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APi Group Corp (APG)·Q3 2025 Earnings Summary

Executive Summary

  • Record Q3 results with broad-based growth: revenue $2.085B (+14.2% YoY, +~$95M vs Q2), adjusted EBITDA $281M (+14.7% YoY, 13.5% margin, +10 bps YoY), and adjusted EPS $0.41 (+20.6% YoY). Management raised FY25 revenue and adjusted EBITDA guidance.
  • Clear beat vs S&P Global consensus: revenue and EPS exceeded estimates; adjusted EBITDA also ahead of consensus. Management cited stronger project activity and continued inspection/service momentum; Specialty Services margins still early in project cycle but expected to expand sequentially. Values marked with * from S&P Global.
  • Mix dynamics explain modest margin expansion (10 bps YoY): higher project starts (lower early-cycle margins) offset by pricing discipline and inspection/service strength; corporate costs and variable comp also weighed on margin.
  • FY25 guidance raised: revenue to $7.825–$7.925B (from $7.65–$7.85B) and adjusted EBITDA to $1.015–$1.045B (from $1.005–$1.045B), with ~75% adjusted FCF conversion.
  • Potential stock catalysts: continued sequential margin expansion in Specialty Services, high conversion in Q4 FCF, and disciplined exposure to high-tech/data center projects (~10–11% of revenue) with long-tail service opportunities.

What Went Well and What Went Wrong

What Went Well

  • Inspection/service momentum and pricing drove margin gains: “double-digit inspection growth in North America for the 21st straight quarter,” with pricing and project selection improving margins.
  • Strong project pipeline and record backlog support growth; management is “being opportunistic but not overcommitting in the high-tech space,” positioning projects to seed recurring service revenue.
  • Capital deployment: 4 bolt-ons in Q3 (11 YTD), on track to deploy ~$250M in 2025 at attractive multiples; net leverage ~2.0x, below long-term target.

What Went Wrong

  • Specialty Services margin pressure: adjusted gross margin fell 60 bps YoY to 19.3% and segment margin fell 80 bps to 11.9% due to increased project starts, mix, and material costs.
  • Mix headwind to consolidated margin: higher early-stage project contribution limited consolidated adjusted EBITDA margin expansion to +10 bps YoY despite pricing discipline.
  • Incremental corporate costs and variable compensation also weighed on margins in the quarter.

Financial Results

Headline Metrics (YoY and sequential comparison)

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$1,826 $1,990 $2,085
Gross Margin %31.1% 31.2% 31.5%
Adjusted EBITDA ($USD Millions)$245 $272 $281
Adjusted EBITDA Margin %13.4% 13.7% 13.5%
GAAP Diluted EPS ($)$0.15 $0.16 $0.20
Adjusted Diluted EPS ($)$0.34 $0.39 $0.41

Notes:

  • Q3 revenues +14.2% YoY (9.7% organic), with “record” Q3 revenue and EBITDA.
  • Sequentially, revenue increased vs Q2 ($2.085B vs $1.990B) while EBITDA margin moderated on mix.

Segment Breakdown

Segment MetricQ3 2024Q2 2025Q3 2025
Safety Services Revenue ($MM)$1,216 $1,362 $1,403
Safety Adjusted Gross Margin %36.5% 37.2% 37.3%
Safety Segment Earnings Margin %16.4% 17.0% 16.8%
Specialty Services Revenue ($MM)$612 $629 $683
Specialty Adjusted Gross Margin %19.9% 18.1% 19.3%
Specialty Segment Earnings Margin %12.7% 11.3% 11.9%

KPIs and Cash/Leverage

KPIQ3 2025
Adjusted Free Cash Flow ($MM)$248
Adjusted FCF Conversion %88.3%
YTD Adjusted FCF ($MM)$434
Q3 Net Debt / Adjusted EBITDA (approx.)~2.0x (management commentary)
Cash and Equivalents ($MM)$555

Results vs S&P Global Consensus (Q3 2025)

MetricActualConsensusBeat/Miss
Revenue ($MM)$2,085 $2,008.9*Beat
Adjusted EPS ($)$0.41 $0.3952*Beat
Adjusted EBITDA ($MM)$281 $276.6*Beat

