Q4 2024 APi Group Corp Earnings Call

All participants are in a listen only mode until the question and answer session. Please note. This call is being recorded I will be standing by should you need any assistance I will now turn the call over to Adam.

Vice President of Investor Relations at API Group. Please go ahead.

Speaker Change: Thank you good morning, everyone and thank you for joining our fourth quarter 2024 earnings Conference call. Joining me on the call today are Russ Becker, our president and CEO, David <unk>, Our interim Chief Financial Officer, and Sam Martin Franklin and Jim Lilly Our board co chairs before we begin I would like to remind you.

Speaker Change: Good morning, ladies and gentlemen, and welcome to API Group's fourth quarter and full year 2024 financial results conference call. All participants are in a listen-only mode until the question and answer session. Please note, this call is being recorded. I will be standing by should you need any assistance.

Speaker Change: Certain statements in the company's earnings press release announcement and on this call are forward looking statements, which are based on expectations intentions and projections regarding the companys future performance anticipated events or trends and other matters that are not historical facts. These statements are not a guarantee of future performance and are subject to.

Speaker Change: Known and unknown risks uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements in our press release and filings with the SEC. We detailed material risks that may cause our future results to differ from our expectations. Our statements are as of today.

Speaker Change: February 26, and we undertake no obligation to update any forward looking statements, we may make except as required by law.

Speaker Change: As a reminder, we have posted a presentation detailing our fourth quarter financial performance on the Investor Relations page of our website. Our comments today will also include non-GAAP financial measures and other key operating metrics.

Speaker Change: A reconciliation of and other information regarding these items can be found in our press release and our presentation.

Speaker Change: Uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements in our press release and filings with the SEC. We detailed material risks that may cause our future results to differ from our expectations. Our statements are as of today February 26.

Speaker Change: Additionally, we will be posting an investor update presentation on the Investor Relations page of our web site later today.

Speaker Change: Now my pleasure to turn the call over to Russ.

Russ: Thank you Alan.

Russ: Everyone. Thank you for taking the time to join our call. This morning.

Speaker Change: And we undertake no obligation to update any forward looking statements, we may make except as required by law. As a reminder, we have posted a presentation detailing our fourth quarter financial performance on the Investor Relations page of our website. Our comments today will also include non-GAAP financial measures and other key operating metrics.

Russ: We remain grateful for the hard work of our 29000 leaders and their dedication to API.

Russ: The safety health and wellbeing of each of our teammates as our number one value.

Russ: As a side note we are very thankful that our 14 meets that were involved in the Toronto plane crashed last week have returned safely to Minneapolis and are recovering well.

Speaker Change: A reconciliation of and other information.

Speaker Change: Formation regarding these items can be found in our press release and our presentation. Additionally, we will be posting an investor update presentation on the Investor Relations page of our web site later today.

Russ: I'd like to thank our API teammates who supported these individuals on their return to to Minnesota.

Russ: I'm also proud that API has once again been recognized as a military friendly employer for 2025.

Speaker Change: My pleasure to turn the call over to Russ.

Russ: Thank you Alan and good morning, everyone. Thank you for taking the time to join our call. This morning.

Russ: We remain committed to providing opportunities for veterans and their spouses to build careers and develop as leaders.

Speaker Change: We remain grateful for the hard work of our 29000 leaders and their dedication to API to <unk>.

Russ: 2024, it was another solid year for API with record net revenues record adjusted EBITDA record adjusted earnings per share and record adjusted free cash flow and an evolving macro environment.

Speaker Change: 50, health and wellbeing of each of our teammates as our number one value.

Speaker Change: As a side note we are very thankful that our 14 meets that were involved in the Toronto plane crashed last week have returned safely to Minneapolis and are recovering well.

Russ: As I mentioned on the last call the team's work executing our $13 60, <unk> shareholder value creation framework shown on slide five has resulted in API being the strongest strongest it has ever been from a revenue profitability and cash flow generation standpoint, which is highlighted on slide six.

Speaker Change: I'd like to thank our API teammates who supported these individuals on their return to to Minnesota.

Speaker Change: I'm also proud that API has once again been recognized as a military friendly employer for 2025.

Speaker Change: We remain committed to providing opportunities for veterans and their spouses to build careers and develop as leaders.

Russ: <unk>.

Russ: In 2024, specifically our leaders delivered progress against each of our $13 60 80 financial targets.

Speaker Change: 2024, it was another solid year for API with record net revenues record adjusted EBITDA record adjusted earnings per share and record adjusted free cash flow and an evolving macro environment.

Russ: First adjusted EBITDA margins expanded adjusted EBITDA margins of 140 basis points to 12, 7%, putting us in a position to surpass our 13% or more adjusted EBITDA margin target for 2025.

Speaker Change: As I mentioned on the last call the team's work executing our $13 60, 80 shareholder value creation framework showing on slide five has resulted in API being the strongest strongest it has ever been from a revenue profitability and cash flow generation standpoint, which is highlighted on slide six.

Russ: Second we increased the mix of inspection service and monitoring revenues from 52% in 2023% to 54% in 2024 on our way to our long term target of 60%.

Russ: And last.

Russ: And we improved adjusted free cash flow conversion from 69% in 2023 to <unk>, 75% in 2024.

Speaker Change: Sure.

Speaker Change: In 2024, specifically our leaders delivered progress against each of our $13 60 80 financial targets.

Speaker Change: First adjusted EBITDA margins.

Russ: Now I will highlight our 2024 full year results.

Speaker Change: Expanding adjusted EBITDA margins of 140 basis points to 12, 7%, putting us in a position to surpass our 13% or more adjusted EBITDA margin target for 2025.

Russ: Net revenues grew by one 3% in 2024, finishing the year at a record 7 billion. This growth was driven by acquisitions and strong organic growth in inspection service and monitoring revenues in life safety and pricing improvements, partially offset by divestitures and an organic decline.

Speaker Change: Second we increased the mix of inspection service and monitoring revenues from 52% in 2023 to <unk>, 54% in 2024 on our way to our long term target of 60%.

Russ: And project revenues driven by a purposeful focus on disciplined customer and project selection and higher than expected delays in certain customer projects and our <unk> and specialty businesses.

Speaker Change: And last.

Speaker Change: And then we improved adjusted free cash flow conversion from 69% in 2023 to <unk>, 75% in 2024 now.

Russ: Importantly, we achieved double digit growth in inspection revenues in our U S life safety business for the year and in the fourth quarter, representing the 18th quarter in a row as we make progress towards our goal of 60% of our total net revenues coming from inspection service and monitoring.

Speaker Change: Now I will highlight our 2024 full year results.

Speaker Change: Net revenues grew by one 3% in 2024, finishing the year at a record 7 billion. This growth was driven by acquisitions and strong organic growth in inspection service and monitoring revenues in life safety and pricing improvements, partially offset by divestitures and an organic decline.

Russ: In line with our strategic initiatives, we continued to see strong improvements in adjusted gross margin for the year up 250 basis points.

Speaker Change: Project revenues driven by a purposeful focus on disciplined customer and project selection and higher than expected delays in certain customer projects in our HVAC and specialty businesses.

Russ: The strong the strong performance in gross margin led to full year 2024, adjusted EBITDA margin of 12, 7% representing margin expansion of 140 basis points we.

