NYSE:APG APi Group Q3 2024 Earnings Report $18.01 0.00 (0.00%) As of 04/1/2025 Earnings HistoryForecast Pactiv Evergreen EPS ResultsActual EPS$0.51Consensus EPS $0.51Beat/MissMet ExpectationsOne Year Ago EPS$0.48Pactiv Evergreen Revenue ResultsActual Revenue$1.83 billionExpected Revenue$1.87 billionBeat/MissMissed by -$48.67 millionYoY Revenue Growth+2.40%Pactiv Evergreen Announcement DetailsQuarterQ3 2024Date10/31/2024TimeBefore Market OpensConference Call DateThursday, October 31, 2024Conference Call Time8:30AM ETUpcoming EarningsAPi Group's Q1 2025 earnings is scheduled for Thursday, May 1, 2025, with a conference call scheduled at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by APi Group Q3 2024 Earnings Call TranscriptProvided by QuartrOctober 31, 2024 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen, and welcome to API Group's Third Quarter 2024 Financial Results Conference Call. 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 Adam Phee, Vice President of Investor Relations at API Group. Please go ahead. Speaker 100:00:28Thank you. Good morning, everyone, and thank you for joining our Q3 2024 earnings conference call. Joining me on the call today are Russ Becker, our President and CEO Kevin Crum, our Executive Vice President and Chief Financial Officer and Sir Martin Franklin and Jim Lilly, our Board co chairs. Before we begin, I would like to remind you that certain statements in the company's earnings press release announcement and on this call are forward looking statements, which are based on expectations, intentions and projections regarding the company's future performance, anticipated events or trends or other matters that are not historical facts. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements. Speaker 100:01:16In our press release and filings with the SEC, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, October 31, and we undertake no obligation to update any forward looking statements we may make, except as required by law. As a reminder, we have posted a presentation detailing our Q3 financial performance on the Investor Relations page of our website. Our comments today will also include non GAAP financial measures and other key operating metrics. The reconciliation of and other information regarding these items can be found in our press release and presentation. Speaker 100:01:54It is now my pleasure to turn the call over to Russ. Speaker 200:01:59Thank you, Adam. Good morning, everyone. Thank you for taking the time to join our call. Before we get into our results, I would like to thank our approximately 29,000 leaders for their dedication to API. The safety, health and well-being of each of our teammates is our number one value. Speaker 200:02:19While I mentioned this every quarter, the events of the last few months, including the impact of the hurricanes on our teammates in the Southeast has given our organization the opportunity to put that value to practice. I'm happy with the way our teammates stepped up to help each other and the impacted communities in which we operate. Back in 2021, we detailed our 13% plus adjusted EBITDA margin target by year end 2025 as part of our broader thirteenseighty shareholder value creation framework that you can find on Slide 5 of our Q3 presentation. In addition to the 13% target, the 6080 financial goals are long term revenues of 60% from inspection, service and monitoring and long term adjusted free cash flow conversion of approximately 80%. Over the past few years, we have communicated and executed our strategy and its key initiatives intended to achieve these goals with a specific focus on expanding margins to reach 13% or more in 2025. Speaker 200:03:29The team has made excellent progress this year executing on our margin expansion initiatives with expected adjusted EBITDA margins up approximately 150 basis points. This has been accomplished by focusing on the following. 1st, pricing. 2nd, improved inspection, service and monitoring revenue mix 3rd, disciplined customer and project selection 4th, Chubb value capture 5th, procurement systems and scale 6th, accretive M and A and selective business pruning. And finally, as I always like to say, we always have the opportunity to just be better. Speaker 200:04:11The team's work over the last few years executing our thirteensixtyeighty strategy has resulted in API being the strongest it has ever been. On Slide 6, we highlight the progress we have made as a business from 2021 to 2024, with 2024 expected to be a year of record net revenues, profitability and free cash flow generation. The 3rd quarter marked 17 quarters in a row of double digit organic growth in inspection revenues in U. S. Life safety. Speaker 200:04:43This performance has been a key contributor to our steady progress towards our long term target of 60% of revenues coming from inspection, service and monitoring. As we prepare to set new and increased financial goals for the next 3 years in 2025, it is gratifying to reflect on our progress since we first became a publicly traded company in late 2019. In our 1st year as a public company, we generated $393,000,000 in adjusted EBITDA. This year, we expect to deliver about $900,000,000 and we have $1,000,000,000 of annual adjusted EBITDA close in our sites. As we prepare to enter 2025, we plan to continue to execute our strategy, accelerate organic growth, increase margins and expand our bolt on M and A program. Speaker 200:05:36Before Kevin gets into the Q3 results, I wanted to address our disciplined customer and project selection initiative on Slide 7, which has been a significant contributor to the improvements we have made towards our thirteenseyeighty financial targets. We have focused on disciplined customers and project selection for some time now and made it a point of emphasis in our planning cycle in early 2023. We challenged our business leaders to evolve away from large, lower margin, higher risk opportunities and focus on allocating our valuable field leaders to the best opportunities to position the business for long term profitable growth. Our leadership team has done an excellent job executing this strategy and it is positively impacting our financial results, allowing us to deliver adjusted EBITDA margins ahead of our expectations. We've been consistently setting new records as it relates to margins and cash flow generation as we evolve our business towards higher margin, more recurring service revenues. Speaker 200:06:41It is encouraging to note that our backlog is growing and healthy with work that comes to us with a higher expected margin, lower expected risk and smaller project sizes. This gives us confidence in reaccelerating growth in 2025 and beyond in these businesses. Equally important during this time, API's underlying core service business has grown steadily as we continue to take market share. More recently in the second and third quarters of this year, we have faced temporary timing revenue headwinds due to unexpected timing delays in certain customer projects. We expect the total impact of these headwinds on our 2024 net revenues to be approximately $150,000,000 with this impact predominantly driven by the Specialty Services and HVAC Businesses. Speaker 200:07:35In Specialty Services, the delays were primarily with certain telecom and utility customers and were driven by the following: higher than expected permitting and engineering delays and slower than planned execution of federal road broadband program. We believe these headwinds are limited to 2024 and primarily related to certain portions of our Specialty Services business. Our core life safety business, which includes our fire protection, electronic security and elevator businesses and excludes the more project heavy HVAC business has made excellent progress as highlighted on Slide 8. Core Life Safety represents over 65% of total API net revenues and has consistently demonstrated strong overall organic growth led by high single digit organic growth in inspection, service and monitoring revenues. The Life Safety business has a record high backlog of approximately $2,000,000,000 up 5% organically versus prior year and it's the healthiest we've seen it. Speaker 200:08:43From 2022 to 2024 adjusted gross profit and EBITDA margins in life safety have improved considerably with adjusted EBITDA margins expanding more than 300 basis points. We expect the flywheel, which is underpinned by our inspection first strategy driving outsized growth in service revenues will continue to allow the businesses to be more selective on project revenues and drive further margin expansion across the branch network in 2025 and beyond. Starting in 2025, you will see our core life safety businesses more clearly as we have made the decision to realign the HVAC business under our Specialty Services segment. This change will put our HVAC business into a segment with other operating companies that serve similar customers in similar end markets to create synergies and efficiencies, which we highlight on Slide 9. We enter 2025 with a lot of momentum. Speaker 200:09:45Organic growth of our inspection, service and monitoring revenue streams in safety services remains strong. Organic growth in backlog and proposal activity is trending providing support for a return to organic growth in project revenues. The international business is nearly finished working through its subpar inherited contracts and branch consolidation plans. On slide 10, the bolt on M and A engine continues to accelerate and support future organic growth with 10 bolt on acquisitions excluding elevated closed at reasonable multiples through October. We expect this momentum to continue in 2025 and beyond. Speaker 200:10:27And on Slide 11, you can see the long term benefits, which we have accelerated through M and A of executing the initiatives behind our thirteensixtyeighty shareholder value creation framework. Our business continues to evolve into a more asset light services focused branch led operating model with an increased mix of recurring higher margin revenues. During this evolution, our contract loss rate, which measures the dollar loss on projects as a percent of total revenue, dropped from approximately 1.5% in 2019 to less than 0.4% in 2024, reflecting more disciplined customer and project selection and strong execution in the field. I'm proud of the team's execution of our strategy. We have built a strong foundation, improve the quality of our business and backlog and expect to return to margin accretive organic growth in 2025. Speaker 200:11:26We are well positioned to achieve our 13% plus adjusted EBITDA margin target in 2025 and set new meaningfully higher targets for the following 3 years, which we will review during our Investor Day next year. I would now like to hand the call over to Kevin to discuss our financial results and guidance in more detail. Kevin? Speaker 300:11:52Thanks, Ross. Good morning, everyone. Reported revenues for the 3 months ended September 30 increased by 2.4% to $1,830,000,000 compared to $1,780,000,000 in the prior year period, driven by strong organic growth and service revenues of 9% in our Safety Services segment and modest benefits from favorable foreign currency exchange rates in M and A. This was partially offset by a 7.7 percent organic decline in our Specialty Services segment. On an organic basis, total company revenues were essentially flat for the quarter. Speaker 300:12:28Adjusted gross margin for the 3 months ended September 30 grew to 31%, representing a 200 basis point increase compared to the prior year period driven by price increases, outsized growth and higher margin services revenue, margin expansion for both project and service revenues as well as Chubb value capture savings. Adjusted EBITDA increased by 9.4% for the 3 months ended September 30 with adjusted EBITDA margin coming in at 13.4% representing an 80 basis point increase compared to the prior year period. This was primarily due to the factors impacting gross margin partially offset by lower fixed cost absorption in our specialty and HVAC businesses due to lower than expected revenues. Adjusted diluted earnings per share for the Q3 was $0.51 per share representing a $0.03 per share or 6.3% increase compared to the prior year period. The increase was driven primarily by growth in adjusted EBITDA, partially offset by increases in interest expense and adjusted diluted shares outstanding. Speaker 300:13:37I will now discuss our results in more detail for the Safety Services segment. Safety Services reported revenues for the 3 months ended September 30 increased by 9.7% to $1,340,000,000 compared to $1,220,000,000 in the prior year. This quarter growth was led by the U. S. Life safety businesses, which posted double digit organic growth in inspection revenues as well as double digit organic growth in broader inspection service and monitoring revenues. Speaker 300:14:07This was partially offset by a low single digit organic decline in project revenues driven by planned customer attrition in our international business and project delays in our HVAC business. On an organic basis, Safety Services revenues increased by 3.1%. Adjusted gross margin for