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]

Financial Performance - Net revenues for Q3 2022 were $1,735 million, a 65.7% increase from $1,047 million in Q3 2021, primarily driven by acquisitions in the Safety Services segment [229]. - Cost of revenues for Q3 2022 was $1,295 million, up 62.9% from $795 million in Q3 2021 [229]. - Gross profit for Q3 2022 increased to $440 million, representing a 74.6% increase from $252 million in Q3 2021 [229]. - Selling, general, and administrative expenses rose to $379 million in Q3 2022, a 79.6% increase from $211 million in Q3 2021 [229]. - Operating income for Q3 2022 was $61 million, up 48.8% from $41 million in Q3 2021 [229]. - Net income for Q3 2022 was $28 million, compared to $19 million in Q3 2021, reflecting a 47.4% increase [229]. - EBITDA for the same period was $152 million, up $56 million or 58.3% from $96 million in 2021 [241]. - Net revenues for the nine months ended September 30, 2022, were $4,855 million, an increase of $2,027 million or 71.7% compared to $2,828 million in 2021, primarily driven by acquisitions and market recoveries [251]. - Gross profit for the same period was $1,251 million, up $586 million or 88.1%, with a gross margin of 25.8%, an increase of 230 basis points from 2021 [252]. - Operating income for the nine months ended September 30, 2022, was $113 million, an increase of $27 million or 31.4% compared to $86 million in 2021 [261]. - Net income for the period was $51 million, an increase of $19 million or 59.4%, with net income as a percentage of net revenues remaining at 1.1% [260]. - EBITDA for the nine months ended September 30, 2022, was $380 million, an increase of $137 million or 56.4% compared to $243 million in 2021 [260]. Segment Performance - Safety Services net revenues increased by $621 million or 116.5% to $1,154 million, primarily due to recent acquisitions [245]. - Specialty Services net revenues rose by $63 million or 12.0% to $590 million, driven by increased activity in infrastructure and utility markets [247]. - Safety Services segment net revenues increased by $1,863 million or 123.3% to $3,374 million, driven by acquisitions and market recoveries [264]. - Specialty Services segment net revenues rose by $173 million or 12.8% to $1,520 million, reflecting growth in service offerings [261]. - Specialty Services operating margin improved to approximately 4.6% for the nine months ended September 30, 2022, compared to 2.7% in the same period of 2021, attributed to higher productivity levels [267]. Expenses and Margins - Gross margin improved to 25.4%, up 130 basis points from 24.1% in the prior year, driven by acquisitions and a better revenue mix [231]. - SG&A expenses rose to $379 million, an increase of $168 million or 79.6% from $211 million in 2021, with SG&A as a percentage of net revenues at 21.8% [234]. - Operating margin decreased to 3.5% for the three months ended September 30, 2022, down from 3.9% in the same period of 2021 [233]. - Selling, general, and administrative (SG&A) expenses rose to $1,138 million, an increase of $559 million or 96.5%, with SG&A as a percentage of net revenues at 23.4% compared to 20.5% in 2021 [255]. Debt and Interest - Interest expense, net, increased to $33 million in Q3 2022, a 135.7% rise from $14 million in Q3 2021 [229]. - Interest expense increased to $88 million from $43 million, primarily due to increased debt from the Chubb Acquisition and higher interest rates [256]. - The first lien net leverage ratio as of September 30, 2022 was 2.72:1.00, below the maximum allowable ratio of 4.00:1.00 for fiscal quarters ending in 2021 [290]. - The company is exposed to a potential increase in interest expense of approximately $11 million for a 100-basis point increase in applicable interest rates [302]. Tax and Effective Rates - The effective tax rate for the three months ended September 30, 2022 was 