZIP look know Logic, APi, buyers at at have at model look XX-plus got that want SKG. all companies. You've saw going you way perspective, our I which you if mid-single-digit we to it, our the as start fit all at check moving so smaller of like, that's should many, right you to XX all buy, And right, has arbitrage the that's our really who think as to acquisitions. for in our the and been has I midsize, we philosophically, companies think from rewarded to we use quite trade [Indiscernible], fit, that investors like multiples those think in would buy for which as how But many large. things between entry us come norm that get like at smaller valuation. how we're probably up multiple companies like the but use not We've the you and we're levels. find When an used and We go. the Obviously, multiples, that, acquisitions, People appropriate same criteria, disciplines at if is know that trade to long boxes really small call multiples. code. the Service levels, we to those our over tried long those And on EBITDA years the, we've

the you smaller really fits are And part things of smaller you very so acquisitions, but you acquisitions. the there so said such the story for don't market, continue still So are is from pay of us the door But very it's fragmented in companies. that for you is to sort all. the perpetuity us use prices And grow. a size was series can one that there's the -- self-funding at to beginning been think for very if the many many one of look opportunistic. of open we really that compelling do We're as much hasn't we

roll You for various capital company the really geographic markets. need to additional acquisitions out those in don't

be And platforms SKG, on to take to with can did list acquisitions. strategy priority additional to pursue. create the like the ourselves into new continues we're very territories, high and that's that going we the we So extent, for

expect the So into to X more the next same kind philosophy going of X-year program. of

Operator

Your with Davis. is the next question from line Thompson, Thalhimer Adam of

Adam Thalhimer

QX. up in color as great next just QX, us for Congrats much little was then something more year? on sets safety Can kind of an you was a the down comparison give is that a as was in surprised it revenue I'm the you that? business? that why And easy

James Lillie

part not to I'll question. first Russ I'll of that say the Well, answer the part. let

Russ Becker

there's Well, where -- I mean, primary impact XXX it's as that's safety mechanical -- the was. not well. we have services And inside services

impacted we have than have that others. certain by locations more also were so -- COVID, We a

about at and of of and that it impacts as a a And looking to York element an and their more the the there on get New is There's cadence. the normal from country had rest compared geographic New to think York recover well. like back markets so ability basis

for of our New and one So but the tick But get taken and based has now I will, normal like those. is it's hours to up, ratchet we place slower, York you we've orders our kind longer at on companies, back the watched business if had different of by track where man of that business levels. to And every up, single one today, like week up up, shelter-in guess, marketplaces more and and being man certain rates for tick up up. tick hours we pick pick of

aspects And all you're the across that managing of so business.

kind markets. largest And get some of tick of a safety services and life of of Canadian lockdown Our level as the in watching We're other greater Canada normal business, a we're same thing. went up back to the those And Toronto into place. back hours than more like provider specifically, well. it's the

by business. varies so it And

on respond. variability you based of each And those and and so the businesses to react in make how you one have decisions

Adam Thalhimer

work a top way thought positive school was school of of election was that probably I -- seeing forward that. it's a there now start an to have are vaccine But we post But Russ, election. probably guess, And early. those some would And I Okay. then, delayed on of of too too these post a positive move uptick that thought early, way news from have vaccine now news, events? there you mean, we but

Russ Becker

for Everyday I of readily Well, too available vaccine much not a number is months. it's to mean America be think I the going to early.

continuously change what business, we second going and there's you so we we that by respond can and your happen, are that react. is to the our plan, wave And markets. expect looking so going like what's are things again to at And and are planning

out look COVID. So look like because the at of restrictive with more like of you came you yesterday, Minnesota if if actions it, governor

conditions we've you businesses going Now to it's have. individual to and and manage I with. that I our that our early affect to to going so business don't we the continue is at properly you to think state we have and what observe market think the tell. all. that and each faced I And it's community But that demonstrated we're too But individual think are based that conditions the doing you situations to can respond react proactive are on

keep into like, it it's sure a position always as in your X But that and respond eye it you're of like and make with. that Our And the backlog call back you're is I conditions the productive that gives XXXX paranoia. solid. in to move can faced I confidence mean where us means we to beyond. you open head great

Adam Thalhimer

in on very top good are line flexing estimates. The job the of the No. light And margins EBIT impressive.

James Lillie

have Who of election, the I'll head that about, into next relative we is though, think to things and year. the as you it, -- call one relative certainty just also to

if opportunities on but on in us, We're Congress view for the upside both planning mentioned Safety forward business. in it moves As surprise. it there infrastructure that together, is If and Services kind infrastructure, the Russ gets act of as just its and happens. for are call, Specialty not a tailwind an we anything,

Operator

with Thompson the Thompson of Kathryn Research. question next line from comes Your

Kathryn Thompson

on be these trajectory the are many of appreciate to the the more strategic James, when multiples color in detail, think. bit part bigger And that also but this thanks, And But the just to hunt be X, up want so strategically I give you're explain companies the of for quarter. just thinking which able Could was picture, really down, then fit you was forward. with to how your going growth to of gets the that bigger following on remaining Because actually, little understand terms of going the for closing you're part going how acquisition, X a picture thinking into you these I company? acquisitions, a richer it that.

