Good morning, ladies and gentlemen, and welcome to APi Group’s First Quarter 2022 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 Olivia Walton, Vice President of Investor Relations at APi Group. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining our first quarter 2022 earnings conference call. Joining me on the call today are Russ Becker, our President and CEO; Kevin Krumm, our Executive Vice President and Chief Financial Officer; and Sir Martin Franklin and Jim Lillie, 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 4, and we have no obligation to update any forward-looking statement we may make. As a reminder, we have posted a presentation detailing our fourth 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. Also as a reminder, there is a presentation containing supplemental information relative to prior periods and other useful information for investors available in the Presentation section of our website. It is now my pleasure to turn the call over to Martin.

Thank you, Olivia. We are proud of the approximately 26,000 leaders of APi for their focus and effort in navigating another complicated backdrop to the quarter. It was just over three years ago that we first met Russ and discussed building a business together, primarily based on our view that a statutorily required services strategy is economically resilient and that these activities were necessary no matter what the economic climate might be. Throughout the challenges since that initial meeting, from navigating the COVID-19 pandemic to dealing with supply chain disruptions and inflation, to acquiring and integrating the Chubb platform, the team has never lost sight of serving our customers safely and efficiently. We're grateful for their unwavering commitment. The integration of Chubb is off to a good start, and the strategic rationale for the transaction is proving even stronger than initially anticipated. Our belief when acquiring the business was that the acquisition would not only position APi well for continued success and improve the protective moat surrounding the business, but that it would also create significant upside for shareholders and employees. We believe that the combined business will offer customers more customized and proprietary offerings through our uniquely trained technicians, as they are called in the U.S., or engineers as they're called in Europe. We believe that the skills of our technicians and engineers, combined with our suite of offerings is a distinct competitive advantage. In addition, we believe that our scale will drive synergies and savings that can be redeployed back into the business to accelerate growth while enhancing margin expansion. We have great confidence in the business and the direction we're heading. We're excited about the opportunities for the company in the years ahead and look forward to updating you on our progress throughout the course of the year. With that, I'll hand over to Russ.

