APi Group Corp Q3 FY2025 earnings call

• Thanked approximately 29,000 leaders for their dedication, emphasizing safety, health, and mental well-being. - Highlighted investments in market-leading systems and technologies like APi Echo, One Code, Connected glasses, and AI-enabled tools. - Noted strong third quarter results with 14% net revenue growth, organic growth, margin expansion, robust free cash flow generation, and 4 bolt-on acquisitions in the quarter with total for the year at 11 completed bolt-ons.

For the third quarter, net revenues increased by 14%, approximately 10% organically. In the Safety Services segment, revenues grew organically by approximately 9%, led by North American safety, with adjusted gross margin at 37.3% (an 80 basis point increase vs prior year) and segment earnings margin at 16.8% (a 40 basis point increase vs prior year). Specialty Services reported organic revenues of $683 million, an increase of 11.6% compared to the prior year period, with adjusted gross margin at 19.3% (a 60 basis point decrease vs prior year) and segment earnings margin at 11.9% (an 80 basis point decrease vs prior year). Safety Services revenues were $1.4 billion (a 15.4% increase y/y), and Specialty Services organic revenues were $683 million (a 11.6% increase y/y).

• Expected full year net revenues of $7.825 billion to $7.925 billion, up from $7.65 billion to $7.85 billion, with reported revenue growth of 12% to 13% and organic growth of 7% to 8%. - Full year adjusted EBITDA expected $1.015 billion to $1.045 billion, compared to previous guidance of $1.05 billion to $1.045 billion, with adjusted EBITDA margin above 2025 goal of 13%. - Anticipated interest expense ~$145 million, depreciation ~$85 million, cap ex ~$100 million, adjusted effective tax rate ~23%, and adjusted diluted weighted average share count ~424 million.

Q: As organic growth has been accelerating in Safety Services, could you give more color on how it broke down?

A: Russ Becker mentioned robust activity in data center, semiconductor, advanced manufacturing, aviation, health care, and critical infrastructure, with data centers accounting for ~7%-8% of total revenue and potentially pushing to 9%-10%.

Q: You mentioned 11 bolt-ons now, still reiterating $250 million plus this year. Could you give more color on M&A progress?

A: Russell Becker stated they're right on track, with focus primarily in North America in fire and security space, continuing work on Elevator, and seeing activity in international business but primarily focused on North America for now.

Q: In terms of organic growth, tracking ahead of mid-single-digit long-term growth rate, could you comment on sustainability?

A: Glenn Jackola referred to the organic growth algorithm shared at Investor Day, expecting mid- to upper single-digit growth in safety services' service side and low to mid-single-digit in project side, with the algorithm sustainable over the long run.

Q: Looking at the M&A pipeline, what's the current status and prioritization for future bolt-ons?

A: Russell Becker said pipeline continues with similar cadence, culture values and fit as top gate, majority of transactions in North American safety business, primarily fire protection, electronic security, and elevators, with international business to follow when ready.

Q: On tech investments, any update on ERP progress?

A: Glenn Jackola stated ERP investment in Safety Services is progressing as expected, out of blueprinting phase and deploying in pilot company, with 2025 being high watermark for spend, stepping down in 2026 and 2027.