APi Group Corporation (APG) Earnings Call Transcript & Summary

All right. I think we're live. Good morning, everybody. I'm Josh Chan, business services analyst here at UBS. We're pleased today to have APi Group join us. They inspect, service and install billing systems such as fire, security, elevators and HVAC. They also provide infrastructure services to utility and telecom markets. With us from the company today are David Jackola, CFO; and Adam Fee, IR. So we're going to do a fireside chat. So feel free to raise your hand, or you can find a way to enter your questions, and I'll get it in the iPad here as well. So feel free to let us know if there are any questions. But with that, David, Adam, great to have both of you here.

Great. Thanks for having us, Josh. Thank you, everybody, for coming.

Yes. Thanks for being here. So I guess, overall, maybe to level set the audience here, could you start by giving a brief overview about APi Group and some recent developments and then we can get into some of the other topics?

Yes, of course. And thanks again for spending some time with us today in person or virtually, learn more about APi and our company. So APi went public back in 2019. At that time, we had about $4 billion in sales, or in revenue. And today, we are about $8 billion in revenue, and we're a global market-leading business services provider of fire and life safety systems, electronic security and elevator and escalator systems predominantly. And we're focused on statutorily mandated recurring revenue opportunities with our inspection-first strategy. We operate in highly fragmented markets, both the fire protection, the electronic security and the elevator escalator market, and we have a track record of growing our business organically and through a bolt-on M&A strategy. We've done about 200 acquisitions since Russ Becker's been our CEO since 2002. So that's the muscle that we've built and the capability that we've built and it's helped grow our business. Sitting here today, two of our big kind of advantages are our inspection-first strategy, which we'll talk more about later and our core purpose of building great leaders, and are investing in people and particularly our field leaders as human beings. And we feel like that differentiates us in a people-first industry like we're in. So again, a lot of momentum in the business. Thanks for having us today and looking forward to kind of chatting more.

Yes. Thanks for that overview. So maybe I'll turn it to David here. So it's been about a year since you've become CFO, but you've been obviously with the company for longer than that. So any observations from the CCFO seat? And then how is your philosophy as a CFO kind of developed over the past year?

Yes, absolutely. Thank you for that question, by the way, Josh. First and foremost, it's just an incredible privilege to be a leader at APi Group and to work with such a talented team and 29,000 phenomenal leaders all around the world. And so more than anything, it's something that I'm incredibly grateful to be a part of. Second is the opportunity in this business is just extraordinary, and we were all privileged to be in New York in May for our Investor Day where we laid out our 10/16/60 2028 financial goals, 10/16/60+. And the most -- I think the most powerful thing about our 13% goal at the end of 2025 was how firmly the organization was lined up in delivering that goal. And so over the last year, Russ and I and all of the leaders at APi have been really purposeful in aligning the organization around our 10/16/60 objectives to make that be our true North Star, and investing time to make sure that we've got alignment up and down the organization so that each and every one of our 29,000 people knows the role that they're going to play in making 10/16/60+ a reality. I think that's really important. The third observation, and part of this comes from my time spent in our international business is how powerful and how important culture is. Culture is truly what differentiates APi from our competitors in our marketplace and what makes us a special organization, the way that we invest in our leaders is human beings as well as professionals, and the way that we truly and fundamentally care about our people, our teammates, our customers and our community. That's just something that we will continue to invest in and be a part. And I view my role as a senior leader at APi. The most important role I play is making sure that, that culture is strengthened and perpetuated every quarter and every single year.

Yes. Great. Thank you. So the inspection-led model is obviously really important to you guys. So could you talk about what benefit that brings you? And where do you see the inspection service monitoring business trending over time?