40.5%, compared to 38.5% in the same period of 2021 [240]. - The effective tax rate for the nine months ended September 30, 2022, was 24.2%, down from 31.3% in the same period of 2021, influenced by discrete and nondeductible permanent items [259]. Cash Flow and Liquidity - Net cash provided by operating activities was $82 million for the nine months ended September 30, 2022, compared to $68 million for the same period in 2021, primarily due to an increase in net income [284]. - Net cash used in investing activities was $(2,931) million for the nine months ended September 30, 2022, significantly higher than $(81) million in the same period of 2021, mainly due to the Chubb Acquisition [285]. - Net cash provided by financing activities was $1,773 million for the nine months ended September 30, 2022, compared to $629 million in the same period of 2021, driven by proceeds from debt issuances [286]. - As of September 30, 2022, total liquidity was $819 million, consisting of $395 million in cash and cash equivalents and $424 million available under the Revolving Credit Facility [278]. Acquisitions and Restructuring - The acquisition of the Chubb fire and security business was completed for $2,893 million, expected to enhance revenue growth opportunities within the Safety Services segment [211]. - The company initiated a multi-year restructuring program in 2022, incurring total restructuring costs of $25 million, primarily related to workforce reductions [209]. - The company issued 800,000 shares of 5.5% Series B Redeemable Convertible Preferred Stock for an aggregate purchase price of $800 million to fund a portion of the Chubb Acquisition [294]. Stock Repurchase and Shareholder Returns - The company authorized a stock repurchase program of up to $250 million, with approximately $217 million remaining for future repurchases as of September 30, 2022 [281]. - During the three months ended September 30, 2022, the company purchased a total of 738,572 shares at an average price of $14.89 per share [321]. - The company has authorized a stock repurchase program to buy up to $250 million of its common stock, set to expire on February 29, 2024 [323]. Internal Controls and Remediation - The company is executing remediation plans to address material weaknesses in internal control over financial reporting, with no material changes reported during the quarter ended September 30, 2022 [317]. - Management has seen improved results in remediation efforts compared to December 31, 2021, but full remediation is expected to take a couple of years [318]. - The company is enhancing its internal control environment by hiring additional qualified personnel and refining existing controls [319]. - The company is implementing additional training programs for personnel responsible for newly implemented processes and controls [319]. - The company is enhancing controls over critical processes, including revenue recognition and financial reporting [318]. - The company is monitoring the effectiveness of its remediation plans and will make necessary adjustments as determined by management [318]. - The company is committed to improving its financial systems and enhancing information and communication controls [319]. Foreign Operations and Currency - Revenues from foreign operations represented approximately 35% and 38% of consolidated net revenues for the three and nine months ended September 30, 2022, respectively [304]. - Foreign currency translation losses totaled approximately $86 million and $311 million for the three and nine months ended September 30, 2022, respectively [304]. Capital Expenditures - The company expects capital expenditures to be approximately 1.5% of annual net revenues [299]. - The company had no amounts outstanding under the Revolving Credit Facility, with $424 million available after accounting for $76 million of outstanding letters of credit [291].

