APi Group Corporation. (NYSE:APG) Q2 2023 Earnings Conference Call August 3, 2023 8:30 AM ET Company Participants Adam Fee - Vice President of Investor Relations Russell Becker - President and CEO Kevin Krumm - Executive Vice President and Chief Financial Officer Martin Franklin - Board Co-Chairs James Lillie - Board Co-Chairs Conference Call Participants Jonathan Tanwanteng - CJS Securities Kiran Patel-O’Connor - Barclays Brian Biros - Thompson Research Group Andy Kaplowitz - Citigroup Christopher Snyder - ...

Q2 2023 Earnings Call Forward ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-39275 APi Group Corporation (Exact Name of Registrant as Specified in its Charter) Delaware 98-1510303 (State or other jurisdicti ...

APi Group Corporation (NYSE:APG) Q1 2023 Earnings Conference Call May 4, 2023 8:30 AM ET Company Participants Adam Fee - Vice President of Investor Relations Jim Lillie - Co-Chair Russ Becker - President and Chief Executive Officer Kevin Krumm - Executive Vice President and Chief Financial Officer Conference Call Participants Andy Kaplowitz - Citigroup Kiran Patel-O'Connor - Barclays Kathryn Thompson - Thompson Research Group Andy Wittmann - Baird Chris Snyder - UBS David Paige - RBC David Ridley-Lane - Ban ...

Q1 2023 Earnings Call May 4, 2023 Forward Looking Statements and Disclaimers Please note that in this presentation the Company may discuss events or results that have not yet occurred or been realized, commonly referred to as forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of APi Group Corporation ("APi" or the "Company"). Such discussion and statements may contain words such as "expect," "anticipate, ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's Q1 2023 results show a 9.7% revenue increase to $1,614 million and a shift to a $26 million net income from a prior-year loss [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets were $7.77 billion as of March 31, 2023, with total liabilities decreasing to $4.80 billion and shareholders' equity slightly increasing to $2.17 billion Condensed Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $2,364 | $2,652 | | **Total Assets** | **$7,766** | **$8,091** | | **Total Current Liabilities** | $1,549 | $1,921 | | **Total Liabilities** | **$4,804** | **$5,167** | | **Total Shareholders' Equity** | $2,165 | $2,127 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company achieved a net income of $26 million in Q1 2023, a significant turnaround from a $7 million net loss in Q1 2022, driven by revenue and gross profit growth Statements of Operations Summary (in millions, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Revenues | $1,614 | $1,471 | | Gross Profit | $425 | $376 | | Operating Income (Loss) | $73 | $(7) | | Net Income (Loss) | $26 | $(7) | | Diluted EPS | $0.05 | $(0.08) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved significantly to $1 million in Q1 2023 from $118 million in Q1 2022, while financing activities used $216 million for debt and stock repurchases Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1) | $(118) | | Net cash used in investing activities | $(27) | $(2,884) | | Net cash (used in) provided by financing activities | $(216) | $1,831 | | **Net decrease in cash** | **$(242)** | **$(1,173)** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the Chubb acquisition, a $105 million restructuring program, revenue disaggregation, and debt structure, with growth shown in both company segments - The company completed its acquisition of the Chubb fire and security business in 2022 for a total net consideration of **$2,893 million**, resulting in **$1,367 million of goodwill**[27](index=27&type=chunk)[29](index=29&type=chunk) - A multi-year Chubb restructuring program is underway, estimated to cost approximately **$105 million** by fiscal year-end 2024, with **$30 million** in costs incurred as of March 31, 2023[34](index=34&type=chunk) Net Revenues by Segment (Q1 2023, in millions) | Segment | Net Revenues | | :--- | :--- | | Safety Services | $1,191 | | Specialty Services | $430 | | Corporate and Eliminations | $(7) | | **Total** | **$1,614** | Total Debt Obligations (in millions) | Date | Total Debt Obligations | | :--- | :--- | | March 31, 2023 | $2,632 | | December 31, 2022 | $2,832 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the 9.7% revenue growth, improved gross margin of 26.3%, reduced SG&A expenses, and strong liquidity position of $809 million [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q1 2023 net revenues rose 9.7% to $1,614 million, gross margin expanded by 70 basis points, and SG&A expenses fell, reversing a prior-year operating loss Consolidated Results of Operations (in millions) | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $1,614 | $1,471 | $143 | 9.7% | | Gross Profit | $425 | $376 | $49 | 13.0% | | SG&A Expenses | $352 | $383 | $(31) | (8.1)% | | Operating Income (Loss) | $73 | $(7) | $80 | NM | - The increase in net revenues was primarily driven by growth in inspection, service, and monitoring revenue within both the Safety Services and Specialty Services segments[162](index=162&type=chunk) - The decrease in SG&A expenses was mainly due to lower acquisition and integration-related expenses incurred in Q1 2023 compared to the same period in the prior year[168](index=168&type=chunk) [Operating Segment Results](index=35&type=section&id=Operating%20Segment%20Results) The Safety Services segment revenue grew 10.9% with higher margins, while the Specialty Services segment revenue increased 4.4% with significantly expanded margins Segment Performance (Q1 2023 vs Q1 2022, in millions) | Segment | Net Revenues (2023) | Net Revenues (2022) | EBITDA (2023) | EBITDA (2022) | | :--- | :--- | :--- | :--- | :--- | | Safety Services | $1,191 | $1,074 | $146 | $123 | | Specialty Services | $430 | $412 | $27 | $20 | - The increase in Safety Services operating margin was primarily the result of disciplined project and customer selection and lower acquisition and integration related expenses[181](index=181&type=chunk) - The increase in Specialty Services revenue was primarily driven by increased activity in the infrastructure and utility markets for emergency service work[182](index=182&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position of $809 million, significantly improved operating cash flow, and executed debt repayments and stock repurchases - Total liquidity as of March 31, 2023 was **$809 million**, comprising **$363 million in cash** and **$446 million available** under the Revolving Credit Facility[193](index=193&type=chunk) - Net cash used in operating activities **improved to $1 million** for Q1 2023 from **$118 million** in Q1 2022, primarily due to higher net income and lower working capital needs[198](index=198&type=chunk) - During Q1 2023, the company **repaid an aggregate of $200 million** on its term loans and **repurchased 541,316 shares** of common stock for approximately **$12 million**[207](index=207&type=chunk)[194](index=194&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from interest rates, foreign currency, and commodity prices, which it mitigates using various hedging instruments - The company mitigates interest rate risk on its term loans through interest rate swaps; a hypothetical **100-basis point increase** in rates would have **increased interest expense by approximately $4 million** for Q1 2023[215](index=215&type=chunk)[216](index=216&type=chunk) - Revenues from foreign operations represented approximately **40% of consolidated net revenues** for Q1 2023, exposing the company to foreign currency translation risk[217](index=217&type=chunk) - The company is exposed to supply chain risks, including price fluctuations for materials like copper and steel, and increases in energy prices for its vehicle fleet[221](index=221&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were not effective as of March 31, 2023, due to material weaknesses in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were **not effective** as of March 31, 2023, due to existing **material weaknesses** in internal control over financial reporting[224](index=224&type=chunk) - The material weaknesses relate to user access controls for an IT system and ineffective process-level controls over revenue recognition stemming from insufficient training[227](index=227&type=chunk) - Management has made progress on its multi-year remediation plan and believes full remediation of the material weaknesses can be achieved by the end of the year[230](index=230&type=chunk) PART II. OTHER INFORMATION [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to the risk factors previously disclosed in its 2022 Annual Report on Form 10-K - There have been **no material changes** to the company's risk factors from those contained in the Form 10-K for the year ended December 31, 2022[233](index=233&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2023, the company repurchased 541,316 shares for approximately $12 million, with $195 million remaining under its repurchase authorization Share Repurchases (Q1 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2023 | 32,754 | $18.73 | | Feb 2023 | 0 | N/A | | Mar 2023 | 508,562 | $21.63 | | **Total** | **541,316** | **$21.45** | - As of March 31, 2023, approximately **$195 million remained available** for repurchase under the company's stock repurchase program, which expires on February 29, 2024[235](index=235&type=chunk) [Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Information regarding mine safety violations and other regulatory matters is provided in Exhibit 95.1 of this report - Disclosures related to mine safety are included in Exhibit 95.1 to this quarterly report[236](index=236&type=chunk) [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including required Sarbanes-Oxley certifications and Inline XBRL data files - The report includes certifications from the CEO and CFO as required by Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk)

