APG - Earnings call transcript Q2 2024

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Operator

Good morning, ladies and gentlemen, and welcome to the APi Group's Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note that this call is being recorded. I will be standing by should you need any assistance. I will now turn the call over to Adam Fee, Vice President of Investor Relations at APi Group. Please go ahead.

Adam Fee

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

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

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

may by to Our of undertake except obligation X, statements today, update law. required make we any and statements no as forward-looking we August as are

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

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

call to pleasure the turn Russ. to my Now over

Russell Becker

this time the morning. everyone. call Adam. our Good morning, to taking you, for Thank you join Thank

hard for our The to and APi. of safety, and our to thank of Before getting into dedication results, the our work remains value. each XX,XXX well-being #X health leaders leaders wanted their I

aim our recognize when our leaders and in commitment training, our not and have the opportunities. At happens men APi, targets. beyond. just believe enhance principles to the continue and of provide human field and XX/XX/XX the as We prioritize branches these investing to committed women leaders field this beings, advancement value field to with that leadership of will we we continue the development one because to in job. to We creation prioritize and each outsized We the them careers, successful. believe returns This success We remain foundational long-term only shareholder will through our are investor lead value. is XXXX investment

of include monetary XX% flow industry these adjusted As reminder, the the in margin organic XX%. more XXXX; average; a long-term EBITDA XX% or revenues long-term above inspection, of adjusted free from service of revenue conversion growth cash and long-term following: and

XXXX, and by with both XX% ending strategy as mentioned our I margins the investors a XX% on relentlessly and plus remain which journey. a focused be expansion achieving checkpoint, we margin in confident our next adjusted destination we long-term often As achieving. To EBITDA driving specific we are not with of focus clear, this team, view

in early to on an opportunities new of As XXXX. this closer the we achievement we plan targets to investor goal, update our expect and move

financial Kevin, volatile. more in through I turning before will be then quarter call, in goals my stated well macro today's our organic call on our begin M&A our that on During a as by the touch walk our will results environment growth who progress on our strategic long-term guidance delivering second results will and I our activity to and continues commenting on briefly recent focus towards remarks continued over detail. to as

margin adjusted growth achieved dollars record quarter. second in EBITDA executing the second Turning results in free generation. evolving and the delivered environment. as by X% on focused plus strategy strong to macro free our cash an adjusted flow Net the APi period. approximately margin compared and in revenues conversion declined quarter year well cash flow by record prior expansion We X% as to dollars and quarter

we slowing over strategically businesses. an past our and this The initiative, HVAC have discussed excellent the we projects. year, has revenue job have particularly on growth As with team in done been more specialty international to profitable services focus

second The at and XXXX. quarter, way growth of done had indicator a This all in our impact achieved year our revenue. basis full while of expect our and leadership project inspection I have that team and team's margin pleased commitment drive up This quarter, improvements pricing, show me federal XX% this these we revenues achieved healthier and our to on in provide said to growth backlog in delays XXXX to year see make once in not the customer even respectively. and to believe momentum following: be year, continued gives revenue from organic our profitability we in up and the adjusted shifts, revenue the is critical initiatives, capture, confidence steady expected as just only delays record service quarter by nearly has the $XXX higher-margin to U.S. basis, in the us, of don't progress APi some pruning. in our and from which that M&A we inspection growth plan on gross life acquisition, and quarter, and our value safety the again still the inspection, are intentional a million progress of slowing with I've adjusted improved to we systems half pleased of of end which business direction for as a better. International business led transforming report a an continues the focused behind adjusted Chubb to meaningful heading and combination delays with backlog continue backlog regular be revenue healthy like project while these work targeting revenues and a XX to way. With EBITDA double-digit much be scale, down target reduction as we contributed and customer the year-over-year and margin and not margin monitoring to initiatives. planned to procurement, in on selection, towards each revenue with since the selective that funding in I growth, project of teams driven perspective. cancellations, service we business, organic are strong to of quarter where customer quarters. XXX has life the organic are timing always project line permitting ongoing before would contribute backlog straight our back inspection, service doubled business. I'm margin to recurring And accretive we We XXXX the disciplined its am the versus reaccelerating and I wanted our second help revenue monitoring business quarter achieving growth strategic great of temporary mix, safety revenues. In is another for challenged team can disciplined say, the end through we selection we driving as And perspective, additive a the was about improvements XXX share that a that commentary the work gross EBITDA in points, the targets.

