Good morning, ladies and gentlemen, and welcome to APi Group’s Second Quarter 2023 Financial Results Conference Call. Please note this call is being recorded. I will now turn the call over to Adam Fee, Vice President of Investor Relations at APi Group. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining our second quarter 2023 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, August 3, and we undertake no obligation to update any forward-looking statements we may make except as required by law. As a reminder, we have posted a presentation detailing our second quarter 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. A reconciliation of and other information regarding these items can be found in our press release and our presentation. It’s now my pleasure to turn the call over to Jim.

Good morning. Thank you, Adam. APi delivered another strong quarter of results, including record net revenues, adjusted EBITDA, and adjusted diluted earnings per share in an evolving macro environment. We continue to be pleased with the momentum APi is building with an outstanding first half of 2023. Russ and Kevin will speak to the performance of the business in more detail, but APi’s consistently strong financial results speak to the direction we are heading and the strength of the company’s recurring revenue service-focused business model as well as the discipline of the organization and its leadership team. We started this journey with Russ and the team nearly four years ago as a U.S.-focused business with approximately $4 billion in revenues. Today, we are significantly larger with an expectation of delivering over $7 billion in revenue in 2023. The quality of the business and our financial performance have also improved significantly. We are the number one provider globally in a growing, highly fragmented fire and life safety market. We have confidence in the team’s ability to expand adjusted EBITDA margins to 13% in 2025 and beyond as we continue to increase our inspection service and monitoring revenues. Since becoming a public company, the team has made measurable progress and demonstrated a track record of disciplined, predictable, and thoughtful decisions regarding capital allocation, maintaining our focus on tuck-in M&A at appropriate multiples while consistently delivering financial results above expectations across a variable macroeconomic backdrop. We have great confidence in the business, and we believe that our laser focus on our long-term 13/60/80 value creation targets will generate outsized investor returns through 2025 and beyond. As a reminder, these include organic revenue growth above the industry average: adjusted EBITDA margins of 13% in 2025, long-term revenues of 60% from inspection, service, and monitoring, and long-term adjusted free cash flow of 80%. We look forward to updating you on the progress in the second half of the year. And with that, I will hand the call over to Russ to talk about the real results.