Yes. So we're really intentional in focusing on leading with inspections, and that's part of our go-to-market strategy that differentiates us in the marketplace. Generally, the companies that we compete against lead with a project. So they'll bid on a project, secure a project and hope that, that project will lead to follow-on service work. And we really flip the model on the head. So we've invested in an inspection sales organization that's going out and knocking on the door of the already built environment, and selling inspections each and every day. And so you go in and you do a great job on that inspection. That inspection is going to generate a deficiency report that's shared with the authority and shared with the customer, and which generally leads to follow-on service work. And we believe that for every dollar of inspection revenue that, that deficiency report is going to generate $3 to $4 of follow-on service work during the course of the year. So in terms of like where we see this going, approximately 54%, 55% of our revenue today comes from inspection service and monitoring work. We're going to make progress each and every year towards our long-term goal of 60% or more of our revenue coming from inspection service and monitoring. And that's going to have a powerful impact on our margins. Generally, our inspection service and monitoring work comes in at 10 basis points -- 10 percentage points higher of gross margin than our contract work. It tends to be incredibly sticky. It generates that follow-on service work. And most importantly, it leads to great relationship-based follow-on contract opportunities.

Okay. And how competitive is the inspection business, I guess, in a given geography, are there lots of other providers that can provide inspection capabilities to the market?

Yes. So it's a really fragmented industry, Josh. And any of our markets, we'll have multiple companies that are playing. But generally, these competitors are smaller family-owned businesses. And if you think about the economics of an inspection versus a project, an inspection is generally a small ticket value, small invoice piece of work, maybe $1,000, $1,500 for an inspection, whereas project could be $0.5 million to $1 million or even more. And so if you're a small family-owned business who's going out and figuring out how they're going to plan their year, they're going to find the 6 or 7 project-based opportunities that they can have to generate their revenue and go forward if they capture some service work on the backside of that project work, that's great. And if they do some inspections, that's great, too. And so they'll make an attempt to move into the service and the inspection space. But then when a project opportunity comes along, they'll divert their team and their resources over the inspection. And we've built the discipline as well as the back-office structure to be able to focus on this each and every day, and that's really created a protective moat around the inspection part of our business. It's made it incredibly sticky, has led to that consistent and reliable follow-on service work, and allows us to propose on project work based on the strength of our relationship rather than bidding down to the lowest possible margin dollars. So it's a really powerful strategy and one that our focus and commitment and dedication to executing it day in and day out gives a pretty strong and powerful protective moat around that chunk of the business.

Sure. So clearly, the focus kind of makes the business more sticky. Is there any structural benefits to scale in that inspection business where you can do just a better job than a small competitor?

Yes. So a number of different reasons. First, going in and knocking on the doors of the already built environment requires a dedicated sales organization. And over the past years, our North American sales leader has done an absolutely phenomenal job of building a world-class sales organization around North America that goes in and just crushes it year in and year out, delivering new work and inspections. We talked on our calls that for 20-plus quarters, we've achieved double-digit organic revenue growth on inspections in our North America sales business. And that's just a testament to the great work that, that team is doing. But then you've also got to be able to dispatch inspectors, so making sure that they're being productive in their time, and that they know where they're going, when they're going so that they can meet the customer there and provide a really high-quality inspection. And then you've got to bill, and you've got to collect, and you've got to follow up and follow up and follow up as well as get the deficiency reports out in the follow-on service proposal. So it does take an infrastructure that you've got to invest in and it takes time to build, that makes it really difficult for a competitor to come in and do what we do at the scale that we do.

The only thing I'd add to that is we're in the very early innings of it today. But if you think about 29,000 teammates, most of them are out in the field every day, layering technology over that group of people when those are investments that we can uniquely make with our scale is going to benefit them in the future. We've got some early things in pilot like APi chat that has the code book and some product manuals uploaded. So our field leaders can voice query if they see an air code on a fire alarm panel and get an answer right away, instead of having to call the branch and have someone look up what's going on and give them kind of feedback and delay their time and the job. And it's the technology side there, and it's also as simple as just the best mechanical tools out there from -- so there's something called the Hose Monster that allows the annual fire pump test to be done with 1 person instead of 2 people and be done more efficiently. And all of our branches have that type of technology where that's not a standard at every company to have like the latest and greatest technology for our field leaders.

Yes. No, thanks for the color that you can afford to give your branches more productivity tools to drive that. Okay. Could you talk about the presence of private equity in this space? Do the PE-owned entities behave, compete any differently than other private competitors?

