APG - Earnings call transcript Q3 2021

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Operator

Good morning, ladies and gentlemen and welcome to APi Group's Third Quarter 2021 Financial Results Conference Call. All participants are now in a listen-only mode until the question-and-answer session. Please note, this call is being recorded. I will be standing by should you need any assistance. I will now turn the call over to Olivia Walton, Vice President of Investor Relations at APi Group. ahead. go Please

Olivia Walton

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

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

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

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

reminder, performance have our on As of detailing a website. financial we posted the quarter page third presentation a our Investor Relations

include our presentation. measures other other and financial key press also our The found non-GAAP these information regarding and today reconciliation items metrics. release will of Our can comments operating be and in

It The and The There adjusted website. impact on the section now quarter. turn no same to expense company the updated remeasurements for and to available are have amounts for selling, Martin. note my information gross over and call please periods associated prior of to is administrative is profit, in our presentation. fourth been periods depreciation Presentation the is pleasure the the that recast adjust income longer comparative as reflect addition, the In with supplemental acquisitions. approximately future actual no net general

Martin Franklin

productive a had I We one. Olivia. add, and quarter another might you, busy Thank very very

last and Over announced call, loan an or to business of the and security add since last equity earnings the offering our term the on XX Chubb a to and planned safe company. of capital the facility, our update and we bond business successful completed days fire very acquisition the these Kevin, activities investors new offering. opportunity and of markets investors Russ, and Each current gave now I Jim introduce the to so

new as October the XXXX, focused passed welcome also company, the recently will widen anniversary upcoming all the company in We three with APi we're very acquisition the of they for in acquisition months since completing we two-year open of as future our you X, APi bulge-bracket and being with very in analysts another will firm achieved the Chubb. while the the new Having launch coverage coming progress investors. acquisition to strategic of APi. of to the on network Chubb pleased audience continue chapter on The

Russ. most focus value of to we strong -- speak path would will our organization would business the I'll performance the I on to thesis opportunities the the leadership to our performance and as investment value global but of hand to services, see safety in discipline foundation for but future future. momentum in mandated a solid and the view, to team believe a the continue bright the are Kevin We Russ build make APi right of on his the that that, opportunities have doing leader over strong on original of very of business us. already we majority things clear life continuation and Russ recurring of creation. our the also the of shareholder like add creating and speaks the we However, With team, of internally as revenue the and front our the statutorily for services. a it call in I the the concentrating business

Russ Becker

Thank for taking this our morning, you the Martin call everyone. good time and Thank join you, to morning.

APi operating As you Martin Kevin Financial senior on from a evolution President release saw all person and the our from including journey the we're around our as and as leadership being company public as the of APi heard press business public international at to life for leveraged leg our the continue background, Kevin's services immediately company integration of right Vice deep and is and Chubb delighted new time APi's next He Chief September this to welcome right team. the is leading growth as and following world's and our begins acquisition provider year-end. Officer, X, Executive Chubb. substantial safety we the plan for of finance integration the acquisition Krumm, and experience,

our very another completion our entry all announcement the on the our priority. the this fire quarter. our in July safety, an one active health of operations for our of well-being productive three of XX As that months, the agreement acquisition transformational team, of of business ongoing was stock remains addition September delivering number offering operational and on of our on security leaders all the into Martin and we solid to business an performance. From had and common Chubb activity, said, expansion to and XX of leadership executing Despite the

by team provide strong a third outlook summary thanking would quarter the of Before of on positive their I our all an and update results, financial ability our impacts. to I quarter of supply ongoing execute for in continued and hard amidst with our am Chubb, acquisition the to of we you like evolution inflationary chain the the our to business. continued and disruptions with third COVID-XX ongoing pleased pressures start support work

combined project our selection recurring such the services-focused our disruptions and some expected, customer through inflation pricing, yielded with strength to chain results. approach pressure impact downward business margins of as as to approach revenue our supply caused the and on While modest model proactive disciplined mitigating measures and

As we well our is we long-term believe future, goals. the look the positioned to achieve company to

seen an year and high for Services increases all Backlog at segments have and of we our all-time to is segments. our three XX% than levels. Safety backlog Our more is Specialty prior up relative across

across to end see We demand as markets tech. strong our data spending such Last and infrastructure care continue high key health agreed and to centers, centers, though. Friday, fulfillment Congress distribution an

net positive us. to We expect for this be a

renovation have such XG and As as anything energy, we benefit services do for into stimulus competencies our an we build our have expect would the do gas certain existing on to renewable infrastructure. that existing core business, or past water not with said incremental We opportunities. in fiber, infrastructure of built incentivize of aspects investment to budget a calls, combined due

language year continued considerable contract our into mitigating focused XXXX, through the constraints, planning supply closely on of will proposals. proactive for approach of We inflationary balance the risk the opportunities through move remain and existing time beyond chain appropriate we and also and pressures our pricing spending XXXX success for remain and vaccine to a within monitoring we'll businesses amount achieving are core we in bring. and are mandates As and

in detailed plan annual margin growth our our that operating potential strategic outlined to budgeting As opportunities reviewed achieving during of their of process, long-term to a each and adjusted map challenged segment a challenges any develop companies These April. part planning as leaders our drive as sessions key we goal revenue to XXXX. Day expansion EBITDA XX% plans market as road an unique include with well operations. addresses our the of the towards Investor opportunities include for are at margin following by and and of organic These initiatives, our