another on more capture the key contributor Additionally, value plan, remains target XX% is to which million our or track. $XXX

rate During company's financial recurring $XX value APi's second strong direction model consistently from of we are results and its mark to as savings. services million of with revenue focused business organization quarter, in and million speak the well taken of heading XX% run as the strength the crossed team. savings the terms realizing target, and of discipline we our leadership the the in approximately have the the $XXX associated capture actions

welcoming Moving and We closed the to it the in excited and on leader APi. has June, acquisition service to build become elevator remain elevated Facility We escalator been on for the market. on team the of in to to early and a platform M&A. opportunity Elevated the Services rewarding

closed are team bolt-on an focused identifying bolt-on our quarter, M&A Through In Xx. opportunities fragmented, pipeline. addition average The X the to to in the highly markets approximately multiple attractive with within remains continues acquisitions EBITDA elevated, operate on robust our the second we of most strategy progress. and we have M&A

the strategy; remain reduce execute over the net deleveraging EBITDA; X.Xx million $XXX executing leverage our of we priorities, growing XXXX, our allocation to to cash and our in free EBITDA as of cash half approximately repurchasing generation follows: which target end leverage confidence our strategy. adjusted adjusted through ability shares. year, of flow M&A target and to in remain net capital committed finally, the With of X.Xx growth expected business first to our free flow below of we the year Our continue M&A our our our gives in us by while

update the in our I cash produced XXXX, APi to and our and repurchase how $XXX commitments to on would Kevin? to the now the we guidance repurchase EBITDA over remain of building on of proud focused activity Kevin record the year, in results back and delivered our execution our has am undertaken half from reflective flow of detail. share summary, discuss like months in February strategy on authorization under $X approximately share far free of of so authorization and the million financial hand of our first XXXX. I remaining billion In in and call XXXX. while team an we As X the the of more

Kevin Krumm

quarter basis XX, ended now of June compared by months Organic of HVAC by customer double-digit strength period. QX inspection organic inspection, growth was offset X.X% morning, our of growth Good X% X.X% in grew and in year billion of revenue. Adjusted by lower increase a share once disciplined the in $X.XX margin where and monitoring XXX double-digit This lower X the was had This EBITDA a driven Organic in by expense, again interest selection revenues. in customer project revenues, of decline offset segment. in or XXXX, driven second partially growth gross services compared of customer were an a the year increase revenues partially than a primarily both growth we Life point absorption, to and margin by by for planned representing year revenue basis to partially partially period. adjusted by margins in EBITDA in service was in and faster discuss to project decline outstanding. I costs, selection results was This increased and by XX.X%, period. Services. diluted to organic months with Safety, in and price expansion to gross prior was driven $XXX XXX our U.S. The increase comparison revenues by attrition which period. months shares increase and period delays growth the delays driven partially $X.XX was prior both year Adjusted Safety period. ended prior the adjusted higher and from offset against growth period, driven increase X.X% compared X.X% ended the margin X% increases, international organic by our in everyone. by the margins year headwinds X.X% XX.X% in adjusted project compared was X XXX compared in declined against a margin organic decreased of months XX.X% XX% well adjusted business selection services due well offset as project XXXX, X% as to strong grew increase adjusted the Services. driven in to XX% for earnings revenues. by and funding the of $X.XX X decline margin reported months months representing this average the XX, the revenues prior the both for X million June project as per per June ended the for our was was year Organic from both revenues ongoing results by point Specialty June months primarily ended in growth XXX EBITDA X.X% expansion Reported and per and the for across operating by $X.XX will driven service $XXX point XXXX, EBITDA driven for XX.X%, comparison XX.X%, in revenues result the Specialty mix fixed in $X.XX diluted delays, to delays. X basis decreased project prior weighted XXXX, $X.XX billion, increased in in for more regarding margins, revenue business. Adjusted improved XX.X% a in June to for revenue million federal to for share prior cost and X was combination June Russ. by representing a a price share, The X.X% due revenues. Adjusted detail to coming representing growth significant point detail to compared revenues. increase expansion X of a margin to XX, a basis a efforts Specialty decline in permitting by will in XXXX, at Services outsized year for period, of XX, representing reported XXXX gross XX.X% to increase increases, monitoring discuss XX.X%, Services XXXX, billion due by XX, XXXX, billion ended revenues. I project compared the customer prior XXXX, the offset compared QX the segments. as our well decline now and as the by June as more service XXXX, Thanks, disciplined Safety Safety and Adjusted higher-margin significant XX, was increased Services ended inspection, disciplined prior year service gross QX project XX,