Financial Data and Key Metrics Changes - Reported net revenues for Q4 2022 increased by 53.1% to $1.7 billion compared to $1.1 billion in the prior year period, driven by acquisitions in Safety Services [17] - For the full year 2022, reported net revenues increased by 66.4% to $6.6 billion compared to $3.9 billion in the prior year, with organic growth of 12.2% [18] - Adjusted diluted earnings per share for Q4 was $0.36, a $0.07 increase from the prior year, and for the full year, it was $1.33, a $0.30 increase [20] Business Line Data and Key Metrics Changes - Safety Services reported net revenues for Q4 2022 increased by 111% to $1.2 billion, with organic growth of 18.1% [20] - Specialty Services saw a decline in net revenues for Q4 2022 by 8.9% to $510 million, but for the full year, revenues increased by 6.4% to $2 billion [23][24] Market Data and Key Metrics Changes - The backlog as of December 2022 was up approximately 9% compared to December 2021, indicating strong demand [14] - The company noted that end markets such as data centers, semiconductors, and healthcare remain strong, with minimal exposure to retail and hospitality sectors [46][47] Company Strategy and Development Direction - The company aims for a net debt to adjusted EBITDA ratio of 2 to 2.5x by year-end 2023, focusing on cash generation and deleveraging [27] - The strategy includes building a global inspection sales force and enhancing cross-selling opportunities to drive organic growth and margin expansion [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's resilience and growth prospects despite potential macroeconomic challenges, citing a strong backlog and diverse end markets [14][15] - The company anticipates net revenues for 2023 to range between $6.8 billion to $6.95 billion, with organic growth in line with historical performance [28] Other Important Information - Adjusted free cash flow for 2022 was $412 million, representing an 84.8% increase compared to the prior year [10] - The company expects to incur between $55 million to $65 million in restructuring costs related to the Chubb restructuring program in 2023 [29] Q&A Session Summary Question: What is the outlook for pricing in 2023? - Management indicated that pricing has been sticky and sustainable, with expectations to continue taking price adjustments, especially in the spring when union agreements reset [36][37] Question: Have there been any changes in customer behavior due to recession concerns? - Management noted no significant changes in customer behavior, supported by a strong backlog and ongoing opportunities [39][40] Question: How has supply chain performance been recently? - Supply chain disruptions remain, but improvements in productivity are expected as issues moderate in 2023 [42][44] Question: What is the demand outlook among major end markets? - Demand remains strong in sectors like data centers and healthcare, with minimal exposure to negatively impacted areas [46][47] Question: What are the expectations for Chubb synergies in 2023? - Management anticipates realizing $5 million to $10 million in savings from restructuring actions taken in 2022, with further savings expected in 2023 [49] Question: How is the backlog expected to change throughout 2023? - Management expects to burn through backlog in Q4 and build it up in the first half of the year, indicating a disciplined approach to project selection [51][52] Question: What are the drivers for margin expansion post-2023? - Key drivers include continued delivery of value capture opportunities, stickiness of pricing, and recovery of gross margins as inflationary pressures ease [54]

PART I This section details APi Group's business operations, industry context, competitive advantages, strategic initiatives, and key operational aspects. [Item 1. Business](index=3&type=section&id=Item%201.%20Business) APi Group is a global leader in safety and specialty services, driving growth through recurring revenue, strategic acquisitions, and a strong leadership culture across its Safety and Specialty Services segments. - APi Group is a global, market-leading business services provider of safety and specialty services in over **500 locations worldwide**, offering statutorily mandated and other contracted services to a strong base of long-standing customers[22](index=22&type=chunk) - The company operates under two primary segments: Safety Services (end-to-end integrated occupancy systems including fire protection, HVAC, and entry systems) and Specialty Services (infrastructure services and specialized industrial plant services)[25](index=25&type=chunk)[26](index=26&type=chunk) - Key competitive strengths include leading market positions, repeat revenue from diverse customers, a differentiated business model focused on selling inspection work first, attractive industry fundamentals, a disciplined acquisition platform (over **90 acquisitions since 2005**), and a distinct leadership culture[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) [Our Business](index=5&type=section&id=Our%20Business) APi Group provides global safety and specialty services, focusing on organic growth, strategic acquisitions, and leveraging its scale across two primary segments. - APi Group is a global, market-leading business services provider of safety and specialty services in over **500 locations worldwide**[22](index=22&type=chunk) - The company's core strategies include driving organic growth, growth through accretive acquisitions, promoting best practice sharing, and leveraging scale and service offerings[23](index=23&type=chunk) - APi Group operates under two primary segments: Safety Services (fire protection, HVAC, entry systems) and Specialty Services (infrastructure and industrial plant services)[25](index=25&type=chunk)[26](index=26&type=chunk) [Our Industry](index=6&type=section&id=Our%20Industry) The company operates in highly fragmented industries, benefiting from increased regulation and deferred infrastructure investment driving demand for its services. - The industries in which APi Group operates are highly fragmented, comprising national, regional, and local companies[27](index=27&type=chunk) - Increased regulation, particularly in life safety (e.g., NFPA and International Code Council building codes), continuously generates demand for recurring inspection and maintenance services[28](index=28&type=chunk) - Deferred infrastructure investment in the U.S., including the **$550 billion** Infrastructure Investment and Jobs Act, is spurring demand for maintenance, repair, and retrofit services[29](index=29&type=chunk) [Our Competitive Strengths](index=7&type=section&id=Our%20Competitive%20Strengths) APi Group maintains leading market positions through diverse niche industries, recurring revenue, and a differentiated "inspection work first" strategy. - APi Group holds leading market positions in diverse niche industries, including fire protection and sprinkler services, and is among the **top five specialty contractors in North America**[31](index=31&type=chunk) - The company benefits from repeat revenue from a diverse base of long-standing, high-creditworthiness customers, with service inspections often mandated by legislation or insurance[32](index=32&type=chunk) - A key differentiator is the **'inspection work first'** go-to-market strategy in life safety, which leads to subsequent service work, recurring revenue, and higher margins[33](index=33&type=chunk) [Our Business Strategy](index=8&type=section&id=Our%20Business%20Strategy) The company aims for organic growth by increasing recurring service revenue and cross-selling, accelerating growth through accretive acquisitions, and investing in leadership development. - The company aims to drive organic growth by focusing on increasing maintenance, inspection, monitoring, and service revenue, and maximizing cross-selling opportunities[40](index=40&type=chunk)[41](index=41&type=chunk) - APi Group plans to accelerate growth through accretive acquisitions, leveraging its established platform and targeting fragmented markets[41](index=41&type=chunk) - A continuous investment in leadership development through the **'Building Great Leaders®'** platform supports the decentralized operating model and fosters innovation[42](index=42&type=chunk) [Customers](index=9&type=section&id=Customers) APi Group serves a diverse, long-term customer base in both public and private sectors, with no single customer representing more than 5% of total net revenues. - APi Group serves a diverse customer base in both public and private sectors, including Fortune 500 companies, with no single customer accounting for more than **5% of total net revenues in 2022**[45](index=45&type=chunk) - Customer relationships are long-term, often under multi-year master service agreements, providing recurring revenue for inspection, maintenance, and monitoring services[46](index=46&type=chunk) [Government Regulation and Environmental Matters](index=9&type=section&id=Government%20Regulation%20and%20Environmental%20Matters) The company's operations are subject to extensive regulations, with non-compliance potentially leading to significant liabilities, fines, or license revocations. - Business activities are subject to extensive regional, national, state, and local laws and regulations covering compliance, licensing, environmental, workplace safety, data privacy, and anti-corruption[48](index=48&type=chunk) - Failure to comply with these regulations can result in civil and criminal liability, substantial fines, or revocation of operating licenses[49](index=49&type=chunk) - The company is also subject to environmental laws imposing liability for hazardous substance releases, which could lead to cleanup costs, penalties, and damages[52](index=52&type=chunk) [Effect of Seasonality and Cyclical Nature of Business](index=10&type=section&id=Effect%20of%20Seasonality%20and%20Cyclical%20Nature%20of%20Business) The company's revenues and operations are subject to seasonal variations and cyclical industry demand, particularly due to weather conditions and end-user fluctuations. - Net revenues and results of operations are subject to seasonal variations, with lower revenues typically in the first and second quarters due to unfavorable weather conditions in North America[53](index=53&type=chunk) - The industries served are cyclical, and fluctuations in end-user