the 3 months ended September 30 was 35%, representing record 3rd quarter adjusted gross margin and a 170 basis point increase compared to the prior year adjusted gross margin, driven by price increases, improved business mix and inspection service and monitoring revenue as well as margin expansion in both our project and services revenues. Adjusted EBITDA increased by 24.3 percent for the 3 months ended September 30 and adjusted EBITDA margin was 15.7% representing a record for the 3rd quarter and a 180 basis point increase compared to the prior year period, primarily due to the factors impacting adjusted gross margin. I will now discuss our results in more detail for our Specialty Services segment. Speaker 300:15:15Specialty Services reported revenues for the 3 months ended September 30 declined by 13.4%, 7.7% on an organic basis or 7.7% on an organic basis to $493,000,000 compared to $569,000,000 in the prior year period, driven by divestitures, a decline in service and project and a decline in project and services revenues. The decline in revenue was primarily driven by the exited customer relationship mentioned in the Q1 higher than expected permitting and engineering delay as well as slower than expected execution of federal broadband programs. Our adjusted gross margin for the 3 months ended September 30 was 20.1 percent representing a 40 basis point increase compared to the prior year period driven by the impacts from our disciplined customer and project selection strategy. Adjusted EBITDA declined by 19.3% for the 3 months ended September 30 and adjusted EBITDA margin was 13.6% representing a 100 basis point decrease compared to the prior year period. This was primarily due to lower fixed cost absorption on lower than expected near term revenues. Speaker 300:16:31We continue to focus on driving strong free cash flow conversion improvements year over year. For the 3 months ended September 30, adjusted free cash flow came in at $227,000,000 reflecting an adjusted free cash flow conversion of 93%. For the 9 months for the 1st 9 months of the year, adjusted free cash flow was $361,000,000 with conversion of 56%, representing an improvement of $124,000,000 or slightly over 50% when compared to the 1st 9 months of 2023. Free cash flow generation has been and continues to be a priority across API and our performance in the first 9 months of the year puts us in a position to increase our full year 2024 cash flow guidance. We now expect to finish the year atorabove75% adjusted free cash flow conversion, which is up from our prior guide of 70%. Speaker 300:17:25As a reminder, the 4th quarter is traditionally our strongest free cash flow conversion due to seasonality. At the end of the Q3, our net leverage was approximately 2.4 times below our long term target of 2.5 times even as we accelerated margin accretive bolt on M and A. As we look forward to 2025, we will remain laser focused on cash generation and expect to grow our free cash flow, providing us a significant opportunity for value enhancing capital deployment. Our long term capital deployment priorities remain maintaining net leverage at stage of long term targets, M and A at attractive multiples and share repurchases where as a reminder, we have $400,000,000 remaining under our current authorization levels. I will now discuss our guidance for the full year 2024. Speaker 300:18:19We expect full year reported net revenues of approximately $7,000,000,000 revised from the low end of our prior guide, which was $7,150,000,000 The $150,000,000 reduction in revenue expectations for the year reflects the impacts of the project delays and our specialty and HVAC businesses discussed earlier in the call. We now expect full year adjusted EBITDA of $890,000,000 to $900,000,000 representing a narrowing of the prior range on the top and bottom end. This range reflects adjusted EBITDA growth of approximately 13% to 15% on a fixed currency basis and adjusted EBITDA margin of 12.8% at the midpoint. For 2024, we anticipate interest expense to be approximately $145,000,000 depreciation to be approximately $82,000,000 capital expenditures to be approximately $90,000,000 and our adjusted effective tax rate to be approximately 23%. We expect our adjusted diluted weighted average share count to be approximately $280,000,000 for the Q4 and $279,000,000 for the full year. Speaker 300:19:28As we look forward to 2025, we have great confidence in the business and its momentum. We plan to share our outlook in the early in the New Year and more details about our long term strategy at our Investor Day, which we expect to host in May in New York. I'll now turn the call back over to Russ. Speaker 200:19:47Thank you, Kevin. We believe we can create sustainable shareholder value by focusing on our thirteensixtyeighty long term value creation targets with a near term laser focus on delivering adjusted EBITDA margins of 13% or more in 2025. As we look to 2025 and beyond, we have great confidence in the business, our backlog, our balance sheet and our ability to continue to evolve API into an even lower CapEx asset light business focused on high margin statutorily mandated services. With that, I would now like to turn the call back over to the operator and open the call for Q and A. Operator00:20:31Thank you. We will now begin the question and answer session. Your first question comes from the line of Julian Mitchell with Barclays. Your line is now open. Speaker 400:20:56Hi, this is Kenyon Pelletier on for Julian. Thanks for taking my question. Maybe to start, earlier on the call, you guided to just under $900,000,000 in EBITDA at the midpoint. And you mentioned that you have $1,000,000,000 of EBITDA in your sites. Could you provide any color on what the timeline might be to get there? Speaker 200:21:25Well, Kevin, do you want to take that one? Speaker 300:21:29Yes, sure. So our current guide hi, Kent. This is Kevin. Our current guide is 890,000,000 to $900,000,000 which is down from our prior guide of $885,000,000 to $915,000,000 Okay. So just to clarify there. Speaker 300:21:45The question on the $1,000,000,000 that was that comment is directed towards the near term with no specific date or time at this point. It's just a near term benchmark we have internally. And as Russ mentioned, we believe we have the momentum in the business to get there in the near term. Speaker 400:22:05Okay. Thank you. That's helpful. And then maybe as a quick follow-up, I was wondering if you could just talk a bit about the M and A environment and what your current pipeline looks like at present? Speaker 200:22:19Sure. I'll take that. I mean, we have, if you recall last year, we shared that we did, approximately $100,000,000 of bolt on M and A and we said that we were going to move into 2024 and accelerate that. And we feel like we have done a really good job of that and that really excludes the acquisition of Elevated. And our pipeline remains really full. Speaker 200:22:46We have a number of targets that we're continuing to work on through the Q4 of this year and we expect to have similar capacity and momentum as we go into 2025. So it's been really good. Our corporate development team has done a really nice job and our pipeline is really robust and the opportunities are plentiful. Speaker 400:23:14Great. Thanks for the color. Operator00:23:18Your next question comes from the line of Stephanie Moore with Jefferies. Your line is open. Speaker 500:23:25Hi, good morning. Thank you. I guess just as a follow-up, I wanted to touch on maybe the projects out of your business a little bit. I think you called out some of these permitting and delays last quarter and throughout the quarter. And I think noted today, you do think these are limited to 2024 and confidence in the full year guide. Speaker 500:23:48Maybe if you could just give us a little bit of color on why you feel confident that these should kind of these should return and rebound here by year Thank you. Speaker 200:23:59Yes, sure. Stephanie, thank you and good morning. Well, when you look at the project delays, essentially everything is moving forward. It's just moving forward in a more herky jerky fashion, if you will. I don't know if that's really actually proper grammar, but the opportunities are continuing to move forward. Speaker 200:24:25Like we've cited, we've got a large government utility client that has a significant winterization program that went on pause and the work basically was going to restart in the Q3 and it has and we have boots on the ground. It's just that the engineering work associated with really kicking off the installation components of it is just slower to get moving than was originally expected and we will see potentially see that work pull through in the first half of next year. We had another one of the larger project related opportunities that I think we shared some color on. It's a high voltage power distribution transmission coming down from in the Northeast and the work has started there as well. But we had originally anticipated having probably 5 crews going right now doing duct bank and bulk work. Speaker 200:25:27And due to some interference issues with existing electrical distribution and natural gas distribution systems that are get those issues resolved so that the work can ramp up and move forward. And some of that stuff is just you can't plan for it. And it's unfortunate and it's difficult, but all of those opportunities are moving forward. And we cited in our remarks the increase in our backlog. Our backlog is up roughly 5% organically and that basically moving into 2025 gives us great confidence that we've got good coverage for growth to return to the business. Speaker 200:26:22And so as we work our way through some of these short term temporary challenges, we have great confidence in where the business is moving to as we move into the end of the year and really next year. Speaker 500:26:37Got it. So just and herky jerky is perfectly fine word in my opinion. I think that sums it up pretty well. So effectively what you're saying is really not much it's not that there was any kind of deterioration since 3Q. It was about as you expected, but a lot of this is outside your control. Speaker 500:26:53It's just the timing of these there's going to be some changes on when things start and the ramp. It's not as that there's anything really that changed since 3Q other than the ramp is happening maybe a little bit slower, which is really outside your control. Is that fair? Speaker 200:27:09That's fair. The only place I would say that we've seen any significant pullback would be in the telecom space. And it's pretty well known that like the federal government's rural broadband program, the way the government is administering that program and delegating and basically delegating the distribution of those funds to the states and how the states are allocating those dollars to get that program going. It's well known that that's a challenge right now. And so you're seeing like proposal activity remains really strong, but you see delays in the work actually getting started because they're having some of these administrative issues associated with it. Speaker 200:27:56So that would probably be the only place that you could really point to where there's maybe some other core underlying issues. But like these other opportunities, the work is moving forward. It's just moving forward slower than anticipated due to unforeseen issues. Speaker 500:28:16Got it. And to be great here, I do want to switch over real quick to the Safety Services side. Could you just talk a little bit about the drivers of the margin expansion that you've seen kind of this year and kind of what and drivers that should continue into 2025? Thank you. Speaker 200:28:35Yes. I'll start maybe and then Kevin can add maybe more detailed color if he would choose. But number 1, this inspection first strategy that we've incorporated and we continue to talk about double digit inspection growth in our core life safety business and that's like our key. And we continue to see really good growth in inspection revenue, which leads to really good service pull through, which is really manifesting itself. And we didn't really I don't know that we really called it out specifically in our remarks, but we get on average 10% higher gross margins on our inspection service and monitoring while even more on our monitoring than we do on our project work. Speaker 200:29:28And I think one thing that gets lost in the mix in the shuffle is that when you have a really robust inspection in service business, that allows you to be even more selective on the project portion of your business. And you get to be more selective and picky with where you're going to deploy those field leaders and your margins go up ultimately on your project work. So that would be the first component of it that drives increased margins. And we've grown the mix of our inspection and service and monitoring business to 54% of total revenue now, which is we continue to make progress towards that 60% goal. Then if you look at our international business, they continue to do a really nice job of number 1 pruning poor performing contracts and customers as