管理層發言
Good morning, ladies and gentlemen, and welcome to APi Group's First Quarter 2026 Financial Results Conference Call. Please note this call is being recorded. I will now turn the call over to Adam Walters, Senior Director of Investor Relations at APi Group. Please go ahead.
Thank you. Good morning, everyone, and thank you for joining our first quarter 2026 earnings conference call. Joining me on the call today are Russ Becker, our President and CEO; and David Jackola, our Executive Vice President and CFO. Before we begin, I would like to remind you that certain statements in the company's earnings press release and on this call are forward-looking statements, which are based on expectations, intentions and projections regarding the company's future performance, anticipated events or trends and other matters that are not historical facts. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. In our press release and filings with the SEC, we detail material risks that may cause our future results to differ from our expectations.
Our statements are as of today, April 30, and we undertake no obligation to update any forward-looking statement we may make, except as required by law. As a reminder, we have posted a presentation detailing our first quarter financial performance on the Investor Relations page of our website. Our comments today will also include non-GAAP financial measures and other key operating metrics. The reconciliation of and other information regarding these items can be found in our press release and our presentation. It is now my pleasure to turn the call over to Russ.
Thank you, Adam. Good morning, everyone. Thank you for taking the time to join our call this morning. I want to start by thanking our 29,000 teammates for their dedication to APi. The safety, health and well-being of each of our teammates is our number one value. We remain deeply committed to investing in their growth and development. This is at the heart of our purpose, building great leaders. Our people are what set this company apart and I'm truly grateful for everything they do. In 2026, APi is celebrating its 100-year anniversary by embracing the theme of gratitude. APi was founded in 1926 as a small plumbing business in St. Paul, Minnesota. Today, we are a global market-leading business services company with more than 500 locations around the world. When I think about that journey, where we started and where we are today, I am truly humbled. We have so much to be grateful for. We are honoring this milestone by giving back to the communities that we serve and by celebrating with our teammates, customers and communities that helped us along this journey.
We are off to a strong start in 2026. Before we get into the financial results, I wanted to touch on a few first quarter highlights. From an M&A perspective, we closed the acquisition of CertaSite in February, an inspection-first provider of comprehensive fire and life safety services across the Midwest. Earlier this month, we announced an agreement to acquire Ireland-based Wtech Fire Group, which adds to our fire sprinkler and suppression capabilities across Europe, a key strategic growth area for our international business. And just last week, we announced an agreement to acquire Onyx-Fire Protection Services, a leading provider of fire and life safety services in Canada with an inspection-first mindset and a strong recurring revenue base. This acquisition positions us well in Canada, which we view as an attractive fire and life safety and electronic security market. We expect Onyx-Fire to close in the second quarter and Wtech Fire to close in the third quarter of this year.
We will update our full year guidance on future earnings calls after these transactions close. In total, these three acquisitions represent an investment of more than one billion dollars to further build out our Safety Services segment across the U.S., Europe and Canada. Each of these acquisitions is accretive to our 10/16/60+ financial targets. And equally important, these businesses are all excellent cultural fits and we are excited to welcome our new teammates to the APi family. We also completed four bolt-on acquisitions during the quarter and we remain on track to deploy approximately $250 million in bolt-on M&A at attractive multiples this year, including opportunities within the international business and the elevator and escalator services businesses. Our systems and business enablement program continues to advance well. Earlier this month, our first pilot company went live on our new business systems.
Our teams have done a tremendous amount of work to get to this point. And while there is still work ahead of us, we are tracking in line with our expectations. Now turning to our strong first quarter results. The business continues to build momentum, delivering robust top line growth while expanding margins. We continue to deliver solid growth in inspection, service and monitoring revenues while capitalizing on the robust project environment. We expanded our adjusted EBITDA margins and as I mentioned earlier, we continue to drive our M&A strategy to further strengthen and expand our global platform. For the quarter, net revenues increased by 15%, and approximately 10% organically, with strong growth across both segments. In our Safety Services segment, revenues grew organically by approximately 5%, while expanding segment earnings margins by 60 basis points. Our Specialty Services segment continued its momentum, delivering approximately 25% organic growth while expanding segment earnings margins by 50 basis points.