customer absorption. I'll exited driven down quarter. in XXXX, for June revenues revenues year selection margins, months for cash lower basis and increase customer Service representing the project by customer discussed XX, to essentially to disciplined XXX margin EBITDA the compared XXXX, expansion gross decreased were XX.X%, a a by in offset basis the X increase X and compared months year prior due the on revenues Adjusted margins XXX XX.X%, the to margin period, adjusted due service primarily project XX.X% revenues. Adjusted were for gross driving and solid touch ended XX% prior fixed flat in service increase now Adjusted the the point was quarter. by last ended due relationship XX, EBITDA June flows. to point representing lower to cost adjusted this was partially period,

free conversion in on progress to pleased date driving the improvements with XXXX. continue cash focus and We flow I'm year-over-year, to

reflecting versus For ended of million, free year, in at June flow $XXX the XX, an adjusted came free million flow of prior conversion XX%. cash months and X the improvement cash XXXX, adjusted $XX

free well priority XXXX financing been million cash adjusted flow across For guidance APi. approximately to updated adjusted of flow cash the of adjusted first the the million elevated the conversion X free by conversion, increased taking free second quarter at QX, a an end over year adjusted was delivery of of ratio net our midpoint $XX be the $XXX our months guidance. At deliver year the flow we of our of cash account XX% on to EBITDA flow all to activities. representing prior debt approximately the cash adjusted into continues and period. Free acquisition X.Xx, performance And compared of has positions in and year, to half us generation our the first EBITDA

As cash to allowing to year free expect the seasonally year-end. I year adjusted target QX cash year our full our X.Xx below and we continue flow second now guidance long-term that by of leverage will is generation, XXXX. the with for a stated free to trend net and strongest back this half calendar us of deleveraging continue half discuss flow, our reminder,

revenues billion to net reported to expect $X.XX year of We current at currency full expectations. continue $X.XX billion

driven delays and other by certain of projects permitting pushout the With discussed by Russ. as related funding

the range year our EBITDA of of reflected have guide adjusted This in XX% our to narrowed business, Having low view the in we end a year $XX bottom and remain $XXX brought confident which will that up profile of our $XXX margin to guidance. of current approximately Our full by said growth million be to million. and of why basis. closer is currency the revenue EBITDA fixed EBITDA adjusted is we is million, performance on adjusted represents XX% full the that, end the and

growth we QX, and expect net billion to growth $X.XX X% X%. $X.XX The billion. of to guidance of of reported net revenues X%, net X% revenue terms of In organic represents to reported revenue

adjusted approximately a EBITDA We EBITDA XX% expect $XXX QX to fixed X% basis. adjusted represents on million $XXX which of growth to million, currency of

interest For approximately tax effective million, capital rate expenditures to $XX anticipate adjusted expense depreciation approximately our XX%. approximately be year $XXX be we full be and XXXX, $XX approximately million, to be to million,

second macro half and over more execution We expect we XXXX. count for the the evolving quarter of in back turn our to now an progress first approximately our we XXX as on environment the adjusted I diluted share look during year with the call updates average throughout strategy the sharing to year. I'll team's move Overall, Russ. be of pleased are million. forward our

Russell Becker

Thanks, Kevin.

leaders' back the focusing feel and confident shareholder As EBITDA our free up to on for of or financial confident in XX/XX/XX business of the perform drive over target and EBITDA by historically XXXX. We continues now would strong delivered to in and the of levels expansion, well, I business, to the to and cash strong value with the XX% you've organic heard, continued can sustainable second return consistently record more creation in I'm build results margin on growth back The margin half our value year create into historical XXXX. With half APi adjusted momentum year. turn we in achieve and the that, to like first generation. quarter Q&A. in open and execution, flow ability generate in our to margin the the we adjusted ability our operator call call long-term targets, believe

Operator

Research Thompson of of the Group. first [Operator Instructions] Thompson Your question from comes line Kathryn

Kathryn Thompson

whether projects you line from the cancellations. not Could contacts delays to you're more the just what you give for the TRG that guidance? color but feedback projects get delays seeing quarter, in or gives some you just confidence what field top addition, has cancellations? of And half year, delays, been project the you are seeing discuss discussed impacting full in on these essentially, kicked In off, are year that back the could for

