What APi Group (APG) Said on Its Q3 Earnings Call

Key Points

• APi Group reported record Q3 results, with revenue up 22.5% year over year to $2.55 billion, organic growth of 15.7%, and adjusted EBITDA margin expanding to 13.7%. Backlog surpassed $5 billion for the first time.
• Specialty Services led segment growth with 29.9% organic revenue growth, while Safety Services benefited from strong inspection, monitoring and project demand. Management said higher-margin project work should support further margin gains through 2026 and 2027.
• The company raised its 2026 outlook for the third time, forecasting $9.20 billion–$9.25 billion in revenue, adjusted EBITDA of $1.235 billion–$1.255 billion and approximately 110% free-cash-flow conversion. APi also remains active in acquisitions, completing 13 transactions year to date.

APi Group NYSE: APG reported record third-quarter results, with revenue rising 22.5% year over year to $2.55 billion and organic revenue growth of 15.7%, as demand remained strong across inspection, service, monitoring and project work.

President and CEO Russ Becker said the company recorded its fourth consecutive quarter of double-digit organic growth. He cited accelerating growth in Safety Services, record backlog, pricing discipline and continued demand from end markets including semiconductors, advanced manufacturing, data centers, healthcare, warehouse and distribution, and critical national infrastructure.

“Our business continues to perform at a high level,” Becker said, adding that APi’s backlog exceeded $5 billion for the first time and remained diversified across segments, service lines and end markets.

Profitability Expands Despite Gross-Margin Pressures

Adjusted EBITDA increased 24.6% in the third quarter, while adjusted EBITDA margin expanded 20 basis points to 13.7%. Adjusted diluted earnings per share rose 22% to $0.50.

Adjusted gross profit margin declined 120 basis points from the prior-year period to 30.3%. Executive Vice President and CFO David Jackola attributed the decline to project and business mix as well as higher material, fuel and other expenses. However, strong revenue growth and favorable selling, general and administrative expense leverage supported EBITDA margin expansion.

Becker said this was the company’s 16th consecutive quarter of adjusted EBITDA margin expansion. He said APi expects higher-margin project work currently entering backlog to become a more meaningful contributor to margin gains over the remainder of 2026 and into 2027.

During the analyst question-and-answer session, Jackola said a greater share of project revenue weighed on Safety Services gross margins, particularly as new projects tend to begin at lower margins before improving as work progresses. He also said recently acquired businesses can experience a temporary margin decline while teams transition following a sale and integration process.

Segment Results Led by Specialty Services

Safety Services revenue increased 18.5% to $1.66 billion, including 8.8% organic growth. The segment’s inspection, service and monitoring revenue continued to grow at a mid- to upper-single-digit rate, while project activity accelerated during the quarter. Segment earnings rose 19.1%, and segment earnings margin increased 10 basis points to 16.9%.

Becker said North American Safety generated double-digit organic revenue growth, supported by double-digit growth in inspection revenue and a robust large-project environment. He said the company had not seen meaningful project delays or cancellations.

International Safety returned to organic growth during the quarter following prior pressure, according to management. Becker said order intake, customer additions and project backlog improved, with project backlog reaching a multiyear high in both value and book gross margin. APi expects the business to return to its historical mid-single-digit growth rate in 2027.

Specialty Services revenue climbed 30.7% to $893 million, including 29.9% organic growth. Segment earnings increased 38.3%, while segment earnings margin expanded 60 basis points to 12.5%. Jackola said disciplined customer and project selection, pricing improvement, revenue growth and SG&A leverage contributed to the margin improvement.

Becker said nearly half of Specialty Services revenue comes from required and recurring services. He also highlighted efforts to bring multiple APi services into a single customer proposal, including structural, mechanical, fire and life safety, and structured cabling capabilities. The company said such cross-business collaboration contributed meaningfully to quarterly revenue growth.

Acquisitions and Capital Deployment

APi closed the acquisition of WTech during the quarter and completed three bolt-on transactions, including Evergreen Fire & Security, a Washington-based systems integrator that expands the company’s North American electronic-security capabilities.

The company has completed 13 transactions year to date and remains on track to spend $250 million on bolt-on acquisitions in 2026. Becker said APi is building capabilities to support $350 million of annual bolt-on M&A spending. He said the company generally pays EBITDA multiples of five to six times for highly complementary bolt-on acquisitions and low-teens multiples for larger strategic or platform transactions.

Becker said acquisitions completed in 2026, including CertaSite, Onyx-Fire, WTech and Evergreen, add more than $500 million of annualized revenue. He said APi expects a full-year contribution from those businesses in 2027, along with benefits from integration, cross-selling, procurement scale and service opportunities.

For the first nine months of the year, APi generated adjusted free cash flow of $468 million, up $34 million from the prior-year period. Adjusted free cash flow conversion was 84% of adjusted net income. The company ended the quarter with a net leverage ratio of 2.4 times.

APi deployed $1.7 billion of capital through the first nine months of 2026. It repurchased $252 million of shares through the end of the third quarter and an additional $143 million in the fourth quarter to date, leaving about $607 million under its authorization.

2026 Guidance Raised

The company raised its full-year outlook for the third time in 2026 excluding acquisitions, with guidance also incorporating completed acquisitions and current foreign-exchange rates.

• Net revenue is expected to be $9.20 billion to $9.25 billion, compared with prior guidance of $8.875 billion to $9.025 billion.
• Organic revenue growth is expected to be 11% at the midpoint.
• Adjusted EBITDA is projected at $1.235 billion to $1.255 billion, up from prior guidance of $1.205 billion to $1.245 billion.
• Adjusted EBITDA margin is expected to be 13.5% at the midpoint, with adjusted EBITDA growth of 20%.
• Adjusted free cash flow conversion is expected to be approximately 110% of adjusted net income.

Jackola said the updated outlook includes estimated unfavorable foreign-exchange effects of $30 million on revenue and $5 million on adjusted EBITDA relative to the prior outlook.

Management did not provide formal 2027 guidance, saying it plans to issue its budget and outlook in February. Becker said, however, that the company enters 2027 with a record backlog, improving International Safety trends, a full-year benefit from recent acquisitions and continued focus on its “10/16/60+” framework, which includes a long-term $10 billion revenue objective and a 16% adjusted EBITDA margin target for 2028.

About APi Group (NYSE:APG)

APi Group Corporation NYSE: APG is a global provider of safety, specialty and industrial services. The company serves commercial, industrial and infrastructure customers through a network of operating businesses that provide services designed to protect people, property and critical assets.

APi Group's offerings include fire protection and life-safety systems, security services, heating, ventilation and air-conditioning services, industrial maintenance, specialty contracting and infrastructure services.

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