Thank you, Jim. Good morning, everyone. Thank you for taking the time to join our call this morning. Jim mentioned our 13/60/80 long-term shareholder value creation model that you see once again included in our presentation. As I mentioned last quarter, we are relentlessly focused on driving this strategy with our specific focus of achieving 13% adjusted EBITDA margins by 2025. I continue to speak to our leaders about how they can help us deliver on this strategy when I’m visiting our locations around the world. We are aligned as an organization in what we want to achieve and how to make it happen. During today’s call, I will begin my remarks by briefly commenting on our record second quarter results as well as our continued progress towards delivering on our stated strategic goals in a macro environment that continues to be volatile. I will then touch on the long-term organizational investment behind our inspection-first model and the benefits that it’s driving in our financial results. Finally, I’ll recap our recent M&A activity and the positive momentum of the business before turning the call over to Kevin, who will walk through our financial results and guidance in more detail. As you’ve heard me say on prior calls, the safety, health, and well-being of each of our 29,000 leaders remains our number one priority. We remain grateful for their hard work and dedication to APi. We believe we have a differentiated approach to leader development for every teammate at APi but specifically for our field leaders, who interact with our customers on a daily basis. We will always prioritize investing in the men and women in the field as human beings and aim to provide each of them with training, leadership development, and advancement opportunities. At APi, our field leaders have careers, not just a job. We prioritize this investment because we recognize that our success only happens when our branches and field leaders are successful. This commitment is one of the foundational principles we believe will continue to enhance shareholder value. Turning to the second quarter. I’m again pleased with the record results delivered by our global team as we continue to see robust demand for the services we offer across the business. Net revenues grew organically by 7.6% in the quarter and by 9.7% year-to-date, reaching $1.8 billion for the three months ended June 30, 2023, representing the ninth straight quarter of mid-single-digit or higher organic growth. Importantly and in line with our strategic initiatives, we saw a double-digit increase in inspection, service, and monitoring revenue as we march towards our long-term goal of 60% of total net revenues from inspection, service, and monitoring. U.S. Life Safety continued its strong performance with organic growth of approximately 12% in the second quarter and approximately 16% year-to-date led by double-digit plus inspection growth, which we have achieved in our U.S. Life Safety business each quarter since the pandemic. In line with our strategic initiatives, we continue to see strong year-over-year improvement in adjusted gross margin in the second quarter, up 160 basis points. I am pleased with the leadership team’s ongoing commitment to driving gross margin improvements through pricing activities, growing higher-margin service work, and maintaining discipline in customer, project, and end market selection. I want to take a moment to update you on a critical investment we have made over the last decade to become an inspection-first organization and how this commitment drives financial results, allows for more disciplined customer and project selection, and helps to build a protective moat around the business. We fundamentally believe that targeting statutorily mandated inspections at existing facilities and providing excellent service on those inspections drives repeatable business and creates sticky customer relationships. When those customers consider expansion plans, we are no longer competing solely on price, but instead can leverage our position as an excellent service provider with our customers to drive higher-margin installation opportunities. We target double-digit quarterly growth in core inspection revenues, and we are continuing to build what we believe is the best global inspection sales organization focused on driving this growth. But it comes down to a lot more than just selling the inspection. Inspections are a highly coordinated process requiring field and office collaboration with the customer. This multistep process requires a significant amount of infrastructure and training to do well as well as the right leaders in the field. We’ve equipped our field leaders with best-in-class technology and invested in multiple instruction training centers and programs to help develop our field leaders and help enable them to provide great service to our diverse customer base. Most competitors would rather pursue large installation jobs than recurring, higher-margin, smaller invoice inspection work. Our investment in and commitment to the inspection-first model over the last decade is a key differentiator and has made growing inspection increasingly within our control. We believe we are ahead of any competitor who would attempt to replicate this strategy. And our investments, sales force, and scale have created a large barrier to entry. As a reminder, in most cases, these inspections need to take place at least once per year or in some cases, more frequently. And we have data that every dollar of core inspection revenue leads to an average of $3 to $4 of subsequent service revenue. On average, core inspection and service revenue comes in at 10%-plus higher gross margins than project revenue. We included a slide in the presentation that shows the 10-year journey of one of our branches that was an early adopter of the inspection-first strategy and its impact on that brand’s profitability over time. An underappreciated benefit of continuing to grow inspection, service, and monitoring revenues beyond serving our customers better is the ability to then be much more selective on the installation work we choose to do, resulting in margin expansion on the project side of the business as well. For this specific branch, EBITDA margins expanded from low single digits to mid-20% in less than 10 years. You can see the benefit of this approach come through in our consolidated results where we have delivered gross margin expansion for six straight quarters and an improved quality of the projects in our backlog, which remains healthy and strong. Our leaders continue to execute this strategy across our branch network, and I’m excited for the long-term opportunity in our international business where we are only in the early stages of instilling this strategy. The international business continues to show progress with another quarter of solid growth as we continue to be intentional about targeting only work that is additive to achieving our 2025 13% adjusted EBITDA margin target. The $100 million value capture plan, which is another key contributor to our 13% target, remains on track. Moving on to M&A. Our free cash flow generation and EBITDA growth in the first half of the year gives us confidence in our ability to reduce net leverage in line with our target net leverage range of 2 to 2.5 times near the end of the year while returning to bolt-on M&A. As you may have seen in our July press release, we announced a return to bolt-on acquisitions that are immediately accretive to our adjusted EBITDA margin before synergies. The markets we operate in are highly fragmented, and the team remains focused on identifying the most attractive opportunities within our robust M&A pipeline. I’m excited to continue to add new businesses and their leaders to the APi family. We have strong momentum across our global platform as we enter the back half of the year, allowing us to again increase our full year financial guidance. Kevin will provide details on our updated guidance. In summary, while we remain focused on executing in the back half of the year, I’m proud of our team and how we delivered on our commitments and produced record financial results so far in 2023. Our field leaders continue to be the driving force of our performance. I’m truly grateful for what each of them has done to get us to where we are today. I would now like to hand the call over to Kevin to discuss our financial results and guidance in more detail. Kevin?

