APi Group Corporation (NYSE:APG) Q3 2023 Earnings Call Transcript

Russell A. Becker: So, we’ve been really focused on the integration of the business. There’s been some opportunities that come across the transom that we’ve passed on. Some of that has to do with the distraction factor when we want them to stay laser focused on Chubb value capture plan of $100 million, which is on-track. But the opportunities are equally as good in that market as they are here in the U.S. And I suspect that you’ll see us get to be a little bit more active in the space as soon as next year.

Jon Tanwanteng: Got it. Thank you.

Russell A. Becker: Thank you, Jon.

Operator: The next question comes from Andy Kaplowitz with Citi. Please go ahead.

Unidentified Analyst : Hi. Good morning. This is in [Cindy Bach] (ph) on for Andy Kaplowitz. So, I was just wondering if you could provide a little color regarding your progress on including cash generation. You obviously are generating a lot more cash year-to-date and maintain your at/or above 65% free cash flow conversion. And maybe if you could provide a little color on supply chain conditions that you’re seeing?

Kevin Krumm: The last part of that question good morning, Cindy. This is Kevin, was supply chain, I think. If not then you can correct me at the end. But, so our cash flows profiles continue to improve this year, both from an absolute delivery standpoint, as well as a conversion standpoint as we start of the year where delays are focused primarily on working capital rate and to a lesser extent CapEx. As we move through this year the changes we made in the business that we’ve been talking about, whether it’s a higher mix of service or continued disciplined customer and project selection, are bearing fruit both in working capital rate on a year-to-date basis sort of vis-a-vis where we ended or vis-a-vis prior year, as well as conversion. And from a supply chain standpoint, we are largely behind the impact of supply chain that we talked about last year in the first half of the year that drove a significant working capital rate investment.

Unidentified Analyst : Great. Thank you very helpful color.

Operator: The next question comes from Parth Patel with JP Morgan. Please go ahead.

Parth Patel : Hi, good morning. Thanks for taking my question. In Specialty, organic growth was down in the quarter on a tough comp. What was pricing there and was there any impact from commodities flowing through?

Kevin Krumm: So, in the Specialty business, we did not break out organic growth this quarter, sort of volume versus price and price pass through. The primary reason is while we continue to get pricing on the service side of the business, the material cost de-escalation that we saw year-on-year drove a significant revenue rate reduction in the quarter. So, we faced year-on-year, that material cost de-escalation drives a headwind at revenue rate, which what you saw in the quarter in the Specialty business. So underlying, we continue to get pricing on the service side of that business. We just faced that headwind at revenue from the material cost de-escalation.

Parth Patel : Great. That’s very helpful. And then Just a follow-up. Can you give an update on some of your big union agreements? I think the last one was negotiated back in 2020. Just any update there?

Russell A. Becker: Well, the largest the union agreement that we have is with the, what they call the Road Fitters Local 669. I think we have, another 18 months before that agreement, will be renegotiated. We have no concerns about our ability to renegotiate that agreement and feel really good about it. So, there’s some smaller ones that are coming up and they really you kind of cycle through them on every year, there’s, there’s different agreements to come up. But the biggest, the largest one that, we’re signatory to comes up in 18 months roughly.