well as optimizing their branches and improving the performance of their branches. Speaker 200:30:28And we've made tremendous strides in eliminating loss making branches in our international business. I think when we originally bought Chubb, we had like 47 loss making branches and we're down into single digits now and expect that to be really very, very close to no loss making branches by the end of the year. I don't know that we'll quite make that, but we're continuing to make significant progress there. And all of that stuff is additive to our margins and we're seeing really good progress in the international business. So you can see like if you look at our contract loss rate, there's a as that has declined, there's a direct relationship with improved gross margins, which ultimately lead to improved EBITDA margins. Speaker 200:31:23And like our team is really doing a great job of being selective in the work that they're choosing and the programs that they're choosing. So Kevin, I don't know if you want to add anything. Speaker 300:31:35I don't, Russ. You highlighted the project execution that we now see in our contract law for the check value capture, which continues to contribute to the Safety Services segment. So nothing else on my end. Speaker 500:31:48Thank you, guys. Appreciate it. Speaker 200:31:50Thanks, Stephanie. Operator00:31:52Your next question comes from the line of Andy Wittmann with Baird. Your line is now open. Speaker 600:32:00Yes, great. Thanks for taking my question guys. I guess I just wanted to start out by checking in on the early days of Elevated. Maybe Russ, you could talk about the level of customer and employee retention that you've seen here so far. If you could talk about any progress you're making on integrating in terms of your ability to cross sell or maybe even how the company's revenue and margins are coming out compared to the way you expected them to come out? Speaker 200:32:33Well, number 1, I would tell you that from say key leader retention and everything else like we couldn't be happier. We like I think I can honestly tell you that Andy that I appreciate the leadership of that business more and more as we continue to get to know them. And we were also starting to look at potential bolt on M and A opportunities in that space. And so it's what that's done is it's afforded us to spend more time with some of their key leaders and taking advantage of their expertise as we look at some of these other businesses. And like there's some really, really there's some really good people. Speaker 200:33:27We lost 1 leader that ran a small piece of our business, but that was I guess that was more anticipated than anything. So we feel really good about where we're at with that with the business. And I really like the long term prospects of what we're doing there. Cross selling, we're just so to speak getting started. And like we've had some joint sales meetings with them. Speaker 200:34:01They have a large hospital client that they brought our national accounts group in on a meeting. And so we're just really scratching the surface as it relates to the cross selling opportunity. We had like is a great example, we had all of our safety professionals on campus this week for their annual kind of collaboration and meeting where they're getting together. And we had people from our international business there as well and our elevated team was well represented. And as we continue to bring our leader development capabilities to them, it's been well received inside their business. Speaker 200:34:47So it's been good. We expect that business to perform just as we shared when we first announced the acquisition going all the way back, I guess, probably June now. And so we have seen no reason why the business hasn't. It's not uncommon for some of these acquisitions to have a little dip in their results in the near term period after the deal closes because the team is so focused on trying to get the deal across the finish line. And I think I shared this on the last when we had a call is that there was no real surprises with the acquisition. Speaker 200:35:33It was kind of a typical private equity kind of owned transaction where they start the business from a CapEx perspective. They weren't investing in the rolling fleet and things like that. None of that's unexpected though. You just you kind of know that going into these transactions when the owner is a private equity firm and we're making the requisite investments in the business. So like I remain super optimistic about the long term prospects for us building a broader platform in the elevator and escalator space. Speaker 600:36:11Great. I wanted to follow-up my next question here probably with Kevin. And I guess I wanted to try to understand the 10 bolt ons that you've done this year for which you've paid $211,000,000 I was just wondering Kevin if you could just give us the aggregate annual revenue from those just so we can get a sense of how those are factoring into your outlook and give us a better sense of how meaningful those have been? Speaker 300:36:46Thanks, Andy. So listen, so you're right, we've done about 10 deals that excludes elevated and the purchase price has been at or around today at or around $200,000,000 We don't disclose revenue exactly on all these deals, but I would say just directionally to help you, the average annual revenue on transactions today is going to be north of $100,000,000 Speaker 600:37:17Got it. Okay. Yes. And then my final question, Kevin, is just on the adjustments between GAAP and your adjusted results, I was just wondering what your outlook is for the convergence of those two numbers. Obviously, there's some things that are just definitional like you're always going to exclude the intangible amortization on your adjusted EPS and things like that. Speaker 600:37:44But for the things like business transformation costs and restructuring, I mean most of Chubb has been integrated now, but and the bigger bucket for your adjustments is in the business transformation. Is 25 a cleaner year where those numbers come down or what are the things you're investing in that might cause that to be higher as we move forward? Speaker 300:38:10Yes. So we said pretty consistently that the restructuring expense with respect to so there's you highlighted on the 2 buckets, the 2 material buckets, there's some non service pension and a few other things in there, contingent compensate or consideration for deals we closed really prior to being a public company. But the 2 big buckets that are in there that are driving the largest gap at this point, Andy, are the BPT and restructuring. We said restructuring is related to the value capture work we're doing in Chubb, which will largely be done at the end of 2025. And that's still our expectation. Speaker 300:38:50The other bucket of business process transformation, that bucket is really focused on integration work associated with primarily Chubb and now elevated and other deals we've done. I would expect that bucket to continue as we do larger sort of deals, platform deals and some things like that. But as you look at 2025 absent that, I would expect that bucket like the restructuring buckets subside. Speaker 200:39:25Thank you very much. Thanks Andy. Operator00:39:30Your next question comes from the line of Catherine Thompson with Thompson Research. Your line is open. Speaker 700:39:38Hi. Thank you for taking my questions today. Just first on the you've gained great pricing over the years and including in the quarter just reported. But given that inflation is abating somewhat, can you discuss the ability to gain pricing in that moderating inflation environment? Speaker 200:40:02Well, I'll start and then Kevin can add some color to it, Catherine. Good morning and thank you for joining the call. But we continue to take price. I mean in our business, especially like if you look at our inspection and service business, which is predominantly labor, you are continuing in our business, we're continuing to see wage rates increase at reasonable levels. Don't get me wrong. Speaker 200:40:33I mean, we're not seeing anything crazy happen there. And so we continue to take price across really the broader portfolio of our business. So and we see really actually good stickiness in that price. I think earlier in the year, we talked about we had a business in our specialty services segment that we struggled to raise our prices and we came to a mutual agreement and walked away from a client relationship. And we've actually already started to do work for that customer. Speaker 200:41:11We haven't returned to the levels that we had, say, in 2023. But we are returning to work and doing executing on different programs for this particular customer at increased prices. So we continue to focus on price and take price and we want to continue to work for clients that value the services and the skills that our field leaders bring to the table. And that's those are the right customers for us and that's where the focus has continued to be. So it's been positive for the business. Speaker 200:41:50I don't know, Kevin, do you have anything more to add that's maybe more detailed? Speaker 300:41:55No, I mean, we've talked about where we're going to consistently take price to drive margin and that's on the service side of the business. And when you look at it this year, our teams in North America and internationally, I would say internationally where they had some room to run as they came into API Group, have continued to take pricing on the service side of the business to drive margin. And I think as we go forward here, it's going to be a lever we're going to be continue to be able to pull. We've talked about ticket size and some things like that, that allows us to do that. And then of course, the value we bring on-site. Speaker 300:42:33And so I think as we go forward here, even in as inflation could subside, we're going to be able to continue to work our pricing mechanics as we have. Speaker 700:42:45Okay, great. That's very helpful. This one's just a little bit. This is it's earning season, so you pick up some great nuggets from companies that have already reported, including a large exterior building product distributor that mentioned that their non res repair model activity is picking up after COVID delays, and it's been better than expected this year. Given APG services are largely non discretionary, how does APG fit into that non res R and R activity that was delayed? Speaker 700:43:21So really what are the opportunities? Speaker 200:43:30Good question, Catherine. I mean, I feel like our business related activities kind of in a world post COVID have essentially returned to normal. So I'm not quite sure what this other firm is necessarily citing. And our business continues to see really, really ample opportunities and the growth in inspections, I mean, again, double digits for in this quarter again. That just continued that's that all that has just continued since COVID and really we had a dip when COVID first hit, which when nobody knew what was going on. Speaker 200:44:24And then it bounced back and we've just continued to see double digit inspection growth. And so I guess I'm at a little bit of a loss as it relates to what this other company is saying. I don't know, Kevin, can you help me out? Speaker 300:44:44Well, what I would point to just on general momentum, we added it to the presentation. You can look at our backlog, it's up. Our proposal activity remains robust. We track that. Our proposal activity is up. Speaker 300:44:56As Russ hit on inspections, we continue to see double digit growth there. And in our service portfolio, which would be sort of not statutorily required, but work we're doing on the security side, our service portfolio work up as well. So we continue to see and what we look at, we continue to see good momentum across those areas. Speaker 700:45:18Yes. But it seems like from our perspective, it's only can only be a positive thing for API. Thanks very much for taking my questions today. Good luck. Speaker 200:45:32Thanks, Catherine. Operator00:45:35Your next question comes from the line of Andy Kaplowitz with Citigroup. Your line is open. Speaker 800:45:41Good morning, guys. Hey, Andy. Good morning. Okay. How are you? Speaker 800:45:48So you're still recording 3% organic growth in safety. And if inspection and service are growing double digit, it means your project business is declining. So I know a lot of the issue is HVAC services and you're going to comp that weakness now and you're moving into specialty anyway. But how should we think about your projects business going forward in safety? Can we get back to, let's say, mid single digit growth in the current market? Speaker 800:46:13Or is there not enough good work out there for that? Speaker 200:46:18There's plenty of good work out there. There's plenty of good work out there, Andy. I mean, if you look at our number 1, we're focused on project selection and customer selection in that business as well. We had a large hospital project in our Asian business that kind of pushed from the commencing in the first half of the year into the second half of the year. And