Thank you, Martin, and good morning everyone. Thank you for taking the time to join our call this morning. I will begin my remarks by commenting on our strong start to 2022, the positive momentum we have across the entire business, and the key factors that we believe support the resilience of our business. I will then provide an update on our ongoing integration at Chubb before turning it over to Kevin to discuss our financial results and guidance in more detail. We saw continued robust demand in the first quarter across our key end markets. For the three months ended March 31, 2022, net revenues increased on an organic basis by approximately 16%, driven strategically by healthy growth in inspection and service revenue across the majority of our markets in Safety Services, as well as general market recovery in Safety and Specialty Services, compared to the prior year's period, which was negatively impacted by the COVID-19 pandemic. We estimate that approximately two-thirds of this growth was driven by price and pass-through of material and labor costs, and one-third was driven by volume, which we measure through labor hours. It is important to note that this shift will shift over time, based on our mix of work and macroeconomic factors such as inflation. This growth is tactical as we focus on margin expansion because on average, inspection and service revenues generate 10% plus higher gross margins, and monitoring revenues generate 20% plus higher gross margins in contract revenue. Going forward on an annual basis, we intend to provide detail on our consolidated backlog. While this metric has less relevance to APi, given our focus on inspection and service revenue and our goal of reducing our contract loss rate, it does provide a barometer of the trends in the markets we serve. Our consolidated backlog continues to build and was at a record high level of $3.6 billion as of the end of March, providing us with a solid foundation for growth as we move through the rest of the year. Backlog was up over 10% compared to the end of December 2021, including Chubb. It's important to note that while backlog is an important indicator of the positive momentum that we have in the business, we remain focused on disciplined projects and customer selection and therefore we do not expect to see backlog growth each quarter. We remain focused on running the business regardless of what's going on in the macro economy. Whether dealing with challenges faced in navigating supply chain disruptions, inflation, the COVID-19 pandemic, increased volatility in the economic climate, geographic anomalies, weather or other, we believe that there are several key factors that strengthen the resiliency of our business and help to reduce the impact of an always volatile business environment. First is our people. Our core purpose of building great leaders continues to define who we are. It is our identity and our culture. We believe that it is the unifying principles that connect everyone within our business, regardless of their role. This purpose is particularly important as we integrate the Chubb team into APi. You've heard me say that the Chubb business was somewhat neglected over the years under prior ownership. Bringing the team into the folds at APi is a key part of the integration of the business. We believe that great leaders, among many things, create great shareholder value. As COVID-19 becomes more endemic, we recently held our first in-person two-day Leader Lab. It was an opportunity for 125 leaders across our global businesses to benefit from APi's culture of organizational sharing of knowledge and best practices, and collaboration across businesses. We have spent approximately $30 million on leadership development over the past five years and plan to continue to invest in and support our leadership development culture, which we believe empowers the leaders across our businesses, drives business performance, and increases future cross-selling opportunities. This investment is unique in our industry, and we believe that it is a competitive advantage. Our employees, technicians, and engineers have careers, not jobs and we believe this investment reduces turnover, aligns communications, and drives performance and productivity. This is a competitive advantage for APi, particularly when many companies see team members opting for new opportunities. Second is our recurring revenue services-focused business model. The regulatory-driven demand for our services provides predictable, higher margin recurring revenue opportunities. We liken this to a protective moat around APi. Our go-to-market strategy in safety services is to sell inspection work first, because we estimate that every dollar sold can lead to $3 to $4 of subsequent service work. This strategy differentiates us from our peers and ultimately creates a stickier client relationship that we believe positions us as the preferred life safety and security services provider in the buildings where we perform the inspections. Following the completion of the Chubb acquisition, we achieved our previously stated goal of more than 50% of our revenue coming from inspection and service. As a result, we are now moving the goalpost to the right and have a new goal of over 60%. Third is our revenue diversification across geographies, end markets, customers, and projects. Our global footprint with approximately 500 plus locations in 20 countries allows us to maintain relationships with local decision-makers while also having the ability to execute multisite services for national and international account customers. We believe that our low customer concentration with no single customer representing greater than 5% of our revenue, and the diversity of the end markets we serve helped to build a protective moat around the business. We believe that this too, is a competitive advantage. The last point I'd like to highlight is the relative variability of our cost structure, which provides us flexibility to effectively navigate the changing market. Our significant union labor force in the U.S. and subcontract labor force internationally allows us to flex our workforce capacity as market conditions dictate without incurring significant trailing costs or severance. As we've discussed on prior calls, our average project size is approximately $5,000 in our largest segment, Safety Services, and $75,000 in Specialty Services. In addition, the average duration of our projects is short, which we believe allows us to reasonably control inflationary variables and manage our supply chain. We remain focused on real-time pricing and operational efficiency to ensure true costs are reflected in the services we provide. As many of you have heard us say previously, our business is not immune to macro marketplace disruptions related to supply chain disruptions and inflationary cost pressures. In general, we believe we've adjusted our project pricing models to pass through these inflationary pressures. With that, the significant step up in revenue related to pass-through pricing on project materials will compress our margins in the short term. That said, we remain laser-focused on our long-term margin expansion levers: inspection visits, service revenue, monitoring accounts, and inflationary pricing on these recurring services. Because we believe this focus will allow our margins to bounce back quickly as we move away from the current inflationary environment on the material side of our business. We expect these negative variables will be present through the balance of the year. However, we do not believe they limit us in achieving our long-term margin expansion goal of over 13% adjusted EBITDA margin by 2025. Before turning the call over to Kevin, I would like to provide an update on our ongoing integration at Chubb. We are pleased with the progress made so far in the four months post closure and are excited about the opportunities that lie ahead. We continue to build up the depth of our team to ensure we are well-positioned to integrate and manage our global footprint. We have recently added resources with significant international and integration experience in areas such as Human Resources, procurements, accounting, finance, and IT. The first half of this year is focused on ensuring the steps are in place to remove the business from Carrier's infrastructure, bringing our brand-led operating model and metrics into our platform, validating synergy assumptions developed during the initial due diligence efforts, and evaluating the quality of the leadership team to ensure we have the right resources and the right people in place moving forward. There has been a significant amount of time and effort spent across multiple functional areas to develop actionable, measurable, and executable multi-year plans to leverage our combined global platform. Our initial assessment prior to closing of the acquisition was that we believed we could capture $20 million in savings in a business that had been historically under-invested in. After having our team on the ground for the last 90 days and working with local leadership, I am pleased to report that we believe we now see a clear path to value capture opportunities that are at least $40 million. We expect this figure to continue to evolve and grow as we learn more, and we believe that most of the projected value capture opportunities can be achieved within three years. It is our intent to reinvest some of the initial cost savings to help position us to maximize the opportunities that lie ahead. We plan to provide a more detailed report to investors of our plans and the opportunities for the business later in the year. There is significant work still to be done and we are in the very early days of this opportunity. The business is performing in line with our expectations. We have had no negative surprises, and more importantly, what we have found has only reinforced our excitement about the acquisition. The opportunities are there to not only reduce costs but also to drive top-line growth, and I look forward to continuing to report on our progress. In summary, I am pleased with the forward progress of our businesses and what has been achieved in the first quarter. We feel good about the momentum we have across the board and the outlook for the balance of this year and the years ahead. I would now like to hand the call over to Kevin to discuss our financial results and guidance in more detail.