First, improving mix. our

on We have and recurring a relentless growing inspection service focus revenue.

plus track project and XXXX. Two, by customer goal our achieve growing We are inspection selection. on disciplined revenue to of in XX%

Our improve. rate contract loss continues to

significant or in achieving X.X% progress our target made have -- of We towards XXXX. less X.XX%

resist We higher-risk will to continue activity. lower-margin,

sold Fourth, opportunities. as leveraging areas in And efforts excellence. call. provide focus such continued procurement. Third, business and fifth through operational our goods and on later on and the transformation of an will cost services Kevin update lastly, shared process SG&A pricing

of business heard there couldn't As many better. previously, one that be part our say you of isn't me

revenue Since Before previously of update providing Kevin call and cover to detail, our Most from growth to do acquisition accretive will expansion and importantly, bring I'd a talented carries platform the about close meaningful. at our in such working the like prospects more synergies, for to products with values Chubb. the and the our will complement and excited turning that an year-end, around be of results customers spend validate the excitement remains the more level that cross-selling continued leadership we our be opportunities transaction it focus opportunity team which international transaction international from APi. belief of to that minutes few same combined certain couldn't is the services over with on will the we announced has on to track our that announcing outlook and margin highly the compelling teams a about

an ingredient similar intend both best growth, professional, business Chubb environment a the advantage flourish. As personal In the to last XX,XXX drive We grow forward value across and are the our discussed earnings to employees aspects individual creating creation. long-term practices APi, can is our believe people a continue We business, both competitive all of in look great and which people-centered and the leaders organizations a shareholder to of and success. combined to center on business. is to call, key leverage

We teams on integration. have dedicated working the intently

in focused have achieve You working Chubb, discuss our Chubb are the I'm goals, many excited financial detail outlook the In forward peers getting spent aspects then few this transaction plans with with we people after XXXX how integration. of in to Kevin a is to providing we have I our that year may through the our the budgets team press operational higher drive week with momentum the and the in improvements and our the senior We seen challenges last of look team hand in over These two results will charge dealing more designed and leaders Kevin are of business, and how about which of the like planning set the we summary, on just very I'm to to I'm London goals. opportunities with new and finalized. between have closed and transformation before more business. X integration. has the and to functional a on going the the September view now and would to announcing pleased area us. teams on Kevin Kevin? the businesses detail. to synergies after performed excited have business each capitalize exist call on release on firsthand and our their plans I at been

Kevin Krumm

our on APi September morning, Russ I'll remarks Thanks, today position on for be followed good by compared to ended year, performance process before results, the a Net increased business and and conclude organic begin everyone. segment-level update excited Industrial my first XX. to by consolidated three to our brief XXXX, operating XX, our outlook. joining XX.X% by a providing on revenues will sheet here turning call basis an earnings reviewing I'm months balance transformation Services. my on by discussion for I our efforts. since prior excluding September

and and year, offset point improved modest downward in which September segment prior XXXX, months XX% on expected representing three ended the to basis and chain revenue. excluding the XXXX driven Industrial growth XX a gross an this revenues This for XX.X%, pressure service outsized the increase by was inspection XX, partially supply was by Services compared For Again, on disruptions XX, inflation ended organic September year. margins. basis Services. months compared the increased Adjusted causing is higher-margin is our net margins prior mix of nine to Safety

joint drivers the was partially was to ended disruptions, XX, compared was which mentioned higher-margin adjusted the For margins chain and mix XXXX, point quarter our Adjusted modest segment by an nine or items months well Specialty driven in this in gross months for by This Services Safety segment. margin less was EBITDA basis contribution third and prior XXXX, prior inflation September improved for gross causing to from continuing the supply as as year offset inspection downward service revenue. margin. year. adjusted outsized consistent the three of with -- growth as is This a year-on-year the pressure ventures margin ended was relatively representing on XX XX, Services September increase XX.X%, due XX.X%,

was as to call. margin positive September For a compared nine third September the the Olivia adjusted earlier a ended mentioned which prior Adjusted basis months three point the ended the XXXX, excludes earnings per was the due XX quarter months of remeasurement $X.XX XX, of $X.XX EBITDA XXXX, on XX.X%, drivers the margin. the to for discontinuance year EBITDA impact share items to XX, for decline representing depreciation adjustment mentioned due

free balance We and cash focus profile continue to liquidity our driving flow strong. strong on sheet remained and

we year-to-date basis growth in As on XXXX quarter, our revenues as a ended investment last has organic working on QX increased with suppressed working capital commented levels. required substantial net capital we