Russ Becker

your for appreciate very much. question. Kathryn, Thanks, it We

geographically our again, something continue So to complementary tell business. you the very would specifically acquisition that these geographically is of for we footprint. are in to is complementary build to Services. But transactions And I that's in the Services, Specialty as platform, important all existing that our us out Safety X

one for component service that's all So of on key driver us. focused revenue recurring and service. They're the

through thing today day The you that those we from know APi an us, positive that's in they can for business strength it's And people, our buying for add well. share these when us from from know improve X. we and opportunity good it an a just the we that think to great results And help -- is for and as And that our so operational people that operations the culture a us about fit values. our to are perspective, quality they family.

Safety will, the on you Services, to the just from call And continue it, more of -- to to we I'll the inspection and having the that. continue about America. about to on geographic, we so we're talked And across for if able there's our And just across really expand today, clients, some to our corporate talked U.S. service do it. of in us Canada. and we we as better call the corporate especially XXX-plus opportunity an to a put North tremendous clients tags locations perspective continue map, amount need In

right what we're our So sweet these into businesses trying to fit and spot all accomplish.

Kathryn Thompson

up then between you a service just a color is I on there And gave. also following the improved appreciate mix that and Okay. greater efficiencies. margin

about For you that half you cost it was helpful -- parse it cutting the half how detail cost would help talked versus say, it much other the efficiencies of was least, could mean measures? but listen, out and us of well, to and versus greater quarter, mix in generally, at it cutting. I be mix were

Tom Lydon

Yes.

with put a quicker some time offset there's to we you're can There's in described in have there. pricing instances project. think It's there. a places very that tighter a a truck little you've COVID of a of right -- that, levers. get got road. have we what difficult I we We're improvement bit for It's we've we was because better less had. little to us people any we that that can't go execution. directionally to have then where But that of work an a cars on than X There many bit combination on the to information

going. So X we've got vans

rate and loss our think as well. working then little I execution everything. a as have it's containment directionally, it's But So of mix contract we on and really reducing cost better

Kathryn Thompson

I journey? best practices are on into you the terms specific how Could give rate these update you There's question is to And And then, goal this organization? the terms great today for of implemented a in year this your least goal where And just that being last and of ago project towards been upside an the guess, final versus selection overall. day. in of a margin then my initiative? that, focus what ultimate Okay. in a across are at point deal loss for just reducing the

Russ Becker

loss would rate of with a it. we that year. X.X% I shared, last think, you So we share that I had And on contract gained we've

on not set but a year gained to XXX% have there, by reduce that and on we've gained We we've that. half, goal it. We're this

the do gain. just if X.X% we you've you get it it's I and X, to simple a mean, if math. X.X% Now got

go it is. that impacts margin of it out up mean, -- that, customers. to it's just throw that you that's of take can to to money goal be figure to I makes so what So out provide should me like -- speak, It on we should the our some myself pocket, services think our And how X. our intuitively, the

be And be have so disciplined to we and better. we have to

no-go actually proposal on have people opportunities come disciplined that's agreement pencil certain to a desk. relates much had get size, got million see of process, to for it inside that it roll it. app for client. service master to So Even preparing master that their my as always desk, a we've to instituted I comes when really they And $XX across that it up opportunity checklists But actually so that implemented all a a they to a if this more a through $XX,XXX and to an it's we've have agreement, large service are across devices my a a is or -- larger speak, company. they paper put we've -- process go, that before notification their they the to even opportunities for submit go

it's, to situation, so for. and as comes we to business in more down who make our sure selective Kathryn, And it who's work we're I to relates we want bringing to every to the almost we're want working discipline really do guess, for. being who And it customer, that in really

James Lillie

Jim. home this. runs good We It's question. have part it's doubles. It's bunch plus. Kathryn, path into A very built singles of a the don't to and any And all of all XX% our

don't So bit over X for get item the a margin time. that but reliant to Kathryn, on I mean cut With we're to any we're little to goal that, XXXX. you off, expansion not us

us. on to there, as coverage first the which, out CJS knows, have everybody guys launch was We

calls, And you we have them I But end so other their with know I them, think we get guys should investors. question. have calls let and with

So if John have CJS. in we

Operator

Yes. One moment. open. And John's line is

Jonathan Tanwanteng

really appreciate short A I'll keep answered, I questions it on just We time my your and have we're support. know lot to one. of been so

expecting a Just wanted from in you're contribution your first, into to wondering, what drill the SKG? was SKG guidance was QX I bit.

James Lillie

about in million call revenue. million about and in $X It's $XX or $X.XXX it, EBITDA,

Operator

disconnected. line My has apologies. John's

James Lillie

everybody Well, John sure to with I'm do don't if John's Russ, to it. guess this heard question. out? heard it not answer But we I why want close that, my up? wrap you

Russ Becker

opportunity this just long work year And I'm of your you thank for to to the we're to people the at want take a company proud a we I proud today. No. the blessed Yes, amidst very We're fortunate team have pandemic. very be public very -- APi. feel in But first would. for great being and I APi. call and journey them. Jim, joining to alongside able thank interest where our It's with the everybody of again morning. for really at been a

you, and each we you thank in So coming look visiting the of with days. to forward

James Lillie

Thanks, everybody.

Operator

participating, it's ladies conference you your call. concludes lines. We and Thank for that today's This could thank disconnect and gentlemen. now you, you

APi (APG) 11 Nov 202020 Q3 Earnings call transcript