We good? Okay. Well, good morning everyone, and thanks for joining. I'm the analyst, Tim Mulrooney, that covers APi Group here at William Blair. I'm required to inform you that for a complete list of research disclosures and conflicts of interest to visit our website at williamblair.com. We're very pleased to have with us this morning at APi Group, that's CEO Russ Becker and Adam Walters, that's Senior Director of IR. We picked up APi Group two, maybe three years ago. Still relatively early in the story and got very excited about the opportunity. I think you all were trading at about 12 times EBITDA at that time. You're taking credit? Yes. Yeah. Okay. Full credit. We were excited because what we saw in this business was, yeah, you had the specialty business, which can be, I think, potentially more cyclical and maybe more of a construction type business, but then you have this fire life safety business, which we viewed as a real gem, and very similar to many of these other types of high-quality services businesses that get very high multiples. The secret's out, because now you've re-rated, and I think everyone, the market, is valuing that business more like how they value many of these other high-quality services businesses that are out there today. I'm really excited to dig in with you on both sides, the safety and the specialty side. Before we do that, this is a generalist conference. We're going to do this as a fireside chat, and then we have a breakout session, by the way, after this at the Burnham A room, where we can dig in more detail. We're going to do this as a fireside chat, but maybe if you don't mind just spending a couple minutes to give an overview on the business, just in case there's anyone out here that's not so familiar with APi Group. Sure. Happy to do that. Thank you. Thanks for having us, Tim, as well. Thank you for everybody for coming and showing interest in the company. My name's Russ Becker, and I'm the President and CEO of APi. I have actually been with this company for over 30 years. I started in one of our operating businesses and have really been serving the company in a similar capacity that I am today since 2002. I've seen the company through a tremendous amount of change during that period of time. When I think when I started with APi, we were about a $600 million, 3% business. Last year, we finished at $7.9 billion in revenue and a 13.2% EBITDA margin. I attribute a lot of that growth and improvement in business performance to our company's enduring purpose, which is building great leaders, and the investment that we make in our people as human beings and as leaders. Leadership development has been a huge part of our company since I started at the parent company in 2002, and I would tell you that it defines our culture and who we are. Our culture is something that we take great pride in continuing to grow and strengthen as we continue to grow as a company. Our business is really organized into two different groups, if you will, or segments. We have our safety services segment, which is our fire protection, fire life safety, and security business. That accounts for about 70% of our total revenue. The other piece of our business is specialty services, which is where our infrastructure business lies, our HVAC business lies. We do HVAC work, we do natural gas distribution replacement and retrofit work, potable water system upgrades, fiber optics, telecommunication. We have a business that's in structural steel manufacturing as well. Last year, 54% of our revenue came from inspection service and monitoring. Our goal and priority is to build a very robust inspection service and monitoring business across our entire portfolio. We have established our 2028 shareholder value creation targets, or what we call 10/16/60+. The 10 stands for $10 billion in revenue, with a 16% EBITDA margin, with our long-term target of 60% of our revenue coming from inspection service and monitoring. The company operates in over 20 countries today. That will expand more with the WTech acquisition that was announced just a few weeks back. Our company traditionally grows organically in the mid-single digit range. We also grow inorganically through M&A. We have a long track record of winning in the M&A space. We've probably done well over 200 acquisitions since I've been the CEO of the company. That's something that we see a lot of opportunity for continued growth for our business. Probably the last thing that I'll leave you with is that we have what we call an inspection-first mindset at APi. What that means is, these hotels are just terrible examples, because the fire systems are different in here. If you took a 50,000 sq ft medical office building, the fire life safety system in that building is required by law to be inspected for functionality and operability at least once a year, and most likely certain components of it, like the fire alarm system, twice a year. We are trying to sell inspections, those inspections to the already built environment as our lead into that client relationship versus the other way around. Traditionally in the industry, most people try to go out and bid and win. I hate the word bid, and we can talk about that, Tim. Bid and win new construction work. When they get done with executing the new construction work, they try to