Yes. So we have seen PE enter into our space. I'll answer this in a couple of different ways. One of the important parts of APi's growth and our strategy is our bolt-on M&A strategy. And we target each and every year to do around $250 million of bolt-on M&A at really attractive 5, 6, 7x multiples. And largely in that area, we bump into PE, but there's plenty of opportunities for us to go out and to acquire great businesses at 5x, 6x, bring them into the APi family. The value proposition that we offer to Target is different than what a PE company would offer. We offer a forever home in a place where we value people. We'll invest in the people on these teams. We'll allow them to keep their legacy in the business. And oftentimes, most of the time, they end up staying with APi after acquisition, which is very different than a PE multiple, or a PE acquisition. On the larger, more platform size, we do see them in the M&A space, and they're driving up multiples for larger fire safety type platforms. But generally, when we see them in the marketplace, like if you're paying 16, 17, 18x for a fire business, you're not going to be cutting price. And so in a lot of ways, they've kind of helped to drive price into the industry, which I think has helped everybody.

That's interesting. Okay. Okay. And then I guess when you talk about the growth profile of mid- to high single digits for inspection service and monitoring, I guess, what does it take to grow that business at that rate? And how much is pricing a part of that? And how much is sort of organizational build-out part of that?

Yes. So we laid out our organic revenue growth algorithm at our Investor Day in May. And so on the inspection service and monitoring revenue streams of our business, which is about 54%, 55% of our total revenue, we expect that part of our business to grow mid- to upper single digits year in and year out. And that's a part of our business that's statutorily or code-driven, highly recurring. You've got to have your fire suppression and detection system tested for operability 1, 2, 4 times a year depending on the code. So that part is highly repeatable, highly recurring. And that mid- to upper single digits is going to largely come half from price and half from share gain, as our inspection sales organization goes out and beats on the doors of the already built environment. And then you think about like we will need to then invest in inspection sales leaders in order to continue to improve that growth. And you think about when you get to an end state or mature state like one, IMA, which is an inspection sales leader, when they're ramped up and fully running, they're going to generate enough business to keep 4 inspectors occupied. And those inspectors are going to create enough follow-on business because $1 of inspection creates $3 to $4 of follow-on service work to keep 3 or 4 service technicians occupied. So if you think about growing this out, it's going to require consistent focus on price, investments in our inspection sales organization, bringing inspectors into the organization, and then service technicians to do the follow-on work, which takes the infrastructure that we talked about earlier around the protective moat to be able to do it.

Okay. So I guess given the regulatory support around the demand of the business, would you say that demand is pretty much a known entity going from year-to-year? Would that be a fair characterization?

So I think it'd be fair to say that the inspection service and monitoring revenue streams in our business are absolutely easier to forecast, are more predictable and repeatable in nature maybe than contract work. I wouldn't say that it's like easy to forecast. It's not. But we like those revenue streams because they're predictable and they're repeatable and they create the sticky customer relationship that allows us to go after the right type of contract work, with the right customers, in the right end markets, at the right gross margin for APi Group.

So if you wanted to, could you just rapidly scale up the organization, absorb some costs temporarily to grow that inspection business even faster than mid- to high single digits if you wanted to?

Well, it doesn't happen overnight. And this is the analogy that I was sharing just a few minutes ago about you could go out and you could hire 10 inspection sales leaders and have them go at it, and they could go out and generate work. And if they do, you're going to need to find 40 inspectors. And it's not the easiest thing to find 10 inspection sales leaders. They got to have the right DNA. They've got to be a great culture fit with our organization. They've got to blend well with the branch. There's a lot of criteria that come into making sure that you've got the right fit in this really important role. And once you found that, you've got to go through the same process to find the right inspector who's going to be a good fit with our culture, who's going to invest in themselves as a leader and try to make the teammates better. And so it's not something that you can just hit a switch and go from 10 to 20 overnight. It's a consistent process, and a consistent discipline, and a consistent build that allows us to grow that business at double digit year-over-year and quarter-over-quarter.