demand or service supply can affect demand for APi Group's services, potentially leading to delays in new projects[54](index=54&type=chunk) [Competitive Environment](index=10&type=section&id=Competitive%20Environment) APi Group operates in highly competitive and fragmented industries with low barriers to entry, competing on factors like price, service, and technical expertise. - APi Group operates in highly competitive and fragmented industries with relatively few barriers to entry, competing with a range of companies from small local businesses to large national/international firms[55](index=55&type=chunk) - Competition is based on factors such as price, service, technical expertise, quality, safety record, response time, and reputation[56](index=56&type=chunk) [Supply](index=10&type=section&id=Supply) The company maintains multiple supply sources for raw materials and components, mitigating commodity cost exposure through early purchasing and contract provisions. - The company has multiple supply sources for raw materials (e.g., piping, steel, HVAC equipment) and components, which have generally been available in sufficient quantities[57](index=57&type=chunk) - Commodity cost exposure is mitigated by purchasing or price locking commodities early and using escalation provisions in contracts[57](index=57&type=chunk) [Sales and Marketing](index=11&type=section&id=Sales%20and%20Marketing) Success relies on long-term customer relationships, high-quality service, and leveraging cross-selling opportunities through a collaborative culture and national service teams. - Success depends on developing and maintaining long-term relationships with key customers by providing reliable, high-quality service[59](index=59&type=chunk) - The company leverages cross-selling opportunities through its collaborative culture and provides a single point of contact for national/regional customers via its National Service Group (NSG) team in North America[59](index=59&type=chunk) [Insurance and Legal Proceedings](index=11&type=section&id=Insurance%20and%20Legal%20Proceedings) APi Group is effectively self-insured for many liabilities due to large deductibles and has accrued losses based on estimates, including those from the Chubb Acquisition. - APi Group is effectively self-insured for many potential liabilities due to large deductibles or retentions, with losses accrued based on estimates and third-party actuaries[60](index=60&type=chunk) - The company assumed risk on certain pending and incurred but not reported (IBNR) claims related to the Chubb Acquisition, with an associated purchase price adjustment and accruals[60](index=60&type=chunk) [Human Capital Management](index=11&type=section&id=Human%20Capital%20Management) The company focuses on talent development, employee engagement, health and safety, and competitive compensation to attract and retain a skilled workforce. [Talent Development and Employee Engagement](index=11&type=section&id=Talent%20Development%20and%20Employee%20Engagement) The company offers accelerated development programs and fosters a diverse, inclusive culture, monitoring employee engagement through periodic assessments. - The company offers multiple accelerated development programs, field-based leadership training, and on-demand learning to attract and retain qualified employees[62](index=62&type=chunk) - APi Group is committed to a culture of diversity and inclusion, monitoring employee engagement through periodic assessments[63](index=63&type=chunk) [Health & Safety](index=12&type=section&id=Health%20%26%20Safety) APi Group maintains a strong safety culture with a "zero incidents" commitment, implementing training and inspection programs, achieving an OSHA recordable rate significantly below the industry average. - The company maintains a safety culture grounded in a **'zero incidents'** commitment, with established safety standards, specific training programs (STEPS in North America, SAFE internationally), and inspection programs[64](index=64&type=chunk) - APi Group's OSHA recordable rate was **1.0 in 2022**, significantly lower than the industry average of **2.5**[65](index=65&type=chunk) [Competitive Pay, Benefits and Total Rewards and Practices](index=12&type=section&id=Competitive%20Pay,%20Benefits%20and%20Total%20Rewards%20and%20Practices) The company's total rewards philosophy aligns employee compensation with financial results and individual performance, offering comprehensive health, financial, and well-being benefits. - The total rewards philosophy aligns employee compensation with company financial results and individual performance, offering a comprehensive portfolio of health, financial, and well-being benefits[66](index=66&type=chunk) [Executive Officers](index=12&type=section&id=Executive%20Officers) This section lists the names, ages, and titles of APi Group's executive officers. | Name | Age | Title | | :--------------- | :-- | :------------------------------------- | | Russell A. Becker | 57 | Chief Executive Officer and President | | Kevin S. Krumm | 48 | Executive Vice President and Chief Financial Officer | | Louis B. Lambert | 47 | Senior Vice President, General Counsel and Secretary | | Kristina M. Morton | 48 | Senior Vice President and Chief People Officer | [Available Information](index=13&type=section&id=Available%20Information) APi Group provides its annual, quarterly, and current reports, along with proxy statements, free of charge on its website and through the SEC. - APi Group makes its annual reports (Form 10-K), quarterly reports (Form 10-Q), current reports (Form 8-K), and proxy statements available free of charge on its website (www.apigroupcorp.com) and through the SEC (www.sec.gov)[73](index=73&type=chunk) [Item 1A. Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including international expansion, acquisition integration, financial instability, operational hazards, litigation, and cybersecurity threats, all impacting financial performance. - The Chubb Acquisition significantly expanded international operations, with approximately **38% of 2022 revenue** from outside the U.S., exposing the company to economic, political, regulatory, and foreign currency risks[74](index=74&type=chunk) - The company carries substantial indebtedness, totaling **$2,212 million** in credit facilities and **$614 million** in senior notes as of December 31, 2022, which increases vulnerability to interest rate increases and limits financial flexibility[99](index=99&type=chunk) - Material weaknesses in internal control over financial reporting (user access controls, revenue recognition) were identified, posing a reasonable possibility of material misstatement in financial statements[96](index=96&type=chunk)[103](index=103&type=chunk)[585](index=585&type=chunk) [Risks Related to Our Business](index=13&type=section&id=Risks%20Related%20to%20Our%20Business) Expanded international operations, a decentralized business model, and joint venture participation expose the company to various economic, political, and operational risks. - Expanded international operations, particularly after the Chubb Acquisition, subject the company to economic, political, regulatory, and foreign currency risks, with **38% of 2022 revenue** derived from outside the U.S[74](index=74&type=chunk) - The decentralized business model carries risks of misalignment with overall strategy and non-compliance with integrated policies[77](index=77&type=chunk) - Participation in joint ventures exposes the company to liabilities and reputational harm from partner failures, as well as potential requirements for additional investments or services[78](index=78&type=chunk)[79](index=79&type=chunk) [Risks Related to Acquisitions](index=15&type=section&id=Risks%20Related%20to%20Acquisitions) The company's growth strategy relies on acquisitions, but the inability to successfully integrate acquired businesses, particularly Chubb, could adversely affect financial results and lead to impairment charges. - The company's business strategy relies on acquisitions, but the inability to successfully identify, complete, or integrate acquired businesses could adversely affect operating results and lead to impairment charges[83](index=83&type=chunk)[84](index=84&type=chunk) - Realizing the expected benefits of the Chubb Acquisition is uncertain due to potential integration and transition difficulties, unanticipated issues, and non-recurring costs[85](index=85&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) [Financial Risks](index=16&type=section&id=Financial%20Risks) The company faces financial risks from credit market volatility, substantial indebtedness, potential goodwill impairment, and identified material weaknesses in internal control over financial reporting. - Adverse developments in credit markets could reduce funding for significant projects, impacting demand for services and the company's ability to secure financing or achieve growth objectives[89](index=89&type=chunk)[90](index=90&type=chunk) - A significant portion of revenue is recognized over time based on estimates, carrying the risk of reduction or reversal of previously recorded revenue or profits if actual costs vary from estimates[91](index=91&type=chunk) - The company has substantial goodwill (**$2,382 million** as of December 31, 2022) and identifiable intangible assets, which are subject to impairment charges that could adversely affect financial results[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - Material weaknesses in internal control over financial reporting (user access controls, revenue recognition) were identified, creating a reasonable possibility of material misstatement in financial statements[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) - Substantial indebtedness (**$2,212 million** in credit facilities, **$614 million** in senior notes as of December 31, 2022) increases exposure to interest rate fluctuations, reduces cash flow for operations, and imposes restrictive covenants[99](index=99&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) - The company is effectively self-insured for many potential liabilities due to large deductibles, making future expense estimation difficult