Financial Data and Key Metrics Changes - Reported net revenues for Q2 2022 increased by 68.6% to $1.6 billion compared to $978 million in the prior year period, driven by acquisitions and strong organic growth [24] - Adjusted gross margin for Q2 2022 was 26.7%, a 282 basis point increase year-over-year, attributed to an improved mix of inspection and service revenue [24][25] - Adjusted diluted earnings per share increased by 27.6% to $0.37, driven by strong operational performance and the acquisition of Chubb [15][26] Business Line Data and Key Metrics Changes - Safety Services reported net revenues increased by 124% to $1.1 billion, with organic growth of 16% driven by a 20%-plus increase in inspection, service, and monitoring revenue [26] - Specialty Services net revenues increased by 8.8% to $518 million, driven by increased service revenue and demand in infrastructure and utility businesses [28] - Adjusted gross margins for Safety Services were 30.6%, a 121 basis point decline due to inflationary pressures on longer-duration contracts [27] Market Data and Key Metrics Changes - Approximately 40% of net revenues are generated outside the United States, with continued growth in international segments, particularly in Western Europe [31][67] - The company anticipates that infrastructure spending from the U.S. Infrastructure Stimulus Bill will begin to impact business in 2023, with some early benefits seen in rural broadband projects [69] Company Strategy and Development Direction - The company aims to increase the proportion of revenue from inspection, service, and monitoring to over 60%, currently at approximately 52% [22][63] - Ongoing integration efforts at Chubb are progressing well, with a focus on developing an empowered leadership culture and capturing value opportunities estimated at $40 million [19][70] - The company is focused on deleveraging, targeting a net leverage ratio below 3.5x by year-end 2022 and approximately 2.5x by the end of 2023 [34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the resilience of the business model despite macroeconomic challenges, highlighting strong demand in key markets such as data centers and healthcare [49][64] - The company remains focused on maintaining operational efficiency and capturing savings through restructuring initiatives [20][37] - Management believes the business is well-positioned to navigate potential recessionary pressures due to a strong backlog and a diversified service portfolio [39][64] Other Important Information - Adjusted free cash flow for Q2 2022 was strong at $63 million, with expectations for recovery in the second half of the year [29][30] - The company has entered into a forward-starting swap arrangement to adjust the mix of fixed versus floating debt, aiming for approximately 70% fixed by January 2023 [30] Q&A Session Summary Question: How is Chubb's organic growth performing against internal plans? - Management is optimistic about Chubb's performance, noting strong recurring revenue that supports the business through macro challenges, with some regional variances due to COVID impacts [44][45] Question: How are inflationary pressures trending? - Management indicated that they have effectively managed inflation, with margin improvements across the portfolio, although some long-term contracts have faced challenges [46][47] Question: What are the biggest areas of strength driving organic growth? - Key markets such as data centers, semiconductor, healthcare, and telecommunications are driving strong organic growth, with a robust backlog for 2023 [49] Question: What is the expected impact of the U.S. Infrastructure Stimulus Bill? - Significant impacts from the Infrastructure Bill are not expected until 2023, but early benefits are being seen in rural broadband projects [69] Question: What are the plans for the restructuring program? - The restructuring program is expected to yield $40 million in value-capture opportunities, with an initial charge of $11 million taken in Q2 [77][79]

APi Group Corporation (NYSE:APG) Q1 2022 Earnings Conference Call May 4, 2022 8:00 AM ET Company Participants Olivia Walton - Vice President of Investor Relations Martin Franklin - Co-Chairman Russ Becker - President and Chief Executive Officer Kevin Krumm - Executive Vice President and Chief Financial Officer Jim Lillie - Independent Co-Chairman Conference Call Participants Andy Kaplowitz - Citigroup Markus Mittermaier - UBS Kiran Patel-O'Connor - Barclays John Mazzoni - RBC Capital Markets Jon Tanwanteng ...

