Andy Wittman

Andy Wittman asked for an update on pricing, specifically how it evolved in the quarter and its magnitude in both non-certification and certification testing. He also inquired about new product releases from customers, particularly within the data center ecosystem, asking for specifics on testing categories, product types, and the revenue contribution from this area. Finally, he sought clarification on the restructuring plan's cost and if most actions have been taken.

Answer

CFO Ryan Robinson stated that price and volume contributed similarly to revenue growth in both certification and non-certification testing in Q4 and full year, with plans to maintain this mix in 2026. CEO Jennifer Scanlon highlighted double-digit growth from digitalization trends, especially in data centers, driven by new complexities in thermal dynamics, DC current, and cooling. She noted testing spans industrial (power, renewables, wire/cable, built environment) and consumer (chillers, HVAC, server tech) categories. Ryan Robinson confirmed the restructuring plan's cost range has not changed, with the majority recorded in Q4 and the remainder expected in H1 2026.

Andy Wittman (Baird) questioned the higher-than-expected capital expenditure forecast for 2026 and beyond, and sought details on new technology and training for sellers, along with examples of future efficiency initiatives.

Answer

VP of Finance Chris Stoczko and CEO Dale Asplund explained the increased CapEx is due to accelerating fleet refresh, driven by balance sheet flexibility and its positive impact on employee and customer retention, with repair/maintenance/rental expenses already seeing a 15% reduction. Dale described new digitized training content for sales, focusing on ancillary services. CFO Brett Urban added that future efficiencies will come from fleet, centralized procurement, and technology investments like the field service management system for crew routing.

Andy Wittman asked for an assessment of APi Group's margin performance, specifically the 10 basis point increase, in the context of its 2028 margin goals, considering factors like material costs, growth investments, and the growth-margin trade-off.

Answer

Russ Becker, President and CEO, affirmed the 2028 margin expansion goal is realistic and that margins will continue to expand non-linearly. David Jackola, EVP and CFO, added that strong margin expansion is seen in inspection, service, and monitoring (ISM) work, and project margins in Specialty Services are expected to expand sequentially in Q4 and into 2026 as projects move deeper into completion. Mr. Jackola also noted that increased corporate costs and variable compensation impacted Q3 margins. Mr. Becker clarified that investments are primarily in building out the sales team for ISM.

Andy Wittman from Baird questioned APi Group's margin performance, specifically the 10 basis point increase, and asked for an assessment of the balance between growth and margin expansion, considering the 2028 margin goals. He also sought clarification on material costs and growth investments.

Answer

President and CEO Russ Becker confirmed the realism of the 2028 margin targets and expressed confidence in balancing organic growth, anticipating non-linear margin expansion. EVP and CFO David Jackola added that inspection, service, and monitoring (ISM) work shows strong margin expansion, and Specialty Services project margins are expected to improve sequentially as projects near completion. Mr. Jackola also noted that higher corporate costs and variable compensation impacted Q3 margins. Mr. Becker clarified that investments are primarily directed towards expanding the ISM sales team and leadership to meet future growth objectives.