and increasing financial risks if estimates are undervalued[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) [Risks Related to Our Contracts](index=19&type=section&id=Risks%20Related%20to%20Our%20Contracts) Inaccurate cost estimates for fixed-price contracts, unrecoverable price increases, government contractor regulations, and backlog uncertainty pose significant contractual risks. - Inaccurate cost estimates for fixed-price contracts can lead to reduced profitability or losses if actual costs exceed original estimates[110](index=110&type=chunk)[111](index=111&type=chunk) - A portion of contracts allocates the risk of price increases in supplies (e.g., copper, steel) and energy (e.g., gasoline) to the company, which may not be recoverable, especially in fixed-price agreements[112](index=112&type=chunk) - As a government contractor, subsidiaries are subject to complex rules and audits; violations could result in fines, contract termination, or debarment from future government contracts[114](index=114&type=chunk)[115](index=115&type=chunk) - The company's backlog is subject to reduction or cancellation, making it an uncertain indicator of future revenues and earnings[116](index=116&type=chunk) [Risks Related to Our Workforce](index=20&type=section&id=Risks%20Related%20to%20Our%20Workforce) A significant unionized workforce, pension commitments, and potential labor shortages or underutilization pose risks to management discretion, financial liabilities, and profitability. - Approximately **49% of the workforce is unionized**, which limits management discretion, carries a risk of strikes or work stoppages, and may impact customer relationships or future acquisitions[117](index=117&type=chunk) - Pension commitments, including multiemployer and defined benefit plans, expose the company to potential liabilities from underfunding, increased contributions, and market/actuarial performance risks[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - Underutilization of the workforce due to delayed contract awards or a significant reduction in services, or shortages of skilled labor, could lead to significant costs and reduced profitability[122](index=122&type=chunk)[123](index=123&type=chunk) [Risks Related to Our Customer Base](index=21&type=section&id=Risks%20Related%20to%20Our%20Customer%20Base) Dependence on capital expenditures in the energy industry and public/private infrastructure investments exposes the company to risks from reduced spending and adverse market developments. - The energy and infrastructure businesses depend on capital expenditures in the energy industry; adverse developments or reduced demand for oil/natural gas could materially affect results[124](index=124&type=chunk) - Future growth is partly based on public and private investments in infrastructure; reduced or delayed spending could defer projects and impact cash flows and margins[126](index=126&type=chunk) [Risks Related to Our Occupational Hazards](index=22&type=section&id=Risks%20Related%20to%20Our%20Occupational%20Hazards) Challenging project conditions and the inherent operational risks of services can lead to delays, unanticipated costs, and severe legal or financial consequences. - Projects are performed under challenging conditions (e.g., difficult terrain, material delays, weather), which can lead to project delays, cancellations, unanticipated costs, and potential liquidated damages[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) - The nature of services involves a high degree of operational risk (e.g., electricity, fires, explosions, injuries, fatalities), potentially resulting in substantial penalties, civil litigation, or criminal prosecution[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[134](index=134&type=chunk) [Claims and Litigation Risks](index=23&type=section&id=Claims%20and%20Litigation%20Risks) The company faces periodic litigation, including complex disputes and class actions, which can incur significant costs, management attention, and reputational harm. - The company is subject to periodic litigation, including class actions and complex legal disputes, which can require significant management attention, attorney fees, and settlement costs[135](index=135&type=chunk)[136](index=136&type=chunk) - Exposure to workmanship warranty, casualty, negligence, construction defect, breach of contract, and product liability claims, which, if adversely determined, could affect financial condition and reputation[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[154](index=154&type=chunk) - Regulatory proceedings, such as Fair Labor Standards Act (FLSA) and state wage and hour class action lawsuits, could result in significant attorney fees and settlement costs[141](index=141&type=chunk)[142](index=142&type=chunk) [Risks Related to the Industries in Which We Operate](index=24&type=section&id=Risks%20Related%20to%20the%20Industries%20in%20Which%20We%20Operate) Operating in competitive, fragmented, and cyclical industries, coupled with environmental liabilities and potential system failures, poses significant risks to financial performance and reputation. - Operating in highly competitive and fragmented markets, with low barriers to entry, could reduce market share and harm financial performance, especially on price-sensitive projects[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) - Demand for services is impacted by construction activity levels; economic downturns in the cyclical construction industry could materially and adversely affect the business[146](index=146&type=chunk)[147](index=147&type=chunk) - The industries served are seasonal and cyclical, and adverse weather conditions can negatively impact business operations, demand for services, and project efficiency[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - Failure in constructed/installed systems (e.g., alarm and fire safety) due to errors or faulty workmanship may subject the company to significant professional or product liability, personal injury claims, and reputational harm[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - Failure to comply with environmental laws (e.g., hazardous substances, waste disposal) could result in significant liabilities, increased costs, and fines[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - The company is party to personal injury litigation related to alleged exposure to hazardous materials (e.g., asbestos, PFAS), which could adversely affect financial condition and results[159](index=159&type=chunk)[160](index=160&type=chunk) [Risks Related to Our Organizational Structure and Ownership of Our Stock](index=27&type=section&id=Risks%20Related%20to%20Our%20Organizational%20Structure%20and%20Ownership%20of%20Our%20Stock) As a holding company, APi Group's cash generation depends on subsidiaries, while outstanding equity instruments and anti-takeover provisions could dilute common stock and affect its market price. - As a holding company, APi Group's ability to generate cash and pay dividends is highly dependent on the earnings and funds received from its subsidiaries[162](index=162&type=chunk)[163](index=163&type=chunk) - The existence of outstanding equity instruments (Series A and B Preferred Stock, equity awards) and potential future issuances could lead to significant dilution of common stock ownership and adversely affect the stock price[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - Delaware law and the company's organizational documents contain anti-takeover provisions that could limit stockholder actions and delay or discourage takeover attempts[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) - The market price of the common stock may be volatile due to various factors, including operating performance, industry volatility, strategic actions, and general economic conditions[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) [General Risk Factors](index=29&type=section&id=General%20Risk%20Factors) Cybersecurity incidents, data privacy compliance, and the loss of key personnel pose significant risks to operations, financial performance, and reputation. - Cybersecurity incidents pose a risk of operational interruptions, substantial costs, legal/regulatory proceedings, and damage to reputation despite established security policies[177](index=177&type=chunk)[178](index=178&type=chunk) - Compliance with data privacy, identity protection, and information security laws (e.g., GDPR, CCPA) requires significant resources, and breaches can result in fines, litigation, and reputational harm[180](index=180&type=chunk)[181](index=181&type=chunk) - The loss of key senior management personnel or the inability to hire and retain highly skilled personnel could negatively affect the business due to intense competition for talent[183](index=183&type=chunk) [Item 1B. Unresolved Staff Comments](index=31&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments to report. [Item 2. Properties](index=31&type=section&id=Item%202.