Speaker Change: Importantly, we achieved double digit growth in inspection revenues in our U S life safety business for the year and in the fourth quarter, representing the 18th quarter in a row as we make progress towards our goal of 60% of our total net revenues coming from inspection service and monitoring.

Russ: We expect to see continued margin expansion in 2025 and beyond largely driven by the same initiatives, we've been executing for the past several years, including improved inspection service and monitoring revenue mix disciplined customer and project selection.

Russ: <unk> value capture.

Speaker Change: In line with our strategic initiatives, we continued to see strong improvements in adjusted gross margin for the year up 250 basis points the.

Russ: Pricing improvements procurement systems, and scale accretive M&A and selective business pruning and as I always like to say, we could always just be better.

Speaker Change: The strong from the strong performance in gross margin led to full year 2024, adjusted EBITDA margin of 12, 7% representing margin expansion of 140 basis points we.

Russ: Regarding chubb and our Internet net regarding Chubb and our international business as we exit 2024, we have realized more than $90 million of the $125 million value capture targets and we remain on track to realize the rest of the savings in 2025 in early 2026.

Speaker Change: We expect to see continued margin expansion in 2025 and beyond largely driven by the same initiatives, we've been executing for the past several years, including improved inspection service and monitoring revenue mix disciplined customer and project selection.

Russ: 2024 was another another year of strong free cash flow with record adjusted free cash flow of $668 million, representing approximately 75% conversion of adjusted EBITDA.

Speaker Change: <unk> value capture.

Speaker Change: Pricing improvements procurement systems and scale accretive M&A and selective business pruning and as I always like to say, we can always just be better.

Russ: Our strong free cash flow generation helped us to repay $100 million of our term loan on December 31, 2024, and delivered on our commitment of reducing net leverage to under our target of two five times ending the year at two two times.

Speaker Change: Regarding chubb and our Internet net regarding Chubb and our international business as we exit 2024, we have realized more than $90 million of the $125 million value captured target and we remain on track to realize the rest of the savings in 2025 in early 2026.

Russ: The strength of our balance sheet allows for flexibility to pursue value enhancing capital deployment alternatives, such as continuing our track record of disciplined M&A or opportunistic share repurchases.

Speaker Change: 2024 was another another year of strong free cash flow with record adjusted free cash flow of $668 million, representing approximately 75% conversion of adjusted EBITDA.

Russ: As a reminder, we have approximately $400 million of authorization remaining on our share repurchase program.

Russ: In 2024, we expect that we accelerated our spend on accretive bolt on M&A to approximately $250 million building on our long track record of integrating businesses and supplementing organic growth through M&A at attractive multiples.

Our strong free cash flow generation helped us to repay $100 million of our term loan on December 31, 2024, and delivered on our commitment of reducing net leverage to under our target of two five times ending the year at two two times.

Russ: In addition, during the first half of the year, we entered the complementary and adjacent $10 billion, plus elevator and escalator services market with the acquisition of elevated.

Speaker Change: The strength of our balance sheet allows for flexibility to pursue value enhancing capital deployment alternatives, such as continuing our track record of disciplined M&A or opportunistic share repurchases.

Russ: We have long viewed the fragmented elevator and escalator service market as an attractive adjacency due to the highly recurring nature of the business driven by non discretionary statutorily driven demand, we expect to build a $1 billion plus elevator and escalator services platform over the long term through a <unk>.

Speaker Change: As a reminder, we have approximately $400 million of authorization remaining on our share repurchase program.

Speaker Change: In 2024, we expect we accelerated our spend on accretive bolt on M&A to approximately $250 million building on our long track record of integrating businesses and supplementing organic growth through M&A at attractive multiples.

Russ: Domination of strong organic growth and long term cross sell opportunity with our existing life safety businesses and a robust M&A pipeline.

Speaker Change: In addition, during the first half of the year, we entered the complementary and adjacent $10 billion, plus elevator and escalator services market with the acquisition of elevated.

Russ: Looking ahead, we are excited about the pipeline of M&A opportunities, we see across fire protection electronic security and elevator and escalator services. Our team remains hard at work prioritizing the most attractive opportunities both from a business quality perspective, but most importantly from our culture values.

Speaker Change: We have long viewed the fragmented elevator and escalator service market as an attractive adjacency due to the highly recurring nature of the business driven by non discretionary statutorily driven demand, we expect to build a $1 billion plus elevator and escalator services platform over the long term through a comb.

Russ: Fit perspective.

Russ: In summary, I am proud of our team and our record financial results achieved in 2024 as we begin 2025 I have great confidence in our ability to continue to expand margins and grow free cash flow, but importantly returned to traditional rates of organic growth driven by the following.

Speaker Change: Foundation of strong organic growth and long term cross sell opportunity with our existing life safety businesses and a robust M&A pipeline.

Looking ahead, we are excited about the pipeline of M&A opportunities, we see across fire protection electronic security and elevator and escalator services. Our team remains hard at work prioritizing the most attractive opportunities both from a business quality perspective, but most importantly from our culture values and.

Russ: Continued strong organic growth in inspection service and monitoring revenues pricing improvements accelerating growth in our backlog.

Russ: Up high single digits in total and up double digits organically and specialty services with a focus on the right projects for the right customers in the right end markets positive progress working through project delays Annualizing.

Speaker Change: Fifth perspective.

Speaker Change: In summary, I am proud of our team and our record financial results achieved in 2024 as we begin 2025 I have great confidence in our ability to continue to expand margins and grow free cash flow, but importantly return to traditional rates of organic growth driven by the following.

Russ: Annualized the impact of disciplined customer and project selection, including the exited customer relationship mentioned in the first quarter of 2024 for specialty services and.

Russ: And finally, our international business business begins 2025 with less than five loss, making branches after having over 50 at the time of the acquisition.

Speaker Change: Continued strong organic growth and inspection service and monitoring revenues pricing improvements accelerating growth in our backlog up high single digits in total and up double digits organically and specialty services with a focus on the right projects for the right customers and the right and Mark.

Russ: I am grateful for our international teammates for their great work transforming our business over the past three years to position it for long term profitable growth.

Russ: In 2025, we began operating in our newly aligned newly realigned segments with our <unk> business moving from safety services to specialty services. This change will provide opportunities to enhance our shared services shared services capability in the specialty segment and allow the HVAC.

Speaker Change: That's positive progress working through project delays.

Speaker Change: Annualized the impact of disciplined customer and project selection, including the exited customer relationship mentioned in the first quarter of 2024 for specialty services.

Speaker Change: And finally, our international business business begins 2025 with less than five loss, making branches after having over 50 at the time of the acquisition.

Russ: To receive increased focus from the leadership team putting it in the best position to win with its customers. Additionally, the change also sets us. The change also sets up the safety services segment as more of a pure play life safety business focused on fire protection electronic security and now.

Speaker Change: I'm grateful for our international teammates for their great work transforming our business over the past three years to position it for long term profitable growth.

Russ: Elevator and escalator services.

Speaker Change: In 2025, we began operating in our newly aligned newly realigned segments with our HVAC business moving from safety services do specialty services. This change will provide opportunities to enhance our shared services shared services capability in the specialty segment and low the HVAC business.

Russ: I would now like to hand, the call over to David to discuss our fourth quarter financial results and guidance in more detail David.

