Kevin Krumm: Hey, Andy, this is Kevin. I’ll take a shot at that first. The 3% number was total APi growth on services. So that includes specialty, also includes services on the HVAC side of the business. I referenced in my commentary, I believe, the fact that in specialty, we walked away from a significant customer that wasn’t willing to take the price increase. That was largely a service contract. So in that number, that’s going to be a drag. Similarly, on the HVAC side of the business, as we continue to think through those customer sets and those end markets, our service revenue was also down on HVAC. You pull those two and set them aside, our service growth was actually – on the rest of the business was north of 6%, I believe.
And so really, that inspection on sort of the core life safety is still driving sort of the pull-through on service. The only other thing I’ll say there is, generally, we do have other service type of work. And in the quarter last year in U.S. life safety predominantly, we saw a significant amount of work related to freezes. Sort of the freeze up that was happening in North America, and so we’re confident against that. But underlying our service business, where we want it to grow, continues to grow well and it’s still, especially in North America where we track it versus inspections, is still highly correlated to that 10% or that double-digit growth Russ referenced.
Andy Wittmann: Okay. That’s super helpful. I just thought maybe as a follow-up, you could just talk a little bit about what you’re seeing out of your international life safety business, in particular. Are you seeing growth in pricing and how’s the economy in Europe and the parts of Asia where you compete holding up to support your expansion there?
Russ Becker: Yes. So the international business grew modestly in the first quarter. So again, we continue to see good organic growth on a quarter-by-quarter basis since we’ve owned the business, coming off a tough comp. I think they had organic growth in the first quarter of last year at 11% or 10% or something like that, Andy. So – but we did show – we did grow modestly in the first quarter of this year. And in general, the business continues to hold up as we continue to kind of focus on a couple of fronts, really focusing on the right end markets. And I think the team is focused on the right end markets. I don’t know that I could have said that to you 2 years ago, but I think today, the team is focused on the right end markets.
And we’re going through really kind of a sales force transformation. I don’t know if that’s the right word. But we’re really – we have a new sales leader in our international business, and he is going through an effort to kind of bring that same inspection and service mindset, selling that first. It’s a little bit of a different market over there, but just even taking the concept that we’re going to sell inspection and service first into the already built environment takes a mind shift change and so we’re going through that with that sales force. But our backlog in our international business is basically sitting like right on top of where it was a year ago, plus or minus. And we’ve seen some customer attrition as we continue to take price and make sure that we’re making smart decisions about where we’re deploying our most important resource, and that’s our people.
So I feel really good about where the business is at and really the momentum that they continue to gain as they go through their value capture efforts.
Andy Wittmann: Thank you, very much.
Russ Becker: Thanks, Andy.
Operator: Your next question comes from the line of Julian Mitchell of Barclays. Your line is now open.
Jack Cauchi: Hi, good morning. This is Jack Cauchi on for Julian Mitchell. How is the M&A pipeline overall? You did Elevated. Could we expect active M&A over the rest of 2024? And how is the environment in terms of valuations?
Russ Becker: M&A market, our pipeline is really good, strong, robust. I would tell you that for us, we need to continue to focus on the right stuff as we’re looking at the M&A market, and it needs to be complementary to our existing offerings, whether that’s geographically or the types of services that the business provides. It needs to be complementary to our margin expansion goals and either that or we have to see a clear path to that business being complementary to our margin expansion goals. And the leadership and the team needs to align from a culture values and fit perspective. And that doesn’t – whether that’s an Elevated or a small family-owned business in Paducah, Kentucky. And we need to continue to be disciplined as we look at it.
There are many good opportunities, and our team is doing a fantastic job, I’d say an amazing job of vetting those opportunities, and you’ll continue to see us make significant progress. I think we spent roughly $100 million on bolt-on M&A over the course of the last year. And we’ve said that we – it’s our intent to accelerate that. And we feel that with the flexibility we have on our – with our balance sheet, even with doing the Elevated acquisition, we still have the flexibility to accelerate that bolt-on tuck-in strategy.
Jack Cauchi: Got it. Thank you. And a quick follow-up, gross margins are showing a decent increase. How is APG coping so well with wage inflation among its service technicians?
Kevin Krumm: So this is Kevin. I’ll take that. At the end of the day, we’ve been on a pricing campaign for the last decade. And we say consistently that we look to take margin expansive pricing on the service side of the business. Our businesses do a really good job of staying in front of that and continuing to price for all elements on the service side that we need to price through, of which labor is one. So I would say it’s just a – it’s a muscle our team has developed, and they continue to work and flex it annually.
Jack Cauchi: That’s helpful. Thank you.
Operator: Your next question comes from the line of Stephanie Moore of Jefferies. Your line is now open.
Stephanie Moore: Hi, good morning, thank you.
Russ Becker: Good morning.
Stephanie Moore: Good morning. I wanted to follow-up actually on the power question. So maybe to take that a step further, is it possible for you to kind of frame your ongoing M&A strategy and then also how that matches with the recent equity raise? So how should we infer that with your appetite to do larger deals going forward even after Elevated? And then is there a potential to expand again outside of the legacy fire and safety end and now Elevated verticals? So an update there would be great. Thank you.
