APi Group Corporation

Good morning, ladies and gentlemen, and welcome to API Group's first quarter 2024 financial results conference call. All participants are now in the listen-only mode until the question and answer session. Please note, this call is being recorded. I will be standing by should you need any assistance. I will now turn the call over to Adam Fee, Vice President of Investor Relations at API Group. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining our first quarter 2024 earnings conference call. Joining me on the call today are Russ Becker, our president and CEO, Kevin Crum, our executive vice president and chief financial officer, and Sir Martin Franklin and Jim Lilly, our board co-chairs. Before we begin, I would like to remind you that certain statements in the company's earnings press release announcement and on this call are forward-looking statements which are based on expectations, intentions, and projections regarding the company's future performance, anticipated events or trends, 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, May 2nd, and we undertake no obligation to update any forward-looking statements we may make, except as required by law. As a reminder, we have posted a presentation detailing our first quarter financial performance and guidance for our second quarter and full year 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's 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. Before we provide you with a summary of our first quarter results, I would like to thank our approximately 29,000 leaders for their unwavering commitment to API. We remain grateful for their hard work and effort. We believe that taking care of our leaders results in our leaders taking care of our customers. This is one of the foundational principles by which we will continue to enhance shareholder value. Next week marks API's ninth straight year of celebrating Safety Week. As I've said before, the safety, health, and well-being of each of our team members remains our number one value. Our commitment to safety drives industry-leading safety outcomes across the organization. At the end of 2023, our total recordable incident rate, or TRIR, was below 1.0, which is significantly better than the industry average. We continue to strive for zero incidents. We believe our leadership making API a safer place to work, along with the investment we make in each of our leaders' development, contributes to our low turnover relative to industry benchmarks. As we've said before, we remain relentlessly focused on our long-term 1360-80 value creation targets, which include the following. Adjusted EBITDA margin of 13% or more in 2025. Long-term organic revenue growth above the industry average. Long-term revenues of 60% from inspection, service, and monitoring. And finally, long-term adjusted free cash flow conversion of 80%. I routinely speak to our field leaders about how they can help us deliver on this strategy when I'm visiting our locations around the world. Our leaders are aligned with what we want to achieve and how we intend to achieve it. Turning to the first quarter, in line with our 2024 plan, net revenues were essentially flat. driven by approximately 3% organic growth in service revenues, offset by divestitures, lower revenues from declining material cost pass-through, and intentionally limiting organic growth in certain project-related revenues. Beginning last year and continuing into this year, we continued our planned, disciplined customer and project selection in our international HVAC and specialty businesses. Importantly, we achieved our goal of double-digit growth in core inspection revenues in our US life safety business. This growth is key as we progress towards our long-term goal of 60% of our total net revenues coming from inspection, service, and monitoring. In line with our strategic initiatives, we continue to see strong improvements in adjusted gross margin for the quarter, up 390 basis points. The strong performance in gross margin led to record first quarter adjusted EBITDA margin of 10.9%, representing margin expansion of 180 basis points. The team continues to make meaningful progress executing our margin expansion initiatives and remains committed to building on that execution as we push towards our 13% or more adjusted EBITDA margin target in 2025. As a reminder, These initiatives include the following pricing, improved inspection service and monitoring revenue mix, disciplined customer and project selection, Chubb value capture, procurement systems and scale, accretive M&A and selective business pruning. And as I like to say, we can always just be better. On April 15th, We entered the complementary and adjacent elevator and escalator services market with the announced acquisition of Elevated Facilities Services Group for $570 million. We have long viewed the elevator and escalator service market as an attractive adjacency due to the highly recurring nature of the business driven by non-discretionary, statutorily driven demand. Elevated is expected to contribute approximately $220 million in annualized revenues and approximately 20% adjusted EBITDA margins. We believe elevated is an excellent platform opportunity for us to enter the $10 billion-plus U.S. elevator and escalator services market and execute our bolt-on M&A strategy at attractive multiples. We expect to build a billion-dollar-plus elevator and escalator services platform over the long term through a combination of strong organic growth, a long-term cross-sell opportunity with our existing life safety businesses, and a robust M&A pipeline. Elevated's target market, elevator and escalator services, benefits from continuous safety and regulatory requirements. It services an aging installed base with 55% of U.S. vertical transportation units being over 20 years old. Elevated also benefits from increased demand due to the growth of urbanization, declining durability and quality of elevators, and modernization projects being driven by bringing aged elevators to code and compliance with safety requirements. The acquisition is expected to be immediately creative to our 136080 shareholder value creation framework. Elevated's strong organic growth adjusted EBITDA margin profile of approximately 20%, 70% plus of revenue from inspections, service, and repair, and an asset-light business model driving strong adjusted free cash flow conversion is a great addition to API. In summary, I'm sure you can tell we are excited about Elevated. It has many of the same attractive characteristics as API, and represents a continuation of our focus on building a robust line of businesses that provide mandatory required life safety service. It benefits from its scale in a highly fragmented market. Its business is driven by regulatory demand and a loyal customer base. It is led by an experienced leadership team and a highly skilled workforce. I intentionally used the word leadership team instead of management team because at API, we believe that leading and managing are fundamentally different, and we aim to build great leaders throughout the organization. Along those lines, Elevated, like API, also maintains an unwavering focus on culture and developing its teammates throughout the organization. We will update full-year 2024 guidance to include expected results of Elevated following the close. which we expect to occur late this quarter. During the first quarter, we also closed on a small divestiture in our specialty services segment, which was expected to contribute approximately $20 million in annual revenue. Similar to the divestiture completed in the fourth quarter, this business was highly cyclical and largely focused on lower margin project work in the energy sector. As we move forward, We remain focused on delivering both the 2024 plan and our long-term 30, 60, 80 financial targets. We are excited about our robust pipeline of opportunities for life safety, security, and elevator escalator services businesses, and will continue to be thoughtful as we look for high quality, margin and creative businesses and leaders to join the API family. I would now like to hand the call over to Kevin to discuss our first quarter financial results and guidance in more detail. Kevin?