Russell Becker

for a a last on project Thanks, are support. growing -- that's comfortable were business. It's company, our setting customer I of start services comfortable to that first summer thank question. book Kathryn, to want And continued build your with by focused we level and I beginning business. you we not on selection and our a we everyone great why with beginning -- are work And project's we're just and healthier

-- For mix end delays to these some causing are but quarter, scope towards be. full the And on behind in we delays the we're been anticipated issues the start a business. But resolved. like why the revenue. XX projects certain guide of context were for we projects cancellations. And are cases, the pushing where and of none changes, about funding, that's days commented the most have of low across that year permitting expected times Kevin back our for And we feel tracking the

we as like today really way a of mean, some really move we is these good I as place confidence, the I delays. we back in our confidence. work Regarding business have the half of good feel into the year through

more remarks backlog the than in And of Our is year. I it's healthier. growing. increased part is million it that $XXX about my the best start since the mentioned And by it's

working that feel way the to those right hard, pricing customer our I do their of to mean clients, hard. managed of that sure team business we've are some that's and of for But the some through and our make And work changes raise and really has the like we're I some sometimes so attrition had that. and

you And waters. on a and existing job. has makes like like to I up leaders more some going of good you -- would field team in to you manage end it feel trying challenging what really And -- these the have said, you utilize still still to sometimes delays, that those are our projects, navigate with do people those I done when you the

into be bit quarter sitting I thought last the So We're the as like of into we half momentum little behind are talked. just feel where the time a back we're heading growing and we would we year. we

know, Kevin, anything don't you would I that? to So add

Kevin Krumm

Kathryn. Sure.

I our as thing range brought million. First end say, to I of up pointed actually bottom would on out, EBITDA Adam the call, we misspoke the $XXX

$XXX that. I million think our so I end for is But the call, apologies our of on $XXX said range bottom million.

about the a say range from our momentum talked in $XXX to as even of standpoint, would current or missed is guide midpoint million overdelivered Russ $XXX we our business. So margins. ]. Yes, [ at million we're or our the revenue we in I QX, off

that's of able going continue gives we and respect move here well. with us in confidence into performance sort to to to perform in of there outsized we're margin Our really hang third expansion to what even quarter And continue be as to margins margins. that the year-on-year sort drive

of elements -- the us do expectations. at out that the were and we Kathryn, in Some closed we did out work the quarter, we than second helped closed margins higher

our higher-margin the So cost expectations. manage done continue above good be continuing really we their to moved accelerating to capture the as work. a execute teams through value what expect even standpoint, has Also They're team a from on and they've year. costs to project job international executing

projects and well favorable, would projects at quarter, favorable our -- back year. expect mix a our higher that to half margins and then the due the ramps we to third see the as our we service been did favorable that's in as business of just as growing rate impacts the business we that margin to impact be business we at expect continue. And than up into move So

as in feel we our good back the about of execute half margins said, we and as the year to well. So ability in, all

Kathryn Thompson

the an of level in back back with uses give debt of terms the seeing follow-up an Okay. your flow you indicated of year? you your focus and on M&A., in just update from in the are along half half us the could commentary. we of Great. acceleration where we year, cash net as as that today's of And free Balancing on my generation cash you're is question

Kevin Krumm

Yes.

color delivery. free cash additional just on flow So

in deliver normal XX% between first a we're back the conversion going expectation Just year, the and full to flow XX% reminder, our to free our in that's to the we're in to year, of the XX% somewhere going year. deliver due cash half of to this XX% year cash as flow seasonality a of and half,

bolt-on as is As it delevering been, continue of said, as and said, a inside first do we north as leverage in today transactions move year. we're has plus And continue remains to priority elevated, back going still half a X.X. we from the move million. on to to of have X still the at We $XXX But through in of through pipeline half to that, of is to it after priority. the the invest year, our that M&A bolt-on spent we where X.X do reduce closed, as Russ we've transactions to year as the we our plans, and continue

Operator

Your of next question comes Citigroup. from Andy the line of Kaplowitz

Andrew Kaplowitz

backlog, Obviously, the leading maybe said, over nonres you in you is see. talk that macro but all the can your are Russ, indicators overall And environment place about as construction, you growing.

can verticals talk driving in data APG or what the us So update that in And on you're market? seeing the specifically is that how are that center playing about market growth? you

Russell Becker

Yes.

