Api Group Corporation · NYSE:APG
Api — Investor Day (April 2021)
69 slides from Api's investor day presentation, Apr 22, 2021
Slide 1: Investor Event April 22, 2021
INVESTOR EVENT APRIL 22, 2021 Exhibit 99.1
Slide 2: Forward-Looking Statements and Disclaimers
Forward-Looking Statements and Disclaimers This presentation does not constitute or form part of any offer or invitation to purchase, otherwise acquire, issue, subscribe for, sell or otherwise dispose of any securities, nor any solicitation of any offer to purchase, otherwise acquire, issue, subscri
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation contains non-U.S. GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The Company uses certain non-U.S. GAAP financial measures that are included in this press release and the additional finan
Slide 4: Non-GAAP Financial Measures (Cont'd)
Non-GAAP Financial Measures (Cont’d) The Company presents free cash flow, adjusted free cash flow and adjusted free cash flow conversion, which are liquidity measures used by management as factors in determining the amount of cash that is available for working capital needs or other uses of cash, ho
Slide 5: Welcome Remarks
BUILDING GREAT LEADERS® PRESENTERS Welcome Remarks Sir Martin E. Franklin James E. Lillie Russ Becker
Slide 6: Agenda
Agenda BUILDING GREAT LEADERS® SECTION PRESENTERS Welcome Remarks Russ Becker CEO and President Sir Martin E. Franklin Co-Chair, Board of Directors James E. Lillie Co-Chair, Board of Directors Who We Are and the Path Forward Russ Becker CEO and President Driving Margin Expansion Building Great Leade
Slide 7: Today's Presenters
Today’s Presenters Kristin Schultes Vice President of Integration Tom Lydon Chief Financial Officer Russ Becker CEO and President Jeff Daane Safety Services Segment Leader Paul Grunau Chief Learning Officer Sir Martin E. Franklin Co-Chair, Board of Directors Velma Korbel Chief Diversity, Equity, and
Slide 8: Key Investment Criteria
Key Investment Criteria OUR GOAL TODAY To demonstrate and reinforce the drivers that will deliver consistent, profitable growth for our shareholders A leader in each of the niche industries we serve Strong free cash flow generation Strong leadership team with proven track record Services-focused bus
Slide 9: Who We Are
BUILDING GREAT LEADERS® Who We Are Russ Becker PRESENTER
Slide 10: Who We Are
Who We Are We are a market-leading business services provider of safety, specialty and industrial services We provide statutorily mandated services and other contracting services to a strong base of long-standing customers across industries, primarily in north America and with an expanding platform
Slide 11: Our Culture
Our Culture OUR VALUES OUR PURPOSE THE RESULTS + Safety, heath and well-being of all our leaders Caring and enduring relationships with others Honesty and integrity Excellence, nothing less Joy in our work and in each other Combining individual company agilities with large company advantages Shareho
Slide 12: Company Timeline
Proud evolution from local contracting firm to global industry leader with recurring services-focused business model Reuben L. Anderson established small plumbing company in St. Paul, MN Established goal of 50%+ revenue from service Acquired by J2 Acquisition Ltd. Listed on the NYSE under the ticker
Slide 13: Broad Geographic Footprint
Broad Geographic Footprint 3 6 14 4 4 4 5 4 7 4 7 8 6 9 As of December 31, 2020. Represents data for North America. Source: 2020 ENR Report. Based on management estimate. Refer to Appendix for reconciliation of non-GAAP measures to most directly comparable GAAP measures. Who We Are Top 5 Specialty S
Slide 14: Segment Breakdown and Revenue Diversification