Importantly, we continue to see solid growth in inspection revenues, and we remain confident in our ability to sustain that momentum. Our team continued to focus on margin expansion with adjusted EBITDA margins expanding 70 basis points year-over-year. We expect to see continued margin expansion for the year, largely driven by the same initiatives that we have been executing. These include the following: first, consistent organic growth; improved inspection, service and monitoring revenue mix, disciplined customer and project selection, pricing, branch and field optimization, procurement, systems and scale, accretive M&A and selective business pruning. And as I always like to say, we can always be better. The first quarter was another strong quarter for cash flow as the business generated $125 million in adjusted free cash flow. In addition, we ended the quarter with a net leverage ratio of approximately 1.8x, well below our long-term target.
Our consistent free cash flow generation and strong balance sheet continue to provide us flexibility to pursue a range of value-enhancing capital deployment opportunities to support our 10/16/60+ financial targets. As a reminder, these targets are the following: $10 billion in net revenues by 2028, supported by consistent mid-single-digit organic growth and accretive M&A. 16% plus adjusted EBITDA margin by 2028. 60% plus of our revenues from inspection, service and monitoring over the long term and $3 billion of cumulative adjusted free cash flow through 2028. I am proud of our team for the strong momentum we have built to start the year. Our inspection, service and monitoring business continues to expand. Our backlog is robust and healthy, and our balance sheet provides us with the flexibility to continue executing on our capital deployment priorities. I would now like to hand the call over to David to discuss our first quarter financial results and guidance in more detail. David?
Thanks, Russ, and good morning, everyone. Reported net revenues for the three months ended March 31 were $1.98 billion, a 15.3% increase compared to $1.72 billion in the prior year period. Organic revenue growth of 10.4% was driven by solid growth in inspection, service and monitoring revenues, growth in project revenues and pricing improvements. Adjusted gross margin for the three months ended March 31 was 31.3%, representing a 40 basis point decrease compared to the prior year period, primarily driven by business mix partially offset by disciplined customer and project selection and pricing improvements. Adjusted EBITDA increased by 21.8% for the three months ended March 31, 18.1% on a fixed currency basis with adjusted EBITDA margin coming in at 11.9%, representing a 70 basis point increase compared to the prior year period. Growth in adjusted EBITDA was driven by strong revenue growth and favorable SG&A leverage.
Adjusted diluted earnings per share for the three months ended March 31 was $0.32, representing a $0.07 or 28% increase compared to the prior year period. The increase was driven by strong revenue growth, adjusted EBITDA margin expansion, and a decrease in interest expense partially offset by an increase in the share count. I will now discuss our results in more detail for the Safety Services segment. Safety Services reported net revenues for the three months ended March 31 were $1.42 billion, an 11.7% increase compared to $1.27 billion in the prior year period. Organic growth of 5.4% was driven by solid growth in inspection, service and monitoring revenues, growth in project revenues and pricing improvements. Adjusted gross margin for the three months ended March 31 was 37.2%, representing a 20 basis point increase compared to the prior year period driven by disciplined customer and project selection and pricing improvements, resulting in margin expansion in inspection, services and monitoring revenues and project revenues, partially offset by mix.
Segment earnings increased by 15.6% for the three months ended March 31, or 11.7% on a fixed currency basis. Segment earnings margin was 16.3%, representing a 60 basis point increase compared to the prior year period, primarily driven by adjusted gross margin expansion and favorable SG&A leverage. I will now discuss our results in more detail for the Specialty Services segment. Specialty Services reported net revenues for the three months ended March 31 were $569 million, an increase of 25.6%, or 24.8% organically, compared to $453 million in the prior year period, driven by growth in both projects and service revenues. Adjusted gross margin for the three months ended March 31 was 16.3%, representing a 50 basis point decrease compared to the prior year period, primarily driven by mix. Segment earnings increased 34.5% for the three months ended March 31, and segment earnings margin was 6.9%, representing a 50 basis point increase compared to the prior year period primarily due to favorable fixed cost absorption, partially offset by mix.