Sure. Any questions from the audience? Okay. Maybe switching over to the project side of the business. It's been a very strong year in 2025. So what's driven the growth this year in projects that wasn't there in the prior year?

Yes. So it's a strong and robust project environment right now. And we talk a lot in our business around how end markets matter. And our business leaders are really intentional about focusing our field leaders on project opportunities in end markets that have the margin profile that we look for, as well as some secular growth drivers behind it. And so the strength that we've seen really in the project environment in 2025 has been across a variety of end markets, including data centers, of course, advanced manufacturing, warehousing, semiconductors, critical national infrastructure, health care. So the growth is really across a robust set of end markets. And as we've been coming out of 2024 was a year in which we were intentionally very focused and disciplined on project and customer selection, partially in our specialty business. And so we were really careful about the type of work that we were doing and the margin that we were doing. And so we're coming off a year in which we contracted revenue in the contract side of that business, and now we're starting to grow off of that base. And we've got a really strong backlog against a diverse set of end markets, really healthy gross margins. So we feel good about that space.

You mentioned data center is clearly an area of strength. How big would you say your data center business is, how fast is it growing? And then maybe you can talk about sort of what capabilities you have to do work for the data centers just as a big picture?

Yes. So we go out and kind of measure the amount of work that we do in various end markets once a year. And we operate in a somewhat decentralized model with different systems. And so finding this data at the tip of the finger point isn't easy. But at the end of the year, we estimate between 5% and 6% of our revenue, give or take, came from the data center space. Data centers have absolutely been a part of our project revenue -- contract revenue growth in 2025. And I suspect that we'll end 2025 at -- if we were at 5%, 6% at the end of 2024, maybe 7% or 8% at the end of 2025. It's one of those things. It's an opportunity that's in the market and that we're absolutely taking advantage of. But we want to be very, very focused and disciplined about not overextending ourselves in the data center space, or in any end market for that matter. And so we're really intentional about the jobs that we do and the type of work that we do in the data center space. And most of the contract work that we're doing in data centers is really coming on the back of already in place inspection and service relationships. So it really is a terrific example of our inspection-first flywheel strategy in action.

Okay. How do your operating companies kind of prioritize data center versus other verticals? Is the margin profile of these projects better than the rest?

Yes. So these jobs are -- that data center projects are generally, what I'd say is, they've got a technical element to it that not every competitor in the marketplace can deliver against. They've got a size element that not every competitor in the market can deliver against, and they're in geographic locations like the Meta 10x project is in the middle of Louisiana and not a lot of competitors have a branch in the middle of Louisiana, but we do. So we're able to go out and deliver and execute against that work. So those 3 things put you in a position where we may be competing against 1 or 2 other competitors on a national scale who could do that work. And because of the technical nature of it and what it requires, we're able to do that, work at gross margins that are above our fleet average for project work.

Okay. Is it too early to think about the data centers that are newly built now being a source of inspection, service monitoring, your revenue stream?

No, I don't think it is. And a lot of the contract work that we're doing in the data center space today is, like I mentioned earlier, on the back of the already in place inspection and service relationships that we have. And so it really just is a great example of how that inspection and service work is tightening the customer relationship. And that tight customer relationship then opens the doors for high-quality, high-margin contract opportunity, which is then going to allow for follow-on inspection and service work.

Okay. So then I guess, stepping away from data centers, as you look into 2026, what kind of verticals do you see strength or weaknesses in terms of kind of end market demand from a project perspective?

Yes. Great question. I commented a few minutes ago on our backlog, and our backlog has been growing each and every quarter this year. We entered the third quarter with backlog at record level at really great margins. And as important as the size of the backlog is the quality of the backlog. And the quality of the backlog is the type of projects, the customers that you're doing work with in the end markets in which you're doing work in. And our backlog as we exit 2025 is a good margin. It's at a high level. But most importantly, it is across a diverse set of end markets. So one of the things that we talk about with our business leaders month after month, quarter after quarter is not overinvesting, or over-indexing on any one given end market. Because at some point, like there may be a slowdown in data centers, and we don't want to be left holding the bag with the revenue hole to fill. So we're really careful and selective in making sure that we've got a robust backlog against critical national infrastructure, health care, semiconductors, advanced manufacturing, warehousing and distribution as well as data centers.