%20Properties) APi Group operates globally from its Minnesota headquarters and over 500 owned and leased facilities, supporting both Safety and Specialty Services segments. - APi Group owns its corporate headquarters in New Brighton, Minnesota, and operates globally from approximately **55 owned and 515 leased facilities** across over **20 countries**[187](index=187&type=chunk) - Facilities are utilized for operations in both reportable segments, including offices, warehouses, storage, fabrication manufacturing, maintenance shops, and training facilities[187](index=187&type=chunk) [Item 3. Legal Proceedings](index=31&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various ordinary course legal proceedings, which management believes will not materially impact its financial position or operations. - The company is subject to various lawsuits, administrative proceedings, and claims in the ordinary course of business, including workmanship warranty, casualty, negligence, construction defect, breach of contract, product liability, and wage and hour claims[188](index=188&type=chunk) - Management believes that the ultimate resolution of these legal matters will not have a material adverse effect on the company's financial position, results of operations, or cash flows[188](index=188&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Information regarding mine safety violations and other regulatory matters, as required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K, is included in Exhibit 95.1 of this Annual Report. - Information on mine safety violations and other regulatory matters is provided in Exhibit 95.1 to this Annual Report, as required by the Dodd-Frank Act and Regulation S-K[189](index=189&type=chunk) PART II This section covers APi Group's market for common equity, financial performance, market risks, and financial statements. [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=32&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) APi Group's common stock trades on the NYSE, with the company prioritizing reinvestment over common stock dividends, while executing a **$250 million** stock repurchase program. - APi Group's common stock is listed on the NYSE under the symbol **'APG'**[192](index=192&type=chunk) - The company has historically not paid cash dividends on common stock and intends to retain future earnings for reinvestment, but pays quarterly dividends on Series B Preferred Stock in common shares[194](index=194&type=chunk) - In March 2022, the Board authorized a **$250 million** stock repurchase program (SRP) expiring February 29, 2024. During 2022, **2,505,723 shares** were repurchased for approximately **$44 million**, with **$206 million** remaining authorized[195](index=195&type=chunk) [Market and Dividend Information](index=32&type=section&id=Market%20and%20Dividend%20Information) APi Group's common stock is listed on the NYSE, with the company not anticipating cash dividends on common stock, but paying quarterly dividends on Series B Preferred Stock. - APi Group's common stock is listed on the NYSE under the symbol **'APG'**[192](index=192&type=chunk) - As of February 22, 2023, there were **15 holders of record** of the company's common stock[193](index=193&type=chunk) - The company does not currently anticipate paying a cash dividend on its common stock, intending to retain future earnings for reinvestment, but pays quarterly dividends on Series B Preferred Stock in common shares[194](index=194&type=chunk) [Stock Repurchase Program](index=32&type=section&id=Stock%20Repurchase%20Program) The Board authorized a **$250 million** stock repurchase program in March 2022, under which **$44 million** of shares were repurchased in 2022, leaving **$206 million** authorized. - On March 9, 2022, the Board authorized a stock repurchase program (SRP) to purchase up to **$250 million** of common stock, expiring February 29, 2024[195](index=195&type=chunk) - During 2022, the company repurchased **2,505,723 shares** for approximately **$44 million** under the SRP, leaving approximately **$206 million** of authorized repurchases[195](index=195&type=chunk) [Issuer Purchases of Equity Securities](index=32&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) This table details the company's common stock repurchases during the fourth quarter of 2022 under its publicly announced program. | During the Three Months Ended December 31, 2022 | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Approximate Value of Shares Yet to Be Purchased Under the Plans or Programs (in millions) | | :---------------------------------------------- | :----------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------- | | October 1, 2022 - October 31, 2022 | — | — | — | — | | November 1, 2022 - November 30, 2022 | — | — | — | — | | December 1, 2022 - December 31, 2022 | 554,391 | 18.74 | 554,391 | 206 | | Total | 554,391 | $18.74 | 554,391 | $206 | [Performance Graph](index=33&type=section&id=Performance%20Graph) The performance graph illustrates the cumulative return on **$100** invested in APG's common stock compared to market indices and a selected peer group. - The performance graph summarizes the cumulative return on **$100** invested in APG's common stock, the S&P 500, the Russell 2000 Stock Index, and a selected peer group from October 1, 2019, to December 31, 2022[199](index=199&type=chunk) - The peer group includes Cintas Corporation, Comfort Systems USA, Inc., EMCOR Group Inc., Jacobs Engineering Group Inc., Johnson Controls International plc, MasTec Inc., Otis Worldwide, and Quanta Services, Inc., with Carrier removed after the Chubb Acquisition[200](index=200&type=chunk) [Item 6. [Reserved]](index=33&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information. [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The Chubb Acquisition significantly boosted 2022 revenues and gross profit, though integration costs and higher interest expenses impacted net income, while liquidity remains strong despite increased acquisition-related cash usage. - Net revenues for 2022 increased by **$2,618 million (66.4%)** to **$6,558 million**, primarily driven by acquisitions within the Safety Services segment and growth in inspection, service, and monitoring revenue[220](index=220&type=chunk) - Net income for 2022 was **$73 million**, an increase of **$26 million (55.3%)** from 2021, while EBITDA increased by **$181 million (53.1%)** to **$522 million**, largely due to acquisitions and an improved service mix[228](index=228&type=chunk)[229](index=229&type=chunk) - Cash flows from operating activities increased to **$270 million** in 2022, but net cash used in investing activities surged to **$2,901 million**, primarily due to the **$2,839 million** Chubb Acquisition[254](index=254&type=chunk)[255](index=255&type=chunk) [Overview](index=34&type=section&id=Overview) APi Group is a global leader in safety and specialty services, focusing on predictable, recurring revenues from diversified, long-standing customers through contractual arrangements. - APi Group is a global, market-leading business services provider of safety and specialty services, focusing on growing recurring revenues and repeat business from diversified, long-standing customers[203](index=203&type=chunk) - Maintenance and service revenues are generally more predictable due to contractual arrangements (typically days to three years) and consistent renewal rates[203](index=203&type=chunk) [Certain Factors and Trends Affecting our Results of Operations](index=34&type=section&id=Certain%20Factors%20and%20Trends%20Affecting%20our%20Results%20of%20Operations) This section discusses key factors and trends, including acquisitions, restructuring, resegmentation, and economic conditions, that impact APi Group's financial performance. [Acquisitions](index=34&type=section&id=Acquisitions) The Chubb Acquisition, completed in January 2022 for **$2,893 million**, significantly expanded the Safety Services segment and is expected to drive future value creation through complementary growth. - On January 3, 2022, APi Group completed the Chubb Acquisition for a total net consideration of **$2,893 million**, integrating a globally recognized fire safety and security services provider into its Safety Services segment[204](index=204&type=chunk) - The Chubb Acquisition is expected to provide meaningful opportunities for future value creation through complementary revenue growth and cross-selling[204](index=204&type=chunk) [Restructuring](index=34&type=section&id=Restructuring) APi Group initiated a multi-year Chubb restructuring program in Q2 2022, with estimated total costs of **$105 million**, primarily incurring **$30 million** in pre-tax costs related to workforce reductions to date. - In Q2 2022, APi Group announced a multi-year Chubb restructuring program to drive efficiencies and optimize operating margin, with estimated total costs of approximately **$105 million** by the end of fiscal year 2024[205](index=205&type=chunk) - To date, **$30 million** in pre-tax restructuring costs have been incurred within the Safety Services segment, primarily related to workforce reductions[205](index=205&type=chunk)[206](index=206&type=chunk) [Resegmentation](index=35&type=section&id=Resegmentation) Effective 2022, the legacy Industrial Services segment was combined with Specialty Services, forming a new operating segment, with prior-year financial information retroactively adjusted. - Beginning in 2022, the legacy Industrial Services segment was combined with the legacy Specialty Services segment to form a new operating and reportable segment called Specialty Services[208](index=208&type=chunk) - Financial information for prior years has been retroactively adjusted to reflect these changes in reporting segments[208](index=208&type=chunk) [Economic, Industry and Market Factors](index=35&type=section&id=Economic,%20Industry%20and%20Market%20Factors) The company monitors economic conditions impacting customer demand and pricing, while supply chain disruptions, labor shortages, and foreign currency fluctuations affect profitability. - The company monitors economic and market conditions, which can affect customer demand, capital/maintenance budgets, and pricing pressure on materials[209](index=209&type=chunk) - Supply chain disruptions, increased competition for skilled labor, and higher labor costs have negatively impacted profitability and service delivery[209](index=209&type=chunk) - Fluctuations in foreign currencies may impact financial position, though exposure to transactional gains/losses is limited as foreign operations primarily invoice and collect in local currencies[209](index=209&type=chunk) [Description of Key Line Items](index=35&type=section&id=Description%20of%20Key%20Line%20Items) This section defines key financial statement line items, including net revenues, cost of revenues, and selling, general, and administrative expenses. - Net revenues are generated from contracted services, fabrication, and distribution, primarily recognized over time using the cost-to-cost method for fixed-price agreements or as services are provided for time and material contracts[210](index=210&type=chunk) - Cost of revenues includes direct labor, materials, subcontract costs, and indirect costs related to contract performance[211](index=211&type=chunk) - Selling, general, and administrative (SG&A) expenses comprise