As Russ mentioned in his remarks, Q1 was another strong quarter for adjusted free cash flow. For the three months ended March 31, adjusted free cash flow was $125 million, up $39 million versus last year, representing an adjusted free cash flow conversion of 88% on adjusted net income. Free cash flow generation has been and continues to be a priority across APi. We are pleased with our first quarter adjusted free cash flow while continuing to drive strong, consistent revenue growth. We remain on track to achieve our adjusted free cash flow conversion target of approximately 115% for the year, in line with prior guidance. At the end of the first quarter, our net debt to adjusted EBITDA ratio was approximately 1.8x, significantly below our long-term target of 2.5 to 3x. Our consistent free cash flow generation and strong balance sheet position us well as we evaluate financing options for the previously announced Wtech and Onyx acquisitions, which we plan to fund with a combination of cash on hand, cash flow from operations and incremental debt.
As a reminder, our long-term capital deployment priorities remain unchanged, maintaining net leverage at stated long-term goals, strategic M&A at attractive multiples and opportunistic share repurchase. I will now discuss our guidance for the second quarter and full year 2026, which, as a reminder, is based on current foreign currency exchange rates and acquisitions closed to date. We expect increased full year net revenues of $8.475 billion to $8.675 billion, up from $8.4 billion to $8.6 billion, representing organic growth in net revenues of 5% to 7% for the year. Moving down to the P&L. We expect increased full year adjusted EBITDA of $1.15 billion to $1.21 billion, up from $1.14 billion to $1.2 billion, representing an adjusted EBITDA margin of 13.8% at the midpoint and adjusted EBITDA growth of 11% to 16% for the year. As a reminder, the impact of the CertaSite acquisition, which closed on February 2, was fully reflected in our prior guidance and we will update our guidance for the Wtech and Onyx acquisitions after those transactions have closed.
Our increased full year revenue and EBITDA guidance is due to the strong business performance to start the year offset by the headwind of the strengthening U.S. dollar since our February guidance. More information on our revised guide can be found on our earnings presentation that is posted on our Investor Relations website. In terms of the second quarter, we expect reported net revenues of $2.175 billion to $2.225 billion, representing organic net revenue growth of approximately 7% to 9%. We expect adjusted EBITDA of $300 million to $310 million, representing an adjusted EBITDA margin of 13.9% at the midpoint and adjusted EBITDA growth of 10% to 14%. For 2026, we continue to anticipate interest expense to be $130 million, depreciation to be $90 million, capital expenditures to be $105 million, and our adjusted effective tax rate to be 23%. We expect corporate expenses to be approximately $35 million per quarter with some timing variability throughout the year, and our adjusted diluted weighted average share count to be 441 million for the year. With that, I will now turn the call back over to Russ.
Thanks, David. We began the second quarter with positive momentum and strong demand for our services. We continue to deliver robust organic growth, expand adjusted EBITDA margins and build on the strength of our backlog. That and the continued strength of our M&A execution and pipeline position us well for the remainder of the year. We remain focused on creating sustainable shareholder value by delivering on our 10/16/60+ targets. With that, I'd like to turn the call over to the operator and open the call for Q&A.
分析師問答
Your first question comes from the line of Andrew Kaplowitz with Citi.
Russ, could you give us a little more color on what you're seeing in Specialty Services? Obviously, it continues to be very strong, a different level of strength over the last few quarters. I know you've got tougher comps moving forward, but do you see the momentum continuing as the majority of the uptick coming from data centers? Or is it more broad-based, would you say? Very helpful. And then it seems like you've accelerated acquisitions quite a bit this year with the $1 billion you mentioned and continued optimism to get to the $250 million per year bolt-on M&A activity. Is there any reason for the uptick — maybe valuation is better, just more companies willing to sell, just more color on what you're seeing, do you expect this uptick of modestly bigger deals to continue?
Thanks, Andy, and I hope you're well. I would say that their backlog is super strong. They are seeing some benefits from data centers, but I would classify the work in their portfolio to be more broad-based than just data centers. As a reminder, we're doing industrial maintenance and service work in our Specialty Services segment. We're doing infrastructure work. We do potable water replacement work, and telecom work. They're definitely benefiting from data center opportunities presented with data center expansions in North America. But I would also classify their backlog as being really diverse with their service offerings as well as from a geographic standpoint. On the M&A acceleration, to be honest, Andy, the opportunities presented themselves at the right time. I don't know that it was anything that was necessarily purposeful. Sometimes things present themselves at the right time. For example, Onyx presented itself 18 months to two years ago; we've known the business for a long time.
