APi Group Corporation

Ladies and gentlemen, and welcome to API Group's second quarter 2025 Financial Results Conference call. All participants are now in a 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 second quarter 2025 earnings conference call. Joining me on the call today are Russ Becker, our President and CEO, David Jacola, our Executive Vice President and Chief Financial Officer, and Sir Martin Franklin and Jim Lilley, 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 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, July 31st, 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 second quarter of financial performance on the Investor Relations page on our website. Our comments today will 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 get into our record second quarter results, I wanted to thank our 29,000 leaders for their hard work and dedication to API. The safety, health, and well-being of each of our leaders remains our number one value. When I say safety, I don't just mean job site safety. We owe it to every one of our teammates to create an environment that's safe for them to do their job, not just physically, but also mentally and emotionally. At API, we believe that culture drives results. We include a slide in our earnings presentation that highlights our culture and our investment in people as human beings, a key ingredient in our progress to becoming a 7 billion, 13% adjusted EBITDA margin company in 2025. It also includes two opportunities to learn more about our culture, which is centered on our purpose of building great leaders. I encourage you to take advantage of these if you haven't done so already. I also wanted to spend a minute on one of our foundational beliefs, the care factor. To win and achieve our new long-term financial targets, we need to care about and invest in our API teammates as human beings. A couple of months ago, at our Investor Day, we announced the start of the Care Factor Fund, an initiative designed to support API team members and their children in offsetting the expense of unexpected mental health treatment. This is something that is important to both me and our board of directors. And I'd like to thank our team members for their generosity in contributing to the fund. I'm happy to share that we have approved the first grant from the fund to one of our teammates. This is just one small way we show our teammates that the API family cares during an important time of need. Over the last several years, our team has remained relentlessly focused on our long-term 1360-80 value creation targets we created in 2022. With our 13% or more adjusted EBITDA margin target in our sights for 2025, we are shifting our focus to the new 10, 16, 60-plus shareholder value creation framework we introduced in 2020. This is the target we are aiming to achieve at our Investor Day. As a reminder, these targets are the following. $10 billion plus in net revenues by 2028 supported by consistent -single-digit organic growth. 16% plus adjusted EBITDA margin by 2028. 60% plus of our revenues from inspection, service, and monitoring over the long term. And $3 billion plus of cumulative adjusted pre-cash flow through 2028. Our leaders rallied behind our 1360-80 targets to deliver on our commitments. And they have done the same with respect to these new targets. We have clear plans for how we intend to deliver on our 10, 16, 60-plus targets. Fortunately, we don't need to reinvent the wheel. The main initiatives that enabled us to achieve our 1360-80 targets will also enable us to hit our new 10, 16, 60-plus targets. These initiatives are pricing, improved inspection, service, and monitoring revenue mix, disciplined customer and project selection, procurement, systems, and scale, our creative M&A, and selective business pruning. And as I like to say, we can always just be better. We will augment these initiatives with our continued focus on building great leaders and the technology necessary to support our growth. Now turning to our record second quarter results. The business continued to accelerate its momentum, delivering strong top-line growth while expanding margins. Some highlights include the following. Consistent margin expansion and safety services. A growing inspection, service, and monitoring business. A return to organic growth in specialty services. Record backlog in both segments. And finally, an acceleration of our creative bolt-on M&A activity, all of which I will detail shortly. For the quarter, net revenues increased by 15%, up over 8% organically, with strong growth across both segments. In our safety services segment, revenues grew organically in line with expectations by approximately 6%, while delivering 80 basis points of segment earnings margin expansion. Within safety services, we delivered strong organic growth across the North American safety business. Importantly, and in line with our strategic initiatives, the North American safety business achieved double-digit inspection growth for the 20th straight quarter. The international business delivered another solid quarter of organic growth, along with high single-digit order growth, as that business continues to build momentum under API's ownership. As expected, specialty services returned to growth in the second quarter, delivering .3% organic growth, as steady increases in backlog, dating back to 2024, converted to revenue growth. The momentum across the business is significant, with our record backlog eclipsing $4 billion for the first time in API history. Importantly, the double-digit organic growth and backlog includes contributions from our cross-sell efforts, focuses on our target end markets, and is healthy from a disciplined customer and project selection perspective. Our continued focus on our margin improvement initiatives allowed API to deliver -over-year improvements in adjusted EBITDA margin in the second quarter, with a 30 basis point increase versus last year. Our continued strong free cash flow generation and balance sheet provide us with flexibility to pursue value-enhancing capital deployment alternatives. In the second quarter, we accelerated our M&A activity, completing six acquisitions, including our second elevator business. We have now closed seven acquisitions -to-date, and we have several more opportunities under letter of intent. We remain on track to deploy approximately $250 million in a creative, bolt-on M&A at attractive multiples this year. We also undertook some selective pruning of a small business in our specialty segment that was not accretive to our new 10, 16, 60-plus financial targets, which is the lens we'll use to continue to evaluate businesses in both segments going forward. In summary, we moved to the second half of 2025 with great momentum. Our inspection, service, and monitoring business continues to expand. Our backlog is at a record high. Our balance sheet remains strong, and we are confident in our leaders' ability to execute our strategy and deliver against our 2025 plan. I would now like to hand the call over to David to discuss our financial results and guidance in more