$XX For XXXX, decrease months XX, $XXX the adjusted was cash flow our a flow million, prior to nine million ended compared adjusted September year approximately free rate was conversion XX%. representing free cash and

flow cash our working year prior continue in reduced historical was we basis as with on and performance our Our to a year-to-date trends capital base. build expectations line from

of to arrive around adjusted cash additional at generate cash an conversion XXXX to XX%. rate flow expect We adjusted free for in free fourth the flow quarter

under cash and equivalents $XXX revolving million and borrowings credit of XXXX, facility. in outstanding we cash As XX, no billion $X.X our had September

pro be at below leverage of of ratio goal transaction, Xx leverage closing We net X.Xx of net the a with expect returning to Chubb forma the expeditiously. at to

in basis Our results transaction Services model prior of Services. pandemic. focus and Safety the remains will our to three conversion the period our an near-term operating will in ended by offered compared service asset-light I this due approximately we through our in to segments, of cash our revenues detail business and months with the by deleveraging annually. September the recovery on general do XXXX, for We'll to negatively continued one revenue discuss each more this majority XX.X% growth free three while the inspection continuing across which increased for was on by do closing high and process markets flow market and the primarily beginning organic then now XX, Safety net impacted turn by combined year improvements. and leaders invest the

revenue increased net margin For the gross three an quarter XXXX, months for for the XX, revenues XX.X% nine basis growth. months drivers through third XXXX, on ended items organic as September the XX, organic mentioned September to driven was was XX.X%, disruptions ended by mix prior year compared an by representing a a XX in and productivity. of decline in service decline resulting This chain partially inspection improved basis revenue. point certain offset supply periods Adjusted

negative of for representing due XXXX, point partially inspection XX, decline was service the to For XX, ended containment was This year adjusted Adjusted the consistent September of basis compared to three last prior EBITDA temporary XX.X%. the months year of an which with XX.X% the cost margin return revenue. XXX gross is offset ended implemented largely prior of nine improved months margin efforts impact relatively XXXX, to gross adjusted counteract the margin by XX.X%, mix a September pandemic. year the and was

for impact ended the discuss pandemic. X%. increased demand organic to our net XXXX, Specialty efforts This mix largely last XX counteract implemented the ended XX, contracting increase months going results revenue. due was September is nine the I'm containment service September three representing and point offset prior was Specialty partially to services. compared specialty for Services to basis the cost our an basis XXXX, return the EBITDA revenues a for an adjusted months timing the year due to improved For This of of margin XX, Services primarily segment. temporary negative by the inspection to XX.X%, by and increased now of on year

additional basis being compared pressure XX, quarter by For for which XXXX, revenue chain of for selection. nine quarter the XXXX. modest items gross prior three in to the margins. revenues an to due weather September an offset and the by project ended partially increased was XX basis Adjusted headwind and disciplined downward XX, disruption representing causing and to the XX.X% mentioned an third months the with the net business growth organic I mix a customer on point supply inflation year is expected was XXXX, margins ended September revenue service decline to with third XX%, organic months QX This improved on due

the a the basis ended was margin gross September decline from ended mentioned the XXXX, XXXX. less third in period. due months prior temporary items pandemic the the contribution for point year cost along XXXX, months margin EBITDA Adjusted to XX, year to to largely noted XX, to the quarter and lower the negative representing XX.X%, conditions of first nine of the items prior the adjusted XX.X%, with to XXX for three the decline to implemented margin the September for year along point a representing due joint weather with unfavorable efforts containment performance XX ventures compared quarter, counteract return gross compared productivity due prior faced For basis was the in impact of

and was suspend is was as improved compared customers unabsorbed ended year due by XX.X%, prior selection, delay our period. from September projects This for by EBITDA offset to as X.X%, lower and to months our and partially XXXX, driven margin costs well volume. XX.X% difficult leases the XX, This customer service Adjusted revenue. Industrial industry For mentioned a The and due point XXX gross months the segment. decisions was discuss ended nine Services items three of by was and respectively, decline equipment. by and margin in mix to XX.X% conditions. XXXX, compared ended respectively. on basis gross disciplined September decline driven quarter XX.X%, organic nine to September and XX, The for by adjusted margins. declined In our months margin an decline and the on adjusted now the Industrial year basis the net third our XX, for EBITDA three for XXXX, focus Services, XX.X%, revenues to prior project the representing continued I'll respectively. was results certain This XX.X% was

X.X%, EBITDA was prior adjusted compared and The in due nine third move XX.X%, and I'll ended XXXX, months guidance. decline now the respectively, respectively. and to was year gross quarter performance. margin period. adjusted X.X% the gross This XX, items noted XX.X% margin margin I've our XXXX to for was For the September to the

Our reflect the full unchanged not year and from for any revenue adjusted contribution and does acquisition. XXXX remains upcoming Chubb EBITDA

approximately revenues adjusted XXXX for net quarter to expect EBITDA continued to XXXX continue $X.XX in and We million. fourth growth between of of with adjusted for the billion billion $X.XX $XXX

to approximately million. expenditures continue $XX be expect We capital to

earlier to be on million previously to expect related of includes call. $XX $XX as depreciation million We periods which the recast the comparative mentioned approximately adjusted,

capital of is cost Our approximately X%.