Thanks, Russ. Good morning to those who have joined online. I'll begin my remarks by reviewing our consolidated results and segment-level operating performance before turning to our guidance. As a reminder, the Chubb business is reported within our Safety Services segment and will be excluded from our organic net revenues until 2023. Reported net revenues increased by 83% to $1.5 billion compared to $803 million in the prior year period. This was driven by acquisitions completed in Safety Services and strong organic growth in Safety and Specialty Services. Adjusted gross margins grew to 26.4%, representing a 371 basis point increase driven by an improved mix of inspection and service revenue resulting from recent acquisitions completed in Safety Services, as well as organic growth and improved productivity in Specialty Services. These factors were partially offset by supply chain disruptions and inflation, which caused downward pressure on margins. Adjusted EBITDA margin was 8.7%, representing a 111 basis point increase compared to the prior year period, driven by an improved mix of inspection and service revenue resulting from acquisitions completed in Safety Services, as well as strong organic growth. This was partially offset by supply chain disruptions and inflation which caused downward pressure on margins. As Russ mentioned earlier on the call, net revenues increased on an organic basis by approximately 16% compared to the prior year period, excluding the impact of acquisitions completed in Safety Services over the past 12 months; both gross profit margin and EBITDA margin improved on a year-over-year basis. Adjusted diluted earnings per share for the first quarter was $0.23, representing a $0.13 per share increase compared to the prior year period. The increase was driven primarily by strong organic growth in Safety and Specialty Services and the accretion from the acquisition of Chubb. Our adjusted free cash flow for Q1 was a negative $47 million. While Q1 is traditionally our lowest cash flow quarter, Q1 2022 was further impacted by working capital build to cover supply chain disruptions and to support our strong revenue growth. In a world of supply disruptions and limited availability, we made the decision in Q1 to ensure we had supply in front of our work needs. Finally, we also saw cash used in acquisitions to rebuild working capital, where we took the offset benefit as a purchase price reduction. That said, we anticipate most of the supply chain related working capital investments deemed to be temporary and to be recovered by year-end, and we expect our adjusted free cash flow conversion for the year to be in excess of prior year levels on the way to our long-term average adjusted free cash flow conversion goal of 80%. I will now discuss our results in more detail for Safety Services. Safety Services net revenues for the three months ended March 31, 2022, increased by 130% to $1.1 billion compared to $466 million in the prior year period primarily driven by revenue from completed acquisitions. Net revenues increased on an organic basis by 14.6% compared to the prior year period, driven by continued growth in inspection and service revenue across the majority of our markets and general market recovery compared to the prior year period, which was negatively impacted by the COVID-19 pandemic. Adjusted Gross margin for the three months ended March 31, 2022 was 31.5% compared to the prior year adjusted gross margin of 31.5%. This is primarily driven by an improvement of inspection and service revenue offset by supply chain disruptions and inflation, which caused downward pressure on margins. Adjusted EBITDA margin for the three months ended March 31, 2022 was 11.8%, representing a 169 basis points decline compared to the prior year period, primarily driven by the impact of completed acquisitions, supply chain disruptions, and inflation which caused downward pressure on our margins. These factors were partially offset by an improved mix of inspection and service revenue. I will now discuss our results in more detail for Specialty Services. Specialty Services reported net revenues for the three months ended March 31, 2022 increased on an organic basis by 19.8% to $412 million compared to $344 million in the prior year period. This was driven by increased demand for specialty contracting services and general market recovery compared to the prior year, which was negatively impacted by the COVID-19 pandemic. Adjusted Gross margin for the three months ended March 31, 2022 was 4.1%, representing a 196 basis points increase compared to prior year primarily driven by improved productivity and improved mix of service revenues. These factors were partially offset by supply chain disruptions and inflation, which caused downward pressure on margins. Adjusted EBITDA margin for the three months ended March 31, 2022 was 5.6%, representing a 93 basis point increase compared to the prior year due to leverage on higher volume and an improved mix of service revenue. These factors were partially offset by supply chain disruptions and inflation, which caused downward pressure on margins. I will now discuss our guidance for 2022. While the macro environment became more uncertain during the quarter, the resiliency of our business and top-line momentum give us confidence to increase our guidance expectations for net revenues and confirm our prior guidance for adjusted EBITDA. We now expect full-year net revenues to range between $6.45 billion to $6.6 billion, up from $6.3 billion to $6.5 billion, and expect growth in net revenues on an organic basis at constant currencies to be between 8% and 9%. This is up from prior guidance of 6% to 7%. We remain confident in our full-year adjusted EBITDA guidance of $650 million to $700 million, as provided in our February 23 press release. As we commented on our last call, where we will end up within the range will largely be dependent on the speed with which we finalize and implement integration activities across our platform, the further impact of supply chain disruptions and inflationary pressures, our revenue growth, and exchange rate movements during the year. For the second quarter, we expect net revenues to be $1.65 billion to $1.7 billion, up from $1.575 to $1.625 billion and adjusted EBITDA to be $170 million to $180 million, which is consistent with our prior guidance. As mentioned on our last call, we anticipate interest expense for 2022 to be approximately $120 million, depreciation expense to be approximately $85 million, CapEx to be approximately $90 million, and our adjusted effective cash tax rates to be approximately 24%. From a capital allocation perspective, we continue to target an average adjusted free cash flow conversion of approximately 80% and intend to use the cash generated to reduce net leverage to return to our targeted long-term range of 2 to 2.5 times over the next couple of years. As we have previously said, with a target of an average of 80%, some years may be closer to 70, and some may be closer to 90. But on average, we think 80% is a reasonable target over the long-term. When we believe our own company represents the best available investment opportunity, we may repurchase shares. To that end, in March 2022, the Board authorized a new stock repurchase program to purchase up to an aggregate of $250 million worth of shares from time to time. This reflects not only our confidence in our ability to execute but also in our ability to generate cash. Our adjusted diluted weighted average share count for the first quarter was 269 million, which is approximately 40 million higher than we had as of the fourth quarter 2021. The increase is primarily driven by the dilutive impact of 333 million shares relating to the $800 million perpetual preferred equity financing used in connection with the Chubb transaction. Rather than trying to determine the probability of conversion from time to time, we think it makes sense to consistently reflect our adjusted results assuming the conversion. We expect our adjusted diluted weighted average share count for the second quarter to be approximately 270 million. I'll now turn the call over to Jim.