David: Thank you Russ and good morning, everyone reported revenues for the three months ended December 31, 2024 increased by five 8% to $1 86 billion compared to $1 $76 billion in the prior year driven by organic growth of four 7%.

Speaker Change: To receive increased focus from the leadership team putting it in the best position to win with its customers. Additionally, the change also sets us.

Russ: <unk> safety services and benefits from M&A.

Speaker Change: <unk> also sets up the safety services.

Speaker Change: As more of a pure play life safety business focused on fire protection electronic security and now elevator and escalator services I would now like to hand, the call over to David to discuss our fourth quarter financial results and guidance in more detail David.

Russ: This was partially offset by a seven 6% organic decline in specialty services and on an organic basis total company net revenues grew by one 3%.

Russ: Adjusted gross margin for the three months ended December 31, 2020 increased to 31, 1%, representing a 100 basis point improvement compared to the prior year driven by planned disciplined customer and project selection pricing improvements and value capture.

You Ross and good morning, everyone reported revenues for the three months ended December 31, 2024 increased by five 8% to $1 86 billion compared to $1 76 billion in the prior year driven by organic growth of four 7% in <unk>.

Our initiatives in our international business.

Russ: Adjusted EBITDA increased by 16, 3% for the three months ended December 31, 2024, with adjusted EBITDA margin coming in at 13%, representing a 120 basis point increase compared to the prior year driven primarily.

Speaker Change: Safety services and benefits from M&A. This was partially offset by a seven 6% organic decline in specialty services and on an organic basis total company net revenues grew by one 3%.

Russ: Similarly, due to the factors impacting gross margin, partially offset by lower fixed cost absorption in the specialty services segment.

Adjusted gross margin for the three months ended December 31, 2024 increased to 31, 1%, representing a 100 basis point improvement compared to the prior year driven by planned disciplined customer and project selection pricing improvements and value capture.

Russ: I'm also pleased to report that adjusted diluted earnings per share for the fourth quarter was 51.

Russ: Representing a seven <unk> or 16% increase compared to the prior year period. The increase was driven primarily by strong adjusted EBITDA growth and was partially offset by increased interest expense and adjusted diluted weighted average shares outstanding.

Speaker Change: <unk> in our international business.

Speaker Change: Adjusted EBITDA increased by 16, 3% for the three months ended December 31, 2024, with adjusted EBITDA margin coming in at 13%, representing a 120 basis point increase compared to the prior year.

Russ: I will now discuss our results in more detail for safety services.

Russ: Safety services reported revenues for the three months ended December 31, 2024 increased by 13% to $1 4 billion compared to $1. Two 4 billion in the prior year period organic.

Speaker Change: Driven primarily due to the factors impacting gross margin, partially offset by lower fixed cost absorption in the specialty services segment.

Speaker Change: Im also pleased to report that adjusted diluted earnings per share for the fourth quarter was 51.

Russ: Organic growth was four 7% driven by double digit inspection revenue growth in our U S life safety business and 7% organic growth in inspection service and monitoring revenues across the segments.

Speaker Change: Representing a seven <unk> or 16% increase compared to the prior year period. The increase was driven primarily by strong adjusted EBITDA growth and was partially offset by increased interest expense and adjusted diluted weighted average shares outstanding.

Russ: Revenues grew low single digits in the quarter adjusted gross margin for the three months ended December 31, 2024 was 35, 7%, representing a 60 basis point improvement compared to the prior year period, driven by planned disciplined customer and project selection.

Speaker Change: I will now discuss our results in more detail for safety services.

Speaker Change: Safety services reported revenues for the three months ended December 31, 2024 increased by 13% to 141 billion compared to 124 billion in the prior year period organic.

Russ: Pricing improvements value capture initiatives in our international business and improved business mix of higher margin inspection service and monitoring revenues.

Speaker Change: Organic growth was four 7% driven by double digit inspection revenue growth in our U S life safety business and 7% organic growth in inspection service and monitoring revenues across the segment.

Russ: Going forward, we will be reporting segment earnings for each segment, which aligns to our historical reporting of adjusted EBITDA by segment.

Speaker Change: Core revenues grew low single digits in the quarter adjusted gross margin for the three months ended December 31, 2024 was 35, 7%, representing a 60 basis point improvement compared to the prior year period, driven by planned disciplined customer and project selection.

Russ: Segment earnings increased by 18, 5% for the three months ended December 31, 2024 and segment earnings margin was 16%, representing a 70 basis point increase compared to the prior year period, primarily due to the factors impacting adjusted gross margin.

Speaker Change: Pricing improvements value capture initiatives in our international business and improved business mix of higher margin inspection service and monitoring revenues.

Russ: Now I will discuss our results in more detail for our specialty services segment.

Russ: Specialty services reported revenues for the three months ended December 31, 2024 decreased by 11, 8% to $463 million compared to $525 million in the prior year period.

Speaker Change: Going forward, we will be reporting segment earnings for each segment, which aligns to our historical reporting of adjusted EBITDA by segment.

Speaker Change: Segment earnings increased by 18, 5% for the three months ended December 31, 2024 and segment earnings margin was 16%, representing a 70 basis point increase compared to the prior year period, primarily due to the factors impacting adjusted gross margin.

Russ: This was driven by divestitures and a decline in project and service revenues driven by delays as well as the impact of the exited customer relationship that we first mentioned in the first quarter adjusted.

Russ: Adjusted gross margin for the three months ended December 31, 2024 was 17, 3%, representing an 80 basis point decrease compared to the prior year, driven primarily by lower fixed cost absorption and stranded costs from delays, partially offset by the favorable impact from planned.

Speaker Change: Now I will discuss our results in more detail for our specialty services segment.

Speaker Change: Specialty services reported revenues for the three months ended December 31, 2024 decreased by 11, 8% to $463 million compared to $525 million in the prior year period.

Russ: Disciplined customer and project selection.

Russ: Segment earnings decreased by 22% for the quarter and segment earnings margin was nine 9%, representing a 130 basis point decrease compared to the prior year period, primarily due to the decrease in adjusted gross margin and lower fixed cost absorption.

Speaker Change: This was driven by divestitures and a decline in project and service revenues driven by delays as well as the impact of the exited customer relationship that we first mentioned in the first quarter.

Speaker Change: Adjusted gross margin for the three months ended December 31, 2024 was 17, 3%, representing an 80 basis point decrease compared to the prior year, driven primarily by lower fixed cost absorption and stranded costs from delays, partially offset by the favorable impact from planned.

Russ: Turning to cash flow as we've highlighted throughout the year. The fourth quarter is our strongest quarter for free cash flow generation due to seasonality and 2024 was no different for the three months ended December 31, 2024, adjusted free cash flow was $307 million, reflecting an adjusted free.

Speaker Change: Disciplined customer and project selection.

Russ: Cash flow conversion of 127%.

Speaker Change: Segment earnings decreased by 22% for the quarter and segment earnings margin was nine 9%, representing a 130 basis point decrease compared to the prior year period, primarily due to the decrease in adjusted gross margin and lower fixed cost absorption.

Russ: For the full year adjusted free cash flow was $668 million with conversion of approximately 75%, representing a $131 million improvement or 24% when compared to 2023 free.