compensation for sales/marketing and executive/administrative personnel, facility leases, professional fees, and other corporate overhead[213](index=213&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) This section analyzes APi Group's financial performance, comparing results for the years ended December 31, 2022, 2021, and 2020, including consolidated and operating segment results. [Year ended December 31, 2022 versus year ended December 31, 2021](index=37&type=section&id=Year%20ended%20December%2031,%202022%20versus%20year%20ended%20December%2031,%202021) Net revenues increased by **66.4%** to **$6,558 million** in 2022, driven by acquisitions and service growth, while gross profit improved by **82.5%** to **$1,714 million**, despite higher SG&A and interest expenses. Consolidated Financial Performance (2022 vs 2021) | ($ in millions) | 2022 | 2021 | Change $ | Change % | | :-------------- | :--- | :--- | :------- | :------- | | Net revenues | 6,558 | 3,940 | 2,618 | 66.4 % | | Gross profit | 1,714 | 939 | 775 | 82.5 % | | Operating income | 162 | 136 | 26 | 19.1 % | | Net income | 73 | 47 | 26 | 55.3 % | | EBITDA (non-GAAP) | 522 | 341 | 181 | 53.1 % | - Net revenues increased by **$2,618 million (66.4%)** to **$6,558 million**, primarily due to acquisitions in the Safety Services segment and growth in inspection, service, and monitoring revenue[220](index=220&type=chunk) - Gross profit increased by **$775 million (82.5%)** to **$1,714 million**, with gross margin improving by **230 basis points** to **26.1%**, driven by acquisitions and an improved mix of higher-margin inspection, service, and monitoring revenue[221](index=221&type=chunk) - SG&A expenses increased by **$749 million** to **$1,552 million (23.7% of net revenues)**, mainly due to additional expenses from acquisitions, integration costs, and a **$75 million** increase in amortization expense[222](index=222&type=chunk) - Interest expense, net, more than doubled to **$125 million** (from **$60 million**), primarily due to increased debt from the Chubb Acquisition and higher interest rates on floating-rate debt[223](index=223&type=chunk) - The company recognized a net gain on extinguishment of debt of **$5 million** in 2022 from repurchasing senior notes, contrasting with a **$9 million** net loss in 2021[224](index=224&type=chunk) - A non-service pension benefit of **$42 million** was recognized in 2022, solely due to the acquisition of pension plans as part of the Chubb Acquisition[225](index=225&type=chunk) - The income tax provision decreased by **$12 million** to **$20 million** in 2022, with the effective tax rate falling to **22.0%** from **40.0%** in 2021, partly due to a **$9 million** benefit from asserting permanent reinvestment of foreign earnings[227](index=227&type=chunk) [Operating Segment Results](index=39&type=section&id=Operating%20Segment%20Results) Safety Services net revenues increased by **120.0%** due to acquisitions, while Specialty Services revenues grew by **6.4%** from increased activity and pricing, with varying impacts on operating margins. Operating Segment Net Revenues (2022 vs 2021) | ($ in millions) | 2022 | 2021 | Change $ | Change % | | :----------------------- | :--- | :--- | :------- | :------- | | Safety Services | 4,575 | 2,080 | 2,495 | 120.0 % | | Specialty Services | 2,030 | 1,907 | 123 | 6.4 % | | Corporate and Eliminations | (47) | (47) | — | — | | Total | 6,558 | 3,940 | 2,618 | 66.4 % | Operating Segment EBITDA (2022 vs 2021) | ($ in millions) | 2022 | 2021 | Change $ | Change % | | :----------------------- | :--- | :--- | :------- | :------- | | Safety Services | 492 | 287 | 205 | 71.4 % | | Specialty Services | 206 | 205 | 1 | 0.5 % | | Corporate and Eliminations | (176) | (151) | (25) | 16.6 % | | Total | 522 | 341 | 181 | 53.1 % | - Safety Services net revenues increased by **$2,495 million (120.0%)** to **$4,575 million**, primarily due to acquisitions and increased inspection, service, and monitoring revenue. Its operating margin declined to **5.6%** (from **10.0%**) due to supply chain disruptions, inflation, and increased amortization[235](index=235&type=chunk) - Specialty Services net revenues increased by **$123 million (6.4%)** to **$2,030 million**, driven by increased activity in contracting, infrastructure, utility, and fabrication markets, and strategic pricing improvements. Its operating margin improved to **4.8%** (from **4.1%**) due to higher productivity and sales volumes[236](index=236&type=chunk)[238](index=238&type=chunk) [Year ended December 31, 2021 versus year ended December 31, 2020](index=40&type=section&id=Year%20ended%20December%2031,%202021%20versus%20year%20ended%20December%2031,%202020) For a discussion of 2021 results of operations compared to 2020, refer to Part I, Item 7 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2021. - For a discussion of 2021 results of operations compared to 2020, refer to Part I, Item 7 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2021[239](index=239&type=chunk) [Non-GAAP Financial Measures](index=40&type=section&id=Non-GAAP%20Financial%20Measures) This section provides reconciliations and explanations for non-GAAP financial measures, including SG&A expenses (excluding amortization) and EBITDA, used by management and investors. [SG&A expenses (excluding amortization)](index=40&type=section&id=SG%26A%20expenses%20%28excluding%20amortization%29) SG&A expenses (excluding amortization) is a non-GAAP measure used by management and investors to assess core operating costs, excluding acquisition-related amortization. - SG&A expenses (excluding amortization) is a non-U.S. GAAP measure used by management and investors to understand core operating costs, excluding acquisition-related amortization expense[242](index=242&type=chunk) SG&A Expenses Reconciliation (2022 vs 2021) | ($ in millions) | 2022 | 2021 | | :--------------------------------------- | :--- | :--- | | Reported SG&A expenses | 1,552 | 803 | | Amortization expense | (197) | (122) | | SG&A expenses (excluding amortization) | 1,355 | 681 | [EBITDA](index=41&type=section&id=EBITDA) EBITDA is a non-GAAP measure used by management to evaluate segment profitability and overall performance, excluding non-core operating items. - EBITDA (Earnings before interest, taxes, depreciation, and amortization) is a non-U.S. GAAP measure used by management to evaluate segment profitability and overall performance, excluding items not indicative of core operating results[245](index=245&type=chunk) EBITDA Reconciliation (2022 vs 2021) | ($ in millions) | 2022 | 2021 | | :------------------------------- | :--- | :--- | | Reported net income | 73 | 47 | | Interest expense, net | 125 | 60 | | Income tax provision | 20 | 32 | | Depreciation | 77 | 75 | | Amortization | 227 | 127 | | EBITDA | 522 | 341 | [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity through operating cash flows and credit facilities, sufficient for near-term needs, despite increased cash usage for acquisitions. [Overview](index=41&type=section&id=Overview) APi Group's primary liquidity sources, including cash flows, cash equivalents, a **$500 million** revolving credit facility, and debt offerings, are deemed sufficient for the next twelve months. - Primary liquidity sources include cash flows from operations, available cash and cash equivalents, a **$500 million** revolving credit facility, and proceeds from debt offerings, which are believed sufficient for the next twelve months[247](index=247&type=chunk) - As of December 31, 2022, total liquidity was **$1,051 million**, comprising **$605 million** in cash and cash equivalents and **$446 million** of available borrowings under the Revolving Credit Facility[248](index=248&type=chunk) - Financing for the Chubb Acquisition included the issuance of **800,000 shares** of Series B Preferred Stock for **$800 million** and a **$1,100 million** seven-year incremental term loan[248](index=248&type=chunk) [Cash Flows](index=42&type=section&id=Cash%20Flows) Operating cash flows increased to **$270 million** in 2022, while investing activities saw a significant increase in cash usage to **$2,901 million** primarily due to the Chubb Acquisition, and financing activities provided **$1,756 million**. Net Cash Flows (2022 vs 2021) | ($ in millions) | 2022 | 2021 | | :--------------------------------------------------------------------------- | :----- | :--- | | Net cash provided by operating activities | 270 | 182 | | Net cash used in investing activities | (2,901) | (121) | | Net cash provided by financing activities | 1,756 | 917 | | Effect of foreign currency exchange rate change on cash, cash equivalents, and restricted cash | (9) | (2) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | (884) | 976 | | Cash, cash equivalents, and restricted cash, end of period | 607 | 1,491 | - Net cash provided by operating activities increased to **$270 million** in 2022, primarily due to higher net income, partially offset by working capital needs, acquisition/integration costs, increased debt costs, and a **$27 million** pension contribution[254](index=254&type=chunk) - Net cash used in investing activities significantly increased to **$2,901 million** in 2022, mainly driven by **$2,839 million** for the Chubb Acquisition and other immaterial acquisitions[255](index=255&type=chunk) - Net cash provided by financing activities increased to **$1,756 million** in 2022, primarily from **$1,104 million** in new debt and **$797 million** from Series B Preferred Stock issuance, partially offset by debt and common stock repurchases[256](index=256&type=chunk) [Financing Activities](index=43&type=section&id=Financing%20Activities) The company's financing activities include a **$1,200 million** 2019 Term Loan, a **$1,100 million** 2021 Term Loan, a **$500 million** Revolving Credit Facility, and the issuance of **$800 million** in Series B Preferred Stock. - The Credit Agreement includes a **$1,200 million** 2019 Term Loan, a **$1,100 million** 2021 Term Loan (for Chubb Acquisition), and a **$500 million** Revolving Credit Facility[259](index=259&type=chunk) - As of December 31, 2022, outstanding indebtedness included **$1,127 