Thank you, Kevin. Good morning, everyone. As everyone has said, we are grateful for the efforts of our leaders who navigated a complicated backdrop and drove strong results in the first quarter. We are pleased that the business has, what we believe, struck a strong momentum despite a choppy macroeconomic environment. Clearly, Russ, Kevin, and the entire leadership team are focused on operational performance and successfully navigating all the macro turbulence since we became a public company two years ago. We couldn't be more pleased with the performance of the business to date and the trajectory of APi. As Co-Chairs, Martin and I view our role as providing our unique resources and the benefit of our shared experiences to help APi perform at the highest level and thereby drive shareholder value. From our perspective, the company is doing what it needs to do and is positioned well for success, having added new leaders to the bench with unique global skills to help drive performance. Additionally, new resources and tools are being added each month to improve efficiency and performance. We are pleased to provide the investment community new insights into the business on this call to help you understand the business better. We intend to continue to evolve the detailed information provided quarterly and look forward to providing more color on our strategic activities related to the acquisition of Chubb later in the year. We intend to maintain a relentless focus on growing recurring service revenue, disciplined project and customer selection, pricing opportunities, leveraging our spend, driving operational excellence, and realizing synergies from the acquisition of Chubb as we work towards our adjusted EBITDA margin goal of over 13% by 2025. We will continue to remain responsive to opportunities within our business and to the macroeconomic environment in which we compete. We continually assess how best to deploy our resources against our three primary growth drivers: optimizing the performance of our existing businesses, effectively managing our capital structure, and investing capital in our business, including evaluating opportunistic acquisitions. And with that, I'd now like to turn the call back over to the operator and open the call for Q&A.

We'll take our first question from Andy Kaplowitz from Citigroup. Your line is open.

Good morning, everyone. Maybe first question, I know you just raised organic guidance to 8% to 9% versus the 6% to 7% that you had Russ. Maybe you could talk about the assumptions in that increase, is that all pass-through in pricing or is there at all volume increase in there? And then obviously, you grew mid-teens in Q1 and again you talked about pass-through in pricing being two-thirds of that. It was still higher than our forecast, but again, was that all pricing and pass-through or were there areas of your business that are outperforming your expectations?

So Andy, in my remarks, I said that two-thirds of that was pricing pass-through and one-third of that was volume. We track man hours by business units actually on a weekly basis, and that's really how we keep our eye on the ball as it relates to the differing trends that we are seeing in the business. And so, we've been really, I guess, forward in our conversations with our different business unit leaders as it relates to price and making sure that we're trying to stay out on the forefront on price, but really it's about two-thirds of that is price.

Okay, and then Russ maybe asking you about sort of Chubb in this context, obviously going to $40 million of synergies looks good. Can you give us more color into where you're seeing the extra synergies as you're now on the ground? And then maybe talk about the probability that that $40 million could move higher over time? And has the timeline changed at all when you get these synergies, I think you had said 18 to 36 months?