Thanks, Russ. Good morning, everyone. Reported net revenues for the three months ended June 30, 2023, increased by 7.4% to $1.8 billion compared to $1.6 billion in the prior year period. Net revenues increased organically for the same period by 7.6% driven by strong organic growth in both Safety and Specialty Services led by double-digit growth in service revenues. In the second quarter, growth in the Safety Services segment was approximately half driven by price and half by volume, while growth in the Specialty Services segment was primarily driven by increased volumes, which were measured through labor hours. Adjusted gross margins for the three months ended June 30, 2023, grew to 28.3%, representing a 160 basis point increase compared to the prior year period driven by price increases, outsized growth in service revenues, and project margin expansion across both segments. These factors were partially offset by inflation, which caused downward pressure on margins. Adjusted EBITDA increased by 16.7% on a fixed currency basis for the three months ended June 30, 2023, with adjusted EBITDA margin coming in at 11.5%, representing an 80 basis point increase compared to the prior year period primarily due to the factors impacting gross margin, partially offset by investments to support revenue growth and the continued build-out of our global capabilities and infrastructure. Adjusted diluted earnings per share for the second quarter was $0.41, representing a $0.04 increase compared to the prior year period. The increase was driven primarily by strong organic growth and margin expansion in both Safety and Specialty Services, partially offset by an increase in interest expense, representing a $0.03 headwind to adjusted diluted earnings per share in the quarter. I will now discuss our results in more detail for Safety Services. Safety Services reported revenues for the three months ended June 30, 2023, increased by 6.9% to $1.2 billion compared to $1.1 billion in the prior year period. Net revenues increased organically by 7.3% driven by double-digit core inspection revenue growth and robust growth in U.S. Life Safety, partially offset by planned customer attrition in our international business and increased discipline in customer and project selection in our HVAC business. Adjusted gross margins for the three months ended June 30, 2023, was 32.4%, representing record high adjusted gross margin and a 180 basis point increase compared with the prior year adjusted gross margin driven by price increases, improved business mix on inspection service and monitoring revenue as well as significant improvement in project margins, partially offset by inflation, which caused downward pressure on margins. Adjusted EBITDA increased by 18.7% on a fixed currency basis for the three months ended June 30, 2023. And adjusted EBITDA margin was 13%, representing a 120 basis point increase compared to the prior year period primarily due to the factors impacting adjusted gross margin, partially offset by investments made to support revenue growth. I will now discuss our results in more detail for our Specialty Services segment. Specialty Services reported revenues for the three months ended June 30, 2023, increased by 7.1% to $555 million compared to $518 million in the prior year period primarily driven by double-digit growth in service revenues led by growth in specialty contracting, infrastructure, and utility markets. It’s partially offset by continued disciplined customer and project selection. Adjusted gross margin for the three months ended June 30, 2023, was 19.1%, representing a 170 basis point increase compared to the prior year period primarily driven by strong organic service revenues as well as significant improvement in project gross margins driven by disciplined customer and project selection. Adjusted EBITDA increased by 15% for the three months ending June 30, 2023. And adjusted EBITDA margin was 12.4%, representing an 80 basis point increase compared to the prior year period primarily due to the factors impacting adjusted gross margin, partially offset by timing of some employee-related expenses and other one-time costs. We continue to focus on driving free cash flow conversion improvements year-over-year, progressing towards our long-term goal of 80% free cash flow conversion. For the three months ended June 30, 2023, adjusted free cash flow came in at $91 million, reflecting an improvement of $28 million versus the prior year period and an adjusted free cash flow conversion of 45%. For the six months of the year, which, as a reminder, is seasonally slower than the back half of the year, we delivered $75 million improvement in free cash flow when compared to the first six months of 2022. Free cash flow generation has been and continues to be a priority across all of APi. And our performance in the first half of the year positions us to deliver on our 2023 guidance of at or above 65% adjusted free cash flow conversion, representing an adjusted free cash flow delivery of over $500 million at the midpoint of our updated adjusted EBITDA guidance. At the end of Q2, our net debt to adjusted EBITDA was approximately 2.9 times even with the return to margin-accretive bolt-on M&A in the quarter. We remain laser-focused on cash generation and deleveraging through our stated long-term net leverage target of 2 to 2.5 times with current expectations to be below 2.5 times net debt to adjusted EBITDA by year-end 2023. Our balance sheet remains strong with a weighted average maturity of approximately 5 years with the earliest maturity in 2026. I will now discuss our guidance for Q3 and full year 2023. As a reminder, our guidance incorporates the expected impact of foreign exchange fluctuations, which we expect to be a modest tailwind in the second half of the year when compared to 2022 after being a headwind in the first half of 2023. I’m pleased with the performance year-to-date and the momentum of the business, which gives us confidence to raise our prior full year guidance for reported net revenues and adjusted EBITDA. We now expect full-year reported net revenues of $7.015 billion to $7.075 billion, up from $6.875 billion to $7.025 billion at current currency expectations. This represents reported net revenue growth of approximately 7% to 8%. We now expect full-year adjusted EBITDA of $765 million to $785 million, up from $740 million to $780 million, which represents reported adjusted EBITDA growth of approximately 14% to 17% and adjusted EBITDA margin of approximately 11% at the midpoint. In terms of Q3, we expect reported net revenues of $1.86 billion to $1.89 billion. This guidance represents reported net revenue growth of approximately 7% to 9%. We expect Q3 adjusted EBITDA of $215 million to $225 million, which represents reported adjusted EBITDA growth of approximately 16% to 21%. For 2023, we anticipate interest expense to be approximately $150 million, depreciation to be approximately $85 million, capital expenditures to be approximately $95 million prior to any potential sale of equipment, and our adjusted effective cash tax rate to be approximately 24%. We expect our adjusted diluted weighted average share count for the third quarter to be approximately $272 million. Overall, I’m pleased with the results delivered by our global team in the second quarter and first half of 2023. I look forward to sharing more updates on our progress throughout the year. I will now turn the call back over to Russ.