You're not seeing any slowing in data centers at this moment, though?

Not at this moment. Not at this moment.

That's good. I guess the project strength has obviously been very positive for the top line, but there's been some margin impact in the recent quarters. And so could you talk about kind of the drivers of that margin effect and then how that's expected to kind of flow through as these projects progress?

Yes. So as we exited the second quarter, and I guess, a little bit in the third quarter is what we -- our Specialty Contracting segment kind of had a point of inflection where they went from a decline year-over-year into some pretty significant organic revenue growth in the second and third quarter, largely on the back of a robust project environment. And just kind of the nature of projects is at the early stage of a project, you generally are conservative in where you mark a project in percent of completion accounting. And as you go through a project and you become more comfortable with your estimates, the work that you have in front of you and things like that, you're able to release some of that cautiousness and you kind of move your margin up through the course of a project. And we just ended up in a position in Q2 where we had a lot of new projects that were coming on board. We are annualizing against a time in 2024 where we are being really disciplined about project and customer selection, and we were actually closing out projects at higher margin. And so it just created a year-over-year drag on gross margin on the project side of the business. So now as you get into Q4, our margins on contract work improved Q2 to Q3. They'll improve again Q3 and Q4 because you got more and more of these projects going from early to middle and middle to end stage, and you're in more of a natural project cycle rather than at a point of inflection. So it's something that we'll see margin expansion in our projects as we end 2025 and move into 2026.

Okay. It sounds like Q3 was just kind of like a timing pinch point.

More of a timing compare year-over-year point than anything else.

Okay. Okay. And then in terms of the total company organic growth, so we talked about both services projects. I guess on a blended basis, what's the right total company growth going forward?

Yes. I'll keep going back to our organic revenue growth algorithm that we shared at our Investor Day in May, and we're going to consistently drive mid- to upper single-digit revenue growth in the inspection service and monitoring part of our business. That's what we do day in and day out, and half of that growth is going to come from price. Half of it is going to come from our inspection sales leaders knocking on the door in the already built environment, we'll be able to continue to move that. We targeted our businesses to go after low to mid-single-digit growth in the contract part of the business. Now that's a little less predictable and, I guess, forecastable as we talked about earlier than maybe the ISM stream. So there'll be some variation around that, and we're at a point in the cycle where you target 2% to 5% and you end up getting upper single digits. and there may be a point where it's a little bit low. But over time, you'd expect to see low to mid-single digit on the contract, mid- to upper on the service. That's going to continue to push our service mix to 60% or higher, and it's going to continue to be margin accretive in our goals and our path to our 16% goal in 2028.

Okay. So I guess projects growth are clearly running ahead of that long-term algorithm. So how important is it for you to manage the rate of project growth now in a strong environment so that there won't be like a tough comp, or some disruption in that line kind of in future years?

Yes. I mean it's -- there is such a thing as too much project work. And we talked a little bit -- the only thing worse than being not busy is being too busy. And to deliver a great project means you've got to have a great piece of work in front of you in a great end market, with a great customer, and that customer has got to have a great project manager on the job, and we've got to have a great project on the job. And then you got to have a great team around. And there's finite level of resources. And if you get to a point where you don't have a great project manager on the job, that's probably where you got to put the brakes on contract work and focus on the stuff that you know you can deliver with a high amount of quality, at a high margin, for customers that you have relationships with through inspection and service work and is going to lead to more follow-on inspection and service work.

Okay. Okay. Cool. Any questions from the audience? All right. Maybe just talking about margins here. I guess you talked about the phasing of the projects impacting kind of the incrementals this year. I guess looking past this year, what's the right range on incrementals going forward? And then how does mix factor into that?