electric of work. opportunities in end center want and screaming. data we thing on like just to our would the leading safety data are piece say, in is obviously, do going We're mechanical fire, projects safety active about packages. which opportunity also smaller of be life and more service smaller. our those centers, It's of Health significantly is robust there's some inspection is we're opportunities I seeing that to again, and countless. the, include mechanical to you level businesses in bit side sports relationships care in as are really seeing really And we're after north which or in and the a well project-related probably and than pharma market expansion, And you the Every data more as focus HVAC the entertainment center that XX% expansion data and place very market, opportunities for space. been aviation and service space you advanced on look, semiconductor as a the in. the is And HVAC in inspection just electrical to specific the the space. that data life instances, centers. electrical of our opportunity, an opportunities hear robust and the project So It's set focused little we're the center and space. One when manufacturing, well remains the would lead think about vehicle/battery space as opportunity ours,

Andrew Kaplowitz

Helpful, Russ. you remain does light to maybe growth could organic the you margin. if talk revenue have lower about little higher that confidence And with you continue a offset growth

that capture in I materially Russ, margin you a higher talked your it than that little higher is than bit. backlog at revenue? value that us, about But think current coming Kevin trending mentioned, as XXX and previously of the you gave shelve that actually then maybe new million $XXX

Russell Becker

in amazing it's say the you. questions X XXXX, like wrap or my that's how that's into Andy, -- good. stated. I and So would [indiscernible] continue well, talked mean, veteran That's to obviously I X I And we about you about remarks, in Yes, margins, that X. for we target as said I also talked the that goal from we margin and that our expand XX% can there. I the think

of I of good in opportunities so we kind to year. of this continue front us grind about really the through feel as the And course

is that it mix XXX X for varies me whatever, look directionally, question, way like. the there's points when be that somewhat like in Well, I back margins for raise half. The to -- X. Yes. our place feel to where of value basis of the have plans brain to But mean, that, will our with with you by mean, international going transforming My our we continue and kind backlog at in track we're is me. a sitting it's business improvement to our capture looks business, much and focusing to that so year us, on it -- we sales or in he's good work And correct. of team we I our we I and expand shown And -- is as not increased his we of it, everything The international leaders hard through and more that we it we've we backlog and we to healthier. some can grow without track on target. and had deliver we important growth a we're usual we're be would grow else, about that. as probably missed that just we're in and has getting to I of feel million or like here. it's done, and XXX, need margins, by leader And had $XXX it it. what kind board you mode that But track business would of sales So tell the expand and margin work without like continue and And it's and meeting, question the at. number healthier.

as rewards mean little service transform, just too, really with serve. I that first work into kind work lead team sales our they're year. and feel and to next bit inspection that part of to to So of it, to having the the fun I'm going of the with we work, they but the move a really markets doing start of we're in that starting

business, in and to just place with feel So in general, like excited good international we're really integrating as our a it. relates about them. it I'm And really Chubb I

Operator

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

Jack Cauchi

are what versus QX on sequentially EBITDA up Jack Julian is seasonality? drivers assumptions, Cauchi Can the down. for slightly The is historically sequentially This versus implied you driving difference being prior explain Mitchell. macro

Kevin Krumm

driver that. I'll of back the we the the numbers This to is primary accelerate referenced fact project half sort Russ of the expect Sure. earlier. our The business is that off that take year in this Yes. of Kevin. that year

projects sequentially And so down be projects year. Traditionally, on year, But we're back backlog rate in in QX. business our our of this coming our -- to up. QX our the expectation out the would with to expecting growth that Russ step flatten projects accelerates referenced are slightly actually and that we the half

it. So that's the largest driver in

of out. the happen in, half that back year, the in year traditionally year expansion that's but margin expect -- also going We to

business. it's the the acceleration project really So of

Jack Cauchi

And in Margins just follow-up. solid a quick both segments. were

You we raising think about should early in targets mentioned the by segment? that How margin earlier XXXX.