adjusted Our average estimated rate for share is weighted XX%. remains diluted effective long-term XXX count mid XXXX and approximately our adjusted And tax approximately million.

the outstanding weighted shares is a reminder, As average adjusted diluted million. quarter XXX the for third

of Before This turning project. our Jim, with improved allow allow model which the call business I'd a to over a on leverage margin technology SG&A. includes is to planned. processes ultimately to call. efforts by year-end further as move multiyear like outlined drive goal brief expect This adjusted better will also of ongoing efforts provide the at The XX% XXXX shared continue leveraging business us to true one we forward our towards procurement our is earlier to EBITDA our by transformation tie we Russ process for and expansion. includes platform update of purchasing expansion to move process margin to mentioned This in contributors further scale and Day the and to Investor service

delivering in making pleased deliverable many milestones largely that improvements start gradual business on as as will come. is with for line allow of to established progress, with the plan and project. the benefit that enjoy at years the the We're the in progress was overall continued we the us made to key made schedule the have -- the budget We continued we've are

has one this our and better the to in investments that flexible advantage with transaction the the remain end reevaluate of we you ensure We and and forward call a We the to a of the XXXX need, in so needs. incorporate to to gain project planning, their we thoughtful closed. they've projects Jim. business made plan. on all integration meaningful, will transformation turn and global, go-forward understanding we through the process I'll have and Chubb's of look updating that and rescope go process As budgeting intend once Chubb we now Chubb company take over

Jim Lillie

the we've environment cost in Thanks, despite disruptions operating that the Kevin. and supply of in We believe chain pressure this seen is inflationary company well industry. the some

Fortunately, have mitigate APi has and to some than these more that longer inflation. issues businesses contract than ours more exposure tools have durations to

believe and what do immune in isn't APi we drive protect have While competitive certain occurring advantages is marketplace, the to we shareholder that value.

and team always negative has they culture these cost-focused effects. and proactively been Our preemptively a are minimizing at skilled

the our three is stated exposure including limit helps average to our $XXX,XXX which segments, than raw all of As to increases material less in we've of previously, size our projects, costs.

than addition, of less duration In the average six months. projects is our

environment. inflationary So exposure in goods experience or cost than to changes we of an sold others expenses less have may labor in inflationary

creation our value for the very quarter cost there realize believe as very take of on. segments our pricing we security fire much integration also and in two and quarter we demand and and business as as are will on has costs of real-time the true reflected our take are security than third fourth strong growth believe near-term that profile as momentum and for it. gratifying pricing plan from that We're pricing the business. future enhance projects provides allow by underlying very all project the we Chubb It's detract occurring excited similar each we term. a rather see fire our organizations the that as and competitive in opportunities it is safety and is these curve well is us long-term and ensure are given momentum to backlog and in are XXXX near believe the as revenue overall to very move core and combine The This our position we quoting reflected that Our focus for operational Chubb in real-time clear efficiency significant three to acquisition We APi and synergies. and into services, segments. visibility advantages revenue us our in business elevated year-over-year the across as us our organic and has

of and reporting we're look as I'd call all we As Q&A. from back have we driving open And for Operator? with our progress direction you've great operator that, continued turn and to like in confidence the focus heard go the shareholder on our to continue the heading on us, the business we and forward value. to

Operator

Jon take We'll question a Instructions] from Tanwanteng CJS of [Operator Securities.

Jon Tanwanteng

Hi, you that morning all. appointment. item Kevin, back Good question congrats you. adjusted first I furthermore, call. income clearly Olivia or to change your actually My basis, no on a the was and with Is on accounting apples-to-apples wanted an the on you an taking impact? mentioned if prior for cash would have thank is circle to item? what consistent for and depreciation my question. net earlier the in compared And EPS periods have that been

Kevin Krumm

an can And noncash also affect earlier. that. our a Thank impact, answer adjusted it you, change, it Yes. so Jon. I I accounting doesn't referenced It's is cash. it

So the quarter. impact in removing us had $X.XX by a it on it

Jim Lillie

versus XX been XX. have would that the Jon, So

Jon Tanwanteng

I for was M&A And My big broadly, peers, then, great. Logic, is comment of between Service that if the you equity your understanding premium. private more could a wondering pretty environment. on Okay, guys traded one

especially smaller have in multiples the obviously private Chubb you're assets, pay given these how equities these you increase the low the lower current understand what and digit deals environment substantially teens. us and at Can You help assets record a days. for able to in SK for these acquiring things for EBITDA, mid-single

Jim Lillie

Yes.

would robust the felt business. we're our Chubb. As our pause I strategy prudent we And range. That to associated restarted in the exit with and have us of difference very place that a first, sell feel we did -- on for was compelling are thoughtful their tell home attractive by I activities of a sort to engine. financing of well, continuing of opportunities and right M&A part bolt-on most saying are say story decision kind help many smaller, is we the -- their see the not in to on very that we we opportunities mean for very I went have very the and to family-owned start was sell that businesses that that would that But we we take company a long-term was our for Jon, through very the for these thing a slight all Xx company We've that we with something to a only evaluate. still pipeline that that find that also the their them employees. looking So Xx but

we so And opportunities and to our acquire Xx range. story still we like businesses in to for see the that us Xx