Acquisition and Growth - The company completed the acquisition of the Chubb fire and security business for $2,935 million, enhancing its Safety Services segment and providing opportunities for cross-selling products and services [188]. - Net revenues for the three months ended March 31, 2022 were $1,471 million, an increase of $668 million or 83.2% compared to $803 million in the same period in 2021, driven by acquisitions and market recoveries [210]. - Safety Services segment revenues increased by $608 million or 130.5% to $1,074 million, driven by acquisitions and market recoveries [221]. - Specialty Services segment revenues rose by $68 million or 19.8% to $412 million, reflecting growth in inspection and service revenue [221]. Financial Performance - Gross profit for the same period was $376 million, up $195 million or 107.7%, with a gross margin of 25.6%, an increase of 310 basis points year-over-year [212]. - Operating loss for the three months ended March 31, 2022 was $(7) million, compared to $(2) million in the same period in 2021, reflecting a 250.0% increase in losses [219]. - Net loss for the period was $(7) million, an improvement of $1 million from $(8) million in the prior year, with net loss as a percentage of net revenues at (0.5)% compared to (1.0)% [219]. - EBITDA for the three months ended March 31, 2022 was $80 million, an increase of $29 million or 56.9% compared to $51 million in the same period in 2021 [219]. - Consolidated EBITDA for Q1 2022 was $80 million, compared to $51 million in Q1 2021, reflecting improved operational performance [233]. Expenses and Margins - Selling, general, and administrative (SG&A) expenses rose to $383 million, an increase of $200 million or 109.3%, representing 26.0% of net revenues compared to 22.8% in the prior year [214]. - Safety Services operating margin for Q1 2022 was approximately 5.9%, down from 9.7% in Q1 2021, primarily due to supply chain disruptions and inflation [225]. - Specialty Services operating margin improved to approximately (1.7)% in Q1 2022 from (5.2)% in Q1 2021, attributed to higher productivity levels [227]. Market Conditions and Challenges - Economic and market conditions, including the Russia-Ukraine conflict, have increased direct costs and created uncertainty in demand for services [195]. - The company has experienced supply chain disruptions affecting material availability and skilled labor resources, impacting project execution [193]. - Seasonal variations typically result in lower net revenues during the first and second quarters due to unfavorable weather conditions [196]. - The company continues to monitor the impacts of COVID-19, with ongoing uncertainty regarding future disruptions to operations [194]. Liquidity and Financing - Total liquidity as of March 31, 2022, was $713 million, consisting of $315 million in cash and cash equivalents and $398 million available under the Revolving Credit Facility [237]. - Net cash used in investing activities was $2,884 million for Q1 2022, primarily due to the Chubb Acquisition [242]. - Net cash provided by financing activities was $1,831 million for Q1 2022, driven by proceeds from the issuance of the 2021 Term Loan and Series B Preferred Stock [243]. - The company completed a private offering of $350 million aggregate principal amount of 4.125% Senior Notes due 2029, with interest payable semi-annually [248]. - The company also completed a private offering of $300 million aggregate principal amount of 4.750% Senior Notes due 2029, used to finance a portion of the Chubb Acquisition [249]. Shareholder Actions - The company repurchased 531,431 shares of common stock for approximately $11 million under its stock repurchase program during Q1 2022 [238]. - The Board of Directors authorized a stock repurchase program with a maximum value of $250 million, which may be executed until February 29, 2024 [273]. - The total number of shares purchased as part of publicly announced plans or programs was 531,431 shares [273]. Debt and Leverage - The first lien net leverage ratio as of March 31, 2022, was 2.93:1.00, indicating the company's leverage position [246]. - As of March 31, 2022, the company had $1,127 million and $1,085 million of indebtedness outstanding on the 2019 Term Loan and 2021 Term Loan, respectively [247]. - A 100-basis point increase in applicable interest rates would have increased the company's interest expense by approximately $5 million for the three months ended March 31, 2022 [255]. Foreign Operations - Revenues from foreign operations represented approximately 40% of consolidated net revenues for the three months ended March 31, 2022 [257]. - The company reported foreign currency translation losses of approximately $(59) million for the three months ended March 31, 2022 [257]. Internal Controls - The company is executing remediation plans to address material weaknesses in internal control over financial reporting, with improvements noted since December 31, 2021 [269]. - The company plans to continue enhancing its internal control over financial reporting and risk assessment processes over the next couple of years [270].

APi Group Corporation (NYSE:APG) Q4 2021 Earnings Conference Call March 1, 2022 8:30 AM ET Company Participants Olivia Walton - Vice President of Investor Relations Martin Franklin - Co-Chairman Russ Becker - President and Chief Executive Officer Kevin Krumm - Executive Vice President and Chief Financial Officer Jim Lillie - Independent Co-Chairman Conference Call Participants Markus Mittermaier - UBS Andy Kaplowitz - Citigroup Julian Mitchell - Barclays Kathryn Thompson - Thompson Research Jon Tanwanteng - ...