Yes. That's a great question. And if you look forward to our 2028 goals, we'll grow revenue organically at the mid-single-digit rate. We're going to have to capture 300 basis points, give or take, of margin expansion over a 3-year period. And just the math of that suggests that you're in the 25% to 30% incremental margins as you go forward into '26, '27 and 2028. And so I would expect that 2026 is going to be a more traditional in-line algorithm incremental margin year than 2025 was.

Okay. I guess outside of organic growth and leverage from that, what levers do you have to drive that 300 basis points of improvement over 3 years?

Yes. The beauty about our 10/16/60 goals is that the same levers that got us to 13% adjusted EBITDA margin, are going to be the levers that get us to 16% adjusted EBITDA margin. And you kind of walk across, and we'll continue to emphasize inspection service and monitoring work. I think we've mentioned a couple of times that work tends to come in at 10 percentage point higher gross margin than our contractor project work. And so that mix effect is going to contribute to our 16% goal. We'll continue to get margin accretive pricing on the inspection and service and monitoring revenue streams, which will help us towards our 16% goal. We're at the early stage of our procurement journey. And we've got a real opportunity over the next couple of years to do a lot better at leveraging the size of our organization and the buying power that comes with that size, to drive down cost and to improve margin in our business. Over the last 3 years, we've been kind of building the infrastructure needed to be an $8 billion public company. And now that's at a point where we'll be able to leverage our SG&A costs as we grow organic revenue, and that's going to contribute to the 16%. And then the most important lever that we've got in that business in that is really what we call branch and field optimization. And that's just the opportunity that we have in each and every one of our branches to be better in 2028 than they were at the end of 2025. And if you think across our North America business, where our fleet average is around 17% or 18% EBITDA margin for a branch, we've got branches that are below that, and we've got branches that are bumping up or bumping over 30%. And there's the same type of profile in our international business. And there's really no structural reason why any of our branches in North America or international can't be performing at a really high adjusted EBITDA margin. And so part of the path to getting to 16% is each and every one of those branches, taking advantage of the inspection-first mindset and going forward, and leading with inspections and getting that service and then allowing that to flow through to high-margin contract work. The more we do that, the more we're going to move on to 60% adjusted EBITDA margin. And then one of the things I love about APi is we've got this friendly level of competition in our business. And so we're all kind of competing with each other to get a little bit better each and every year. And so every month, we stack rank the performance of our companies and our branches. And so we know who is at 30%. We know who's at 20%. We know who's at 7% and 8% at the bottom of the list. And if you got a competitive bone in your body, you're not going to want to be at the bottom of the list. And so you're going to push your business harder. You're going to call the guys whose branches are at the top of the list and you're going to learn what you can do to make your business better so that you're moving on up. And I think that type of visibility and transparency, as well as the friendly competition that it inspires, is something that's going to continue to propel our businesses to get better each and every year.

Sure. Okay. So you talked about going from 10% to 13% and then 13% to 16%. I guess when you got from 10% to 13%, you did have help from a really large acquisition where you were kind of taking out costs. And so I guess, going forward, you don't necessarily have as big of a lever perhaps. So do you feel confident that you can still achieve the same cadence of margins without a big cost takeout from like the Chubb acquisition?

Yes. And I think it comes down to the levers that we just talked about. I mean our margin expansion journey in the international business, even as we're coming out of the Chubb value capture program is far from over. And we had a slide in our Investor Day presentation where we shared the median branch performance in international, and we shared the median branch performance in North America. And like I said it earlier, and I'll say it again, there's no structural reason why our business in the international market can't perform at the same level as our business in North America. It just takes time and commitment to the inspection-first mindset and the inspection-first model to get there. And so just because we're out of the Chubb value capture range doesn't mean that there's not an outsized opportunity in our international business to continue growing the top line, to continue growing EBITDA dollars and to continue to move our margins upward in a meaningful way.

Okay. Okay. And how does pricing work in the business? Can you usually price at or above wage inflation? Or how does that equation typically work?