Russell Becker

one, we'll to share improve deliver we if goals raise targets number to their we our everybody and every make nobody sure and and then expectation, want that improve not margins. where portfolio next need are we're sort better. expand our to businesses, continue the single on that's directionally, we to we're But of going of speak of you mean, piece of of look I to And business to rebrief higher-margin to out gets to advantage tell opportunities and that XXXX Well, expect to to will a and has And taking the every you the lay going. one we grow. first, of expectations them clearly we're continue year. And obviously. But that companies, our across early will we're be until going our what kind

Operator

Balsky Your next America. of the question of comes Heather from Bank of line

Unknown Analyst

Heather I'm pushback? And getting how pricing? for you second wondering [indiscernible] Are give what color guidance? your on us if is you're any does that some you on into factor seeing could This Balsky. half

Kevin Krumm

], Aly Kevin. that. this I'll [ take is

that our pricing the side have short business. campaigns answer service say year on service pricing the the the year we focus, of in margin expansion side continued out. drive on is We're our of business. We and especially So pushing

in that our side Our the work especially on the our life generally, teams across teams done push It great that businesses safety around world. But job. continued margin pricing business. looks the it the they've have space, different to expansion drives way of you in a as have service

around We customers say, point, customers this the at appreciate continue I bring. our But value we would our always that. to with dialogue are in

to continues through of we work, pricing continue half Our and expect this year. to that back the

Operator

Your next CJS Tanwanteng of Jon comes Securities. question line the from of

Jonathan Tanwanteng

several you Really the at then risk I guys. further talk was more specific independent that coincidentally wondering delays. in could any the nice job pushouts headwinds of it beyond point? between about the is was commonality market there or what this them? margin that, Was on if Or And QX? end

Russell Becker

and to a their the We actually of would was issues in I on client had I'm resolved, like infrastructure the had those our it's are I customers question, stop kind a delay have ground been a Well, one resolved, the reflecting aspect of to with been across permitting project of ours just site. we of say, of here one utility it. kind August. a on had we're and of of boots an your kind that mean, was Northeast of we on and actually have and Like I of that's that your we the start kind answer large month to question, work programs that opportunity -- expect MSA every in with

And been so resolved. that's

general that. the safety slowed on some opportunity Asian has American forward their down North We movement a contractors, space. which delays some business, which in life making have We had our in is in clients changes with project the is security who

And focused don't kind one bit it's from service of has Jon. inspection, immune monitoring little so an focus. aspect clearly we're of one necessarily been -- think growing that the So everything, that a and I from on any X been it. of it's first reasons our XXX% business is just

lumpiness the results business. of business the project that and work an have your associated on impact So the with the doesn't of some

and of us So what most mean, we about from that's folks thing some some to to our get important I -- strategy our from time the of the time. compared differentiates that from

Jonathan Tanwanteng

inspection of backlog that's much just then the the and Okay. and the that markets acquisition? know away backlog, focus, from drove just services was from -- your and enough. increase end but regarding what Fair And getting how I EFS

Russell Becker

that remember facilities. And and revenue and new of project-related inspections, than know, more I elevators bit I acquisition, it, comes that. really, acquisition, the been existing a doing a mean, And little repair about elevated, maintenance. maybe of service to speak, lot is but approximately from don't more maybe I on upgrades by in XX% thinking has work of not so XX% north from not existing driven mean, the much not modernization construction. Their their they're

been that, So argue when thing that the -- talk opportunities about one was kind the could specifically I warehouse increase and infrastructure of activity that distribution would semiconductor work. I space. coming seeing to that of I activity starting amount but end but almost space. increased of the a one seeing some project starting the There's to that's didn't talking about coming data. infrastructure of there, in service version that activity see space. -- space worked center the is We're we're we're space coming in in a I in probably say you're of -- lot there. opportunity right as the in backlog see markets, their but increased some We're seeing in a lagging, that's tremendous of it's amount tremendous is well, some

activity well. so anticipating health I more rate a with remains interest there. you're are think seeing robust people lot opportunities care -- But But cuts. of as

was end The about. the talked really really, that infrastructure of I So the space. only markets one I missed kind

Operator

question next from Stephanie line Jefferies. of Your Moore comes the of

Stephanie Benjamin Moore

deals us funding doing M&A the and/or as larger a just profile would revenue maybe M&A accelerate a or source to if for potentially about on to first the you the cetera? talk of source even kind that. recurring maybe starting especially elevated larger, of transaction deal of going targets, appetite And your et X-part also your targets Maybe on your margin front. within size similar Kind question then deals, Could forward? desired