Who We Are Segment Breakdown Revenue Diversification Industrial Services Specialty Services Safety Services SEGMENT Revenue Generated Outside of the U.S. Revenue Generated in the U.S. GEOGRAPHY Average Project Size(3) ~89% ~40% Service as a % of 2020 net revenues <5% Largest customer as a % of 2020
Slide 15: Safety: Our Commitment to Zero
Safety: Our Commitment to Zero 1.3 Total Recordable Incident Rate (TRIR)(1) 0.64 Experience Modification Rate (EMR)(1) Key SAFETY Metrics Who We Are Ten Core Values Zero is achievable and is the expectation of everyone who works on our team. We care about each other. The safety and well-being of our
Slide 16: The Path Forward
The Path Forward BUILDING GREAT LEADERS® PRESENTER Russ Becker
Slide 17: Driving Long-Term Growth
Driving Long-Term Growth + GROW Recurring service revenue Geographic expansion Expansion into adjacencies Channel expansion CAPITALIZE Improved project and customer selection Increase market share Pricing opportunities Investment in back-office infrastructure Increase margins SCALE Expand core busin
Slide 18: Focus on Long-Term Value Creation
Deliver long-term organic revenue growth above industry average Leverage SG&A / COGS Expand adjusted EBITDA margin to 12%+ BY FY 2023 Average adjusted free cash flow conversion of 80%+ Generate high single digit average earnings growth 2.0x to 2.5x Target long-term net leverage ratio of Focus on Lon
Slide 19: Path to 12%+ Adjusted EBITDA Margin
Improve mix Grow inspection and service revenue Disciplined project and customer selection Leverage SG&A / COGS Procurement Shared services Pricing opportunities Operational excellence Just be better 1 2 4 3 5 Path to 12%+ Adjusted EBITDA Margin The Path Forward
Slide 20: Driving Margin Expansion
Driving Margin Expansion BUILDING GREAT LEADERS® PRESENTERS PRESENTERS Russ Becker Jeff Daane Kristin Schultes Tom Lydon Joe Walsh Paul Grunau Velma Korbel
Slide 21: Driving Margin Expansion: Building Great Leaders
Driving Margin Expansion: Building Great Leaders BUILDING GREAT LEADERS® PRESENTERS Paul Grunau Velma Korbel
Slide 22: What We Believe
What We Believe Great leaders are a competitive advantage and create shareholder value We each own our development Leadership is the single biggest differentiator between average and excellent Leaders develop Leaders Building Great Leaders Everyone is a Leader Everyone should have the opportunity to
Slide 23: Best-in-Class Leadership Development
Best-in-Class Leadership Development Accelerated Readiness Program (“ARP”) Field Leader Development Additional Leadership Opportunities Executive coaching Leadership compass Learning management system Succession development EQI, DISC, and 360 assessments, debriefs and workshops Field Leader Day Fiel
Slide 24: Leadership Blueprint
LEADERSHIP BLUEPRINT LEADING SELF LEADING TEAMS AND BUSINESSES LEADING OTHERS Building Great Leaders
Slide 25: Building Great Leaders: Talent Acquisition & Retention
Building Great Leaders Talent Acquisition & Retention Cross-functional leadership development platform designed to enable independent company leadership, cultivate broad management skills, enhance organizational flexibility, and empower the next cohort of leaders across our businesses Seven rotation
Slide 26: Driving Margin Expansion: Safety Services
BUILDING GREAT LEADERS® PRESENTER Jeff Daane Driving Margin Expansion: Safety Services
Slide 27: Safety Services at a Glance
Safety Services at a Glance 3 6 Safety Services Multiple Offices Single Offices 14 4 4 8 4 5 4 7 4 7 3 #1 150+ Locations Worldwide 15+ Operating Companies ~8,000 Employees(1) ~$10,000 Average Project Size(1) Safety Services Data as of December 31, 2020. Represents statistic based on North America. S
Slide 28: Services Overview
Services Overview Life Safety Backflow devices Emergency and exit lighting Emergency fire suppression systems Fire alarm and detection systems Fire pumps Security and surveillance systems Standby systems HVAC Services (Mechanical) Controls technology and entry systems HVAC systems and service and ma