Thanks, Kevin. As you’ve heard, APi delivered record financial results in the second quarter and the first half of the year. The business continues to perform well, and we continue to deliver on our commitments. I’m confident in our leaders’ ability to generate continued momentum in the business, build on historically strong execution, and consistently drive margin expansion in any macroeconomic environment through increasing high-margin inspection, service, and monitoring revenue, pricing initiatives, operational improvements, and their relentless focus on customer and project selection. As reflected in the increased guidance Kevin just went through, we had strong momentum across our global platform. Backlog remains healthy. And as planned, we’ll continue to focus on the right work for the right customers in the right markets. We believe we can create sustainable shareholder value by focusing on our 13/60/80 long-term value creation targets. As a reminder, these include above-market organic growth and adjusted EBITDA margin of over 13% by 2025. As we look to 2024 and beyond, we have great confidence in the business and the direction we’re heading. With that, I would now like to turn the call back over to the operator and open the call for Q&A.

Your first question comes from Jon Tanwanteng of CJS Securities.

Hi, good morning. Thank you for taking my questions. My first one, just on the increased guidance. How much of that is contribution from acquisitions that you made recently and any changes in FX? Any color on that would be helpful.

Jon, I heard the first part of the question, so I’ll answer that. And the second part, you’ll have to come back to me on. So our most recent acquisitions announced as part of our July press release are in our guidance. The impact of that in the back half of the year from an EBITDA standpoint is at or around a couple million dollars.