Martin Franklin

is I'd also add this -- Martin.

comparative You're of But the the in and mid-XXs of -- particularly larger going United in to right, to play not seeing we've States, I that EBITDA in been our the teens clearly almost in some going We're transactions, the space. terms it high of value, and get environment. where I palatable more multiple. much validates, it's that on thesis this multiples than unique position think a going and the are our can we discipline value are as that deals of we're Chubb, in in buyer feel like a that looking we for opportunities scaled that can in some be at think,

with, So, executed disciplined are time comparative the world public encourage for successfully the but APi but us of there company. that in a out the we're in original tuck-in opportunities should definitely does there us terms going formula multiples what it be stay as over to larger

Jon Tanwanteng

to times Got like the I is could what Or signed know to the a last what to just couple I've signed prior of are more is to be? budgeting bill need point, passed impact start to it to be asked in customers this see later it? one calls stage, for your about plans me. before where their much now you on it but at it's it. a you first for this infrastructure And law, start Russ, prudent for do that announce and thinking wait

Russ Becker

Yes.

lot So a there's I mean, Jon. there,

be the boats buckets floats that It will us. certainly a start all into on plans opportunities programs the we are for by potentially and -- to factor time in impact gain visibility. few I'd industry have interesting a actually as reality and some can tide spending a of positive we those impact infrastructure First, directly seeing and rising additional our a these bill general. will will become There's take

As for infrastructure communities. see rural that business. a billion billion Internet potable an $XX impact also and positive example, We aspects of on for there's roughly for low-income tribal an that would have $XX approximately increase in our broadband that access space. water would There's opportunity

are clarity more of will So won't that that have some places for positive around that plans work factor reality there until be our see happening. the the we company. into actually there we But ultimately programs we the

Jon Tanwanteng

enough. guys. Thank Fair you, Okay.

Russ Becker

Jon. Thanks,

Operator

Markus is question of UBS. next from Mittermaier Our

Russ Becker

Hey, Markus.

Markus Mittermaier

everyone Hi, good and Kevin. welcome, morning,

Kevin Krumm

you. Thank

Markus Mittermaier

seems to gross or in that you pressure are we I'm that be bit where One relatively margins if had inflation Kevin, I but just trying some But the protected? obviously chain little point to project a bit mentioned, pressures. great. can little right? downward pricing put pressure, on safety. if that margins margins, duration. obviously, Should stable and up that means to there assume in here through backlog supply that much elaborate of there short there like back reconcile on margin. that and Russ for able could. that you alluded and segment you sort in terms on what on cost that, could XX% as Is size to? backlog Just then you of be you small were some Understand of elaborate You margins, how coming and Is saw all on you would well? you the inflation that movements that a kind say

Russ Becker

sure. Yes, participating for today. thanks Markus,

for as of there's like separate guess there. the more chain, disruptions chain work. is in that the it be it comes we're in us our things where and business. I'd the to makes supply the supply to inflationary the -- efficient it the of margin few I that execution a seeing cost issues pressure from some productive relates And the difficult to So in

workforce. necessarily of we've supply the us. and we us not not front is in efficient chain, it's execute can it's chain managing effect So price-related. of they working It's productivity-related have efficiency a oftentimes, a supply associated necessarily plans. even job negative our work and on If that done have And being somebody our of as our great with issues

proactive very standpoint. be to that have we from so And

mean, we rising low such. see project a told the inflation, prices work. from the some I negative average the if you be you that didn't of point Regarding steel But I I'd would size impact and I to liar

If $XX,XXX. look project at is Safety you average size Services, our

project $XX,XXX. our average size Our is Specialty Services,

work so forward. into we're really quick pricing programs hitting, in turning, our factor short to the and move cost escalation quick we have part we continue are those most duration for -- the And that to as able that

So, the margins backlog, feel integrity of our the Markus. about I in good

installation really job job language like a price with we a to our make And for communicating work sort service staying I protected of really And built think escalation have have it escalation out that our some communicating from any in sure and feel of we've we that contract businesses the our done increases. of with in we've customers, rapid larger and they're done from from nice front perspective. a of I in of good price businesses. protection price well

Markus Mittermaier

one, more second my That's helpful. long for term. And

the the confidence that looking target Now more old some levels that of of do we be so can months? that much at APi, Chubb, for I maybe months to have we the looked to know have have that at a you also for what now entity speak. or sort you How few you higher is that get going combined is be excited are for share these that you few kind at some XX% If And of on that anything opportunity? even a would helpful. examples more asset -- maybe

Russ Becker

that get confident on people spend our the XXXX the Bruno, I working get team, Chubb, target with the on work Kristin with of really the the Schultes, XX% with with Chubb amount are where The There's for a tremendous margin associated and excited. acquisition. integration, getting achievable time that leadership team I that integration point to very Paul I'm closed. more the is Chubb we So the EBITDA transaction our even with and

to for very said to the branch individual performance that enhancing is APi we've Chubb, how improvement that areas we're be improving from exactly is like at really calls, center advantage level transform I of fairway working the have We on really take in of of the good able ownership we're perspective areas really like of taking can And going going of procurement in and feel us. advantage while Chubb. opportunities that's into branch-led, transaction with that other of a This performance branches I've previous we the like how to of their inside a really the margin visibility the model, this focus see is built we're truly profile directly leadership margin and we the company.