Slide 29: Safety Services Revenue Diversification
Safety Services Safety Services Revenue Diversification SERVICE HVAC Services (Mechanical) Life Safety Revenue Generated Outside of the U.S. Revenue Generated in the U.S. ~29% ~18% ~13% ~13% ~8% ~5% ~4% GEOGRAPHY END MARKET Data based on management’s estimated 2021 net revenues. Data estimated by ma
Slide 30: Safety Services: Strategic Priorities / Growth Drivers
12%+: Strategic Priorities / Growth Drivers Increasing Share with Existing Customers $4.4 – $7.5 MARGIN EXPANSION OPPORTUNITIES GROWTH DRIVERS EXAMPLE Defibrillator Services AEDs found in public settings throughout the U.S. ~3.2mm Total number of AEDs required if rapid defibrillation is going to be
Slide 31: Driving Margin Expansion: Specialty Services
PRESENTER BUILDING GREAT LEADERS® Joe Walsh Driving Margin Expansion: Specialty Services
Slide 32: Specialty Services at a Glance
Specialty Services at a Glance 6 9 Specialty Services Multiple Offices Single Offices 40+ Locations in the U.S. 10+ Operating Companies ~3,000 Employees(1) ~$70,000 Average Project Size(1) Specialty Services ~$1.4bn 2020 Adjusted Net Revenues(2) ~12.1% 2020 Adjusted EBITDA Margin(2) Data as of Decem
Slide 33: Specialty Services Overview
Specialty Services Services Overview Specialty Services Infrastructure / Utility Electric and gas utility maintenance Fiber optic and cellular system installation and maintenance including 5G Natural gas line distribution services Underground electrical, transmission line and fiber optic cable insta
Slide 34: Specialty Services Revenue Diversification
Specialty Services Revenue Diversification Specialty Contracting Fabrication Infrastructure / Utility Revenue Generated in the U.S. ~13% ~10% ~8% ~5% ~4% ~2% Data based on management’s estimated 2021 net revenues. Data estimated by management based on 2020 net revenues. Other Commercial / Education
Slide 35: Specialty Services: Strategic Priorities / Growth Drivers
Specialty Services 12%+: Strategic Priorities / Growth Drivers MARGIN EXPANSION OPPORTUNITIES GROWTH DRIVERS Grow service revenue through multi-year master service agreements Disciplined project and customer selection Pricing opportunities Leverage SG&A / COGS (e.g. procurement, shared services) Joi
Slide 36: Driving Margin Expansion: Industrial Services
BUILDING GREAT LEADERS® PRESENTER Russ Becker Driving Margin Expansion: Industrial Services
Slide 37: Industrial Services at a Glance
Industrial Services at a Glance Industrial Services Multiple Offices Single Offices 10+ Locations in North America 5 Operating Companies ~1,000 Employees(1) ~$700,000 Average Project Size(1) SERVICE Civil Transmission ~77% ~15% ~4% ~3% ~1% Telecom / Utilities Integrity / Transmission Government / In
Slide 38: Industrial Services: Strategic Priorities / Growth Drivers
12%+: Strategic Priorities / Growth Drivers Disciplined project and customer selection Grow service revenue through multi-year master service agreements Improve margins as opposed to growing the top line Pricing opportunities Leverage SG&A / COGS (e.g. procurement, shared services) Focused on statut
Slide 39: Driving Margin Expansion: Disciplined Project and Customer Selection
BUILDING GREAT LEADERS® PRESENTER Driving Margin Expansion: Disciplined Project and Customer Selection Russ Becker
Slide 40: Disciplined Project and Customer Selection
Disciplined Project and Customer Selection BUILDING GREAT LEADERS® Disciplined Project and Customer Selection Contract Loss Rate Contract language / negotiation of terms Go / no-go checklists Improved Operational Discipline AND BEYOND 2022 Increased discipline around key performance metrics Less tha
Slide 41: Driving Margin Expansion: Growing Inspection and Service Revenue
BUILDING GREAT LEADERS® Driving Margin Expansion: Growing Inspection and Service Revenue Courtney Brogard PRESENTER