I believe an 18 to 36 month timeline is realistic. In the various countries where we operate, the necessary processes for making changes take longer than they would in the U.S. So, considering this timeframe is practical. It won't all happen at once, and we will likely go through two phases for some of the changes. As we invest more time in the business and shift towards a branch-led model similar to what we have in our core life safety operations, we will gain better visibility into the necessary changes to empower branches and their leaders instead of relying solely on corporate support. Our visits to Western Europe have provided clarity on what needs to be accomplished, which is exciting as we move toward this branch-led operating model. We are also enthusiastic about procurement opportunities. We believe we've only begun to explore the potential of our core APi from a procurement standpoint, and as we expand our procurement team, we see great synergies between our businesses. Previously, Kevin mentioned that we are just beginning to tap into commercial opportunities, and we anticipate numerous chances to cross-sell with our existing business and engage with multinational customers. We are already having discussions aimed at leveraging Blackstone's real estate portfolio. These factors give us strong confidence in the $40 million synergies, and we will keep you updated as things develop.

Andy, if I could chime in, one of the things that I think what Russ and Kevin and the team are doing is that I think is different than what has historically occurred under prior ownership is, Russ is out there pounding the pavement, visiting places where senior leaders have never visited before. And he's working with the leaders in individual countries, and having them build bottom-up plans, rather than being told top-down what to do. And from those bottom-up plans, you're getting ownership from country managers on what to do, how to do it. It's their plan, rather than someone in some other country just telling them what to do. And so, there's a lot of buy-in on what needs to happen when it needs to happen, who's accountable, and what the economic return is and we're in the early days of that, but it's really a team effort that Russ is driving rather than an administrative directive.

I appreciate all the color guys.

Our next question comes from Markus Mittermaier from UBS.

Yes, hi, good morning, everyone. Maybe I'll follow up on the discussion you just had there, sort of what's the cadence then to get to the bottom-up branch-led platform? What has to happen between now and then sort of, like if you are seeing forward two years? So is it kind of ripping out the old IT platform? Or what's the process to get there? Can you give us a bit more color on that?

Good morning, Markus. Thank you for your question and for being here today. Our top priority is to separate this business from Carrier, which involves a considerable amount of work. Specifically, the two main areas we need to focus on are IT and HR. This will require adequate resources and the right talent from both Chubb and our side, and we are emphasizing that. It’s important to note that while we have to start with this foundation, we can still implement necessary changes, and we’ve already begun to do this in various countries where appropriate. Change is similar to steering a large freighter; it takes time to alter its course. Our branch-led operating model differs from the Chubb model developed over many years under UTC and Carrier's leadership, so finding a balance between the two will require time. Additionally, we still do not have access to Hong Kong or China due to ongoing COVID-related lockdowns. We are actively developing plans and preparing to implement our initial changes while also looking to seize procurement opportunities that arise. I would estimate that an 18 to 36-month timeframe is realistic. We want to be transparent with you about our progress, and please know that we are actively engaged in this business and will tackle opportunities as they come.

That's very helpful. Thank you. And maybe one more on backlog the $3.6 billion, I appreciate the update to the guidance here for the rest of the year. How should I think about the $3.6 billion obviously a lot of projects in there? What's your ability to reprice once you put that into the backlog? And then what's your visibility there on margin across that 3.6? Thank you.

So, number one, that is our contract, and that includes our contract installation backlog. It also includes larger time and material projects with our industrial maintenance customers, and would also include our anticipated work under certain master service agreements and blanket contracts. So it's not just fixed-price lump-sum contract related work, and so there is a variety of opportunities that's included in that $3.6 billion. And margins vary based on segment and based on individual company to be totally honest with you, Markus, inside that. We have confidence in the margins there. We've been preaching price. We've been preaching protecting yourself in your contract languages, which goes back to your original proposal to make sure that you're protecting yourself from inflationary pressures associated with it. So we have really good confidence in the quality of the backlog that we have, but it would be extremely difficult for us to give you an exact margin percentage based on it would vary by segment and by business.

Got it, okay, great. Thanks for the color. I'll get back in queue.

And next question comes from Julian Mitchell from Barclays.

Hi, this is Kiran Patel-O'Connor on for Julian. You know, I'm just looking at this 60% plus in a new target for inspection service revenues. When do you think you'll be able to achieve that and what actions are you guys taking to reach that goal?

Well, I mean, the reality is, I can't tell you if we're going there in three or four years to be totally honest with you, Kiran. So, it's really driven by our relentless focus on growing the inspections. And our inspections were up again on a year-over-year basis for this quarter, which really gets us excited. We had really solid growth in that piece of the business. We need to drive that inspection-first mindset into the Chubb business so that they're thinking about things in a very, similar fashion that we are. And as long as we continue to grow the inspection piece of the business, we know that we're going to grow the service piece of the business, which is the recurring revenue portion of it. And we're going to incrementally make gains on it each and every year, and that's what's positive for us. That's our biggest focus. We still have work to do as we continue to build out our inspection sales team, and that is happening and ongoing every single day. And that's really our number one strategic priority across the business.