sell that end user and client an inspection and service contract. We're doing it just the opposite way. We're trying to win the inspections with that existing building owner and developing a relationship, because we know for every dollar of inspection revenue we generate, we're going to generate someplace between $3 and $4 worth of service work as a pull-through. If we do a really good job with that client, we're going to develop a sticky relationship with them, so when they do have new expansion needs or retrofit needs, we're going to be in a position, based on our relationship, to negotiate the work versus compete for the work on low price. That is a significant difference in our business and in our business model. Right it's a great company. Yeah. Yeah, no, that's. I'll stop there. really good overview. Thank you. So. I actually do have a whole, so on the quarterly conference calls, I have a list in my notes that says, "Don't say these words on the conference call, or Russ will yell at you publicly on the conference call. I don't yell. Bid Well. I don't yell. You know? Bid is one of them. I hate the word. Yeah, you don't like the word bid. They're not employees, they're teammates. That's true. They're leaders. They're- They're leaders. teammates or leaders. Teammates or leaders. I do not use the word employee. I've actually heard that leadership training. I've spoken to someone that's gone through it, and it sounds like it's quite the experience. Something I'd love to do someday, actually. You've got to come to work for us first. Oh, I can't just do it? No. Oh. Okay. Well, I'll put that in my back pocket. Yeah, why don't you use the word bid? Why do you think it's better to go to market with an inspection-first mindset? When did you decide to do that? Have you always done that? Is that something that you've done more recently? Love to hear a little bit about that journey. On the word bid, to start is, that means that you're going to buy our services because we have the cheapest price. Yep. we have no interest in that. You associate that with low price work. Yeah. Okay. We want our clients to choose to buy our services because we present the best value. Mm-hmm. Yeah. There's a lot that comes with that. It could be safely delivering the work, it could be your speed to execute the work, and timing. Showing up on time. I'm sure at some point somebody's going to want to talk about data centers. Oh, that's right. Your ability to execute is more important than what your cost is for most of the providers or end users. Bid is just, it's actually forbidden to be used at APi. I will correct somebody if they use the word bid, and because there's something, your words matter, and just this whole idea of we're proposing, and we're going to sell our services based on the value and what we bring to that particular client. Got it. Inspections first. The reality of it is, I think we first set a goal in 2006 that we wanted 50% of our revenue to come from what we called service work at the time. Yep. We didn't even differentiate at that time between inspection and service work. I think our mindset around doing the inspections and stuff like that was more like, we need to do the inspections to get the service work. We didn't look at and view winning the inspections that we could actually generate a really good gross margin and a really, really good profitable component of our business. That changed and evolved over time. Where it really got a tremendous amount of energy is when the woman who leads our national inspection sales team now came to work for the company. I'd love to tell everybody in this room that I'm just the most strategic guy. This whole idea of inspections first was our sales leader's, not mine. It was because she's so damn good at it. Yep. It literally started in one of our branches where she showed up as an inspection sales leader. She did such a good job selling inspections, then that morphed into she's the inspection sales leader for that branch. Then the guy that was actually running that business was like, "Hey, you're doing a kickass job. How about you take that idea to this branch and this branch? Yep. It blossomed. Then it's like, "Hey, you're doing a great job. How about we take it to these next three branches?" Well, then that happened to be the guy who's running our safety services segment was actually running Las Vegas at the time, and we promoted him to lead one of our operating units, our business is out in the Northeast. He moved with his wife to New York and he's like, "Hey, how about you come out here and you bring this to our business?" It blossomed there. Then we promoted the guy that was running that company to run the segment. He's like, "Well, how about if we make this a national role?" You know? Yep. It's taken on a life of its own. It's really just evolved over time, and I would say that it got going with earnest in, trying to think, maybe 2016. Okay. You've been doing this for 10 years, has been this slow transition to an inspection-first? Yeah mindset, and now you have X% of branches that you'd consider, what's the term you use, bulletproof? Where your gross margin, gross profit dollars from inspection and sales exceed the SG&A of the branch? 