Russell Becker

catch really something for that part the regarding question elevated, would if right half like I would digestible of the us. would say the other feel the be of of transactions, Stephanie. be that your second didn't first question, I it fit, But was size the

with have Obviously, we element would able at revenue we'd to of to It's have would price. have service the profile inspection, high the some think the I to the margin profile be that business acquired interest. we'd right recurring fit of got accretive. monitoring, be and looking for to a kind and be

the of their larger us into truly this their a meeting, Regarding got that of expand but Board home positive of it's at. We one the didn't their integrating they space. And half and level to on good owe forever that them actually forever key a journey chance bringing a our -- think we don't Kevin really of team interest home know really have to sitting never about that feel making The couple me. And and for APi at to And business mean anything, a your the I is attention leaders called business on will present where say now. yesterday. had that, that them. than focused because our where to we're reality can their And effort of that I stuck leaders that's I and really make you we I right with no this they a keen family, continuing so Elevated right question their in but that do you. hear in first handle is

Kevin Krumm

We that sure come. make M&A how sort we free we able in that year bolt-on Yes. flow. is year that's to in year, it That's we'll produce to this our tackled years Stephanie, to we're with it campaign, and in to given to on plan the funding, our any how our expect bolt-on of tackle cash going ability we year. through campaign out, it us it would enough prioritize do to flow cash and fund and be aligned on

Russell Becker

great it like that reality of to really year, businesses people But robust. of we of Kathryn, accelerate -- the our is, that and continue $XXX the last the about Xx that job. this M&A team good of spent our we north half and it really it We a family. will the said It's continue excess market, plan acquiring we what we this to the to year, of teams a And still I drumbeat. going that we've spent. Yes. And mean, tuck-in -- that in that year into million we're and we're doing pipeline we APi course opportunities will directionally, feel is right bolt-on In be of be year. -- last have in the go. is is we're bringing

Stephanie Benjamin Moore

priority this this on up ongoing improvement, margin noted. following the into -- I think it been just obviously, some you year, maybe have clearly, then next of an I questions thus remains of And kind and year, Understood. guess, as asked asked margin far I like, that well,

the You synergies of and self-help on can the much rebound talk kind predicated you expansion on opportunity and you of still tailwinds just organic about based kind in that have? growth how how of likes versus initiatives the much achieve margin is other of of kind

Kevin Krumm

that, I'll Stephanie. take

level look last at year, X just if margins the the So back last half over basis of set expanded gross quarters, points. over XXX you the we

the business. That expansion impacts levers that's is over of year, been pulling overall and X the quarters from that's the we an higher service up -- that driver, will the half we been we've obviously for lot of a backlog there. Also, to a the subside. customer the First we've continue took it that talked the higher have of into about costs to on XXXX last beyond. have going inspection, of this some and impact be to pricing, XXX that come. We and pricing driving to -- driver had, which have disciplined our The monitoring. talking on revenues way impact That's headwind an project on we and side down and as where margin mix, to move this the significant growth on going basis service about tailwind points. impact going a and over the selection like on going expansive years be say we're has down. year. a that's That's of both tackled that been started I'll an coming last impact seen the We've driving and percentage material way to

been operations going sort project of on. So the our side be and XXXX to but ability of health move that, quarters. margin there, And productivity focused we to continued improving into service mix. drive would business as we've margin move have as new beyond. pricing, the going well. But to improvement subside as driver future on scale of focused impacts has years, backlog to that our And is will the continue be we obviously We're into over our to too, and it's the to really last stay X as the impact the in we're significant moved going

Operator

of Your line the Josh of next comes Chan from UBS. question

Joshua Chan

project versus Safety Safety the I your of that is think pace I us focusing of segment? probably was things, a kind mind? which you wondering the then within the if the on Service right in side going Is service range. give breakdown could And mid-single-digit growth of service forward in

Kevin Krumm

that. take I'll Josh,

service So the the half way, business it in that year, the at first continue if safety side our on of you digits. about perform think mid-single to

that. our team well on team as have North America stayed international Our as focused

on well that business the safety the good drag work see back expect on we segment half talked results, first have we and safety to back to projects as business continue about well. to the expect the been as We in we move the mid-single-digit improve half half of of the the move the year. Project side, on as doing. That year, international the side into growth the team into we to we of that improve the the growth our of rate expect year. as But other and was a hand, has

Joshua Chan

gotten how mix business Great. benefit we How And of recent and the of you've kind do lessens? think reaccelerates, you think quarters? about from about the that sort the as potentially that margin benefit dovetailing most maybe should that project balancing in maybe, that, as mix on margins