Russ: Free cash flow generation has been and continues to be a priority across API and we are pleased that we were able to meet our increased adjusted free cash flow conversion target of 75% for the year.

Speaker Change: Turning to cash flow as we have highlighted throughout the year. The fourth quarter is our strongest quarter for free cash flow generation due to seasonality and 2024 was no different for the three months ended December 31, 2024, adjusted free cash flow was $307 million, reflecting an adjusted <unk>.

Russ: At the end of the year, our net leverage ratio was approximately two two times well below our long term net leverage target of two five times, even as we continue margin accretive bolt on M&A as we look forward to 2025, we expect to continue to grow our free cash flow, providing us a significant.

Speaker Change: Free cash flow conversion of 127%.

Speaker Change: For the full year adjusted free cash flow was $668 million with conversion of approximately 75%, representing a $131 million improvement or 24% when compared to 2023 free.

Russ: Opportunity for value enhancing capital deployment.

Russ: Finally, we are happy to announce that we have successfully remediated all prior year material weaknesses and have concluded that our internal control over financial reporting was effective as of December 31, 2024, and may be ill go off script for a second to express my gratitude.

Speaker Change: Free cash flow generation has been and continues to be a priority across API and we are pleased that we were able to meet our increased adjusted free cash flow conversion target of 75% for the year.

Speaker Change: At the end of the year, our net leverage ratio was approximately two two times well below our long term net leverage target of two five times, even as we continue margin accretive bolt on M&A as we look forward to 2025, we expect to continue to grow our free cash flow, providing us a significant.

Speaker Change: To all of our leaders and our branches in our companies and the central team that did just a great job to get us there I am grateful.

Russ: Turning to our 2025 guidance.

Russ: Based on current foreign exchange rates, we expect full year reported net revenues of seven 3% to seven 5 billion, representing a return to traditional rates of organic growth in net revenues driven by high single digit organic growth and inspection service and monitoring revenues in safety.

Speaker Change: Opportunity for value enhancing capital deployment.

Speaker Change: Finally, we are happy to announce that we have successfully remediated all prior year material weaknesses and have concluded that our internal control over financial reporting was effective as of December 31, 2024, and may be ill go off script for a second to express my gratitude.

Russ: Services and a return to mid single digit organic growth in our specialty services segment. Following the first quarter, which is impacted by challenging weather related comparable.

Speaker Change: To all of our leaders and our branches in our companies and the central team that did just a great job to get us there I am grateful.

Russ: We expect full year, adjusted EBITDA of $970 million to $1 two.

Speaker Change: Turning to our 2025 guidance.

Russ: 2 billion, which represents adjusted EBITDA growth of approximately 10% to 15% on a fixed currency basis, and adjusted EBITDA margin of 13, 4% at the midpoint, which is up 70 basis points versus 2024.

Speaker Change: Based on current foreign exchange rates, we expect full year reported net revenues of seven 3% to $7 5 billion, representing a return to traditional rates of organic growth in net revenues driven by high single digit organic growth and inspection service and monitoring revenues in safety.

Russ: In 2025, we expect to continue to make progress in terms of free cash flow growth with a 2025 adjusted free cash flow conversion target of approximately 75%, while returning to organic revenue growth.

Speaker Change: Services and a return to mid single digit organic growth in our specialty services segment. Following the first quarter, which is impacted by challenging weather related comparables.

Russ: In terms of the first quarter, we expect reported net revenues of $1 62, five to $1 675 billion.

Speaker Change: We expect full year, adjusted EBITDA of $970 million to $1 two.

Speaker Change: <unk> 2 billion, which represents adjusted EBITDA growth of approximately 10% to 15% on a fixed currency basis, and adjusted EBITDA margin of 13, 4% at the midpoint, which is up 70 basis points versus 2024.

Russ: This guidance represents reported revenue growth of 2% to 5% and a low single digit organic net net revenue decline at the midpoint.

Russ: We expect first quarter, adjusted EBITDA of $185 to $195 million, which represents adjusted EBITDA growth of approximately 7% to 13% on a fixed currency basis, and adjusted EBITDA margin of 11, 5% at the midpoint up 60 basis points versus last year.

Speaker Change: In 2025, we expect to continue to make progress in terms of free cash flow growth with a 2025 adjusted free cash flow conversion target of approximately 75%, while returning to organic revenue growth in terms of the first quarter, we expect reported net revenues of $1.

Russ: For 2025, we anticipate interest expense to be approximately $145 million depreciation to be approximately $90 million.

Speaker Change: 625 to one $6 75 billion. This guidance represents reported revenue growth of 2% to 5% and a low single digit organic net net revenue decline at the midpoint, we expect first quarter adjusted EBITDA of $185 to 195.

Russ: Capex to be approximately $100 million and our adjusted effective cash tax rate to be approximately 23%, we expect corporate expenses to be between 30% and $35 million per quarter with some timing variability throughout the year.

Speaker Change: Which represents adjusted EBITDA growth of approximately 7% to 13% on a fixed currency basis, and adjusted EBITDA margin of 11, 5% at the midpoint up 60 basis points versus last year.

Russ: We expect our adjusted diluted weighted average share count to be approximately $284 million for the year.

Russ: I will now turn the call back over to Russ.

Russ: Thanks, David Nice job.

Russ: Our record results in 2024, once again demonstrates the strength of our recurring revenue services focused business model and the ongoing execution of our strategy by our teammates.

Speaker Change: For 2025, we anticipate interest expense to be approximately $145 million depreciation to be approximately $90 million capex to be approximately $100 million and our adjusted effective cash tax rate to be approximately 23% we expect <unk>.

Russ: We begin 2025 with positive momentum and the demand for the services. We offer is strong across the global platform.

Russ: We remain relentlessly focused on growing inspection service and monitoring revenue.

Speaker Change: <unk> expenses to be between 30 and $35 million per quarter with some timing variability throughout the year, we expect our adjusted diluted weighted average share count to be approximately $284 million for the year.

Russ: That combined with the accelerating growth in our backlog provides a solid foundation for returning to traditional rates of organic growth in 2025, while continuing to expand our margins we remain focused on creating sustainable shareholder value by delivering on our $13 60, 80 targets with the <unk>.

Russ: I will now turn the call back over to Russ.

Russ: Thanks, David Nice job.

Russ: Our record results in 2024, once again demonstrates the strength of our recurring revenue services focused business model and the ongoing execution of our strategy by our teammates.

Russ: Near term focus on generating adjusted EBITDA margins of 13% or more this year.

Russ: As a reminder, we will be hosting an investor day on May 20, <unk> in New York for professional investors, where we will be detailing new meaningful meaningful meaningfully higher long term financial targets and updates to our strategic plan.

Russ: We begin 2025 with positive momentum and the demand for the services. We offer is strong across the global platform we remain.

Russ: Relentlessly focused on growing inspection service and monitoring revenue.

Russ: That combined with the accelerating growth in our backlog provides a solid foundation for returning to traditional rates of organic growth in 2025, while continuing to expand our margins we remain focused on creating sustainable shareholder value by delivering on our $13 60 80 targets with the near.

Russ: With that I would now like to turn the call back over to the operator and open up the call for Q&A.

Russ: If you would like to ask a question during this time.

Russ: Frankly.