That’s great. I was wondering about FX contribution as well?

FX contribution? Yes, if any. FX in the back half of the year at EBITDA will be somewhere approximately $2 million to $4 million at current currency expectations.

Okay. Great. And then just I’m looking at a little bit longer term, can you talk about the M&A pipeline that you’re seeing even with the smaller tuck-ins that you’ve been doing? Are you seeing more opportunities out there? And is there an opportunity for anything that might be a larger, or more accelerated as you look at the pipeline? Thank you.

Thanks, Jon, and thank you for your continued interest in the company. Our M&A pipeline remains really robust. And as we’ve shared in the past, and we’ve been focused on North America primarily in the U.S. in the Life Safety space just partly because we see the same opportunities available to us in our international business. But we remain focused on executing on our value capture program in that part of our business. But the pipeline is really robust. And I think our company leaders do a really good job of helping us build that pipeline along our M&A leadership inside the company. But there are plenty of opportunities, and we continue to look forward to pursuing them and making sure that we add the right businesses to the APi family. On these bolt-on acquisitions, the number one criteria for us is to find the right fit, make sure we’re culturally aligned and we share common values. And when we do that, that’s one of the primary benefits we have as we think about why we’re able to acquire these companies at reasonable purchase prices, etc. So, lots of opportunities for us. Excited for what the rest of the year is going to bring and potentially in the next year.

Great. Thank you, guys.

Your next question comes from Julian Mitchell of Barclays.

This is Kiran Patel-O’Connor on for Julian. I just wanted to ask about Life Safety. The organic growth there in the quarter and the first half was pretty strong. So I was just curious how much of that organic growth that you’ve seen year-to-date is market-related versus market share gains? Thanks.

Hi Kiran, this is Kevin. I would say that the lion’s share of the growth that we’re seeing in the U.S. Life Safety business is share gains. We continue to win business through our inspection-first model that continues to feed the service side of the business. But we’re going out there and taking business and competition, and that’s the primary driver.

Got it. That’s helpful. You mentioned the market being very fragmented. Are you primarily taking market share from smaller competitors, or are larger players also contributing to these gains?

I mean, I think it’s probably a little bit of both when you think about it. And the key driver for us there is the continued build-out and growth of our inspection sales team. And as we continue to build that group out, we will continue to take share. As I mentioned in my remarks, the more traditional way of companies capturing service and inspection work is to do the installation work first. When the installation work is basically 90% complete, they try to approach that customer and sell them on a service and inspection contract. And we’ve put that model on here and are really, really focused on calling on the already built environment. And that sales force is out pounding the pavement, building relationships with potential customers. So you’re taking that share away from whether that’s a large player or a small player. And it’s about having a different approach and a different tactic as we go after that business.

Got it. Thank you. And then just my follow-up would be you talked about strategic pricing initiatives. And I was just curious, where are these focused and if you’re getting any pushback from customers on them and if there’s any churn as a result? Thank you.

We have incorporated price escalation into our inspection and service contracts, aligning it with wage rate and labor increases. As we sell and pitch these contracts, we actively include these price increases. Generally, we find that these price increases are quite effective. While we have experienced some attrition, which has been somewhat intentional, this has been more noticeable in our international business. Referring back to our Investor Day last November in New York, Andrew White noted a plan for 5% customer attrition, partly due to necessary price adjustments on underperforming contracts. However, we have not seen a 5% attrition rate; it's closer to 2% to 3%. Overall, our price increases have been successful.

Great. Thank you.

Your next question comes from Kathryn Thompson of Thompson Research Group.

Good morning. This is Brian Biros filling in for Kathryn. I appreciate the opportunity to ask my questions. To begin, I noticed that contract revenue was mentioned at high single digits for the quarter, but I haven't heard much discussion on that aspect of the business. Could you provide insights on the trends in that area? Can we anticipate consistent performance like that moving forward, or is this more of an isolated occurrence for the quarter?