Slide 42: Growing Inspection and Service Revenue
Growing Inspection and Service Revenue Differentiated Business Model COMPETITORS APi’s strategy in Safety Services is to sell inspection work first, for which every $1 leads to $3 – $4 of service work(1), and ultimately to relationship based, higher margin new contract revenue opportunities Target i
Slide 43: Driving Recurring Revenue
Driving Recurring Revenue Multiplier effect (3-4x) service return(1) Stable, higher margin recurring revenue Economic resiliency Clearly defined objectives and goals Statutorily mandated Pricing opportunities BUILDING GREAT LEADERS® Growing Inspection and Service Revenue Based on management estimate
Slide 44: Service Revenue Growth
Service Revenue Growth 50%+ Service Revenue 2008 CURRENT(1) TARGET Stability through significant recurring service revenue On average, service and inspection revenue generates ~10%+ higher gross margin than contract revenue Data for Life Safety companies as of December 31, 2020. Growing Inspection a
Slide 45: Intentional Inspection Focus
Intentional Inspection Focus THE I.M.A. PROGRAM C.I.S.L. ROLE & INTENTION Corporate Inspection Sales Leader Grow inspections Hire Train Inspection Managed Account Program Grow Inspection Revenue 10%+ ANNUALLY Inspection and service revenue represent 50%+ OF REVENUE Inspection and service to cover 10
Slide 46: Driving Margin Expansion: Leverage SG&A / COGS
PRESENTER BUILDING GREAT LEADERS® PRESENTER Driving Margin Expansion: Leverage SG&A / COGS Tom Lydon
Slide 47: Leverage SG&A / COGS
Leverage SG&A / COGS BUSINESS PROCESS TRANSFORMATION Common systems projects to improve controls and allow for future shared service SG&A leverage and better buying power Leverage SG&A / COGS Enable standardized processes and technology, SOX compliance and controls for key business processes and sys
Slide 48: Driving Margin Expansion: Integration
PRESENTER BUILDING GREAT LEADERS® Driving Margin Expansion: Integration Kristin Schultes
Slide 49: Integration Value of APi Platform
Integration Value of APi Platform Focused integration activity to drive and capture cost savings Drive cultural integration with fully engaged employees Leverage purchasing power Drive longer-term revenue synergies through cross-selling opportunities Sharing of best practices Pricing opportunities I
Slide 50: Integration Plan
Integration Plan BUILDING GREAT LEADERS® PRE-CLOSE PHASE 1 PHASE 2 PHASE 3 Day of Close + 30 Days Two – Six Months Beyond Diligence and structuring participation Determine level of integration Day 1 planning Customer and vendor communications IT approach Personnel related Insurance / surety IT infra
Slide 51: Growth Through M&A
Growth Through M&A BUILDING GREAT LEADERS® PRESENTERS Sir Martin E. Franklin James E. Lillie Russ Becker
Slide 52: APi's Disciplined Acquisition Strategy
APi’s Disciplined Acquisition Strategy KEY CRITERIA DEAL SOURCING Alignment of values and culture fit Industry associations History of strong free cash flow generated Track record Experienced management team with proven record Company leader referrals Service growth component Cold calls Accretive to
Slide 53: Potential Areas of Interest
Potential Areas of Interest Fire & Life Safety Elevator & Escalator Repair & Maintenance HVAC Services Utility & Telecom Services Leverage existing competencies and infrastructure Strengthen recurring, inspection, maintenance and service revenue Complementary to existing life safety offerings with a
Slide 54: Financial Perspective & Investment Opportunity
Financial Perspective & Investment Opportunity BUILDING GREAT LEADERS® PRESENTERS Tom Lydon James E. Lillie
Slide 55: Strong Free Cash Flow Generation