I've known their CEO for probably 10-plus years. When it presented itself the first time, we were in the middle of an integration and didn't feel like we had the bandwidth to do it. We remained disciplined and stayed on the sideline, and this opportunity presented itself again, so we were able to capture it. Wtech is another example. I first met Ted Wright, their CEO, a couple of years ago, and we've stayed in touch and got to know his business. I think our culture and everything we invest in people lined up with what he was looking for. The opportunity presented itself and we took advantage of it. CertaSite was more of a process-driven transaction. I think it's more that the opportunities came at the right time and were a great fit for us. We have a great team here that was able to jump in and execute. I'm excited about these businesses. They are central to the services we want to offer our customers, very strategic for us, and have great leadership and people.
I actually was in Portugal last week with the Wtech team during their annual planning process and came away even more excited about the fit. So right opportunities and right time, probably the best way to put it.
Your next question comes from the line of Jon Tanwanteng with CJS Securities.
I was wondering if you could talk a little bit about input cost inflation, what you're seeing there, number one. And if you're seeing any pushback from customers or any sensitivity to pricing as you put those price increases through to them?
Yes. Good question, John. On the pricing side, we continue to be able to get pricing on the inspection, service and monitoring streams in our business. That hasn't changed over the last couple of quarters. In terms of input costs, we've seen the impact of rising fuel costs and some material inflation in our business as a result of tariffs and the conflict in Iran. Our teammates and our leaders have done a great job of protecting themselves at the time of proposal, which means that we're able to capture the dollar impact of rising fuel costs and material costs as they come through. As a reminder, about 53% of our revenue comes from inspection, service and monitoring and we're able to price that revenue nearly in real time. If material costs increase, we're able to price for that almost in real time. We've done a great job of protecting ourselves and capturing the dollar value. It may have had a slight nick on margin, but we've been able to protect ourselves on a dollar basis. No, we've been able to continue to capture price.
Your next question comes from the line of Tim Mulrooney with William Blair.
Back to the acquisitions. Curious how far along are your recent acquisitions of Wtech and Onyx down this inspection-first journey. We think of APi as being very forward leaning on focusing on inspections and service versus installed jobs, but I'm unclear how many other companies out there have a similar go-to-market strategy or at least how well developed their systems and protocols are, as it relates to being aligned with your strategy? And, if I just stick along those lines, if I'm looking at Wtech in particular, just curious how you think about the margin potential of that European business in totality. You take Chubb, adding Wtech, I think what you had originally SK Fire, you put all this together, you streamline the operations. But obviously, the mix is a little bit different. The markets are a little bit different than the U.S., but you take all of this into account, what does that look like three to five years down the line relative to your U.S. Fire and Life Safety business?
Tim, thank you. I'll include CertaSite in this discussion as well. CertaSite was way down the line; about 95% of their revenue came from inspection and service work. I would put them even ahead of APi in that respect, and that goes back to when Jeff Wyatt founded the business with an inspection-first mindset. I would say Onyx is in a similar spot to where APi is today. They are very focused on building a robust inspection, service and monitoring business, and I put them in a similar spot to us. Wtech is probably more traditional and heavier on the project side today, and there's opportunity for us to build a robust inspection and service business inside that current business. So all three are in different phases of evolution but in a good spot and will be accretive to what we're trying to accomplish. Regarding margin potential in Europe, the expectation is that it will be in line with our North American Safety business. There's no reason from a margin perspective that they won't be. A big part is setting expectations and creating the right belief that it's achievable. We believe every one of our branches has the opportunity to be a 20% EBITDA branch. That's the goal and target. We feel the same way about Wtech and about Chubb integrated with SK as we do about our business in Paducah, Kentucky.
Your next question comes from the line of Kathryn Thompson with TRG.
Good to see that guidance was raised, seeing good underlying business performance. But if you could just give a little bit more color on that in terms of what you're seeing? Is it increased demand or pricing or just timing? And has there been any change in the variety of work? You noted earlier in your Q&A that it's not just data centers, but it's other projects, too. So just maybe sussing out a little bit more the color on that improved performance.