Good morning, Brian. Our contract revenue in the quarter was up organically, but it did not grow at the same pace on the service side. Our contract revenue, just to clarify, was at around mid-to-low single-digit growth in the quarter.

Okay. Got it.

I think what you wanted to talk about was the margin expansion on that side of the business, which we continue to purposely moderate growth while we continue to focus on higher margin work with the right customers in the right end markets.

Okay. Got it. And then in the presentation deck, Slide 16, that visual shows that the branch growing margins. I think you guys touched on it on the prepared remarks. Can you just maybe bucket out how many branches are either closer to the beginning of that stage or closer to the end of that journey? Just trying to get a sense of how much impact this has going forward versus just the general push for more services.

If you examine the entire scope of our business, you can see that this branch is fully mature, while our international operations are still in early stages. We span the whole business, and even within North America, where we have focused our strategy for the past decade, there are varying levels of adoption in different areas. It’s difficult to quantify our progress on a scale of 1 to 10 because in some areas, we are at 10, while in others, we might only be at 3 or 4. However, I can confirm that every part of our business now recognizes and embraces this approach. We are actively working on expanding our sales force, which involves recruiting, training, and developing inspectors who can carry out the necessary inspection work. Additionally, we need to define our services to support this work. The process is progressing well in North America, while our international business is just beginning and requires some additional efforts to gain momentum.

Thank you.

Your next question comes from Andy Kaplowitz of Citigroup.

Hey good morning everyone. Russ, so you mentioned U.S. Life Safety still growing low double digits organic. And we talked about inspection market share gains. I know APi is quite nimble regarding its market focus, but could you give us more color into what end markets are driving that growth? And are there any markets that you are more concerned about in terms of slowing?

Thank you. Our primary focus is on data centers, semiconductors, healthcare, higher education to some extent, aviation, and critical infrastructure, which have all shown significant strength. These are the main end markets we continuously guide our business leaders towards. As for commercial real estate, there is a lot of uncertainty as many loans will need refinancing in the next 12 to 18 months, and people are concerned about the implications of that. If you're focused on developer-led commercial real estate projects, that sector is currently struggling. Fortunately, that area represents a very small portion of our business. Overall, I feel optimistic about the end markets we operate in. We can always improve and be more disciplined, but I'm confident in our current position. The discipline our business leaders are exhibiting in project, customer, and market selection is at an all-time high, and I take great pride in it. The expansion in our gross margin reflects this progress. We could pursue more project-based work to boost revenue growth, but it would likely come at the expense of gross margin expansion. It is crucial for us to maintain that gross margin growth as we aim for a long-term target of over 13% by 2025.

Yes, that’s helpful. And maybe the same question for Europe. You already mentioned customer attrition is lower. How would you characterize the European markets? And looks like the growth there is a little bit lower in general. Is it still sort of mid-single digits? And I think that’s what you told us at the Investor Day last November.

Yes, I think that’s fair. And the one thing that I would just point you to and going all the way back to the Investor Day is that our international business is actually inspection service and monitoring makes up 60% of their revenue mix. And so just as a generalized statement, the resiliency of that business is really pretty high. And we have continued to see robust demand in the business. And we have seen minimal customer attrition, and the customer attrition we’re seeing, to be quite honest with you, is positive for the business. And it’s going to improve our margins and performance in the business. So we’re confident in the business and where the business is going.

Helpful. And then maybe one last one for Kevin. Just maybe on price versus cost. Kevin, I think you mentioned price and volume had about a 50-50 split in your revenue in Q2. Is that what you would expect moving forward? And with steel coming down maybe a little bit since the spring, does that help your margin at all in the second half of the year?

Thank you, Andy. The 50-50 split refers to the safety aspect of the business. This is what we have observed on a year-to-date basis and our baseline expectation for the latter half of the year. We view material costs in terms of inflation, comparing them not necessarily year-on-year, but against the costs when we initially proposed our business. The work we focused on during the second quarter was primarily work we proposed towards the end of Q4 last year. Compared to Q4, we have experienced an increase in material costs for both steel and hot-rolled coil, which presents a challenge as we proceed. However, as those costs decrease, and they appear to be continuing to decline in Q3 and the latter part of the year, we should see an improvement in the margins that we lost due to the cost rise in the first half.