100%. We don't talk about this enough when we talk about our company and our business. A branch literally becomes bulletproof when the inspection service and monitoring business, when those departments, if you will, generate enough gross margin to cover the SG&A of the entire branch. Yeah. It becomes bulletproof because then the project work and the project opportunities that that branch has, they can be even more selective, and then the gross margins on that project work when they're being more selective expand. Yep. They get better. The profitability of the branch, overarching profitability of the branch expands. Gets even better. It gets even better. If you look at Adam's slide deck, there's a slide in there that shows the evolution of a branch. It has those points earmarked along that timeline. that shows, but in this particular case, the gross margins on the project grew by 10 percentage points. That's the thing about this story that I think is maybe a little bit underappreciated. Everyone understands inherently that the service work is 10 percentage points gross margin higher than the project work, and so as your service work is growing high single digit and your project work is growing low single digit, there's going to be some natural margin accretion from that. I think the part that's maybe less well appreciated is how much the being more disciplined on the projects once these branches become bulletproof, how much that's contributing to the margin as well. You gave me a statistic one time, maybe you can share it here. What did your average project margin look like when you took over as CEO relative to today? Well, I can't imagine that it was me that gave you that statistic because I don't know. Oh, okay. And, but- Okay I mean. I think it was a dramatic number, like mid-single digit, or maybe it was average branch profitability or something like that, but it sounded like it was very low. The thought being like, well, people thought it would be so hard to just get to 10% over time. Now here you are sitting at 13. Well, that was like the company was a 3% business when we started. That must be what it is. in 2002, and I think I shared that in my opening remarks. Yeah, it's funny, and I know exactly what you're talking about. Yeah. When I first came to APi Group, this is going to maybe shock you, maybe it won't shock you, but our financial goals as a company was 5%. At the time we were privately held, the majority shareholder of the business was a gentleman by the name of Lee Anderson. I was up at his summer home with him, we'd spent some time. He never has come into the office since I've been with the company. I was up at his summer home. We had some work stuff to talk about, and traditionally, I would go, and we'd spend a couple of hours talking about work stuff, and then I'd stay and have drinks and dinner overnight, and I'd get up early in the morning and drive back to Minneapolis. We were probably finishing up a scotch or something, and I looked at him and I said, "Where did 5% come from?" He looks at me, and the gentleman that had my job before me, his name was Jeff, and he goes, "I don't know. Jeff?" I'm like, "I don't know." I'm like, "Seems pretty low." I said, "For how much risk we take every day," I said, "5% seems pretty low." This is a true story. He looks at me and says, "Well, what do you think it should be?" I said, "I don't know. Let's start with 10." He goes, "Okay." I literally go back to the office. Now, I'm looking at this guy right here who's pretty young. He doesn't even know what a fax machine is, I'm guessing. Some of the cagey veterans I see over here, so write up a memo, send my memo out via fax. Really email was in its infancy, I send out a fax or a memo to everybody saying our new financial target is 10%. Everybody bitched. I'm not kidding you. Everybody's, "Can't be done. Industry average is 3%." All of a sudden, one of our businesses climbs, climbs, gets to 10%. This guy's still running this business to this day. The best part about it was, he didn't stop at 10%, he just kept on going, and his business got to 20%. At APi, we publish our financial results, so every one of our business leaders can see exactly how their company stacks up against their peers. They can see exactly how every branch stacks up with every other branch. We stack rank them highest performance to lowest performance. We actually color code it. If you're meeting our goals, you're in green. If you're trending in the right direction, you're in yellow. If you're missing the target, you're in pink. The only reason you're in pink is that if you put it in red, you can't see the numbers. You can see, and if you have a competitive bone in your body, you don't want to be in the bottom third, right? You create this kind of natural draft that pulls people along. Our business has just continued to grow as we continue to increase the expectations. Yep. We believe and we know that, and our goal is that every one of our branches will operate at 20%. We're not there, I mean, clearly. Right. You know what I mean? Yeah. I suspect we'll always have. Some a challenge or something like that, where maybe you don't have the right leader and you have to make some changes, and you know, or somebody does a poor job on customer selection and gets us in trouble, and we have to work our way through that. It's real, and this is a people-centered business. When