I would say it's a combination of everything. There's increased demand, and data centers are a primary pusher of demand. But other end markets continue to create robust opportunities as well, like advanced manufacturing. We're seeing good opportunities in the health care space, and higher education presents opportunities too. Critical infrastructure continues to create opportunities for us. So demand, playing in the right end markets, and price all contribute. We've been consistent in our messaging that we are not over-indexing on the data center space. We want to take advantage of the opportunities presented, but we're not pushing all the chips onto data centers. We'll take advantage of it, but we need to continue to serve our customers in health care and advanced manufacturing. So it's a combination of everything you mentioned.
Great. And the follow-up question relates to the inspection-first businesses that you acquired. Does the integration timeline differ between your inspection-first and inspection-and-servicing businesses? Is it easier to ramp? Any other color on the ramp-up of this type of business?
Yes. All three of the recent acquisitions are slightly different. CertaSite will operate as an independent business inside our North American Safety business; their service offerings are a little different and they do a lot of extinguisher work, so the integration will look different for that business than for a more traditional bolt-on. Our Canadian Onyx acquisition will operate as an independent portfolio business for the time being until we assess strengths and weaknesses and how it complements our existing footprint in Canada. We'll address that market by market as we complete regulatory filings and other steps to close the acquisition. Wtech will be a stand-alone business inside our international business. Wtech brings strong capability in the suppression side of the Fire and Life Safety space, which hasn't been a significant strength for us. We plan to operate that as an independent business inside our international operations. So integration will vary by business and each will have its own level of integration and timeline.
Your next question comes from the line of Julian Mitchell with Barclays.
I understand that growth is quite broad-based across your markets, but specifically on data centers, could you provide a bit more color on the funnel and pipeline over the next few quarters? And are you still on track to reach around 10% of sales from data centers this year?
You're a little choppy, but I think I heard your question about data centers, the funnel and whether approximately 10% of our revenue will come from the data center space by the end of the year. Yes — the funnel of opportunities continues to be robust, and we're being selective about which opportunities we pursue and where we deploy our teammates. I tell our business leaders that the men and women who do the work in the field are precious resources and we should put them on the right opportunities. There's a lot of partnering opportunities because of demand in the data center space, so we're selective with whom we work and the clients we choose to align with. We also want to be focused on project work that gives us opportunity to do inspection, service and monitoring afterward. We do believe that approximately 10% to 11% of our revenue will come from data centers by the end of the year. I think that's fair, isn't it, David?
Absolutely. And that was the result in the first quarter and the evolution of the backlog as we went through the quarter as well.
Perfect. And a quick one on Safety Services. Is the 5.4% organic sales growth rate a relatively good run rate for the year?
Yes. The mid-single-digit organic revenue growth is a good run rate for the Safety segment for the year. We expect our service revenue to grow mid- to upper-single digits and project work to grow low to mid-single digits, which gets to mid-single-digit organic revenue growth overall. That was the playbook we saw in the first quarter.
Your next question comes from the line of Ashish Sabadra with RBC.
Following up on the last question, Specialty Services seems to be tracking above your midterm organic growth target. How should we think about that in the back half of the year given demand and project strength — does that organic growth target need to be revisited? And within Specialty, some of the subsegments like infrastructure, fab and specialty contracting, can you just give some color on how those performed in the quarter?
Really strong first quarter for Specialty. I expect that business to perform at a strong level throughout the year. As we get deeper into the year, we'll be coming up against more difficult comps, so the growth rate will slow in the back half, but I expect continued strength. Regarding fab and infrastructure, I'm very pleased with the performance of all three subsegments. Growth in Specialty was diverse and well spread across reportable segments with strength in a variety of end markets, including data centers and critical national infrastructure. The backlog across those segments is strong and robust as well.
Your next question comes from the line of Tomo Sano with JPMorgan.
Regarding your international business, backlog remains strong overall. But in today's volatile market, competitive dynamics can present both risks and opportunities. Given ongoing geopolitical and supply chain challenges, how have you adapted your international operations over the past couple of months? And do you see any new opportunities emerging globally?
Our international backlog is basically on par with where it was the previous year, so we feel good about opportunities. Our presence in the Middle East is small and that region feels more impact from the conflict in the Middle East given proximity, but overall we feel good about international leadership and opportunities. From an M&A perspective, we've opened the aperture and see opportunities to expand internationally. We are seeing opportunities come forward. The international team does feel impacts of the conflict more than our North American business, but we're in a good place overall.