confident. greatly I'm So,

Markus Mittermaier

you. Thank

Russ Becker

Markus. Thanks,

Operator

next Andy is Baird. Our of from Wittmann question

Andy Wittmann

out asking few here. Thanks have thought my I a Great. Good questions, morning. them I guidance guidance quarter and implied in And just start I'd by the fourth taking about for guys. the particular. of

analyst quarter, it's little revenue conservative. think you particular, It way? the backlog It were like trending I should as fair be at like in high feels thinking about that this of pre-released, guidance, the expectations. right that the revenues to the seems Am I supportive like clearly end here. is a the bit screens in say

Jim Lillie

it's Andy, Jim.

October I that of range implies think got which high we've we And can at of an now around comfortable the got higher behind with X% consensus X% later your out there quarter. We've But conferences. consensus guidance just is right end gave we're growth. end give towards is the other conference. is now is in or We we where right the which gave. us. the the update

about wouldn't where I are. So worry the numbers

that momentum the you very the third far the under-promise don't of we into getting and too in just if like we If But we've to and that we're with we what the listen what in coming want us. words have the And carrying out over-deliver. and Russ momentum quarter look world to the fourth and the to listen in about quarter you at front comfortable said backlog. and said,

Andy Wittmann

question I it what Got on number fourth be I'd kind a And to the going did it. implies Fair you the quarter. my ask of next year was for big enough. thought free and cash pretty I guess, flow. say

be for guess maybe seems is here we that, capital customer the the Kevin question would in big you it's have the quarter? that quarter about the things into happen a visibility just there that like significant little maybe maybe that I the anything draw third quarter. collections then And fourth quarter disputes inside implication just for know bit or talk And working that it's in that pretty So given should X-part that's like pretty a cash. there it's a slowdown

Kevin Krumm

Yes, Andy, thanks.

a few So flow. cash on things

anomaly ended It's free reminder, our quarter year to last as well is also a We which year is quarter above and an a it note in QX given largest cash QX. standpoint. traditionally that we as important free XXX%. to any base our Just highest flow year year, off conversion for from this in was usually we the cash be back especially expect come flow us too, of our revenue year

So capital where the all levels everything suppressed of last we were year backlog with else. ended because that in we QX with year said, and working of just

So we those built ended year the the the of we really first to revenue year organic suppressed back had. We growth half with the in significantly levels. due significant

patterns, there. is line historical using around XX%. And our a so, free XXXX basis, with a year-to-date This in is flow as conversion reference on cash

quarter. think you third XXXX, look around we So I XX% to at XX% can through the were probably it,

the all flow free XX% significant XX% in that's be on so this the that at we're year. number QX comfortable a conversion that QX year-to-date cash as And we full expecting to said, our for therefore, those why strongest comes guidance year revenue quarter our conversion levels. as off anticipate We're basis, well. around with provided we're And QX

Russ Becker

Andy, any of not ongoing -- do clients right now. any significant just just we our disputes with have -- And

Kevin Krumm

slight Yes. working on Thanks, actually We've seen I'm for sorry, key year-to-date a basis. Andy. metrics our in capital Russ, that. a improvement

Andy Wittmann

but know anyway doesn't Yes, the you that because small it ask. I all of usually to projects lend thought I'd

your cost Russ. happening there. about are that changes commentary, issues, labor question, last availability, talk didn't you maybe In Just labor

that, it macro there, important you're would pretty is Given a how theme ask with that's you're be happening dealing about out remiss didn't if what we that thought and I seeing that.

Russ Becker

Yes.

-- workforce So going first. I union guess, that A fair question the reminder a and I'll field cost the good of by is of I about, a labor question. our to very majority I'm talk think nature.

being our paid. great have into we and are wage packages field leaders visibility that escalation So the the wage

that pretty consistently And into so factor as and able we're we continue constantly. pricing to move forward our really to

We labor. certain have certain seeing markets where more pockets tightness in in we're

more As an that labor perspective. a Houston market from we're and is little example, a tightness seeing a bit

personally an and attract market need keep your you additional And will help first. your draw also a you investment leaders, a labor I people And develop retain installation think that that the the a the our and to that to and little you the advantage leading in opportunity and seen is both me, those women in Minnesota and if has is in us. people tight a that's And to men we've Northern tell talent workforce. the we We one have including in that's of through that to us your differentiator business from that a bit is leaders then them been be the make to successful that of large field, to on we're I'd for opportunities you're all giving grow tightness been But best going step things our grow organization. as that labor executing able to professionally, a of for perspective. first

eye right our continue the our on pinch it we've have on able now. lead keep eye we So been through to the and to it but we business

Jim Lillie

just These $XX pay well-paid And isn't supplement. of, with jobs. we are I skilled jobs This people. a situation hour? are would well-paid These high should an people

you're transitory So to be a will, a higher caliber, a isn't say you different attracting workforce, it. that if might fair way demographic

Russ Becker

federal no additional people provided packages of was well not them to, excess benefit of employment mean that. because government these for benefit wage because on by in the there the say, go -- are their I Yes. unemployment did

field relates And our what so to I mean, like. as that workforce it we that's an have been advantage looks

Jim Lillie

that participating week. this to And in just commercial, looking conference Baird we're forward

Operator

We'll move Mitchell of next Julian to Barclays.