you show people, show them kind of the path and share best practices and create an environment of collaboration, there's a lot of opportunity. Yeah a lot of opportunity. It's a great company, and with a lot of continued upside. I think that that's part of the story that investors like so much, is watching this march towards profitability. When you came out with your 2025 targets for 13%, was that 2025? Yeah, 13% and 2025. Yep. Yep, 13/60/80, we called it. 1360- Came out with that in like 2022. There was a lot of skeptics. How are they going to get to 13? Yet you did it. Now the target is 16 by 2028, and I don't have 16 in my model. I don't know how you're going to do it. I don't have any doubt that you are. What's up with this, you know? I'm just saying, you guys keep beating the expectation and delivering, and I think a lot of it goes back to this conversation about it's a people business, and it's about culture and leadership and driving this competitive spirit in the business. I have no doubt that you will hit the 16% number. However, I will note that that would be upside to my model and to consensus if you do it. That's the opportunity. It sounds like a little bit of a throw down. Arm wrestle on stage. I like my chances. Yeah, I don't want to do that. All right. Maybe we should get to some actual numbers here because we've got eight minutes left. High single digit in services. If we're looking at the U.S. fire life safety business, you got high single digit growth in services that you're expecting and low single digit growth in the projects business. Is that correct? That's correct. That's the guidance we give our businesses. That's the guidance you give your businesses. That kind of equates to a mid-single digit growth for the full year. I will note that the comps get tougher in the second half of the year for that business. Can you just help bridge that gap for us between the fact that the comps are getting more difficult, but you still expect that mid-single digit growth for the full year? If you break it out into the two parts that you talked about, the inspection and service business, that just continues to, it's steady Eddie. You know what I mean? We continue to grow that in the high single-digit range. It starts with, we talked about the inspection-first flywheel. It starts with that, our inspection sales leaders continue to knock on the already built environment, take share, it's continue to push price, and that business continues to just be super steady and grow at that high single-digit clip. Talked about the comps get tougher, obviously. I would say the project environment right now, I would say is more robust than normal. Yep. There's a lot of good work out there, and we talk about end markets all the time, and focusing on the right end markets definitely matters. The end markets we're focusing on are very robust right now. The project business is growing- More than- more than low single digits like the long-term algorithm would suggest. We see it in the work we're doing right now. We see it in the backlog. There's just a lot of good work out there, whether it's data center, advanced manufacturing, aviation. There's just a lot of good project work out there, and we're taking advantage of that. That's where you kind of, even though it is tougher comps, we're still projected to continue with the mid-single digit growth throughout the year. Yep, that makes sense. Maybe you could talk a little bit about those end markets. I mean, your data center business, there we go. I can't remember the number. I think you said it was 5% of revenue a few years ago, and then 7%, and now it's going to be closer to 10% this year. I don't know how that splits between your specialty business and your safety business, but presumably some of that is in safety. Is that helping there on the project side? For sure. Our best guess, like you mentioned, is 10% is what we'll land for the year in terms of percentage of revenue coming from data center. It's good work for both segments. I would say specialty is probably a little bit higher than 10%. Maybe 11%, 12% of their work is coming from data center. Safety is a touch lower, maybe 8%, 9% of their work is coming from data center. It's really good opportunities for both businesses. Every data center needs a fire life safety system. They have sprinkler systems, fire alarm detection systems. We're doing the uncertain. We've also been doing the inspection service for a lot of these hyperscalers for a long time. It's good existing customer relationships that we already have, when these new data centers are being built, we already have a relationship with the customer, we're coming in and doing the installation. Then on the specialty side, a lot of good work there as well. There's fiber optic cabling that goes into these data centers, uncertain into the server rack that we're doing. We have an HVAC business that'll do a little bit of data center work every year. Our steel fabrication business does data center work. Good opportunities across both segments. I would also just add, we have a business development leader who, he's got a lot of good relationships with these hyperscalers, with general contractors, and he's been kind of coordinating our sister companies in terms of, we have a data center opportunity in