Russ: Followed by the number one on your telephone keypad, if you would like to withdraw your question Press Star one.

Russ: Term focus on generating adjusted EBITDA margins of 13% or more this year. As a reminder, we will be hosting an investor day on May 20, <unk> in New York for professional investors, where we will be detailing new meaningful meaningful meaningfully higher long term financial.

Russ: Again, we also ask you limit your questions to one question and one follow up thank you.

Speaker Change: Your first question comes from the line of Ashish <unk> with RBC capital markets.

Please go ahead.

Speaker Change: Hi, Good morning. This is David on for Ashish Congrats on the good results here.

Russ: <unk> and updates to our strategic plan.

Russ: With that I would now like to turn the call back over to the operator and open up the call for Q&A.

Speaker Change: I'm just curious if you could double click on some of the key variables that will drive margin EBITDA margin expansion to 13, 13% plus going forward. Thank you.

Russ: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again, we also ask that you limit your questions to one question and one follow up thank you.

Speaker Change: Good morning, and thank you for joining us and thank you for your question I would say that it's we're pounding the same the same drop.

And.

Speaker Change: The different levers that we continue to poll wood.

Speaker Change: I would start with discipline customer and project selection and as I'd like to share with people, it's really customer selection and making sure that we're working with people that really value.

ashish: Your first question comes from the line of Ashish <unk> with RBC capital markets. Please go ahead.

David: Hi, Good morning. This is David on for Ashish Congrats on the good results here.

Speaker Change: The services that we provide in the field leaders that we are going to deploy to their sites.

David: I'm just curious if you could double click on some of the key variables that will drive margin EBITDA margin expansion to 13, 13% plus going forward. Thank you.

Speaker Change: Next I would say is improved mix as we continue to improve the percentage of our revenue that comes from inspection service and monitoring if you remember in our prepared remarks, we have grown that from 52% of total net revenues in 2023 to <unk>, 54% in 2024 on our way to our <unk>.

David: Good morning, and thank you for joining us and thank you for your question I would say that it's we're pounding the same the same drop.

David: <unk>.

David: The different levers that we continue to Paul Wood.

Speaker Change: <unk> of 60%.

Speaker Change: Price continues to be a lever for us to us to stay focused on.

David: I would start with discipline customer and project selection and as I'd like to share with people, it's really customer selection and making sure that we're working with people that really value.

Speaker Change: I would say procurement is another opportunity for us.

Speaker Change: We feel like we're still in the early innings of where we think that there is tremendous opportunity for us there.

David: The services that we provide in the field leaders that we are going to deploy to their sites.

Speaker Change: I would also say chubb value capture we're getting to the point, where we're going to stop talking about jump value capture and be talking about it like it's business as usual.

David: Next I would say is improved mix as we continue to improve the percentage of our revenue that comes from inspection service and monitoring as you remember in our prepared remarks, we have grown that from 52% of total net revenues in 2023 to <unk>, 54% in 2024 on our way to our <unk>.

Speaker Change: But.

Speaker Change: Were $90 million into our $125 million target and we continue to make really good progress there I would say, what we call business process transformation, which is basically working towards more shared services and.

David: <unk> of 60%.

Price continues to be able for us to us to stay focused on.

Speaker Change: Utilizing the scale of the company that would be another lever strategic.

David: I would say procurement is another opportunity for us.

Speaker Change: Strategic M&A as a lever and.

Speaker Change: Like I always like to tell people, we have the opportunity to just be better and I saw a report just yesterday that showed kind of branch performance across our portfolio of our business.

David: We feel like we're still in the early innings of and we think that there is tremendous opportunity for us there.

David: I would also say chubb value capture we're getting to the point, where we're going to stop talking about jump value capture and be talking about it like it's business as usual.

Speaker Change: We continue to pull our branches forward and we've got branches that are well north of 20% from a EBITDA margin perspective, which means we've got other branches that are.

David: But.

David: Were $90 million into our $125 million target and we continue to make really good progress there I would say, what we call business process transformation, which is basically working towards more shared services and.

End of mid single digit and we need to continue to bring those branches, along and theirs and we know what the playbook is there so but the.

Speaker Change: The levers that we're going to pull in the drug and we're going to beat is going to be the same.

David: Utilizing the scale of the company that would be another lever strategic.

Speaker Change: Great. That's very helpful. I appreciate it.

David: Strategic M&A as a lever and.

David: Like I always like to tell people, we have the opportunity to just be better and I saw a report just yesterday that showed kind of branch performance across our portfolio of our business and we continue to pull our branches forward and we've got branches that are well north of 20% from a EBITDA margin.

Speaker Change: Your next question comes from the line of Kathryn Thompson with Thompson Research Group. Please go ahead.

Kathryn Thompson: Alright, thanks, very much for taking my questions today.

Speaker Change: And very nice job on the year and achievements since going public.

Kathryn Thompson: Hi.

I wanted to step back and.

David: Active which means we've got other branches that are.

Kathryn Thompson: Look at the forest for the trees. This is something that you have.

David: Mid single digit and we need to continue to bring those branches along and there is and we know what the playbook is there so but the <unk>.

Kathryn Thompson: Focused on early on as public company in terms of recurring revenues.

David: The levers that we're going to pull in the drum we're going to be this is going to be the same.

Kathryn Thompson: Taking a how to manage through that very cyclical.

David: Great. That's very helpful. I appreciate it.

Kathryn Thompson: As we look at the re segmentation going forward.

Kathryn Thompson: Where are we today in terms of.

Speaker Change: Your next question comes from the line of Kathryn Thompson with Thompson Research Group. Please go ahead.

Kathryn Thompson: How you think about managing the business in light of some concerns about economic slowdown and how is your business model.

Kathryn Thompson: Alright, thanks, very much for taking my questions today.

Kathryn Thompson: Up to manage these fluctuations.

Speaker Change: And very nice job on the year and achievements since going public.

Kathryn Thompson: Hi.

Speaker Change: Thanks, Thanks, Katherine and good morning.

Speaker Change: I wanted to step back.

Speaker Change: And look at the forest for the trees. This is something that you have focused on early on as public company in terms of recurring revenues.

Kathryn Thompson: I always appreciate the perspective that you bring.

Kathryn Thompson: The calls to your to your question is actually.

Kathryn Thompson: I feel like if.

Speaker Change: In particular, how to manage through that very cyclical downturns.

Kathryn Thompson: If you look at the evolution of the business.

Speaker Change: As we look at the lease segmentation going forward.

Kathryn Thompson: Every year, we continue to build a greater sense of resilience.

Speaker Change: Where are we today in terms of.

Kathryn Thompson: Into our model and it really starts with that whole idea of driving inspect.

Speaker Change: How you think about managing your business in light of some concern about economic slowdown and how is your business model set up to manage these fluctuations. Thank you.

Kathryn Thompson: Inspection service and monitoring to 60% of our total net revenues and Thats where.

Kathryn Thompson: The.

<unk> component of it comes in which becomes provides the opportunity for us to be.

Speaker Change: Thanks.

Speaker Change: Thanks, Catherine good morning.

Speaker Change: I always appreciate the perspective that you bring.

Kathryn Thompson: More immune to any sort of fluctuations that youre going to see.

Speaker Change: Two the calls to your to your question is actually.

Kathryn Thompson: In the economy.