Kevin Krumm

question. a Yes, good it's

half our in a projects we our a don't from the or respect QX, a service the it's project expansion on year still service where flipping margin efforts. think of going mix us headwind. our with any of be to acceleration But into in I I be benefit our as QX. to versus it could look a business, with see QX, or quarter standpoint in even service the bit in the back In outgrows business business

Operator

from next JPMorgan. Tusa Your the question line Steve of of comes

C. Stephen Tusa

to segments, organic the -- The rates just to relative how can the color give XQ us you Congrats on execution. just -- them some on the to growth see you just expect a couple pretty pushed of into how half. Obviously, second is you obviously out getting the $XX the expect to significant play acceleration. million for next It's the each, for quarters? them

helps a the it's lumpy. but So obviously, comps, little that

the around framework half. a just help the maybe a the little of each bit So around segments in of for second organic

Kevin Krumm

down Steve, I'll Kevin. just Safety our then I'll break take between it segment. Yes, Specialty and is this that.

in half on decline again, of low the and the saw single-digit Safety, So HVAC teams first work of in largely We project disciplined driven project year, saw doing side selection. business, customer the on we the and growth. service we're mid-single-digit the by the international

the also to to the HVAC in into organic up an still As the to but expect move single standpoint, be improve we work will our the from to side year, digit half low a from to move growth down we project international mid-single slightly sequentially and the business rate expect of second of from we the business, and growth continue sort that digits, Russ down be talked standpoint. of our in business backlog were in our of that that and year. to that about Drivers which new of expect up first half we half would through the be back service

specialty the as the the mid-single to in of year year, actually service of our up side first back showed On that half was the half well. would digits, we and of growth business, there the the expect in continue organic and

was Our significantly. down business project

expect that single-digit the touched on And double-digit back the half it get expect the to in business I would project back well call, to we that the think year. to low we or growth improve on we business low well. year actually and teens, the in half the the Specialty of of on as as

C. Stephen Tusa

Okay.

every the organic remain quarter the will to positive flip third be in the segment then for on like every -- and do So around Specialty? specialty in expect organic? negative Or positive you fourth

Kevin Krumm

up third organic flat the should slightly an in Specialty quarter. to from be growth standpoint

C. Stephen Tusa

the contribution helpful. And relatively acquisition, year? for Services, through Safety lastly, is as the the should Okay. -- X% we That's consistent move rest the that be that super on then of just

Kevin Krumm

Yes.

against think X% about transaction, elevated impact. annualize can we you yes, As a the of it

Operator

the Ashish of Sabadra Capital comes RBC Markets. Your next question line of from

David Paige Papadogonas

then the question around there also just them, -- are maybe and you anything how the surprises, have positive anything This Paige early had tell on acquisition. that elevated from around is [indiscernible] us David for Ashish. on learnings a I you looking? any Can some of some

Russell Becker

the Oh, that leadership quality positives of depth the say leadership the maybe man, team the are would of and team. the I

he glasses commented Our people with of put and to quality of later like apprentices the sites X-week their interact North He young raving to back came one the a opportunity that American had have of him one on even And please the a Safety a team on about with. didn't their about went kind Services asked up customer how and on. showed apprentice, tour their he him and of just on segment glasses approached safety safety in. really

So it investment making just company that it and their culture in of a the to the field -- lot leaders. they're the spoke

sale equity say the And from I'd necessarily know We say surprises. positive. things private firm. there's some don't think really that's all that would any anything I I of I that the that's came bought through. ready that I So business -- to that a and that. get guess, And a sponsor you would -- expect ready polish for when business by a surprised for -- you when up -- nobody's get it tries ever

surprised it's nets might surprised. what closet You other in, really not but be are

the I'd fired APi So up joining as say the usual, we're it's elevated family. really and team business about

Operator

to I over That the turn concludes conference back remarks. now Becker will our session. closing Q&A Russell for

Russell Becker

our as basis much. our so amazing. I APi, for every remainder throughout and support. their us and to that our And for to I dedication am business. their your have as look one are also grateful those like well thank thank truly updating the Thank forward do our each of would We appreciate team to to daily really what members you and of efforts would of year. shareholders truly your a long-term like progress I on of for on all in closing, you again, the continued really, recently and you joined ownership support

you, everybody. thank So

Operator

Ladies call. that and today's joining. Thank for all concludes gentlemen, you

You may now disconnect.

APi (APG) 1 Aug 242024 Q2 Earnings call transcript