Monroe, Louisiana. Who should we be getting involved? Maybe one of the fire life safety companies has a relationship there's opportunities for our specialty businesses to get involved as well. He's been doing an awesome job coordinating across all of our companies and making sure we're attacking these opportunities as a coordinated group. Okay. All right. That's helpful. Maybe in the last couple of minutes here, I know M&A is a big topic of conversation and an important component to your $10 billion target by 2028. You certainly are on your way there. You've announced a few large acquisitions this year so far. Usually when I see a company announce this much, it's not even a balance sheet conversation. It's like a cultural and an integration conversation. Is it fair to assume that we're hitting the pause button here for a while while you work on those? Do you have more appetite for M&A this year? We have more appetite. Oh. I mean. Be clear. You want me to hesitate? No. I would tell you, the three transactions that we announced that are somewhat larger, they're not that big. You know what I mean? Okay. As it relates to, they're not Chubb-esque, you know what I mean? They're not like Chubb. Yeah, no, they're not Chubb-esque. At the time we bought Chubb, it was a $2 billion company. It operated in 20 different countries. You could argue that there's an element of complexity there that I feel like we've done a really nice job of navigating, and I'm really pleased with where that's at. The Wtech acquisition is a fire suppression business that's based in Mullingar, Ireland, which is just north of Dublin. Ted, I met Ted Wright, their CEO. His family founded the company. It's actually got family origins even though we bought the firm from a private equity firm. Yep. Ted's been with it. Ted and his brother actually bought his parents out, then Ted bought his brother out, it does a few things for us. It brings fire suppression, i.e. sprinkler capabilities, to our business in Western Europe that we don't have that level of expertise that we need. Actually, Ted is an entrepreneur through and through, he's going to bring that mindset to our business, which I think will be really, really healthy for us. Yeah. That business had been publicly traded, sat underneath United Technologies and Carrier, and became pretty corporate-y, to be honest with you. He's going to bring a little bit of that entrepreneurship to the company and to that culture, which is needed. It's not that big a business, and Ted fits our culture through and through. He's already participated in our Leader Labs and things like that. I was there, they had a planning session in Portugal back a month or so ago, and I flew over to Portugal for the meeting. His people are just cut from the same cloth. Okay. Just wonderful people. Then Onyx, which is a Canadian-based firm. I've known Brian Chu, their CEO, since probably 2017. Yeah when he was actually with Brookfield. We've known that firm and stayed in touch with that firm for many, many years. When it actually sold, it was recently sold, and then we bought it 18 months after. Right. We passed on it at the time because we were busy integrating our existing business in Canada, and we just didn't feel like we had the bandwidth to stomach it. I feel like we showed good discipline in saying we couldn't. We had a relationship with Blackstone that goes back to the Chubb acquisition. Okay. That presented itself, and so we were able to buy that business when we did. Yep based on that relationship. CertaSite, which was announced at the end of the year and closed on here, what was it?1st February. That business is like inspection-first. That's the beauty of that business. It's like a center of the fairway transaction for us. Again, it's not that big. It's geographically complementary to our existing portfolio, so minimal overlap. It's a non-union business. It's strong in extinguishers and portables, which is an add for us. There's a lot to it, but it's like that one's already rocking and rolling. Okay One of the things that we have to sell, so to speak, to these owners is really centered on our leadership development efforts. The fact that we have a deep bench in succession planning and all that stuff that comes with it is attractive to these folks. Not everybody wants to be in this world called private equity forever. Right. I think one of the things that you'll hear us, the words that you hear us use all the time when we're pitching why should you sell to us is that we're a forever home. Yep I actually stole that from one of the guys from the elevator business. We had him in actually presenting to our board shortly after the acquisition of Elevated back a couple of years ago. Yeah. His words to our board was, "We'd found our forever home." I thought it was pretty good, so I grabbed it. Very complimentary. Yeah. Yeah. They feel like they found their spot. We have a lot of bandwidth. Okay. We've got a lot of dry powder. Our balance sheet is in a great place. For us, that's our number one priority from when you think about how we're going to use our capital. Yep would be M&A. Yep. We've been active in the market, buying back some shares as well. Okay. All right. That's good color. I know we're out of time, but thank you very much, Russ. Yeah. Thank you. I really appreciate it.