Your line open. is

Kiran Patel-O'Connor

Services. this segment? line top just quarter. for growth to Hi, question this looks that you'll on you and on improvement margin Julian. had about during Industrial return when business the Patel-O'Connor there was margin I what Kiran I is saw significant in a think Can help normalized us like a for

Russ Becker

Yes.

the hit of trough is of sort has bottom beginning segment the that the rebound. and to view we So

we segment by also increase. their spending that the of has our and gas And that business and that the the spend really to the recall, in the which the to will our that fleet regulated spending impacted opportunity, call to we oil really We're in the get in XXXX you in that believe have spend while particular, and where integrity world, integrity want the sectors be we, is expansive to the take working our and COVID. to some advantage I time We inside piece transmission exposure hard energy. but space our at or work don't that that's it that know and back government opportunity is oil heavily see reposition of our really to and do transmission companies programs And was work. Transmission the near segment most for company obviously, margin one If average one gas work that side service space. we're of one starting business, average. we -- the to is customers fleet believe of to

Kiran Patel-O'Connor

us Chubb? SKF And integration is update give integration how help the you of there surprises upside is to the that follow-up question inform help SKF. on then, my Can is anything an there? will you've it. on Any learned the Got proceeding? And will you

Russ Becker

Yes.

potentially that integration going team decisions right current working with to certain with of is really our hard U.K. the that's the outperforms you and way overlapping would to opportunity, the we I integration we our making changes more of to integrate that would people in ago that budget relates right next year to business, Chubb, SK's now. integration firm, that SK's and it are how the business outlook that when on whether at the something that aspects business acquired sure business and business just the continue reverse that want back push it when all an quarter look think of as we about are that actually sense be SK. year. picture. go of in it the first business we looking made to it a markets at build as about put that to if be SK have from So to make a And say Chubb's And perspective, you more the with our the in said would Chubb's relates There we're we're involved. as into we'll share to we Obviously,

than, the us that equals And we opportunity see to SK's business, on in opportunity guess, has I impact, of say, adage an more old general, one think COVID. their say, so, than really, has the in met expectations. as U.S. business integration. would our They an really battled we the We for with I life there's plus one forward had move safety three. businesses

we've through to at we're to would and them level. but a -- better. battled can always meeting performance it higher So expectations. and company And execute be pushing I is say grow continue It actually that the of

Kiran Patel-O'Connor

you. thank Perfect,

Operator

We'll Kathryn our next take question from Thompson.

line open. Your is

Kathryn Thompson

thank my for questions. Hi, you taking

or physical to at to on the categories procure, bit where commentary give update But you get jobs, eye like that ability least are further -- other keep cables for? an are in there are any to and today's optic materials terms to And been harder we out have little are those? if fiber materials of a structural there some procurement materials, with you just out in and -- steel finish an the on Q&A. prepared certain touched just and could it the On

Russ Becker

Yes.

structural in the supply impact business a to from deck out joist biggest And So business. And deck. there and have of anywhere deliveries pushed from manufacturing steel the six and the a -- have perspective, we be is have eight would only joist steel area we manufacturing structural months. of

nobody And and to ours be and a that has so else it we're Amazon able important. We're joist very access as fortunate call planning like customer Amazon to makes of deck does.

I'm the to of fact -- able us customers so cost today want I again beginning to jobs, on there, we've that's that to area that But -- I'm our to is so. of to been the would of short that efficiently. that's in seen our the but to pipe our by through price our Steel going XXX% prices the memory my you work to you increases the the pipe prices. advantage just the are pass that not escalation. up probably an it. just And I we've area those greatest pipe pretty that for duration of increases Kathryn. steel or been seen way able and business point back from we're probably level rapid And probably tell year in biggest -- continue we've the

Kathryn Thompson

are on have that type we is are times terms certain follow-up years' unions we a getting But need just you Understanding coming of metrics this." to been How in five labor. to of and conversations visibility unprecedented set and and union the the labor is you key in for on terms that labor feedback of saying, or may of type -- what back pushback what readdress front up of having in "Listen, majority of from And wages. are have you readdressing already conversations? your Okay. could

Russ Becker

Yes.

largest for we're that agreement pandemic, price it or and anybody to pegged we're resolved haven't during come just basically we the haven't that's one had it like don't right union to, based the To -- else. any was already settled to -- recently settled that both back of union. just wage ask with know we agreement We to to bargaining signatory on I to come today. sort at bargaining reopen I anybody if felt Angeles. us consumer in they So settlement increases sides than and That put had the mean, of Los back middle a I everything resolved been collective five-year us. actually resolved. fair us knowledge, but more collective is way we we the really agreement the my where The

settlement. So it's a fair

better move So could moving don't are as think there. have commensurately. a that come things with up and rates we their up solution wage I down and down, up