Appreciate all the color.

Andy, it's Jim. I just want to chime in. Martin and I were in Minneapolis earlier this week, meeting with both the international team and the domestic team. And everybody went through their growth plans to get to the 13% plus EBITDA margin. But you said earlier in your question you have lower growth in the international business. I just want to level set people who may be new that remember, most of our international business was acquired by Carrier. And historically, that had negative growth over the last 10 years or so. And so the growth that we’re seeing is well within our strategic plan and in line with making sure that we’re spending behind the right initiatives. But we couldn’t be more pleased with the performance of the international side of the business. It’s measured, balanced, and thoughtful growth as compared to its historical performance.

Appreciate the additional color, Jim.

Your next question comes from Chris Snyder of UBS.

Thank you. So organic growth in the first half of the year is kind of hanging around this low double-digit level. And it feels like, ultimately, the drivers of the business are regulation and also share gains, which feel long-lasting and really not macro-dependent. So with that, what are the drivers or the headwinds for just the normalization that’s going to push the organic growth from the low doubles to the kind of the more mid-single-digit normalized levels? Is it the project selection that you guys have been talking about?

100%. And we’ve been very purposeful in the installation work in our HVAC business and trying to make sure that we’re selecting the right opportunities to pursue as well as in our Specialty Services segment just as a whole. And as I mentioned earlier, I’m really proud of our team for the discipline that they’re showing and making sure that we’re pursuing the right opportunities. And I think it’s making a difference.

Thank you for that. For my follow-up, I wanted to ask about the two bolt-on acquisitions the company mentioned in the preannouncement last month. What surprised us was that you indicated these transactions would immediately enhance EBITDA margins, even though they are smaller businesses. Could you elaborate on that? Should we expect similar performance from all bolt-ons, or is there something specific about these that contributes to their higher EBITDA margin? Thank you.

The bolt-on acquisitions we completed recently are showing immediate accretion, with their current EBITDA margins exceeding the average for APi. We expect these businesses to maintain their performance levels as we integrate them quickly and work on enhancing their margins, which is a key aspect of our strategy. From the outset, we consider these businesses accretive under the right assumptions. Generally, our goal is to acquire companies that increase our value. That said, we wouldn't rule out acquiring a business that operates at an EBITDA margin of 11% or 12% if it's located in a desirable geographic area, aligns with our culture and values, and presents a clear opportunity to improve its performance to around a 15% margin. Often, upon acquisition, we discover that the claimed percentage of revenue from inspection services and monitoring is inflated, so we have a structured approach to instill an inspection-first mentality and set these businesses on a positive trajectory. It's crucial for us to explore geographic expansion that complements our existing operations, especially as we aim to expand our national accounts. However, we are not actively seeking underperforming businesses in any way.

Appreciate that. Thank you.

Your next question comes from Andy Wittmann of Baird. Your line is open.

Hey Russ, so I guess my question is, just given the relative growth rates between your inspection, service and monitoring business that’s the flywheel that you’re really focused on growing so well and the project business where you’re being so selective, are you having to move personnel to the inspection side of the business from your project side of the business, given the tight labor market? Can you just talk about how you’re staffing this growth on that inspection side?

Yes, that’s a distinct workforce. Good morning, by the way. We have been expanding our inspection sales team and have established centers of excellence within the Life Safety business to train our new and future inspectors as we continue to recruit. As we build this inspection sales team, it’s essential to develop the workforce that will carry out the work, and we must train those individuals. We also have other centers of excellence, like a design center where we handle overflow and train designers. One of our initiatives is to create accredited apprenticeship programs for fire alarm technicians to ensure that the demand for skilled technicians doesn’t become a bottleneck. It’s crucial to maintain this as a separate workforce. For a strong inspection, service, and monitoring business, these roles need to be distinct. People involved in installation prefer to focus on that work; many are not interested in juggling small jobs for different customers and moving around in a van. Their interests vary, and keeping these roles separate is very important.