Got it, thanks. And I have one follow-up, just looking at the $40 million synergies in a number that you talked about, for the cost to achieve that, should we assume some sort of similar timeline or how should we think about that?

Well, I guess, we said that we believe that we're going to capture those synergies over an 18 to 36-month period of time. And that's where our focus is. As I said earlier in my remarks, our number one focus right now is the separation from Carrier and that needs to continue to be our priority. But we believe that we see opportunities up to $40 million, and hopefully that's going to continue to evolve, but it's going to take us that period of time to capture.

Our next question comes from John Mazzoni from RBC Capital Markets.

Hi, this is John Mazzoni filling in for Ashish. Congratulations on the strong results. Given the higher international tensions, and I think you mentioned this previously on Hong Kong and China, could you just walk us through how you are navigating international risks, and any of the actions you're doing, perhaps in Europe, on knock on effects or any other things you're seeing in terms of just kind of the overall business environment? Thanks?

Well, I think when I think about navigating risk, obviously we continue to watch how things continue to evolve into Ukraine with Russia. We have very little exposure to that. Our legal team has stayed on top of that, looking at areas where we may have customer ties to Russia, and what sort of impact that may or may not have on the business. But it is very, very low and it's been extremely small. As it relates to how things potentially evolve with China in the position China takes, that's something that we continue to keep our eye on. Our exposure in China is small. The majority of our business in Asia is focused in Hong Kong. We continue to really just keep our eye on it and have open dialogue about any sort of risks and what sort of action planning that we may have to take if there are potentially additional problems and challenges there.

I think, you know, from Martin and I, we were talking the other day, it's kind of funny that since we've been a public company, we've known nothing but headwinds. We went public, and so did COVID. And then we've had supply chain issues, and it will be interesting when the world just calms down a little bit. But this company has performed amazingly well and put up the numbers that it has put up in what has been a crazy couple of years. And so, it's just going to be interesting when the waters smooth out and you get a bit of a tailwind in what's going on in the macros. But look at how well we've performed over the last couple of years with global headwinds that have nothing to do with the business. I really think you really see the resiliency of how the business is set up and what we call the protective moat. And so, we look forward for the day when the world just takes a breath.

Great, thank you for the color. And maybe quickly, could you just remind us on labor and how the union workforce in the United States and the subcontracted workforce actually helps? It sounds like the color around the $30 million spent over the past five years on leadership development is helpful, but just maybe around what you're seeing in the hiring environment and how you think you can pretty much navigate that as well, just because of the issue of the tough labor market today? Thanks.

Yes, so there was a lot there in your question. So first, just to tackle the union component of it. So the majority of our workforce is union. That does a couple of things for us; it gives us really good visibility into their wage rates and the cost structure associated with that. And even going through this, kind of a challenging time from a people perspective, in our collective bargaining agreements that have come up for renegotiation, I would tell you that they've all been resolved and settled at very fair wage packages and escalation in those wage packages. I've been actually very impressed with the leadership of the Union, and how they have been reasonable in their expectations and haven't tried to take advantage of the hot labor market and situation there. The other aspect of the Union aspect of it is, when you have, when Friday afternoon comes and we don't have work for that individual on Monday, we can basically lay them off and send them to the Union Hall without any trailing severance costs. That's all built into their wage packages. And so that gives us much more flexibility to flex up and down as we need. What you see commonly in Western Europe, specifically around installation work, is the use of a lot of subcontract labor, instead of having permanent employees, and that allows them greater flexibility to flex up and down based on what their needs are. And so, you'll see the new subcontract labor more often than they would have saved having full-time employees. Regarding the $30 million investment in leadership development over a number of years, I would just tell you that we have believed for almost 20 years now that investing in our people, investing in our people as leaders and as human beings, is what's ultimately going to drive greater results; increased shareholder value and it's really proven itself true. The industry has done the men and the women that are actually doing the work in the field, they've done them a disservice. And they haven't made the level of investment in those individuals in the same way that say they have in their office personnel and staff. And from my perspective, that's an absolute shame. Almost 70% of our workforce is showing up on our customers' sites every single day, and those men and women want to be invested in as human beings just like you and me. And I think that's one of the things that we've done that's unique at APi is that we've taken our leadership development efforts to those men and women. And I think that is something that creates a unique environment for us there that the people will want to be a bigger part of something that stands for our purpose of building great leaders, and that means something and it stands for something bigger than an individual self. I think that's something that is unique to what we're trying to accomplish at APi and I think that's something that we can do and bring to the job organization. We already have one individual from our team that we're planning to relocate to London. He was the individual that originally helped stand up our leadership development efforts way back in the early 2000s and he is going to relocate to London and help bring that effort to Chubb. So we're already thinking about how we are going to bring that same energy and enthusiasm from a leader development perspective to the Chubb organization. And as I said in my remarks, I really think that that's going to be a big part of the integration and a big part of what makes the Chubb organization successful as we move this thing forward.