So, associated feel that's an I Kathryn. seen think that that, again, us. haven't issues And any that, we really advantage I for with

Jim Lillie

was I to what both Careful it negotiator. contract of goes you to contracts open a but part like unrelated labor ask Jim, early people my ways. for, because career, in my don't It's APi

other And so now doing that. you open the one you to something it years from side, wants for likes the ugly open nobody if And of then for two it started side precedent else.

things rare a event when happen. it's So those pretty

Russ Becker

Kathryn, prices. the over they've last of Kevin of that a just just one pipe actually my point additional bit ear couple whispered weeks. little the down regarding in come course steel

from pipe we're downward at hopefully, trend and increases. price So we'll a steel the see a plateau

Kathryn Thompson

this Okay, demand. terms you But is backlogs great. of And given Great in a question. more if geographic bit differences. high-level just final cleanup granularity of little views terms give you job on and me could have what some in driving

Southeast, -- that the shift the anything but support any to industries the to in U.S. sense of have of We differences seeing essentially, geographies? you makes Southwest are that, the some population And to

Russ Becker

market like such right suppressed most feel say, positive Southwest, most a the business. Surprisingly if the that a of customers North general I for across play to great of will Well, across Chicago. Kathryn, continue additional Southeast be demographic we continue that. those And the our that, that now we'll in And do really the really opportunities. take the market I general, the and probably that us in have in opportunities advantage I is across opportunity. would the But of softest, residential would going seeing all a really that And it, an happens that's markets But opportunities to is don't work just like seen with our really largest as shifts, expansion we've pick and I to Obviously, the aspects don't I suspect as example, good is really pick in slowly show Phoenix some Chicago. we provide to America. But business marketplace recovery. market was had aspects market of on which us. for Intel. one major is They great enough,

Kathryn Thompson

great Okay, a great. my for answering questions Have Thanks day. today.

Russ Becker

Kathryn. Thanks,

Operator

Thalhimer our Davis. next Adam Thompson take question of from We'll

Adam Thalhimer

a little month dipped indicators bidding guys. I on reaccelerated in the or I can say a good non-res you hoping during more give environment. Delta they've for color leading bit past construction really two. would but Hey, the Because the morning, Russ, was

Just that curious your if you're in bidding. seeing

Russ Becker

are have to Well, our word don't bid not to provide work, to I'm Adam to take at us customers. customers and we And going we value this best want do price and that that APi. use select we offense the to but the going -- start, bid we the because only when cheapest implies be our

tell remained see So do strong. like back us activity word bid. no level bounce area Services that the in our probably for to offense would is I The the of has you Industrial greatest but I proposal starting that's segment. not

Now everybody to has to our our But total remember than services home robust have we are of XX% is really so write seeing see less rest businesses anything back. some revenue, not that it's to the bounce Industrial nice about, continued activity. of

some that specifically in have seen Now, we Specialty have out the things Services to slid in right.

actually has in that opportunities also remains move our we our generate those quarter the build but of really into to we've of as forward strong, to one each been and able some have But the backlog revenue been slid proposal that's as out fourth so, XXXX. strong. as reasons business activity backlog into able And we've segment of remained

Adam Thalhimer

of are pockets strength the real some within specialty? What of

Russ Becker

that seeing think I slide chain area just that seeing issues fiber because pockets we're -- associated that an of customers telecom, XG, where things mean, But we're we're also space. I also that's have. seeing in of supply our Well, strength

of the product been has of and challenge. opportunities in that Amazon business of and little good is lot manufacturing center a a distribution lot We've customers a most Our that of that product our and seen with availability or a bit marketplace. associated provide

an our example, robust a customers have that recently industrial have take that really & We able us been to Light, of. is to because came came Power work plans as number of a back as this advantage Florida their on something winter a storm tracing asked facilities. and heat it retrofit year come electric their Texas the us of and that number the number in in utility space, result impact of has had to last a the different back we've of

good there's business. aspects opportunities of our most really So, just across

Adam Thalhimer

Sounds good. Nice quarter. Thanks.

Russ Becker

Adam. Thanks,

Operator

our to the And call any happy question-and-answer I'd session Russ remarks. this be return final for for conclude Becker to does today.

Russ Becker

and continued in I'm gratitude again work for shareholders. that. grateful for deliver women everybody Thank for our to exceptional interest your your just to all work the And results and number very APi. my to one, much, for hard to want at hard thank of your I and I effort. APi express to I And men want appreciate want you Yes. who the continue -- I to

It's have our We And alongside just an we're fortunate each journey. going begun be have ride. us. riding to to of exciting you

a and thank day. you have So, great

Operator

call. This conclude today's does conference

now You a disconnect your day. may have everyone, great lines. And

APi (APG) 10 Nov 212021 Q3 Earnings call transcript