that work is now moving forward. Speaker 200:46:53We actually recently booked another large hospital project that literally when you're standing in our office in Hong Kong, you can look out the window and look down on the project site. And we've just recently put that project into I don't even think it shows up in our backlog figures as of yet. So we have a business that's based in the South in the South that does a lot of warehouse and distribution work and that business has been slightly impacted by the high interest rate environment and as interest rates continue to come down, we expect to see that business kick off and really have a positive impact. It's a highly profitable business, but the revenue is down some. And then you cited some of the general pruning from Speaker 900:47:49a project selection perspective that we've had in the HVAC business. Speaker 200:47:49But I think I cited in my remarks, perspective that we've had in the HVAC business. But I Speaker 800:47:55think I cited in my remarks that the backlog in our Speaker 200:47:55North American Safety business or in our Safety business is at $2,000,000,000 and it's the highest it's ever been. So we have really good visibility into what this next year is going to look like and we're really optimistic and it's positive. Speaker 800:48:15Got it. No, that's helpful. And then Russ, I know obviously you don't want to give out those new 3 year targets on margin, but you're already delivering over 13% over the last couple of quarters. I know it's a seasonal business. So but still, like if the inspection services are much higher project margins, as you look forward, what stops you from delivering sort of mid to high teens or at least how do you think about what you could be telling us next year? Speaker 200:48:44Well, come to our Investor Day in May and we'll share our targets with you. But I mean directionally you're correct. I mean we're not saying that we're done when we get to 13%. And just like anything when you set a goal and you set a target, the first thing you need to do is deliver on that target. And we haven't done that yet. Speaker 200:49:10And we expect we will do that in 2025. We will be within a stone's throw, if you look at the guidance that we provided as we finish out this year. So we've made really, I think, fantastic progress in expanding our margins. And there's we're not going to stop. So when we get to 13%, we're not going to stop. Speaker 200:49:32And there continues to be upside for us and we're going to share that next May. And we're doing a lot of work right now on kind of we're calling it 2025 and beyond. And what does that look like, not just margin expansion, but where can we go from a revenue perspective and where are the growth opportunities in the business. And we feel just really, really good about the long term prospects and the viability where we're taking the business. Speaker 800:50:06Got it. And just one more quick one for me. Like backlog, I know you don't love to talk about backlog for us, but is it still growing sequentially? And if you think about sort of core markets, whether it's been data centers or semiconductor, LNG, whatever it is, like generally are those markets still giving you more opportunities? Has there been any delays in some of those bigger markets? Speaker 800:50:30And how do you think about that? Speaker 200:50:33Yes. I mean, so yes, our backlog continues to grow and it continues and it when I when we talk about it growing, it's healthier. And I think that's a really important component for folks that are joining the call today to take away is that, yes, it's growing and it's been it's much more healthy than it was, say, 12 months ago or 24 months ago. And so it's very positive. Our core end markets, I mean, you don't even need to talk about data centers. Speaker 200:51:04I mean, the data center market is so hot and there's so many opportunities in the space. We still see good opportunities in the semiconductor space. Healthcare continues to remain positive. The infrastructure space, critical infrastructure remains on there continues to have a lot of opportunities in that sector as well. Probably the only place and I think when Stephanie from Jefferies was asking a question and I cited the only place that we've seen any sort of kind of pullback from some of is in the telecom space and a lot of that has to do with the administrative issues that the federal government has in administering the funds with the rural broadband program. Speaker 200:51:55BEANS, I think is what the acronym is. And that's really the only place where we've seen any sort of true difficulty, if you will. But our backlog is super strong. Speaker 800:52:09Helpful. Thank you. Operator00:52:14Your next question comes from the line of Josh Chan with UBS. Your line is open. Speaker 1000:52:21Hi, good morning, Russ, Kevin. Thanks for taking my question. When you talk about accelerating organic growth in 2025, is the primary driver there that the absence of the project delays that you're seeing today? And I guess could you talk about kind of the composition between service and project and whether both can kind of grow in 2025? Thank you. Speaker 200:52:47Well, Kevin, why don't you want to grab this one? Speaker 300:52:51Yes. So as we think about 2025 going into 2025, obviously with strong backlog and the activity that I referenced earlier in the call, we feel like it's going to or we believe it's going to be more of a what I can say is a normal year, Josh. And so as we look at the project side of the business, we'd expect that to perform in that lowtomidsingledigits. And service, which has held up this year at that mid to high single digits, that would be our expectation as we go through 2025 as well. Now there'll be a ramp up period in the first half of the year. Speaker 300:53:31But in general, we see 2025 setting up as that normal year with projects low to mid and service mid to high. That's on an organic Speaker 1000:53:43basis. Organic basis, okay. Yes, thank you. And then on your 3 year targets, obviously, you guys have done a great job expanding margins and likely to reach your existing target. Kind of going forward, will there be a kind of an organic growth component to the next round of targets as well? Speaker 1000:54:01Just curious how you're thinking about what metrics are important? Thank you. Speaker 200:54:10Well, for sure. I mean, like there's for sure is an element of organic growth in like this long term planning that I talked about 2025 and beyond. Organic growth is a component of that. I guess, Josh, I guess we haven't really thought our way through exactly how I think it's good feedback for us and something for us to think about as we start to establish some of these targets and goals and what we share with folks like yourself as we go forward. But there's no question that organic growth is part of the algorithm as we think about what does the business look like in 2025 beyond or like through 2028. Speaker 200:55:02We think about it from an organic growth. We think about it from a bolt on M and A perspective. We think about it from transformational M and A and what does business look like and how much of that is service and is there another leg under the stool and all of those things come into play as we think about 2025 and beyond. So yes, organic growth is a component of that. We understand the importance of organic growth and the health of our business. Speaker 200:55:33And we'll have to think about how we establish and publish from a target perspective. So I don't know, Kevin, you got any thoughts on that? Speaker 300:55:46Nothing to add, Russ. Speaker 1000:55:48Great. Thank you both for the color and the time. Appreciate that. Speaker 200:55:52Thank you, Josh. Operator00:55:55Your next question comes from the line of Jon Tanwanteng with CJS Securities. Your line is open. Speaker 900:56:03Hi, good morning, guys. I was just wondering if you could give us a little more color on the M and A pipeline and kind of the timing and size of opportunities there. Do you expect some of these to close earlier in 2025 or maybe late in 2024 and maybe that has an effect on the accretion for the year? Or is it more spread out? Or is it more back half weighted? Speaker 900:56:23Just help me understand what you're looking at in your pipeline today. Speaker 200:56:28Well, the reality of it is when you think about bolt on M and A, John, we want that to happen consistently throughout the year and not in the reality of it is that we don't have like I'm talking specifically bolt on M and A now. Most of these sellers sell their business one time and that's it. And so sometimes they don't have usually a lot of resources. And so sometimes transactions move relatively quickly, sometimes they move relatively slowly. And some of it's based on do they have the resources, can they pull the information together that we need, etcetera. Speaker 200:57:11And so you don't have 100% control about the timing of some of these transactions, But the goal is to have them happen consistently throughout the year so that you're balancing your workload. We're not killing our team and our people are getting their work done and we just it's kind of like you just like clicking away and clicking away and clicking away and clicking away and you continue to do some transactions. So we expect to get have some deal activity get completed up here yet in the Q4 and we'll continue and we'll just continue right pushing right through into next year. Now the next elevated, when that comes along, we're always kind of digging in and looking at the next opportunity and doing a little bit of work. And there's always something going on. Speaker 200:58:09And it doesn't mean though that we're going to move forward. We are very disciplined in how we value these businesses and whether the business is the right fit for us. And so it's whether we have one happen yet this year, I would say probably doubtful. I suspect anything is possible, but it's probably doubtful. And most likely there will be it would be something would if something were to happen, it would happen in 2025. Speaker 900:58:43Got it. And to follow on an earlier question, are you expecting to provide something like an inorganic growth target or aspiration or perhaps a target for capital deployment towards M and A at your Investor Day? Speaker 200:58:57Again, I don't know that we've worked our way through exactly what we're going to publish in Target. But bolt on M and A is part of our playbook. And we've always been an acquisitive company and it's really a big part of our DNA and who we are. And so it will be part of the playbook. There's always going to be an element of hesitation about saying we're going to do X amount of M and A a year, because if it's not the right opportunities for us, then we need to be disciplined and we need to not do it. Speaker 200:59:38And I don't want to get into a situation where we're doing deals just to do deals. That would not be good for our shareholders for the long term. So it will be part of our playbook. It will be part of our planning. It will be part of how we're thinking about what the business looks like long term and in the future. Speaker 201:00:02But I would be reticent to say we're going to do X amount of M and A each year. It just I don't know if that would make much sense. Operator01:00:14That concludes our Q and A session. I will now turn the conference back over to Russ for the closing remarks. Speaker 201:00:22Thank you. In closing, I would like to thank all of our team members for their continued support and dedication to our business. I'm truly grateful for what each one of you do on a daily basis. I would also like to thank our long term shareholders as well as those that have recently joined us for their support. We appreciate your ownership of API we look forward to updating you on our progress throughout the remainder of the year. Speaker 201:00:46Thank you everybody. Appreciate your time this morning. Operator01:00:51Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallAPi Group Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Pactiv Evergreen Earnings HeadlinesAPi Group (APG) Expected to Announce Quarterly Earnings on ThursdayApril 24 at 3:47 AM | americanbankingnews.comRBC Capital Keeps Their Buy Rating on APi Group (APG)April 19, 2025 | markets.businessinsider.comTrump purposefully forcing markets to crash…Whether you agree with the plan or not doesn’t matter. It’s happening. The only question is – are you ready for it?April 24, 2025 | Porter & Company (Ad)Analysts’ Opinions Are Mixed on These Industrial Goods Stocks: Booz Allen (BAH), General Dynamics (GD) and APi Group (APG)April 17, 2025 | markets.businessinsider.comAnalysts Offer Insights on Industrial Goods Companies: Trex Company (TREX) and APi Group (APG)April 17, 2025 | markets.businessinsider.comAPi Group Confirms Date of First Quarter 2025 Earnings ReleaseApril 17, 2025 | gurufocus.comSee More APi Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Pactiv Evergreen? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Pactiv Evergreen and other key companies, straight to your email. Email Address About Pactiv EvergreenPactiv Evergreen (NASDAQ:PTVE) manufactures and distributes fresh foodservice and food merchandising products, and fresh beverage cartons in the United States, rest of North America, and internationally. It operates in two segments, Foodservice, and Food and Beverage Merchandising. The Foodservice segment offers food containers; drinkware, such as hot and cold cups and lids; and tableware, service ware, and other products. The Food and Beverage Merchandising segment manufactures cartons for fresh refrigerated beverage products, including dairy, juice, and other specialty beverage; clear rigid-display containers, containers for prepared and ready-to-eat food, and trays for meat and poultry and egg cartons; fiber-based liquid packaging board; and supplies fresh carton systems comprises printed cartons, spouts, and filling machinery. It serves its products to full-service restaurants, quick service restaurants, foodservice distributors, supermarkets, grocery and healthy eating retailers, other food stores, food and beverage producers, and food packers and food processors. The company was formerly known as Reynolds Group Holdings Limited. The company was founded in 1880 and is headquartered in Lake Forest, Illinois. Pactiv Evergreen Inc. is a subsidiary of Packaging Finance Limited.View Pactiv Evergreen ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step InCan IBM’s Q1 Earnings Spark a Breakout for the Stock?Genuine Parts: Solid Earnings But Economic Uncertainties RemainBreaking Down Taiwan Semiconductor's Earnings and Future UpsideArcher Aviation Unveils NYC Network Ahead of Key Earnings Report Upcoming Earnings AbbVie (4/25/2025)AON (4/25/2025)Colgate-Palmolive (4/25/2025)HCA Healthcare (4/25/2025)NatWest Group (4/25/2025)Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Booking (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 11 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen, and welcome to API Group's Third Quarter 2024 Financial Results Conference Call. 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 Adam Phee, Vice President of Investor Relations at API Group. Please go ahead. Speaker 100:00:28Thank you. Good morning, everyone, and thank you for joining our Q3 2024 earnings conference call. Joining me on the call today are Russ Becker, our President and CEO Kevin Crum, our Executive Vice President and Chief Financial Officer and Sir Martin Franklin and Jim Lilly, our Board co chairs. Before we begin, I would like to remind you that certain statements in the company's earnings press release announcement and on this call are forward looking statements, which are based on expectations, intentions and projections regarding the company's future performance, anticipated events or trends or other matters that are not historical facts. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements. Speaker 100:01:16In our press release and filings with the SEC, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, October 31, and we undertake no obligation to update any forward looking statements we may make, except as required by law. As a reminder, we have posted a presentation detailing our Q3 financial performance on the Investor Relations page of our website. Our comments today will also include non GAAP financial measures and other key operating metrics. The reconciliation of and other information regarding these items can be found in our press release and presentation. Speaker 100:01:54It is now my pleasure to turn the call over to Russ. Speaker 200:01:59Thank you, Adam. Good morning, everyone. Thank you for taking the time to join our call. Before we get into our results, I would like to thank our approximately 29,000 leaders for their dedication to API. The safety, health and well-being of each of our teammates is our number one value. Speaker 200:02:19While I mentioned this every quarter, the events of the last few months, including the impact of the hurricanes on our teammates in the Southeast has given our organization the opportunity to put that value to practice. I'm happy with the way our teammates stepped up to help each other and the impacted communities in which we operate. Back in 2021, we detailed our 13% plus adjusted EBITDA margin target by year end 2025 as part of our broader thirteenseighty shareholder value creation framework that you can find on Slide 5 of our Q3 presentation. In addition to the 13% target, the 6080 financial goals are long term revenues of 60% from inspection, service and monitoring and long term adjusted free cash flow conversion of approximately 80%. Over the past few years, we have communicated and executed our strategy and its key initiatives intended to achieve these goals with a specific focus on expanding margins to reach 13% or more in 2025. Speaker 200:03:29The team has made excellent progress this year executing on our margin expansion initiatives with expected adjusted EBITDA margins up approximately 150 basis points. This has been accomplished by focusing on the following. 1st, pricing. 2nd, improved inspection, service and monitoring revenue mix 3rd, disciplined customer and project selection 4th, Chubb value capture 5th, procurement systems and scale 6th, accretive M and A and selective business pruning. And finally, as I always like to say, we always have the opportunity to just be better. Speaker 200:04:11The team's work over the last few years executing our thirteensixtyeighty strategy has resulted in API being the strongest it has ever been. On Slide 6, we highlight the progress we have made as a business from 2021 to 2024, with 2024 expected to be a year of record net revenues, profitability and free cash flow generation. The 3rd quarter marked 17 quarters in a row of double digit organic growth in inspection revenues in U. S. Life safety. Speaker 200:04:43This performance has been a key contributor to our steady progress towards our long term target of 60% of revenues coming from inspection, service and monitoring. As we prepare to set new and increased financial goals for the next 3 years in 2025, it is gratifying to reflect on our progress since we first became a publicly traded company in late 2019. In our 1st year as a public company, we generated $393,000,000 in adjusted EBITDA. This year, we expect to deliver about $900,000,000 and we have $1,000,000,000 of annual adjusted EBITDA close in our sites. As we prepare to enter 2025, we plan to continue to execute our strategy, accelerate organic growth, increase margins and expand our bolt on M and A program. Speaker 200:05:36Before Kevin gets into the Q3 results, I wanted to address our disciplined customer and project selection initiative on Slide 7, which has been a significant contributor to the improvements we have made towards our thirteenseyeighty financial targets. We have focused on disciplined customers and project selection for some time now and made it a point of emphasis in our planning cycle in early 2023. We challenged our business leaders to evolve away from large, lower margin, higher risk opportunities and focus on allocating our valuable field leaders to the best opportunities to position the business for long term profitable growth. Our leadership team has done an excellent job executing this strategy and it is positively impacting our financial results, allowing us to deliver adjusted EBITDA margins ahead of our expectations. We've been consistently setting new records as it relates to margins and cash flow generation as we evolve our business towards higher margin, more recurring service revenues. Speaker 200:06:41It is encouraging to note that our backlog is growing and healthy with work that comes to us with a higher expected margin, lower expected risk and smaller project sizes. This gives us confidence in reaccelerating growth in 2025 and beyond in these businesses. Equally important during this time, API's underlying core service business has grown steadily as we continue to take market share. More recently in the second and third quarters of this year, we have faced temporary timing revenue headwinds due to unexpected timing delays in certain customer projects. We expect the total impact of these headwinds on our 2024 net revenues to be approximately $150,000,000 with this impact predominantly driven by the Specialty Services and HVAC Businesses. Speaker 200:07:35In Specialty Services, the delays were primarily with certain telecom and utility customers and were driven by the following: higher than expected permitting and engineering delays and slower than planned execution of federal road broadband program. We believe these headwinds are limited to 2024 and primarily related to certain portions of our Specialty Services business. Our core life safety business, which includes our fire protection, electronic security and elevator businesses and excludes the more project heavy HVAC business has made excellent progress as highlighted on Slide 8. Core Life Safety represents over 65% of total API net revenues and has consistently demonstrated strong overall organic growth led by high single digit organic growth in inspection, service and monitoring revenues. The Life Safety business has a record high backlog of approximately $2,000,000,000 up 5% organically versus prior year and it's the healthiest we've seen it. Speaker 200:08:43From 2022 to 2024 adjusted gross profit and EBITDA margins in life safety have improved considerably with adjusted EBITDA margins expanding more than 300 basis points. We expect the flywheel, which is underpinned by our inspection first strategy driving outsized growth in service revenues will continue to allow the businesses to be more selective on project revenues and drive further margin expansion across the branch network in 2025 and beyond. Starting in 2025, you will see our core life safety businesses more clearly as we have made the decision to realign the HVAC business under our Specialty Services segment. This change will put our HVAC business into a segment with other operating companies that serve similar customers in similar end markets to create synergies and efficiencies, which we highlight on Slide 9. We enter 2025 with a lot of momentum. Speaker 200:09:45Organic growth of our inspection, service and monitoring revenue streams in safety services remains strong. Organic growth in backlog and proposal activity is trending providing support for a return to organic growth in project revenues. The international business is nearly finished working through its subpar inherited contracts and branch consolidation plans. On slide 10, the bolt on M and A engine continues to accelerate and support future organic growth with 10 bolt on acquisitions excluding elevated closed at reasonable multiples through October. We expect this momentum to continue in 2025 and beyond. Speaker 200:10:27And on Slide 11, you can see the long term benefits, which we have accelerated through M and A of executing the initiatives behind our thirteensixtyeighty shareholder value creation framework. Our business continues to evolve into a more asset light services focused branch led operating model with an increased mix of recurring higher margin revenues. During this evolution, our contract loss rate, which measures the dollar loss on projects as a percent of total revenue, dropped from approximately 1.5% in 2019 to less than 0.4% in 2024, reflecting more disciplined customer and project selection and strong execution in the field. I'm proud of the team's execution of our strategy. We have built a strong foundation, improve the quality of our business and backlog and expect to return to margin accretive organic growth in 2025. Speaker 200:11:26We are well positioned to achieve our 13% plus adjusted EBITDA margin target in 2025 and set new meaningfully higher targets for the following 3 years, which we will review during our Investor Day next year. I would now like to hand the call over to Kevin to discuss our financial results and guidance in more detail. Kevin? Speaker 300:11:52Thanks, Ross. Good morning, everyone. Reported revenues for the 3 months ended September 30 increased by 2.4% to $1,830,000,000 compared to $1,780,000,000 in the prior year period, driven by strong organic growth and service revenues of 9% in our Safety Services segment and modest benefits from favorable foreign currency exchange rates in M and A. This was partially offset by a 7.7 percent organic decline in our Specialty Services segment. On an organic basis, total company revenues were essentially flat for the quarter. Speaker 300:12:28Adjusted gross margin for the 3 months ended September 30 grew to 31%, representing a 200 basis point increase compared to the prior year period driven by price increases, outsized growth and higher margin services revenue, margin expansion for both project and service revenues as well as Chubb value capture savings. Adjusted EBITDA increased by 9.4% for the 3 months ended September 30 with adjusted EBITDA margin coming in at 13.4% representing an 80 basis point increase compared to the prior year period. This was primarily due to the factors impacting gross margin partially offset by lower fixed cost absorption in our specialty and HVAC businesses due