Great, thank you so much for the color.

Next question comes from Jon Tanwanteng from CJS Securities.

Hi, good morning. Thank you for taking my question. My first question is what gives you confidence in achieving the market target margin given the current pace of inflation? I understand that you can increase profit dollars in line with expectations, or possibly even better, but how are you planning to reach the margin percentage in this environment? What factors are contributing to that? Is it an expectation of moderate inflation, more synergies, or is there something else we should consider?

Jon, hey it's Kevin, I'll take that one. You know, when we look at what's going on this year with the significant pasture that Russ talked about, when you think about some of our businesses, if you take one of our businesses in the Specialty Services segment as a proxy, fabrication, you know, they're obviously seeing a significant run-up in revenue due to what we're pushing through from a price standpoint related to steel, that's going to compress margins this year. All that said, they continue to focus and you can use that company really as a proxy for our contract work in specialty and broadly, they continue to focus on productivity initiatives and continue to push more and more of our offerings to that service and recurring revenue. So in a year like this, where we see the run-up, of course, it's going to compress margins. But as we continue to focus on the long-term levers that we've talked about for the last couple of years, and this inflationary pressures subside, we expect there to be a higher ramp, let's say next year and the following year in our margins, as we see that work start to show up and as the material or inflationary impacts due to material costs subside.

Okay, great. I appreciate that. And then, second Kevin, this is actually for you. What is your expected interest expense for the year just given the expectation of rising rates? And are you comfortable keeping that at a floating rate at this point?

Yes, our expected full year interest expense right now is $120 million. And we're comfortable with that, if that's your question. You know, we're forecasting as we do, based on sort of the mix of fixed and floating.

Our next question comes from Kathryn Thompson from Thompson Research.

Hi, thank you. Hey, how is it going? Thanks for taking my questions today. Just in terms of this is just a bigger picture, understanding you're more services focused, but against that backdrop, how are you thinking about managing inventories and just basic goods as the world shifts from a just-in-time to more of adjusting case? And how relevant is this trend really for APi?

Kevin, do you want to talk about that?

Yes. So yes, Kathryn, I think in the remarks I mentioned this as well, you see, you saw the impact of, and I think you said it well, instead of just in time, we're trying to get in this world where availability started getting you on defense a little bit. We're doing what we can to get materials in our businesses into our jobs in time to do the work that we need, and noting the growth rates that we're seeing that's become really, really important. Ultimately, in my mind, we saw that as a working capital investment here in the first quarter. Obviously, as we move through the year, we expect for that to work itself through and have less of an impact as we move through sort of Q2, Q3, and into Q4. So we think the most significant impact we're going to see really is in the first half of the year, and we expect to work a lot of that off in the back half of the year.

Okay, and what are you seeing in terms of supply chain timings from others in the construction cycle? And with your next goal of 60% of your revenues coming from service, how much of this is organic growth versus acquired?

Well, the majority, and Kathryn, this is Russ, good morning. The majority of your growth in inspection and services is going to be organic. You know, you might have some small M&A activity associated with buying customer accounts, etc., that will be additive on to that, but essentially, you can count on most of that being organic by nature. And when you think about inspection and service, the lion's share of the work that's being done there is labor, and so from a supply chain perspective, as we continue to grow them we become less and less susceptible to supply chain related issues. I mean, you have component issues from a fire alarm perspective in security, on the security side of the business, that have been seeing some challenges in the last number of months and pipes is also an item that we continue to keep a close eye on. Pipe is a big part of what we do in all aspects of our businesses. So we continue to monitor not only cost but availability. But as we continue to grow the inspection service side of the business, we become less and less susceptible to those issues and challenges.

Okay, and what sequential trends are you seeing in terms of types of projects that are in kind of in the proposal pipeline? And then I guess importantly, who you taking market share from?

Well, I think that the end markets that we serve continued to be very strong and very robust. If you think about the data center space, and what companies like Facebook, Microsoft, and Google are doing and the investment that they're continuing to make, is really positive for us from both an installation and more importantly, an inspection and service space, semiconductor, the Intels of the world continue to provide robust opportunities for us. I think that that's something that we need to continue to stay focused on is being in the right end markets and the opportunities from both an inspection and service perspective, ultimately, an installation perspective will continue to be robust. What was the second half of your question Kathryn, I'm sorry?

Just really, who are you taking market share from? I mean, who are the big buckets in terms of taking market share, because one of the things that's happening post-COVID world is the bigger getting bigger, but also it gets down to service. So we see this as an opportunity to take share, which appears that you are from others that just don't have as good access to products and people? So it's really, what are the big buckets where you're seeing market share gains?