Kathryn Thompson: It includes even potential cost increases associated with tariffs, we price our inspection and service work in real time, So we're able to pass pass those increased costs on very very quickly.

Speaker Change: I feel like if.

Speaker Change: If you look at the evolution of the business.

Speaker Change: Every year, we continue to build a greater sense of resilience.

Speaker Change: Into our model and it really starts with that whole idea of driving inspect.

Kathryn Thompson: To our clients and so thats one of the more significant.

Kathryn Thompson: Opportunities for us.

Speaker Change: Inspection service and monitoring to 60% of our total net revenues and Thats where.

Kathryn Thompson: We also feel like being focused on inspection service and monitoring allows us to be more selective in the project work, we do and in one of Adam's slide decks, we have.

Speaker Change: You know the the resiliency component of it comes in which becomes provides the opportunity for us to be.

Kathryn Thompson: No.

Kathryn Thompson: Typical branch or a branch that we.

Speaker Change: More immune to any sort of fluctuations that youre going to see.

Kathryn Thompson: Really impose the inspection first mindset on and one of the things that you can see is that the project gross margins improve as your inspection service and monitoring revenue mix improves because it gives you the opportunity to be more selective on the project work that you do.

Speaker Change: In the economy I mean that includes even potential cost increases associated with tariffs, we price our inspection and service work in real time, So we're able to pass pass those increased costs on very very quickly.

Speaker Change: Due to our clients and so that's one of the more significant.

Kathryn Thompson: And that helps build resiliency, so like I look at our business today versus where our business was.

Speaker Change: Opportunities for us.

Speaker Change: In two.

Speaker Change: We also feel like being focused on inspection service and monitoring allows us to be more selective in the project work, we do and in one of Adam's slide decks. We have you know.

Speaker Change: 2008, 2009, and we've made a tremendous amount of progress in IP.

Speaker Change: I feel like we're in a really good place the last thing I would say about our ability to manage any sort of fluctuations in.

Speaker Change: A typical branch or a branch that we.

Speaker Change: The economy is that our cost model is basically 75% 70, 75% variable, which means that if needed we have the opportunity to flex very very quickly and I think if you go back and look at our results in 2020.

Really impose the inspection first mindset on and one of the things that you can see is that the project gross margins improve as your inspection service and monitoring revenue mix improves because it gives you the opportunity to be more selective on the project work that you do.

Speaker Change: When when Covid landed you.

Speaker Change: And that helps build resiliency, so like I look at our business today versus where our business was.

Speaker Change: You saw us exercise that muscle and.

Speaker Change: And really showed a positive result, as we worked our way through a very very much an unknown time, so I hope I addressed your question adequately.

Speaker Change: In.

Speaker Change: In 2008, 2009, and we've made tremendous amount of progress in him.

Speaker Change: Yes. Thank you very much I appreciate that and one follow up just more tactically about.

Speaker Change: I feel like we're in a really good place the last thing I would say about our ability to manage any sort of fluctuations in.

Speaker Change: Commentary about project delays is it more weather permitting financing.

Speaker Change: The economy is that our cost model is basically 75% 70, 75% variable, which means that if if needed we have the opportunity to flex very very quickly and I think if you go back and look at our results in 2020.

Speaker Change: Or is it more related to large projects or more kind of a localized.

Speaker Change: Market small project issue and just really take a picture trying to understand this.

Speaker Change: When when Covid landed you.

Speaker Change: More one time or more.

Speaker Change: You saw us exercise that muscle.

Speaker Change: And something that we'll be managing throughout the year.

Speaker Change: And.

Speaker Change: And really showed a positive result, as we worked our way through a very very much an unknown time, so I hope I addressed your question adequately.

Speaker Change: <unk>.

Speaker Change: Yes, Catherine so what I would say is that the project delays and everything else that we cited.

Speaker Change: Yes. Thank you very much I appreciate that and one follow up just more tactically about the commentary about project delays is it more weather permitting financing.

Speaker Change: Last year are mostly behind us we have.

Speaker Change: Government clients that.

Speaker Change: I would say continues to kind of get in their own way to a certain degree, but what I would also tell you is that we are smarter.

Speaker Change: Or is it more related to large projects or more a kind of a localized.

Speaker Change: When we were last year and I think we have built that into our plan.

Speaker Change: Market small project issues, and just really bigger picture trying to understand is this.

Speaker Change: Understanding that it would be more Hershey jerky, so I think that.

Speaker Change: More one time or more.

Speaker Change: We learned a lesson.

Speaker Change: And something that we'll be managing throughout the year.

Speaker Change: To a certain degree about how to how to plan for that work and to make sure that we are deploying our resources. So that we can.

Speaker Change: <unk>.

Speaker Change: Yes, Catherine so what I would say is that the project delays and everything else that we cited.

Speaker Change: <unk>.

Speaker Change: Last year are mostly behind us we have.

Speaker Change: Just do a better job of.

Speaker Change: Of forecasting and budgeting and how we lay out the work and how we're deploying our resources and probably more of that more than anything and as we move into this year I would say that Q1 is more normal this year than it was last year last year. If you. If you recall was an extremely.

Speaker Change: Government clients that.

Speaker Change: I would say continues to kind of get in their own way to a certain degree, but what I would also tell you is that we are smarter.

Speaker Change: Then we were last year and I think we have built that into our plan understanding.

Positive year as it relates to weather.

Speaker Change: Understanding that it would be more herky-jerky, so I think that.

Speaker Change: Q1 has always been.

Speaker Change: We learned a lesson.

Speaker Change: Our so to speak quietest quarter of the year because of seasonality and weather and thats proven to be true as we've dealt with more I guess, what I would consider normal weather conditions in this year and we're just dealing with that.

Speaker Change: To a certain degree about how to how to plan for that work and to make sure that we are deploying our resources. So that we can.

Speaker Change: Sure.

Speaker Change: Just do a better job of.

Speaker Change: Of forecasting and budgeting and how we lay out the work and how we're deploying our resources and probably more of it more than anything and as we move into this year I would say that Q1 is more normal this year than it was last year last year. If you. If you recall was an extremely.

Speaker Change: Great. Thank you so much and good luck.

Speaker Change: Thanks Catherine.

Speaker Change: Your next question comes from the line of Ken.

Speaker Change: Ronnie with William Blair. Please go ahead.

Ken Ronnie: Yes, good morning, Russ Thanks for taking my questions.

Speaker Change: Okay.

Speaker Change: Positive year as it relates to weather.

Speaker Change: To build on <unk> question, a little bit.

Speaker Change: Q1 has always been.

Speaker Change: A level set us where we stand with respect to those <unk>.

Our so to speak quietest quarter of the year because of seasonality and weather and thats proven to be true as we dealt with more I guess, what I would consider normal weather conditions in this year and we're just dealing with that.

Speaker Change: <unk> delays that you were experiencing late last year I think.

Speaker Change: There were three that you've called out publicly for a headwind of $150 million in 2024, and we get a lot of questions on those so I'm curious on those specific three <unk>.

Speaker Change: Great. Thank you so much and good luck.

Speaker Change: Those moving forward and then are there any other large specialty projects out there where you are seeing unexpected delays.

Catherine: Thanks Catherine.

Speaker Change: Your next question comes from the line of Tim Mulrooney.