Okay. That makes sense. And then I guess for my follow-up, Kevin, for you. Could you just give us an update on the cost capture plans and their status? Maybe talk about how much cost do you expect to incur in the second half of the year, maybe the run rate of cost capture synergies that you exited the second quarter and how you’re tracking for exiting this calendar year as you head into 2024 on those cost captures.

Sure. Good morning. So from an expense standpoint, our prior guide of $55 million to $65 million in the year is still our expectation for full year 2023. As a reminder, that’s on the back of $30 million that we had in 2022. We’ve talked about the 2022 charge of $30 million should accrue to the P&L one-for-one basis for savings. We still expect that in the year to be between $20 million and $25 million that we expect to accrue from a savings standpoint from last year’s charge. This year’s charge will be back-half loaded, but we expect to see some savings there. And they’ll probably be somewhere between $0 and $5 million, so approximately $5 million of additional savings from our 2023 activity and charge.

Thank you.

Your next question is from Steve Tusa of JPMorgan.

Hi, good morning. Congrats on the strong cash flow in the quarter.

Thank you.

The commercial exposure seems to represent about 19% of sales. How much of that pertains to the office segment? Additionally, regarding the telecom utility category, is it primarily telecom, or is there a significant portion related to power energy utilities? I noticed there is also a transmission component. I'm interested in understanding these two segments better.

So in the commercial bucket, I would say a very small amount of that is sort of the high rise that you’re talking about. We estimate that it’s inside of 5%. The remainder would be the end markets or the areas that you are referencing being telecom and some of those other areas.

Great. And then just a little guidance on the segment sales forecast in the second half, just organically how you expect those to trend? Are those pretty stable or accelerating or decelerating? Thanks.

Yes, no problem. We’re not guiding to specific segment breakouts in the back half of the year. But what I’ll tell you is sort of the specialty businesses; we’ve done a good job of managing growth as we planned, focusing on the right end markets and the right customers and driving gross margin expansion. And obviously, we talked a lot about the safety businesses and the U.S. Life Safety business and the performance we saw there in the first half. I would say as you look at our back half, those are similar expectations. We’re going to continue to moderate and manage growth from the Specialty Services side, and we’re going to continue to capture organic growth and share gain on the safety side.

Great. Thanks a lot.

And there are no further questions at this time. I’d be happy to return the call to our hosts for any concluding remarks.

Hey Russ, it’s Jim. Can I just jump in on one thing before you do your concluding remarks, please?

Sure.

So there’s been a lot of conversation on the call today about M&A. So I just want to clarify the return to focus on the tuck-in deals, we think that we can live well within our leverage targets while staying more focused on these smaller acquisitions, so much so that when we were in Minneapolis this week, we talked about ramping up the spending and likely doubling it as we move into 2024 and still doing thoughtful tuck-in M&A, considering larger ones as they come across our desk because we want to remain educated on what’s out there in the world. But the real focus in the near term is on these tuck-in deals that Russ and the team have just done so well historically paying appropriate multiples for them. And as I said earlier, I believe we can ramp up our spending on that and still live well within our debt-to-EBITDA ratio goals. So with that, Russ, I’ll turn it back over to you. Thanks.

Thanks, Jim, for the color. In closing, I would like to thank all of our team members for their continued support and dedication to our business. We believe our people are the foundation on which everything else is built. Without them, we do not exist. I’d also like to thank our long-term shareholders as well as those that have recently joined us for their support. We appreciate your ownership of APi, and we look forward to updating you on our progress throughout the remainder of the year. So thank you again for taking time to join the call. And to all of our APi teammates across the globe, please know that we’re grateful for everything that you do to help us win in this environment. Thank you.

This does conclude today’s conference. You may now disconnect your lines, and everyone, have a great day.