Yes, well, I mean, the industry is so fragmented. And I think that we're going to be taking share from a lot of smaller, more family-owned type businesses in the regional and local communities that we serve, and that's where our scale and technical capabilities are going to be ultimately a big advantage for us and something that we continue to stay focused on. And it's like anything, you know, you are right; it's about service and it's about your commitment to serving your customers with flexibility, safely, efficiently, and everything else associated with that. And so, I mean, this is also very much still a relationship-based industry and space. I think that our inspection-first strategy that we've employed allows us to create more solid, sticky relationships with our customers. So that's a driver for us. Our customers continue to consolidate, and that's an advantage for us as our customers continue to consolidate and grow their businesses; that's going to create opportunities for us. If we're delivering and we're executing and we're maintaining those key relationships.

Thank you very much.

And we have time for one more question from Andrew Wittmann from Baird.

Great, excuse me, thanks for taking my questions. I guess, I wanted to ask a little bit on the integration maybe from two perspectives. The first one I guess is, I think I heard in the prepared remarks obviously the $20 million to $40 million synergy, but I also heard that there is going to be a level of reinvestment. So I was wondering what the expectation is for the net savings to EBITDA would be after the reinvestments? And maybe for Kevin, if you could talk a little bit about what this year's budget is for like acquisition and integration costs? I know this quarter an adjusted reconciliation has large numbers for the acquisition expenses which make sense in the quarter where you actually closed the deal. But the integration and reorganization expense were actually fairly modest. So I was hoping to understand how that works. I would expect the integration and reorganization expenses to maybe go up and the acquisition expenses to go down. But what's the net budget maybe for the year? So those type of items, just so we have an order of magnitude to what they'll cost this year.

Yes, I can take both those. I'll start on the latter, Andrew, and then you'll have to remind me. I think the first one was the $20 million to $40 million, but we'll have to come back to clarify that question. So on the acquisition, the one-time cost, yes, you're right. We saw about $24 million related to just closing the deal in the quarter, and then you should have seen somewhere around, you know, I'll say $15 million to $20 million, I think it was close to $17 million on just ongoing costs. The majority of that cost that we saw in the quarter was related to our continued investment in carving out the Chubb business from the Carrier infrastructure. Okay, there's various things in there, but also that was largely always in there. We are still working through the full year use of that, so we're not ready to guide on it. I think you asked for a budgeted number, but we have two buckets there: one will be the cost to capture the value opportunities that we're talking about and the other is the costs that we’re going to continue to see for the year as we carve this business out of the Carrier platform. Okay, so the costs you saw in Q1, I think you can, those will step up slightly as we move through the year, but we are still in the planning phase of all that and looking to conclude that here in the second quarter.

Yes, and then the first part of the question was if you're going to $40 million of gross synergies, what's a realistic expectation for the net benefit for EBITDA from cost synergies?

I'll jump in on that one and tell you that will be part of the update later in the year.

Okay, and then I guess, I was just curious with what is softening demand or what was seen as softening demand from some of the large warehouses, customers and you look at what Amazon's results were for the quarter, clearly there was a pre-billed in COVID related to home delivery services and it's not just Amazon, it's probably others as well. I guess Russ, given that this has been, to my understanding, a fairly large driver of your growth over the last couple of years, are you seeing any signs or changing any expectations around what the longer-term outlook might be or like at least the intermediate-term outlook over the next couple of years could be on the specific end market?

Yes, we operate in this area, but it doesn't make up a large part of our revenue. My main focus has often been on securing inspection and service work after installations, particularly with companies like Amazon. Some competitors prefer to pursue original installation projects, but we target the right opportunities with the right clients and relationships. I believe our diverse customer base, both individually and across different markets, gives me confidence. We are not concerned about this situation. Our manufacturing and Specialty Services divisions do some work with Amazon, and they have a strong backlog as we move through 2022, along with excellent customer diversification. Therefore, if Amazon reduces its activity and we miss some project opportunities, it won't impact our business or results. We are monitoring the situation, but we are more focused on service and inspection work rather than the original installations.

And hey Andrew, going back to the $20 million to $40 million, I mean while we'll give you color when we do the more fall presentation in the back half of the year. The reinvestment really is a one-time event, whereas the synergy savings are perpetual. So you have to look at it in that way as well.

Got it, we'll look forward to seeing updates later this year on that. Thanks, guys, for the perspective.

Yes, so thank you, Andy, and nice to hear from you. So I'll wrap things up here and in closing, I would be remiss if I did not take the opportunity to thank all of our APi and Chubb team members who have remained focused on not only supporting our company and customers, but also the communities in which we serve. The safety, health, and well-being of each of our leaders remains our number one priority. I want to thank everybody for taking the time to join the call this morning. Thank you for your continued interest in APi. We truly are excited about the opportunities that lie ahead and really look forward to updating you on our progress throughout the course of the year and as we continue to cross key milestones. So thank you and have a great day.