Catherine: Ronnie with William Blair. Please go ahead.

Speaker Change: Early on here in 2025 is therefore it is Eric Thank you.

Tim Mulrooney: Yes, good morning, Russ Thanks for taking my questions.

Speaker Change: No so.

Speaker Change: Of the of the three I guess.

Speaker Change: I just want to build on Catherine's question, a little bit.

Speaker Change: And this is built into our plan already but of the three I would say that one is done.

Speaker Change: Can you level set us where where we stand with respect to those project delays that you are experiencing late last year I think.

Speaker Change: One is this government entities that I mentioned and we've built it into the plan we're doing the work as we speak.

Speaker Change: There were three that you've called out publicly for a headwind of $150 million in 2024, and we get a lot of questions on those so I am curious on those specific three half those move forward and then are there any other large specialty projects out there where you are seeing unexpected delays.

Speaker Change: So that is proceeding forward.

Speaker Change: The third was started off as a permitting issue and then became a right of way issue and there was.

Speaker Change: Early on here in 2025 is that our fourth as Eric said Thank you.

Speaker Change: I guess.

Speaker Change: Natural gas lines running into duct bank and things like that and.

Speaker Change: No so.

Speaker Change: And so that slowed things down, but we have people on the job site and I would say that the seasonality associated with winter work has slowed it down.

Speaker Change: Of the of the three I guess.

Speaker Change: And this is built into our plan already but of the three I would say that one is done.

Speaker Change: But the work is progressing and as.

Speaker Change: One is this government entities that I mentioned and we've built it into the plan we're doing the work as we speak.

Speaker Change: Kind of the winter season gets behind US, we expect the work to ramp up but that's all been appropriately factored into into our plant.

Speaker Change: So that is proceeding forward and the third was started off as a permitting issue and then became a right of way issue and there was.

Speaker Change: And do I know like what four or five years, there is stuff happening all the time and I'd like we had a semiconductor customer in our North American safety business that went through some changes on one of their large expansions that delay that project last year as well, we just don't happen to talk about that is as much and there is always.

Speaker Change: I guess.

Speaker Change: Natural gas lines running into duct bank and things like that and.

Speaker Change: And so that slowed things down, but we have people on the job site and I would say that the seasonality associated with winter work has slowed it down.

Speaker Change: On the project side of your business there's always.

Speaker Change: No delays and things that happen. So is there anything like what we experienced last year that we're anticipating this year no.

Speaker Change: But the work is progressing and as you know.

Speaker Change: Kind of the winter season gets behind US, we expect the work to ramp up but that's all been appropriately factored into into our plan.

Speaker Change: We feel like we're more prepared as we move into 2025 so.

Speaker Change: As I sit here right now.

Speaker Change: There is no number four.

Speaker Change: And do I know like what four or five years, there is stuff happening all the time and I I like we had a semiconductor customer in our North American safety business that went through some changes on one of their large expansions that delay that project last year as well, we just don't happen to talk about that is as much and there is always.

Speaker Change: Okay, that's really helpful and I think really helps.

Speaker Change: But that conversation to the side.

Speaker Change: Just just building on that a little bit more you did mention that one.

Speaker Change: Federal project.

Speaker Change: I guess Im curious this is something else we get questions on how much of your specialty business or I guess, how much of your business overall.

On the project side of your business there's always.

Speaker Change: No delays and things that happened. So is there anything like what we experienced last year that we're anticipating this year no.

Speaker Change: It is driven by projects that are funded.

Speaker Change: Partially.

Speaker Change: We feel like we're more prepared as we move into 2025 so.

Speaker Change: By federal funds like that federal rural broadband projects, just curious if theres any.

Speaker Change: Notable government.

Speaker Change: As I sit here right now.

Speaker Change: There is no number four.

Speaker Change: Bose your risk that you could highlight and investors given everything thats going on in the headlines. Thank you.

Speaker Change: Okay, that's really helpful and I think really helps.

Speaker Change: Yes, I don't I mean, as it relates to us I mean, it's not material in our in our total revenue I'd have to have Adam circle back with you and try to give you more specific figures I would I would just be guessing as I sit here.

Speaker Change: But that conversation to the side.

Speaker Change: Just building on that a little bit more you did mention that one.

Speaker Change: Federal project.

Speaker Change: I guess I'm curious just to something else, we get questions on how much of your specialty business I guess, how much of your business overall.

Speaker Change: The bead act or whatever you want to call that that had some.

It is driven by projects that are funded even partially by federal funds like that federal rural broadband projects, just curious if theres any.

Speaker Change: Some impact and some uncertainty, but thats I think more about more about the government getting in its own way.

Then about whether the funding is not there.

Speaker Change: Notable government.

Speaker Change: We don't do a tremendous amount of.

Speaker Change: Exposure risk that you could highlight and investors given everything thats going on in the headlines. Thank you.

Speaker Change: Federal government work that so to speak if your if your question is directed towards Dol.

Speaker Change: Yes, I mean as it relates to us I mean, it's not material.

Speaker Change: Those in.

Speaker Change: Some of that could get.

Speaker Change: Could get cut.

Speaker Change: And our total revenue I'd add to have Adam circle back with you and try to give you more specific figures I would I would just be guessing.

Speaker Change: That wouldn't have a direct impact on us, but like I said, one even going all the way back to when the infrastructure Bill was originally signed whatever two years ago now.

Speaker Change: As I sit here I mean.

Speaker Change: The bead act or whatever you want to call that that had some some impact and some uncertainty, but thats I think more about more about the government getting in its own way.

Speaker Change: A rising tide floats all boats.

Speaker Change: If.

Speaker Change: If a bunch of stuff gets cut and.

Then about whether the funding is not there.

That would have probably more of a negative effect on the overarching industry.

Speaker Change: We don't do a tremendous amount of federal government work that so to speak if your if your question is directed towards <unk>.

Speaker Change: Which you would expect to have some trickle down effect that would come.

Speaker Change: At a much later date as people continue to work through their backlogs and everything else. So.

Speaker Change: <unk>.

Speaker Change: Some of that could get.

Speaker Change: I'm not sitting here super concerned about it.

Speaker Change: It could get cut.

Speaker Change: That wouldn't have like a direct impact on us, but like I said, one even going all the way back to when the infrastructure Bill was originally signed whatever two years ago now.

Speaker Change: We obviously I think.

Speaker Change: From from my Chair, what we're watching more closely is tariffs and the effect that tariffs could have on inflation, making sure that we're protecting ourselves and our proposals today.

Speaker Change: A rising tide floats all boats.

Speaker Change: <unk>.

For potential increases in the cost of the products that we provide to our customers. The most notable commodity that we continue to watch as steel pipe prices and we've seen a small increase in steel prices.

Speaker Change: If a bunch of stuff gets cut and.

Speaker Change: That would have probably more of a negative effect on the overarching industry.

Speaker Change: Which you would expect to have some trickle down effect that would come at a much later date as people continue to work through their backlogs and everything else. So.

Speaker Change: But this is something that we actually anticipated win.

Speaker Change: The elections are over and we saw that.

Speaker Change: I'm not sitting here super concerned about it.

Speaker Change: We obviously I think from from my chair, what we're watching more closely is tariffs and the effect of tariffs could have on inflation, making sure that we're protecting ourselves and our proposals today.