to lower than expected revenues. Adjusted diluted earnings per share for the Q3 was $0.51 per share representing a $0.03 per share or 6.3% increase compared to the prior year period. The increase was driven primarily by growth in adjusted EBITDA, partially offset by increases in interest expense and adjusted diluted shares outstanding. Speaker 300:13:37I will now discuss our results in more detail for the Safety Services segment. Safety Services reported revenues for the 3 months ended September 30 increased by 9.7% to $1,340,000,000 compared to $1,220,000,000 in the prior year. This quarter growth was led by the U. S. Life safety businesses, which posted double digit organic growth in inspection revenues as well as double digit organic growth in broader inspection service and monitoring revenues. Speaker 300:14:07This was partially offset by a low single digit organic decline in project revenues driven by planned customer attrition in our international business and project delays in our HVAC business. On an organic basis, Safety Services revenues increased by 3.1%. Adjusted gross margin for the 3 months ended September 30 was 35%, representing record 3rd quarter adjusted gross margin and a 170 basis point increase compared to the prior year adjusted gross margin, driven by price increases, improved business mix and inspection service and monitoring revenue as well as margin expansion in both our project and services revenues. Adjusted EBITDA increased by 24.3 percent for the 3 months ended September 30 and adjusted EBITDA margin was 15.7% representing a record for the 3rd quarter and a 180 basis point increase compared to the prior year period, primarily due to the factors impacting adjusted gross margin. I will now discuss our results in more detail for our Specialty Services segment. Speaker 300:15:15Specialty Services reported revenues for the 3 months ended September 30 declined by 13.4%, 7.7% on an organic basis or 7.7% on an organic basis to $493,000,000 compared to $569,000,000 in the prior year period, driven by divestitures, a decline in service and project and a decline in project and services revenues. The decline in revenue was primarily driven by the exited customer relationship mentioned in the Q1 higher than expected permitting and engineering delay as well as slower than expected execution of federal broadband programs. Our adjusted gross margin for the 3 months ended September 30 was 20.1 percent representing a 40 basis point increase compared to the prior year period driven by the impacts from our disciplined customer and project selection strategy. Adjusted EBITDA declined by 19.3% for the 3 months ended September 30 and adjusted EBITDA margin was 13.6% representing a 100 basis point decrease compared to the prior year period. This was primarily due to lower fixed cost absorption on lower than expected near term revenues. Speaker 300:16:31We continue to focus on driving strong free cash flow conversion improvements year over year. For the 3 months ended September 30, adjusted free cash flow came in at $227,000,000 reflecting an adjusted free cash flow conversion of 93%. For the 9 months for the 1st 9 months of the year, adjusted free cash flow was $361,000,000 with conversion of 56%, representing an improvement of $124,000,000 or slightly over 50% when compared to the 1st 9 months of 2023. Free cash flow generation has been and continues to be a priority across API and our performance in the first 9 months of the year puts us in a position to increase our full year 2024 cash flow guidance. We now expect to finish the year atorabove75% adjusted free cash flow conversion, which is up from our prior guide of 70%. Speaker 300:17:25As a reminder, the 4th quarter is traditionally our strongest free cash flow conversion due to seasonality. At the end of the Q3, our net leverage was approximately 2.4 times below our long term target of 2.5 times even as we accelerated margin accretive bolt on M and A. As we look forward to 2025, we will remain laser focused on cash generation and expect to grow our free cash flow, providing us a significant opportunity for value enhancing capital deployment. Our long term capital deployment priorities remain maintaining net leverage at stage of long term targets, M and A at attractive multiples and share repurchases where as a reminder, we have $400,000,000 remaining under our current authorization levels. I will now discuss our guidance for the full year 2024. Speaker 300:18:19We expect full year reported net revenues of approximately $7,000,000,000 revised from the low end of our prior guide, which was $7,150,000,000 The $150,000,000 reduction in revenue expectations for the year reflects the impacts of the project delays and our specialty and HVAC businesses discussed earlier in the call. We now expect full year adjusted EBITDA of $890,000,000 to $900,000,000 representing a narrowing of the prior range on the top and bottom end. This range reflects adjusted EBITDA growth of approximately 13% to 15% on a fixed currency basis and adjusted EBITDA margin of 12.8% at the midpoint. For 2024, we anticipate interest expense to be approximately $145,000,000 depreciation to be approximately $82,000,000 capital expenditures to be approximately $90,000,000 and our adjusted effective tax rate to be approximately 23%. We expect our adjusted diluted weighted average share count to be approximately $280,000,000 for the Q4 and $279,000,000 for the full year. Speaker 300:19:28As we look forward to 2025, we have great confidence in the business and its momentum. We plan to share our outlook in the early in the New Year and more details about our long term strategy at our Investor Day, which we expect to host in May in New York. I'll now turn the call back over to Russ. Speaker 200:19:47Thank you, Kevin. We believe we can create sustainable shareholder value by focusing on our thirteensixtyeighty long term value creation targets with a near term laser focus on delivering adjusted EBITDA margins of 13% or more in 2025. As we look to 2025 and beyond, we have great confidence in the business, our backlog, our balance sheet and our ability to continue to evolve API into an even lower CapEx asset light business focused on high margin statutorily mandated services. With that, I would now like to turn the call back over to the operator and open the call for Q and A. Operator00:20:31Thank you. We will now begin the question and answer session. Your first question comes from the line of Julian Mitchell with Barclays. Your line is now open. Speaker 400:20:56Hi, this is Kenyon Pelletier on for Julian. Thanks for taking my question. Maybe to start, earlier on the call, you guided to just under $900,000,000 in EBITDA at the midpoint. And you mentioned that you have $1,000,000,000 of EBITDA in your sites. Could you provide any color on what the timeline might be to get there? Speaker 200:21:25Well, Kevin, do you want to take that one? Speaker 300:21:29Yes, sure. So our current guide hi, Kent. This is Kevin. Our current guide is 890,000,000 to $900,000,000 which is down from our prior guide of $885,000,000 to $915,000,000 Okay. So just to clarify there. Speaker 300:21:45The question on the $1,000,000,000 that was that comment is directed towards the near term with no specific date or time at this point. It's just a near term benchmark we have internally. And as Russ mentioned, we believe we have the momentum in the business to get there in the near term. Speaker 400:22:05Okay. Thank you. That's helpful. And then maybe as a quick follow-up, I was wondering if you could just talk a bit about the M and A environment and what your current pipeline looks like at present? Speaker 200:22:19Sure. I'll take that. I mean, we have, if you recall last year, we shared that we did, approximately $100,000,000 of bolt on M and A and we said that we were going to move into 2024 and accelerate that. And we feel like we have done a really good job of that and that really excludes the acquisition of Elevated. And our pipeline remains really full. Speaker 200:22:46We have a number of targets that we're continuing to work on through the Q4 of this year and we expect to have similar capacity and momentum as we go into 2025. So it's been really good. Our corporate development team has done a really nice job and our pipeline is really robust and the opportunities are plentiful. Speaker 400:23:14Great. Thanks for the color. Operator00:23:18Your next question comes from the line of Stephanie Moore with Jefferies. Your line is open. Speaker 500:23:25Hi, good morning. Thank you. I guess just as a follow-up, I wanted to touch on maybe the projects out of your business a little bit. I think you called out some of these permitting and delays last quarter and throughout the quarter. And I think noted today, you do think these are limited to 2024 and confidence in the full year guide. Speaker 500:23:48Maybe if you could just give us a little bit of color on why you feel confident that these should kind of these should return and rebound here by year Thank you. Speaker 200:23:59Yes, sure. Stephanie, thank you and good morning. Well, when you look at the project delays, essentially everything is moving forward. It's just moving forward in a more herky jerky fashion, if you will. I don't know if that's really actually proper grammar, but the opportunities are continuing to move forward. Speaker 200:24:25Like we've cited, we've got a large government utility client that has a significant winterization program that went on pause and the work basically was going to restart in the Q3 and it has and we have boots on the ground. It's just that the engineering work associated with really kicking off the installation components of it is just slower to get moving than was originally expected and we will see potentially see that work pull through in the first half of next year. We had another one of the larger project related opportunities that I think we shared some color on. It's a high voltage power distribution transmission coming down from in the Northeast and the work has started there as well. But we had originally anticipated having probably 5 crews going right now doing duct bank and bulk work. Speaker 200:25:27And due to some interference issues with existing electrical distribution and natural gas distribution systems that are get those issues resolved so that the work can ramp up and move forward. And some of that stuff is just you can't plan for it. And it's unfortunate and it's difficult, but all of those opportunities are moving forward. And we cited in our remarks the increase in our backlog. Our backlog is up roughly 5% organically and that basically moving into 2025 gives us great confidence that we've got good coverage for growth to return to the business. Speaker 200:26:22And so as we work our way through some of these short term temporary challenges, we have great confidence in where the business is moving to as we move into the end of the year and really next year. Speaker 500:26:37Got it. So just and herky jerky is perfectly fine word in my opinion. I think that sums it up pretty well. So effectively what you're saying is really not much it's not that there was any kind of deterioration since 3Q. It was about as you expected, but a lot of this is outside your control. Speaker 500:26:53It's just the timing of these there's going to be some changes on when things start and the ramp. It's not as that there's anything really that changed since 3Q other than the ramp is happening maybe a little bit slower, which is really outside your control. Is that fair? Speaker 200:27:09That's fair. The only place I would say that we've seen any significant pullback would be in the telecom space. And it's pretty well known that like the federal government's rural broadband program, the way the government is administering that program and delegating and basically delegating the distribution of those funds to the states and how the states are allocating those dollars to get that program going. It's well known that that's a challenge right now. And so you're seeing like proposal activity remains really strong, but you see delays in the work actually getting started because they're having some of these administrative issues associated with it. Speaker 200:27:56So that would probably be the only place that you could really point to where there's maybe some other core underlying issues. But like these other opportunities, the work is moving forward. It's just moving forward slower than anticipated due to unforeseen issues. Speaker 500:28:16Got it. And to be great here, I do want to switch over real quick to the Safety Services side. Could you just talk a little bit about the drivers of the margin expansion that you've seen kind of this year and kind of what and drivers that should continue into 2025? Thank you. Speaker 200:28:35Yes. I'll start maybe and then Kevin can add maybe more detailed color if he would choose. But number 1, this inspection first strategy that we've incorporated and we continue to talk about double digit inspection growth in our core life safety business and that's like our key. And we continue to see really good growth in inspection