Your next question comes from the line of Andrew Wittmann with Baird.
With these larger acquisitions still yet to close, could you give us a view of where net leverage stands pro forma for those after they close, so we can gauge where the balance sheet is and how much dry powder you have? And Russ, on safety, inspection, service and monitoring: given more focus across the industry on inspection and service, is the competitive environment for customers and acquisitions noticeably different than two or three years ago? Or is it unchanged?
I'll start on the competitive environment. It's largely unchanged. The highly fragmented markets we serve continue to create opportunities to take share in inspection and service. If you analyze major metropolitan markets in the U.S., there isn't a single firm with 10% market share in those markets. Even the largest players typically don't have more than 5% market share. That fragmentation creates opportunities for us. From an M&A perspective, our funnel and pipeline are robust, especially for bolt-on opportunities. We're looking for sellers who want a forever home for their people; if they're focused only on highest price, private equity buyers may be better fits for them. We offer a forever home and respect for legacy businesses, many of which are family-owned. That is a differentiator for us and creates unique opportunities. As we gain momentum, that creates more opportunity for us. We'll have more to share as we work through the year.
We ended the first quarter with a net leverage ratio of about 1.8x. By the time we finance and close on the two announced acquisitions, we will be at or below the low end of our target net leverage ratio, and I expect we'll work that down to the ballpark of where we are today by the end of the year. We have a lot of flexibility.
Your next question comes from the line of Jasper Bibb with Truist Securities.
Really nice organic growth this quarter. Obviously, you mentioned a mix impact on gross margins for both segments. Could you provide a bit more detail on the mix factor this quarter and clarify if there was any material purchase pull forward due to uncertainty from the war or to support upcoming projects in the next three quarters that could have boosted revenue and diluted margins?
Think of mix as two math-driven factors. First is the growth in project revenue in the quarter, which on average comes at about 10 percentage points lower gross margin than our inspection, service and monitoring work. Second is the growth in the Specialty Services segment relative to the Safety segment and the impact that had on margin in the quarter. So those are the two primary mix factors: the ratio of service and project work in the quarter and the segment mix. To answer your other question, no, there was no material pull-forward impact in the quarter.
Your next question comes from the line of Curtis Nagle with Bank of America.
Just wanted to go back to that point you made on the 5.4% run rate for that being a good run rate for the year. Given the second half compares are higher, I wanted to confirm that that's what you meant.
Yes. This is around the anticipated growth rates in the Safety segment for the full year and the back half. We continue to refer back to our long-term organic revenue growth algorithm in that segment. We expect our service revenue to grow mid- to upper-single digits, each and every quarter, and we expect our project work to grow low to mid-single digits, which gets to mid-single-digit organic revenue growth. That was the playbook that we saw in the first quarter, a little heavier on project revenue, but we expect that to play out through the course of the year.
Okay. And then just one quick one on gross margins, should mix continue to be a headwind? How should we think about gross margins for the back half of the year?
I continue to expect our gross margins and our adjusted EBITDA margins to expand year-over-year. We are targeting 60 to 70 basis points of margin improvement for the year.
Your next question comes from the line of Josh Chan with UBS.
Russ and David, on that Safety Services growth point, you grew 5.4% in Q1 and it was a little heavier on project. Could you talk about the trajectory on the inspection, service and monitoring and whether there's any change there or more of a timing in the quarter?
There hasn't been any change in the trajectory of our inspection, service and monitoring revenue growth. That business consistently grows mid- to upper-single digits across the business. There might be quarters where it ends up closer to mid and others closer to upper, but it has been a consistent mid- to upper-single-digit revenue growth stream for the Safety segment. It was in the first quarter and we expect it will continue in the back half of the year.
There are no further questions at this time. I would now like to turn the call back to Russ Becker, President and CEO, for closing remarks.
Thank you. In closing, I'd like to thank all our teammates for their continued support and dedication to our business. We believe our people are the foundation on which everything else is built. Without them, we do not exist. I would also like to thank our long-term shareholders as well as those that have recently joined us for their support. We appreciate your ownership of APi and look forward to updating you on our progress throughout the remainder of the year. Thank you again, everybody, for joining the call.
This concludes today's call. Thank you for attending. You may now disconnect.