million** on the 2019 Term Loan and **$1,085 million** on the 2021 Term Loan, with **$446 million** available under the Revolving Credit Facility[263](index=263&type=chunk) - The company issued **$350 million** of **4.125%** Senior Notes and **$300 million** of **4.750%** Senior Notes, both due 2029, and repurchased **$13 million** and **$23 million**, respectively, in 2022[264](index=264&type=chunk)[265](index=265&type=chunk) - **800,000 shares** of **5.5%** Series B Redeemable Convertible Preferred Stock were issued for **$800 million** to fund a portion of the Chubb Acquisition, with holders entitled to dividends and conversion rights[266](index=266&type=chunk)[267](index=267&type=chunk) [Material Cash Requirements from Known Contractual and Other Obligations](index=44&type=section&id=Material%20Cash%20Requirements%20from%20Known%20Contractual%20and%20Other%20Obligations) Material cash requirements, primarily for leases, debt, taxes, and pensions, are expected to be met by operating cash flows, with capital expenditures projected at **1.5%** of annual net revenues. - Material cash requirements primarily relate to operating and finance leases, debt obligations, tax obligations, and pension obligations, expected to be satisfied by cash generated from operations[269](index=269&type=chunk) - Capital expenditures are expected to be approximately **1.5% of annual net revenues**[269](index=269&type=chunk) [Recently Issued Accounting Pronouncements](index=44&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) The company adopted ASU 2020-04, ASU 2020-06, and ASU 2021-08 on January 1, 2022, none of which materially impacted its consolidated financial statements. - The company adopted ASU 2020-04 (Reference Rate Reform), ASU 2020-06 (Debt Conversion), and ASU 2021-08 (Business Combinations) on January 1, 2022, none of which had a material impact on its consolidated financial statements[381](index=381&type=chunk)[382](index=382&type=chunk)[383](index=383&type=chunk) [Critical Accounting Estimates](index=45&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates for revenue recognition, business combinations, goodwill impairment, and income taxes involve significant management judgment, with potential for material impact from changes in assumptions. - Revenue recognition from contracts with customers involves significant estimates, particularly for fixed-price construction projects using the cost-to-cost method, where changes in estimates can materially affect results[273](index=273&type=chunk)[276](index=276&type=chunk)[278](index=278&type=chunk) - Business combinations require significant estimates and assumptions for fair value determination of acquired assets and liabilities, including intangible assets and contingent consideration, which can lead to future impairment charges[282](index=282&type=chunk)[284](index=284&type=chunk) - Goodwill is annually tested for impairment (October 1) at the reporting unit level using market and income approaches; while no impairment was found in 2022, significant deterioration in economic conditions could trigger future charges[285](index=285&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk)[290](index=290&type=chunk) - Income tax provision relies on estimates of pre-tax income, statutory rates, and tax planning, with inherent uncertainty in quantifying tax positions that could result in significant costs or benefits[291](index=291&type=chunk)[292](index=292&type=chunk) [Item 7A. Qualitative and Quantitative Disclosures About Market Risk](index=49&type=section&id=Item%207A.%20Qualitative%20and%20Quantitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate, foreign currency, and other market risks through derivative instruments, though full elimination of these exposures is not possible. - The company is exposed to interest rate risk on its variable interest rate debt, including the 2019 Term Loan (**$1,127 million** outstanding) and 2021 Term Loan (**$1,085 million** outstanding) as of December 31, 2022[295](index=295&type=chunk) - To mitigate interest rate risk, APi Group uses interest rate swaps; a **100-basis point** increase in applicable interest rates would have increased interest expense by approximately **$21 million** in 2022[295](index=295&type=chunk)[296](index=296&type=chunk) - Foreign currency risk has increased due to the Chubb Acquisition, with **38% of 2022 consolidated net revenues** from foreign operations, resulting in translation losses of approximately **($164) million** in 2022[297](index=297&type=chunk) - Other market risks include impacts on accounts receivable from customer creditworthiness, supply chain risks (commodity price fluctuations, availability), and increases in energy prices[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk) [Interest Rate Risk](index=49&type=section&id=Interest%20Rate%20Risk) The company is exposed to variable interest rate risk on its term loans, mitigating this with interest rate swaps, but faces potential impacts from LIBOR discontinuation. - As of December 31, 2022, the company had **$1,127 million** outstanding on the 2019 Term Loan and **$1,085 million** on the 2021 Term Loan, both subject to variable interest rates[295](index=295&type=chunk) - Interest rate swaps are used to mitigate variable interest rate increases; a **100-basis point** increase in applicable rates would have increased 2022 interest expense by approximately **$21 million**[295](index=295&type=chunk)[296](index=296&type=chunk) - The discontinuation of one-month LIBOR after June 30, 2023, and its replacement with the Secured Overnight Financing Rate (SOFR) may adversely impact interest rates and interest expense[296](index=296&type=chunk) [Foreign Currency Risk](index=49&type=section&id=Foreign%20Currency%20Risk) Foreign operations, constituting **38%** of 2022 consolidated net revenues, expose the company to foreign currency fluctuations, resulting in **($164) million** in translation losses in 2022, managed through hedging strategies. - Revenues from foreign operations constituted approximately **38% of consolidated net revenues** for 2022, increasing exposure to foreign currency exchange rate fluctuations, particularly after the Chubb Acquisition[297](index=297&type=chunk)[298](index=298&type=chunk) - Foreign currency translation losses totaled approximately **($164) million** in 2022, recorded in accumulated other comprehensive loss[297](index=297&type=chunk) - The company manages foreign currency exposure by minimizing net asset/liability positions in non-functional currencies and using cross-currency swaps for hedging intercompany loans[298](index=298&type=chunk) [Other Market Risk](index=50&type=section&id=Other%20Market%20Risk) The company faces market risks from customer creditworthiness, supply chain disruptions (commodity prices), and energy price increases, which could impact profitability and project viability. - Exposure to market risks impacting the customer base, potentially affecting accounts receivable or contract assets if customers' ability to pay is negatively impacted by economic conditions[300](index=300&type=chunk) - Supply chain risks include fluctuations in availability and prices of commodities (e.g., copper, steel, cable optic fiber) and increases in energy prices (e.g., gasoline for vehicle fleet)[301](index=301&type=chunk) - Significant declines in market prices for oil and gas could lead to project delays or cancellations, impacting profitability for certain businesses[302](index=302&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=51&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section provides APi Group's audited financial statements, with KPMG issuing an unqualified opinion on financials but an adverse opinion on internal controls due to material weaknesses. - KPMG LLP issued an unqualified opinion on the consolidated financial statements for the three-year period ended December 31, 2022[307](index=307&type=chunk) - KPMG LLP issued an adverse opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2022, due to material weaknesses in user access controls and process level controls over revenue recognition[319](index=319&type=chunk)[321](index=321&type=chunk) - The Chubb Fire & Security business, acquired in 2022, was excluded from management's assessment of internal control over financial reporting, representing **47% of total assets** and **31% of total revenues**[322](index=322&type=chunk) [INDEX TO CONSOLIDATED FINANCIAL STATEMENTS](index=51&type=section&id=INDEX%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The index provides a comprehensive list of APi Group's consolidated financial statements, including balance sheets, statements of operations, comprehensive income, shareholders' equity, cash flows, and accompanying notes. - The index lists the Consolidated Balance Sheets, Statements of Operations, Comprehensive Income (Loss), Shareholders' Equity, Cash Flows, and Notes to Consolidated Financial Statements[305](index=305&type=chunk) [Report of Independent Registered Public Accounting Firm (Consolidated Financial Statements)](index=52&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an unqualified opinion on APi Group's consolidated financial statements for the three-year period ended December 31, 2022, highlighting critical audit matters related to cost estimates and acquired intangible asset valuation. - KPMG LLP issued an unqualified opinion on the consolidated financial statements of APi Group Corporation and subsidiaries as of December 31, 2022 and 2021, and for the three-year period ended December 31, 2022[307](index=307&type=chunk) - Critical audit matters included the assessment of total estimated costs for certain fixed-price projects recognized over time and the fair value measurement of certain acquired intangible assets in the Chubb Fire and Security acquisition[311](index=311&type=chunk)[312](index=312&type=chunk)[315](index=315&type=chunk)[316](index=316&type=chunk) [Report of Independent Registered Public Accounting Firm (Internal Control Over Financial Reporting)](index=54&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an adverse opinion on the effectiveness of APi Group's internal control