revenue, which leads to really good service pull through, which is really manifesting itself. And we didn't really I don't know that we really called it out specifically in our remarks, but we get on average 10% higher gross margins on our inspection service and monitoring while even more on our monitoring than we do on our project work. Speaker 200:29:28And I think one thing that gets lost in the mix in the shuffle is that when you have a really robust inspection in service business, that allows you to be even more selective on the project portion of your business. And you get to be more selective and picky with where you're going to deploy those field leaders and your margins go up ultimately on your project work. So that would be the first component of it that drives increased margins. And we've grown the mix of our inspection and service and monitoring business to 54% of total revenue now, which is we continue to make progress towards that 60% goal. Then if you look at our international business, they continue to do a really nice job of number 1 pruning poor performing contracts and customers as well as optimizing their branches and improving the performance of their branches. Speaker 200:30:28And we've made tremendous strides in eliminating loss making branches in our international business. I think when we originally bought Chubb, we had like 47 loss making branches and we're down into single digits now and expect that to be really very, very close to no loss making branches by the end of the year. I don't know that we'll quite make that, but we're continuing to make significant progress there. And all of that stuff is additive to our margins and we're seeing really good progress in the international business. So you can see like if you look at our contract loss rate, there's a as that has declined, there's a direct relationship with improved gross margins, which ultimately lead to improved EBITDA margins. Speaker 200:31:23And like our team is really doing a great job of being selective in the work that they're choosing and the programs that they're choosing. So Kevin, I don't know if you want to add anything. Speaker 300:31:35I don't, Russ. You highlighted the project execution that we now see in our contract law for the check value capture, which continues to contribute to the Safety Services segment. So nothing else on my end. Speaker 500:31:48Thank you, guys. Appreciate it. Speaker 200:31:50Thanks, Stephanie. Operator00:31:52Your next question comes from the line of Andy Wittmann with Baird. Your line is now open. Speaker 600:32:00Yes, great. Thanks for taking my question guys. I guess I just wanted to start out by checking in on the early days of Elevated. Maybe Russ, you could talk about the level of customer and employee retention that you've seen here so far. If you could talk about any progress you're making on integrating in terms of your ability to cross sell or maybe even how the company's revenue and margins are coming out compared to the way you expected them to come out? Speaker 200:32:33Well, number 1, I would tell you that from say key leader retention and everything else like we couldn't be happier. We like I think I can honestly tell you that Andy that I appreciate the leadership of that business more and more as we continue to get to know them. And we were also starting to look at potential bolt on M and A opportunities in that space. And so it's what that's done is it's afforded us to spend more time with some of their key leaders and taking advantage of their expertise as we look at some of these other businesses. And like there's some really, really there's some really good people. Speaker 200:33:27We lost 1 leader that ran a small piece of our business, but that was I guess that was more anticipated than anything. So we feel really good about where we're at with that with the business. And I really like the long term prospects of what we're doing there. Cross selling, we're just so to speak getting started. And like we've had some joint sales meetings with them. Speaker 200:34:01They have a large hospital client that they brought our national accounts group in on a meeting. And so we're just really scratching the surface as it relates to the cross selling opportunity. We had like is a great example, we had all of our safety professionals on campus this week for their annual kind of collaboration and meeting where they're getting together. And we had people from our international business there as well and our elevated team was well represented. And as we continue to bring our leader development capabilities to them, it's been well received inside their business. Speaker 200:34:47So it's been good. We expect that business to perform just as we shared when we first announced the acquisition going all the way back, I guess, probably June now. And so we have seen no reason why the business hasn't. It's not uncommon for some of these acquisitions to have a little dip in their results in the near term period after the deal closes because the team is so focused on trying to get the deal across the finish line. And I think I shared this on the last when we had a call is that there was no real surprises with the acquisition. Speaker 200:35:33It was kind of a typical private equity kind of owned transaction where they start the business from a CapEx perspective. They weren't investing in the rolling fleet and things like that. None of that's unexpected though. You just you kind of know that going into these transactions when the owner is a private equity firm and we're making the requisite investments in the business. So like I remain super optimistic about the long term prospects for us building a broader platform in the elevator and escalator space. Speaker 600:36:11Great. I wanted to follow-up my next question here probably with Kevin. And I guess I wanted to try to understand the 10 bolt ons that you've done this year for which you've paid $211,000,000 I was just wondering Kevin if you could just give us the aggregate annual revenue from those just so we can get a sense of how those are factoring into your outlook and give us a better sense of how meaningful those have been? Speaker 300:36:46Thanks, Andy. So listen, so you're right, we've done about 10 deals that excludes elevated and the purchase price has been at or around today at or around $200,000,000 We don't disclose revenue exactly on all these deals, but I would say just directionally to help you, the average annual revenue on transactions today is going to be north of $100,000,000 Speaker 600:37:17Got it. Okay. Yes. And then my final question, Kevin, is just on the adjustments between GAAP and your adjusted results, I was just wondering what your outlook is for the convergence of those two numbers. Obviously, there's some things that are just definitional like you're always going to exclude the intangible amortization on your adjusted EPS and things like that. Speaker 600:37:44But for the things like business transformation costs and restructuring, I mean most of Chubb has been integrated now, but and the bigger bucket for your adjustments is in the business transformation. Is 25 a cleaner year where those numbers come down or what are the things you're investing in that might cause that to be higher as we move forward? Speaker 300:38:10Yes. So we said pretty consistently that the restructuring expense with respect to so there's you highlighted on the 2 buckets, the 2 material buckets, there's some non service pension and a few other things in there, contingent compensate or consideration for deals we closed really prior to being a public company. But the 2 big buckets that are in there that are driving the largest gap at this point, Andy, are the BPT and restructuring. We said restructuring is related to the value capture work we're doing in Chubb, which will largely be done at the end of 2025. And that's still our expectation. Speaker 300:38:50The other bucket of business process transformation, that bucket is really focused on integration work associated with primarily Chubb and now elevated and other deals we've done. I would expect that bucket to continue as we do larger sort of deals, platform deals and some things like that. But as you look at 2025 absent that, I would expect that bucket like the restructuring buckets subside. Speaker 200:39:25Thank you very much. Thanks Andy. Operator00:39:30Your next question comes from the line of Catherine Thompson with Thompson Research. Your line is open. Speaker 700:39:38Hi. Thank you for taking my questions today. Just first on the you've gained great pricing over the years and including in the quarter just reported. But given that inflation is abating somewhat, can you discuss the ability to gain pricing in that moderating inflation environment? Speaker 200:40:02Well, I'll start and then Kevin can add some color to it, Catherine. Good morning and thank you for joining the call. But we continue to take price. I mean in our business, especially like if you look at our inspection and service business, which is predominantly labor, you are continuing in our business, we're continuing to see wage rates increase at reasonable levels. Don't get me wrong. Speaker 200:40:33I mean, we're not seeing anything crazy happen there. And so we continue to take price across really the broader portfolio of our business. So and we see really actually good stickiness in that price. I think earlier in the year, we talked about we had a business in our specialty services segment that we struggled to raise our prices and we came to a mutual agreement and walked away from a client relationship. And we've actually already started to do work for that customer. Speaker 200:41:11We haven't returned to the levels that we had, say, in 2023. But we are returning to work and doing executing on different programs for this particular customer at increased prices. So we continue to focus on price and take price and we want to continue to work for clients that value the services and the skills that our field leaders bring to the table. And that's those are the right customers for us and that's where the focus has continued to be. So it's been positive for the business. Speaker 200:41:50I don't know, Kevin, do you have anything more to add that's maybe more detailed? Speaker 300:41:55No, I mean, we've talked about where we're going to consistently take price to drive margin and that's on the service side of the business. And when you look at it this year, our teams in North America and internationally, I would say internationally where they had some room to run as they came into API Group, have continued to take pricing on the service side of the business to drive margin. And I think as we go forward here, it's going to be a lever we're going to be continue to be able to pull. We've talked about ticket size and some things like that, that allows us to do that. And then of course, the value we bring on-site. Speaker 300:42:33And so I think as we go forward here, even in as inflation could subside, we're going to be able to continue to work our pricing mechanics as we have. Speaker 700:42:45Okay, great. That's very helpful. This one's just a little bit. This is it's earning season, so you pick up some great nuggets from companies that have already reported, including a large exterior building product distributor that mentioned that their non res repair model activity is picking up after COVID delays, and it's been better than expected this year. Given APG services are largely non discretionary, how does APG fit into that non res R and R activity that was delayed? Speaker 700:43:21So really what are the opportunities? Speaker 200:43:30Good question, Catherine. I mean, I feel like our business related activities kind of in a world post COVID have essentially returned to normal. So I'm not quite sure what this other firm is necessarily citing. And our business continues to see really, really ample opportunities and the growth in inspections, I mean, again, double digits for in this quarter again. That just continued that's that all that has just continued since COVID and really we had a dip when COVID first hit, which when nobody knew what was going on. Speaker 200:44:24And then it bounced back and we've just continued to see double digit inspection growth. And so I guess I'm at a little bit of a loss as it relates to what this other company is saying. I don't know, Kevin, can you help me out? Speaker 300:44:44Well, what I would point to just on general momentum, we added it to the presentation. You can look at our backlog, it's up. Our proposal activity remains robust. We track that. Our proposal activity is up. Speaker 300:44:56As Russ hit on inspections, we continue to see double digit growth there. And in our service portfolio, which would be sort of not statutorily required, but work we're doing on the security side, our service portfolio work up as well. So we continue to see and what we look at, we continue to see good momentum across those areas. Speaker 700:45:18Yes. But it seems like from our perspective, it's only can only be a positive thing for API. Thanks very much for taking my questions today. Good luck. Speaker 