Yes. I mean margin accretive pricing is part of our path and our algorithm to 16% adjusted EBITDA margin. And if you think about an inspection, I think I mentioned earlier, an inspection is a relatively small dollar invoice piece of work. It could be $1,000, it could be $1,500. And if you think about that within like the cost to operate a building like the hotel that we're in today, that's a very small part of the overall cost of operation. But if we were to commit to being here at 6:00 p.m. on a Monday morning to do an inspection, and the parking lot is empty, and the building is empty, and like our customer is ready to go and we're not, like that's a real problem, and we've disrupted their operation. And so you come in and you do a great job in the inspection, you know that you're going to be there and be reliable and do it each and every time you come in. The customer is not going to take a risk to trying to save $10, $15 on an inspection and take on that kind of business disruption. So you've got a relatively small invoice ticket. You've got a high cost of sales system, and then you've got the stress on the operation if you don't deliver what you say you're going to deliver. And so those dynamics put you in a place where you can go out and you can get pricing each and every year, so long as you're delivering on your commitments, delivering a great inspection and then delivering great follow-on service work afterwards.

Okay. Maybe switching to M&A here since that's an important part of the story. So how does the pipeline look currently? What types of assets are attractive to you at this juncture?

Yes. Our pipeline continues to be really, really strong. We'll end 2025 right around our $250 million bolt-on M&A target. Our pipeline going into 2026 is strong and robust, and there's still ample opportunity for the foreseeable future to go out and to be able to bolt on small fire and life safety companies at really attractive multiples into APi Group. So the pipeline in that area is really, really strong. As we get into 2026, you talked about kind of entering the -- exiting the Chubb value capture phase and moving more into business as usual in the international business. And part of business as usual as a life safety company at APi is going out and applying that bolt-on M&A strategy. And so as we go into 2026, we'll be more intentional and more focused on executing bolt-on M&A transactions in the international part of our business. We've also committed to building a $1 billion elevator services platform, and we've got a long way to go to get to $1 billion in bolt-on M&A in that space, is something that we'll be taking a step forward on in 2026 as well. So I think generally, if you look across the portfolio, it's continuing what we do well in North America and starting to really roll that bolt-on M&A strategy in international and in the elevator space.

Sure. And the Analyst Day also kind of contemplated the possibility of having some platform deals, as you call them. And so what does that entail? And how do you decide when, or what is the right platform deal for you?

Yes. Great question. So first and foremost, we're going to be disciplined in our platform M&A. That's part of the core and part of the DNA of APi's M&A strategy, and that's first and foremost. When you think about platform, it's got to be a good geographic fit. It's got to be a good strategic fit. It's got to be consistent with our long-term financial goals or accretive to it. And most importantly, it's got to be a great culture fit. And you think about those criteria, it's a pretty high bar and a pretty high standard. So we'll continue to be really disciplined and intentional about platform opportunities. And when the opportunities come along that fit those criteria, we'll be in a position. We've got flexibility in our balance sheet to be able to do platform-type M&A. It's just about being disciplined and finding the right structure and fit. And then you think about the makeup of the business. I think we've got the legs of the stool, so to speak, is we've got a really strong fire alarm and electronic security business in our international business, and we've got an opportunity to do more of that in North America. We've got a really strong fire suppression sprinkler business in North America. We've got an opportunity to do more of that internationally. And then you've got the elevator space, too.

Okay. And then maybe lastly, for the businesses that are in your portfolio, do they have to meet certain criteria to kind of remain in the portfolio? And any businesses that could become less core over time?

Yes. So we've been pruning our portfolio, so to speak, for the last couple of years. And our 10/16/60 framework that we laid out in May really caused, I think, all of us to look in the mirror and to assess all of our businesses and all of our branches against that framework. And it isn't to say that every business in APi needs to be a 16% adjusted EBITDA margin business. That's not the right standard, but every business within APi has to be accretive to that 10/16/60 framework somehow. And if a business isn't, we've got to look in the mirror and think can we make it accretive? And if the answer to that is no, then we've got to think about different portfolio type decisions.

Sure. Okay. With that, I think we're out of time. So thanks, David and Adam, for being here. Great to have you both at the conference. Please join me in thanking the team.

Thank you.

Thank you Josh.