Strong Free Cash Flow Generation Committed to driving strong free cash flow Long-term average adjusted free cash flow conversion target of 80%+ Asset light model which allows us to increase volume without the need for significant additional capital expenditures As revenue rebounds post COVID-19, use
Slide 56: Investment Opportunity
Investment Opportunity 2021 ADJUSTED FCF YIELD Source: FactSet as of April 16, 2021. Based on average long-term adjusted free cash flow conversion target of 80%+. Peer group includes Carrier Global, Cintas Corporation, Comfort Systems USA, Inc., Jacobs Engineering Group Inc., Johnson Controls Intern
Slide 57: Establishing Performance Track Record
Establishing Performance Track Record SHARE PRICE APPRECIATION FROM NYSE LISTING ON 4/29/20 Source: FactSet as of April 16, 2021. (Indexed Price Performance) Financial Perspective & Investment Opportunity
Slide 58: Building Blocks for Long-Term Value Creation
Building Blocks for Long-Term Value Creation Delivering best-in-class shareholder returns through prudent capital allocation Deliver long-term organic revenue growth above industry average Entry into adjacent service categories and geographies Maximize cross-selling opportunities Revenue Growth EBIT
Slide 59: 2021 Guidance
2021 Guidance 2021 net revenues between $3,650 to $3,750 million driven by APi’s relentless focus on service and inspection combined with disciplined approach to project and customer selection Growth in segment net revenues on an organic basis of ~8% in Safety Services and ~6% in Specialty Services,
Slide 60: Driving Margin Expansion: Path to 12%+ Adjusted EBITDA Margin
BUILDING GREAT LEADERS® PRESENTER Driving Margin Expansion: Path to 12%+ Adjusted EBITDA Margin Russ Becker
Slide 61: Path to 12%+ Adjusted EBITDA Margin
Path to 12%+ Adjusted EBITDA Margin = Based on ~$1 billion of revenue and ~$150 million of EBITDA from M&A Strategic M&A Synergies $30 – $50 $ IN MILLIONS Grow inspection revenue by 10%+ annually Improve Mix $55 – $65 1 + Just be better Operational Excellence $5 – $7 5 Improve contract loss rate Dis
Slide 62: 13%+ Adjusted EBITDA by YE 2025 New Goal
13%+ Adjusted EBITDA by YE 2025 New Goal Financial Perspective & Investment Opportunity
Slide 63: Q&A Session
Q&A Session
Slide 64: Appendix
Appendix
Slide 65: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures $ IN MILLIONS Net Revenues and Adjusted Net Revenues (non-GAAP) Adjustment to reflect the elimination of amounts related to businesses divested and classified as held-for-sale. Acquisitions exclude net revenues of material acquisitions from their respect
Slide 66: Reconciliation of Non-GAAP Financial Measures (Cont'd)
Reconciliation of Non-GAAP Financial Measures (Cont’d) $ IN MILLIONS EBITDA and Adjusted EBITDA (non-GAAP) Adjustment to reflect the elimination of amounts related to businesses divested and classified as held-for-sale, inclusive of impairment charges and gain/(loss) on sale. Adjustment to reflect t
Slide 67: Reconciliation of Non-GAAP Financial Measures (Cont'd)
Reconciliation of Non-GAAP Financial Measures (Cont’d) Adjustment to reflect the elimination of amounts related to businesses divested and classified as held-for-sale. Adjustment to reflect the addback of amortization expense related to backlog intangible assets. Adjustment to reflect annualized dep
Slide 68: Reconciliation of Non-GAAP Financial Measures (Cont'd)
Reconciliation of Non-GAAP Financial Measures (Cont’d) Information based on non-GAAP reconciliations included in this presentation. $ IN MILLIONS Adjusted Segment Financial Information (non-GAAP)
Slide 69: Reconciliation of Non-GAAP Financial Measures (Cont'd)
Reconciliation of Non-GAAP Financial Measures (Cont’d) Adjustment to reflect the elimination of amounts related to businesses divested and classified as held-for-sale, inclusive of impairment charges and gain/(loss) on sale. Adjustment to reflect the elimination of expense attributable to deferred c