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenues ($MM)FY 2025$7,650–$7,850 $7,825–$7,925 Raised
Adjusted EBITDA ($MM)FY 2025$1,005–$1,045 $1,015–$1,045 Raised (midpoint)
Adjusted FCF ConversionFY 2025~75% ~75% Maintained
Corporate Expense (Adj)FY 2025—~$35MM/quarter (timing variability) New detail
Interest ExpenseFY 2025—~$145MM New detail
DepreciationFY 2025—~$85MM New detail
CapexFY 2025—~$100MM New detail
Adjusted Tax RateFY 2025—~23% New detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
Inspection/Service mix and pricingEmphasis on inspection/service growth, pricing and selection driving higher margins (Q1) ; Q2 pricing and selection lifted Safety margins “Double-digit inspection growth in North America,” continued pricing and disciplined selection supporting margin Positive, sustained
Specialty Services margins & project mixQ1 revenue decline and lower fixed-cost absorption pressured margins ; Q2 margins down on project starts, materials, weather Margins still below prior year but sequential improvement expected into Q4 as projects mature Improving sequentially
Guidance trajectory & margin targetsFY25 guidance raised; margin framework communicated (13/60/80) FY25 revenue and adj. EBITDA raised again; 10/16/60+ reiterated Upward bias, higher ambition
Capital deployment & M&AQ1: new $1B buyback; ongoing M&A 4 bolt-ons in Q3 (11 YTD); ~$250MM 2025 deploy, leverage ~2.0x Active, balanced
Macro/tariffs/supply chainQ1 referenced navigating dynamic tariff variables Materials inflation and mix noted; project sizing/complexity favors scaled players Mixed but manageable
Data center/high-tech exposure—Data centers ~9–10% of revenue in 2025; may “creep to 10–11%,” with service tail Tailwind, disciplined approach
Technology enablement—AI-enabled tools (API Echo, OneCode, Connected Glasses) and ERP deployment underway; 2025 peak spend Building capabilities

Management Commentary

  • “We continue to accelerate organic growth while expanding adjusted EBITDA margins, growing our recurring inspection, service and monitoring business, building on our record backlog, and improving our free cash flow generation.”
  • On project discipline and opportunity set: “We are being opportunistic but not overcommitting in the high-tech space…primarily sourced from our existing inspection and service relationships…margin accretive…and provide a long-term recurring inspection and service revenue opportunity.”
  • On Specialty Services margin trajectory: “We will see margins expand sequentially again in Q4…as those projects move deeper into completion.”
  • On data centers: “Data centers probably accounted for…7–8% of total revenue and maybe…9–10% based on tailwinds…might creep to 10–11%.”
  • On technology investments: “API Echo…OneCode…Connected Glasses…and an AI-enabled predictive tool…we believe our business-led approach…will…drive growth and margin expansion as we work towards our 10-16-60+ financial targets.”
  • On leverage and capital allocation: “Net debt to adjusted EBITDA…~2.0x…flexibility to pursue value enhancing capital deployment…priorities remain…maintaining net leverage…strategic M&A…opportunistic share repurchase.”

Q&A Highlights

  • Data center exposure and sustainability: Management expects revenue contribution to “creep to 10–11%,” noting fire/life safety scope is smaller vs HVAC but provides service tail; backlog supports continued activity.
  • Margin progression vs growth: Incremental corporate costs/variable comp weighed in Q3; inspection/service margins expanding; Specialty Services to improve sequentially as projects mature into completion phases.
  • M&A cadence and focus: 11 bolt-ons YTD; ~$250M deploy in 2025; priority areas are North American fire protection, electronic security, and elevators, with international activity governed by country readiness.
  • Technology/ERP update: ERP in pilot; 2025 peak spend, stepping down in 2026 and 2027; several AI-enabled tools in early innings aimed at productivity and first-time fix rates.
  • Organic growth algorithm: Long-term mid-to-upper single digit in Safety Services and mid single digit in Specialty Services; 2025 project growth running above algorithm but seen as sustainable within framework.

Estimates Context

  • Q3 2025 beat vs S&P Global consensus on revenue and EPS; adjusted EBITDA also ahead. Management raised FY25 guidance on stronger project activity and service strength, with FX immaterial to the change. Values marked with * from S&P Global.
  • Forward consensus (S&P Global): Q4 2025 revenue $2,083.5MM*, EPS $0.4119*; Q1 2026 revenue $1,880.6MM*, EPS $0.3054*. Mix and project phasing suggest incremental margin could trend higher into 2026 as projects mature (management view). Values marked with * from S&P Global.

Key Takeaways for Investors

  • Mix-led but disciplined growth: Robust project volume is lifting revenue while inspection/service strength and pricing underpin margins; as projects mature, margin expansion should accelerate.
  • Guide raised again: Two consecutive raises to FY25 revenue and adjusted EBITDA; Q4 targeted as the highest margin expansion quarter of the year.
  • Cash generation inflecting: Q3 adjusted FCF conversion at 88% with ~75% targeted for FY25; seasonally strongest cash quarter ahead.
  • Target framework ambition: 10/16/60+ underscores a path to $10B revenue and 16%+ adjusted EBITDA margin by 2028, supported by technology enablement and a growing recurring base.
  • Exposure to secular tailwinds: Data centers, semiconductors, and critical infrastructure present scaled opportunities with service tail; APG is selective on complexity and schedule risk.
  • Balanced capital deployment: Ample capacity (~2.0x net leverage) for bolt-ons and opportunistic buybacks; 2025 ~$250M M&A on track at attractive multiples.
  • Watch Specialty Services margins: Expect sequential improvement into Q4 and 2026 as early-phase projects advance. Positive surprise on this trajectory could be a stock driver.

Appendix: Detailed Guidance and Non-GAAP Reconciliations (source references)

  • Consolidated P&L, balance sheet, cash flow, and reconciliations as disclosed.

Estimates note: Values marked with * retrieved from S&P Global.