200:45:32Thanks, Catherine. Operator00:45:35Your next question comes from the line of Andy Kaplowitz with Citigroup. Your line is open. Speaker 800:45:41Good morning, guys. Hey, Andy. Good morning. Okay. How are you? Speaker 800:45:48So you're still recording 3% organic growth in safety. And if inspection and service are growing double digit, it means your project business is declining. So I know a lot of the issue is HVAC services and you're going to comp that weakness now and you're moving into specialty anyway. But how should we think about your projects business going forward in safety? Can we get back to, let's say, mid single digit growth in the current market? Speaker 800:46:13Or is there not enough good work out there for that? Speaker 200:46:18There's plenty of good work out there. There's plenty of good work out there, Andy. I mean, if you look at our number 1, we're focused on project selection and customer selection in that business as well. We had a large hospital project in our Asian business that kind of pushed from the commencing in the first half of the year into the second half of the year. And that work is now moving forward. Speaker 200:46:53We actually recently booked another large hospital project that literally when you're standing in our office in Hong Kong, you can look out the window and look down on the project site. And we've just recently put that project into I don't even think it shows up in our backlog figures as of yet. So we have a business that's based in the South in the South that does a lot of warehouse and distribution work and that business has been slightly impacted by the high interest rate environment and as interest rates continue to come down, we expect to see that business kick off and really have a positive impact. It's a highly profitable business, but the revenue is down some. And then you cited some of the general pruning from Speaker 900:47:49a project selection perspective that we've had in the HVAC business. Speaker 200:47:49But I think I cited in my remarks, perspective that we've had in the HVAC business. But I Speaker 800:47:55think I cited in my remarks that the backlog in our Speaker 200:47:55North American Safety business or in our Safety business is at $2,000,000,000 and it's the highest it's ever been. So we have really good visibility into what this next year is going to look like and we're really optimistic and it's positive. Speaker 800:48:15Got it. No, that's helpful. And then Russ, I know obviously you don't want to give out those new 3 year targets on margin, but you're already delivering over 13% over the last couple of quarters. I know it's a seasonal business. So but still, like if the inspection services are much higher project margins, as you look forward, what stops you from delivering sort of mid to high teens or at least how do you think about what you could be telling us next year? Speaker 200:48:44Well, come to our Investor Day in May and we'll share our targets with you. But I mean directionally you're correct. I mean we're not saying that we're done when we get to 13%. And just like anything when you set a goal and you set a target, the first thing you need to do is deliver on that target. And we haven't done that yet. Speaker 200:49:10And we expect we will do that in 2025. We will be within a stone's throw, if you look at the guidance that we provided as we finish out this year. So we've made really, I think, fantastic progress in expanding our margins. And there's we're not going to stop. So when we get to 13%, we're not going to stop. Speaker 200:49:32And there continues to be upside for us and we're going to share that next May. And we're doing a lot of work right now on kind of we're calling it 2025 and beyond. And what does that look like, not just margin expansion, but where can we go from a revenue perspective and where are the growth opportunities in the business. And we feel just really, really good about the long term prospects and the viability where we're taking the business. Speaker 800:50:06Got it. And just one more quick one for me. Like backlog, I know you don't love to talk about backlog for us, but is it still growing sequentially? And if you think about sort of core markets, whether it's been data centers or semiconductor, LNG, whatever it is, like generally are those markets still giving you more opportunities? Has there been any delays in some of those bigger markets? Speaker 800:50:30And how do you think about that? Speaker 200:50:33Yes. I mean, so yes, our backlog continues to grow and it continues and it when I when we talk about it growing, it's healthier. And I think that's a really important component for folks that are joining the call today to take away is that, yes, it's growing and it's been it's much more healthy than it was, say, 12 months ago or 24 months ago. And so it's very positive. Our core end markets, I mean, you don't even need to talk about data centers. Speaker 200:51:04I mean, the data center market is so hot and there's so many opportunities in the space. We still see good opportunities in the semiconductor space. Healthcare continues to remain positive. The infrastructure space, critical infrastructure remains on there continues to have a lot of opportunities in that sector as well. Probably the only place and I think when Stephanie from Jefferies was asking a question and I cited the only place that we've seen any sort of kind of pullback from some of is in the telecom space and a lot of that has to do with the administrative issues that the federal government has in administering the funds with the rural broadband program. Speaker 200:51:55BEANS, I think is what the acronym is. And that's really the only place where we've seen any sort of true difficulty, if you will. But our backlog is super strong. Speaker 800:52:09Helpful. Thank you. Operator00:52:14Your next question comes from the line of Josh Chan with UBS. Your line is open. Speaker 1000:52:21Hi, good morning, Russ, Kevin. Thanks for taking my question. When you talk about accelerating organic growth in 2025, is the primary driver there that the absence of the project delays that you're seeing today? And I guess could you talk about kind of the composition between service and project and whether both can kind of grow in 2025? Thank you. Speaker 200:52:47Well, Kevin, why don't you want to grab this one? Speaker 300:52:51Yes. So as we think about 2025 going into 2025, obviously with strong backlog and the activity that I referenced earlier in the call, we feel like it's going to or we believe it's going to be more of a what I can say is a normal year, Josh. And so as we look at the project side of the business, we'd expect that to perform in that lowtomidsingledigits. And service, which has held up this year at that mid to high single digits, that would be our expectation as we go through 2025 as well. Now there'll be a ramp up period in the first half of the year. Speaker 300:53:31But in general, we see 2025 setting up as that normal year with projects low to mid and service mid to high. That's on an organic Speaker 1000:53:43basis. Organic basis, okay. Yes, thank you. And then on your 3 year targets, obviously, you guys have done a great job expanding margins and likely to reach your existing target. Kind of going forward, will there be a kind of an organic growth component to the next round of targets as well? Speaker 1000:54:01Just curious how you're thinking about what metrics are important? Thank you. Speaker 200:54:10Well, for sure. I mean, like there's for sure is an element of organic growth in like this long term planning that I talked about 2025 and beyond. Organic growth is a component of that. I guess, Josh, I guess we haven't really thought our way through exactly how I think it's good feedback for us and something for us to think about as we start to establish some of these targets and goals and what we share with folks like yourself as we go forward. But there's no question that organic growth is part of the algorithm as we think about what does the business look like in 2025 beyond or like through 2028. Speaker 200:55:02We think about it from an organic growth. We think about it from a bolt on M and A perspective. We think about it from transformational M and A and what does business look like and how much of that is service and is there another leg under the stool and all of those things come into play as we think about 2025 and beyond. So yes, organic growth is a component of that. We understand the importance of organic growth and the health of our business. Speaker 200:55:33And we'll have to think about how we establish and publish from a target perspective. So I don't know, Kevin, you got any thoughts on that? Speaker 300:55:46Nothing to add, Russ. Speaker 1000:55:48Great. Thank you both for the color and the time. Appreciate that. Speaker 200:55:52Thank you, Josh. Operator00:55:55Your next question comes from the line of Jon Tanwanteng with CJS Securities. Your line is open. Speaker 900:56:03Hi, good morning, guys. I was just wondering if you could give us a little more color on the M and A pipeline and kind of the timing and size of opportunities there. Do you expect some of these to close earlier in 2025 or maybe late in 2024 and maybe that has an effect on the accretion for the year? Or is it more spread out? Or is it more back half weighted? Speaker 900:56:23Just help me understand what you're looking at in your pipeline today. Speaker 200:56:28Well, the reality of it is when you think about bolt on M and A, John, we want that to happen consistently throughout the year and not in the reality of it is that we don't have like I'm talking specifically bolt on M and A now. Most of these sellers sell their business one time and that's it. And so sometimes they don't have usually a lot of resources. And so sometimes transactions move relatively quickly, sometimes they move relatively slowly. And some of it's based on do they have the resources, can they pull the information together that we need, etcetera. Speaker 200:57:11And so you don't have 100% control about the timing of some of these transactions, But the goal is to have them happen consistently throughout the year so that you're balancing your workload. We're not killing our team and our people are getting their work done and we just it's kind of like you just like clicking away and clicking away and clicking away and clicking away and you continue to do some transactions. So we expect to get have some deal activity get completed up here yet in the Q4 and we'll continue and we'll just continue right pushing right through into next year. Now the next elevated, when that comes along, we're always kind of digging in and looking at the next opportunity and doing a little bit of work. And there's always something going on. Speaker 200:58:09And it doesn't mean though that we're going to move forward. We are very disciplined in how we value these businesses and whether the business is the right fit for us. And so it's whether we have one happen yet this year, I would say probably doubtful. I suspect anything is possible, but it's probably doubtful. And most likely there will be it would be something would if something were to happen, it would happen in 2025. Speaker 900:58:43Got it. And to follow on an earlier question, are you expecting to provide something like an inorganic growth target or aspiration or perhaps a target for capital deployment towards M and A at your Investor Day? Speaker 200:58:57Again, I don't know that we've worked our way through exactly what we're going to publish in Target. But bolt on M and A is part of our playbook. And we've always been an acquisitive company and it's really a big part of our DNA and who we are. And so it will be part of the playbook. There's always going to be an element of hesitation about saying we're going to do X amount of M and A a year, because if it's not the right opportunities for us, then we need to be disciplined and we need to not do it. Speaker 200:59:38And I don't want to get into a situation where we're doing deals just to do deals. That would not be good for our shareholders for the long term. So it will be part of our playbook. It will be part of our planning. It will be part of how we're thinking about what the business looks like long term and in the future. Speaker 201:00:02But I would be reticent to say we're going to do X amount of M and A each year. It just I don't know if that would make much sense. Operator01:00:14That concludes our Q and A session. I will now turn the conference back over to Russ for the closing remarks. Speaker 201:00:22Thank you. In closing, I would like to thank all of our team members for their continued support and dedication to our business. I'm truly grateful for what each one of you do on a daily basis. I would also like to thank our long term shareholders as well as those that have recently joined us for their support. We appreciate your ownership of API we look forward to updating you on our progress throughout the remainder of the year. Speaker 201:00:46Thank you everybody. Appreciate your time this morning. Operator01:00:51Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.Read morePowered by