over financial reporting as of December 31, 2022, due to material weaknesses in user access controls and revenue recognition processes. - KPMG LLP expressed an adverse opinion on the effectiveness of APi Group's internal control over financial reporting as of December 31, 2022[319](index=319&type=chunk) - Material weaknesses identified include ineffective user access controls related to an information technology system and ineffective operation of process level controls over revenue recognition[321](index=321&type=chunk) - The audit of internal control over financial reporting excluded an evaluation of Chubb Fire & Security's internal control, which represented **47% of total assets** and **31% of total revenues**[322](index=322&type=chunk) [Consolidated Balance Sheets](index=56&type=section&id=Consolidated%20Balance%20Sheets) This table presents APi Group's consolidated balance sheets as of December 31, 2022, and 2021, detailing assets, liabilities, and equity. Consolidated Balance Sheet Highlights (in millions) | Item | December 31, 2022 | December 31, 2021 | | :------------------------------------ | :---------------- | :---------------- | | Cash and cash equivalents | $605 | $1,188 | | Total current assets | $2,652 | $2,626 | | Property and equipment, net | $407 | $326 | | Goodwill | $2,382 | $1,106 | | Intangible assets, net | $1,784 | $882 | | Total assets | $8,091 | $5,159 | | Short-term and current portion of long-term debt | $206 | $1 | | Total current liabilities | $1,921 | $867 | | Long-term debt, less current portion | $2,583 | $1,766 | | Total liabilities | $5,167 | $2,836 | | 5.5% Series B Redeemable Convertible Preferred Stock | $797 | — | | Total shareholders' equity | $2,127 | $2,323 | [Consolidated Statements of Operations](index=57&type=section&id=Consolidated%20Statements%20of%20Operations) This table presents APi Group's consolidated statements of operations for the years ended December 31, 2022, 2021, and 2020, detailing revenues, expenses, and net income. Consolidated Statements of Operations Highlights (in millions) | Item | 2022 | 2021 | 2020 | | :------------------------------------ | :--- | :--- | :--- | | Net revenues | $6,558 | $3,940 | $3,587 | | Gross profit | $1,714 | $939 | $756 | | Selling, general, and administrative expenses | $1,552 | $803 | $725 | | Operating income (loss) | $162 | $136 | $(166) | | Interest expense, net | $125 | $60 | $52 | | Income (loss) before income taxes | $93 | $79 | $(184) | | Income tax provision (benefit) | $20 | $32 | $(31) | | Net income (loss) | $73 | $47 | $(153) | | Net income (loss) attributable to common shareholders | $29 | $(137) | $(375) | [Consolidated Statements of Comprehensive (Loss) Income](index=58&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20%28Loss%29%20Income) This table presents APi Group's consolidated statements of comprehensive (loss) income for the years ended December 31, 2022, 2021, and 2020, detailing net income and other comprehensive income components. Consolidated Statements of Comprehensive (Loss) Income Highlights (in millions) | Item | 2022 | 2021 | 2020 | | :------------------------------------ | :--- | :--- | :----- | | Net income (loss) | $73 | $47 | $(153) | | Other comprehensive (loss) income: | | | | | Fair value change - derivatives, net of tax | $62 | $25 | $(26) | | Defined benefit pension plans adjustment, net of tax | $(165) | — | — | | Foreign currency translation adjustment | $(164) | $(11) | $9 | | Comprehensive (loss) income | $(194) | $61 | $(170) | [Consolidated Statements of Shareholders' Equity](index=59&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) The Consolidated Statements of Shareholders' Equity detail changes in Preferred Stock, Common Stock, Additional Paid-In Capital, Accumulated Deficit, and Accumulated Other Comprehensive Loss for the years ended December 31, 2022, 2021, and 2020. - The Consolidated Statements of Shareholders' Equity detail changes in Preferred Stock, Common Stock, Additional Paid-In Capital, Accumulated Deficit, and Accumulated Other Comprehensive Loss for the years ended December 31, 2022, 2021, and 2020[338](index=338&type=chunk) [Consolidated Statements of Cash Flows](index=60&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This table presents APi Group's consolidated statements of cash flows for the years ended December 31, 2022, 2021, and 2020, detailing cash flows from operating, investing, and financing activities. Consolidated Statements of Cash Flows Highlights (in millions) | Item | 2022 | 2021 | 2020 | | :---------------------------------------------------------------- | :----- |

Q3 2022 Performance Highlights - Record net revenues of $1.7 billion[15] - Net revenues increased on an organic basis by approximately 16.5%, driven by a double-digit increase in inspection, service and monitoring revenue[15] - Adjusted gross margin of 26.3%, representing a 208 basis point increase compared to prior year[15] - Record adjusted EBITDA of $186 million, representing a 10.7% margin[15] - Record adjusted diluted earnings per share of $0.37, representing a $0.02 increase from prior year period[15] - Adjusted free cash flow of $166 million, representing a 159% increase compared to the prior year period[15] 2022 Financial Results Overview - Net revenues increased by 16.4% on an organic basis for the three months ended September 30, 2022[17] - Adjusted gross margin was 26.3% for the three months ended September 30, 2022, a 208 basis point increase[17] - Adjusted EBITDA was $186 million with a 10.7% margin for the three months ended September 30, 2022[17] - Adjusted diluted EPS was $0.37 per share for the three months ended September 30, 2022, a $0.02 increase[17] - Net revenues increased by 14.7% on an organic basis for the nine months ended September 30, 2022[18] - Adjusted gross margin was 26.5% for the nine months ended September 30, 2022, a 280 basis point increase[18] - Adjusted EBITDA was $490 million with a 10.1% margin for the nine months ended September 30, 2022[18] - Adjusted diluted EPS was $0.96 per share for the nine months ended September 30, 2022, a $0.22 increase[18] 2022 Guidance - The company expects full year revenue outlook to range between $6.45 billion to $6.5 billion[31] - The company expects adjusted EBITDA will range between $660 million to $675 million[31] - The company now expects growth in net revenues on an organic basis at constant currencies of 10%+[31] - Q4 net revenues are expected to be $1.602 billion to $1.652 billion[33] - Q4 adjusted EBITDA is expected to be $170 million to $185 million[33] - Q4 adjusted Free Cash Flow is expected to be $190 million to $210 million[33] - Full year adjusted Free Cash Flow is expected to be $372 million to $392 million[33] - Full year adjusted Free Cash Flow Conversion is expected to be 55%+[33]

Financial Data and Key Metrics Changes - Net revenues for Q3 2022 increased by 65.7% to $1.7 billion compared to $1 billion in the prior year period, driven by acquisitions and strong organic growth [20] - Adjusted gross margin grew by 208 basis points to 26.3%, despite inflation and supply chain disruptions [21] - Adjusted diluted earnings per share increased by approximately 6% or $0.02, driven by strong operational performance and acquisition accretion [12][22] - Adjusted free cash flow was $166 million, exceeding the guided range and representing a 159% increase compared to the prior year [14][25] Business Line Data and Key Metrics Changes - Safety Services reported net revenues increased by 117% to $1.1 billion, primarily driven by acquisitions, with organic growth of 19.7% [22][23] - Specialty Services net revenues increased by 12% to $590 million, driven by increased service revenue and improved pricing [24] Market Data and Key Metrics Changes - Approximately 2/3 of organic revenue growth was driven by price and pass-through of material and labor costs, with the remaining 1/3 from volume [22] - The backlog stood at approximately $3.6 billion, slightly down from $3.7 billion, which is typical for the season [50] Company Strategy and Development Direction - The company aims for long-term organic growth above industry average, targeting an adjusted EBITDA margin of 13% by 2025 and a net leverage ratio of 2x to 2.5x [32] - The integration of Chubb remains a top priority, with plans to enhance operational efficiencies and drive organic growth [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2023 goals, supported by a strong backlog and resilient end markets [36][37] - The company is focused on mitigating margin pressures through high-margin inspection, service, and monitoring revenue [31][32] Other Important Information - The company expects to provide updates on the ongoing integration of Chubb and its strategic plans at the upcoming investor update [19] - Management highlighted the importance of disciplined customer and project selection to enhance margins [58] Q&A Session Summary Question: Visibility on 2023 goals - Management feels confident due to a strong backlog of approximately $3.6 billion and continued growth in inspection revenue [36] Question: Performance of Chubb by region - Chubb's revenue is resilient, with over 60% coming from inspection service and monitoring, providing stability amid potential recessions [39] Question: Cash flow improvement and conversion - The company expects continued improvement in cash flow conversion, aiming to return to traditional levels in 2023 [42] Question: Organic growth performance - Strong performance was noted in data centers, semiconductors, and healthcare, with limited exposure to retail and hospitality [46] Question: Supply chain disruptions - Mixed improvements were observed, with some costs decreasing while others, like semiconductors, remain challenging [48] Question: Backlog trends - The backlog is slightly down but remains strong, with a year-over-year increase of 8% [50][52] Question: Pricing strategies - The company continues to push for price increases and utilize fuel surcharges to manage inflationary pressures [52] Question: Integration costs for Chubb - Integration costs are expected to carry into 2023, but the company aims for a cost-neutral transition [84]