Speaker Change: The new administration will be taking over we knew that president Trump.

Speaker Change: He likes to use tariffs and so it's not like it was a surprise and not like it was something that we didn't see coming it's just a matter of making sure that we're protecting ourselves.

Speaker Change: For potential increases in the cost of the products that we provide to our customers. The most notable commodity that we continue to watch as steel pipe prices and we've seen a small increase in steel prices.

Speaker Change: Got it thank you very much.

Tim: Thanks, Tim.

Tim: Your next question comes from the line of Josh Chan.

Speaker Change: Yes. Please go ahead.

Josh Chan: Hi, Good morning, David Thanks for taking my question, maybe one quick question on guidance you did mentioned that Q1 is impacted by weather.

Speaker Change: But this is something that we actually anticipated win.

Speaker Change: The elections are over and we saw that.

Speaker Change: Does that mean it has a disproportional impact on specialty and could you just kind of talk to whether the 5% type organic growth you had in safety in Q4, roughly sustainable for you.

Speaker Change: The new administration will be taking over we knew that president Trump.

Speaker Change: He likes to use tariffs and so it's not like it was a surprise and not like it was something that we didn't see coming it's just a matter of making sure that we're protecting ourselves.

Josh Chan: Yes.

Speaker Change: Yes, Thanks, Josh Thanks for the question I guess, what I'd say about our Q1 guidance and the impact on weather is is Q1 is going to look a lot like Q4, and as we get into Q2 Q3 and Q4, we will start seeing the specialty business returned to more traditional rates.

Speaker Change: Got it thank you very much.

Tim Mulrooney: Thanks, Tim.

Speaker Change: Your next question comes from the line of Josh Chan with UBS. Please go ahead.

Josh Chan: Hi, good morning, and rest and David Thanks for taking my question. Maybe one quick question on guidance. You did mentioned that Q1 is impacted by weather.

Josh Chan: Growth.

Josh Chan: But the growth formula and safety will be largely the same in Q1 in all of 2025 as it was in the fourth quarter in 2024.

Josh Chan: Does that mean it has a disproportional impact on specialty and could you just kind of talk to whether the <unk> to 5% type organic growth you had in safety in Q4 is roughly sustainable for for the.

Speaker Change: That's great to hear and then.

Speaker Change: A question for Russ on branches. So you mentioned, obviously, a certain branches at 20% plus margins and others that did.

Josh Chan: Yes.

Speaker Change: Would you say are the key factors that differentiate whether it branches in that high versus the low profitability buckets. Thank you.

Josh Chan: Yes, thanks, Josh Thanks for the question.

Josh Chan: Guess, what I'd say about our Q1 guidance and the impact on weather is is Q1 is going to look a lot like Q4, and as we get into Q2 Q3 and Q4, we'll start seeing the specialty business returned to more traditional rates of growth.

Speaker Change: Thanks for that softball.

And I would say that number one it starts with the branch leader and we.

Speaker Change: We need to have really good quality branch leaders on leading leading all of our branches.

Josh Chan: But the growth formula and safety will be largely the same in Q1 in all of 2025 as it was in the fourth quarter in 2024.

Speaker Change: And inside those branches, we have multiple departments and we need to have really good people, leading those departments and I think that's something that's where it starts.

Josh Chan: Great that's great to hear and then.

Speaker Change: A question for Russ on your branches. So you mentioned, obviously, a certain branches at 20% plus margins and others that did you. What would you say are the key factors that differentiate whether it branches in that high versus the low profitability bucket. Thank you.

Speaker Change: Second would be adopting this inspection first mindset and making sure that we're developing.

Speaker Change: Bringing on inspection sales leaders in those branches.

Speaker Change: To start selling that inspection, because we know we're going to get the $3 to $4 a pull through.

Speaker Change: Thanks for that softball.

Speaker Change: And I would say that number one it starts with the branch leader and.

Speaker Change: Service work that that's going to come alongside that and that takes a lot of energy and.

Speaker Change: Sure.

Speaker Change: We need to have really good quality branch leaders on leading leading all of our branches.

Speaker Change: <unk> effort.

Speaker Change: And then and then I would say that the second component of that following that recipe is making sure that you are disciplined from a customer in a project selection perspective, but it is 100% start with the with the branch leader and then it's going to going to be adopting that inspection first.

Speaker Change: And inside those branches, we have multiple departments and we need to have really good people, leading those departments and I think that's something that's where it starts.

Speaker Change: And second would be adopting this inspection first mindset and making sure that we're developing.

Speaker Change: Mindset, and really putting that playbook to work.

Speaker Change: Bringing on inspection sales leaders in those branches.

Speaker Change: Great. Thank you for that and thanks for the color and good luck in 'twenty five.

Speaker Change: You started selling that inspection, because we know we're going to get to $3 to $4 a pull through.

Speaker Change: Thank you. Thank you.

Speaker Change: Your next question comes from the line of Anthony Moore with Jefferies. Please go ahead.

Speaker Change: Service work that that's going to come alongside that.

Speaker Change: That takes a lot of energy and.

Harold: Good morning. This is Harold so on first us anymore. So just wanted to talk.

Speaker Change: An effort.

Speaker Change: And then and then I would say that the second component of that following that recipe is making sure that you are disciplined from a customer in a project selection perspective, but it's going to 100% start with the with the branch leader and then it's going to going to be adopting that inspection first mindset and really putting.

Speaker Change: M&A expectations for the year no leverage.

Harold: No I guess what are you seeing.

Speaker Change: On the M&A front.

Speaker Change: I can tell you is this.

Speaker Change: Jason.

Speaker Change: Uh huh.

Speaker Change: So as you think about M&A are you looking to do.

Speaker Change: That playbook to work.

Speaker Change: Legacy safety space or.

Speaker Change: Great. Thank you for that and thanks for the color and good luck in 'twenty five.

A bit more on the elevated <unk>.

Speaker Change: Thank you. Thank you.

Speaker Change: Around that philosophy.

Speaker Change: Any willingness to do another large platform deals.

Speaker Change: Your next question comes from the line of Stephanie.

Speaker Change: The more with Jefferies. Please go ahead.

Speaker Change: I guess.

Speaker Change: Either.

Harold: Good morning. This is Harold so on just us anymore.

Speaker Change: Thank you so much and so.

Speaker Change: Just wanted to talk about.

Speaker Change: So theres a lot a lot of ground to to really cover there.

Harold: M&A expectations for the year no leverage.

Speaker Change: So we shared that we spent roughly $250 million.

Speaker Change: Sure.

Speaker Change: Yes no.

Speaker Change: On bolt on M&A.

Speaker Change: On the M&A front.

Speaker Change: Really mid single digit multiples that has been a key tenant of <unk>.

Speaker Change: How competitive was this basin.

Speaker Change: So as you think about M&A are you looking at.

Speaker Change: Our M&A playbook, if you will.

Speaker Change: Legacy safety space or.

Speaker Change: Our plan and our goal is to execute kind of similarly.

Speaker Change: More on the elevated spacious comments around there <unk> any willingness to do another large platform deals.

Speaker Change: This year, so we plan to spend hopefully another $250 million.

On bolt on M&A through the course of this year I would say that the priorities there would be in the fire life safety space, the security space and the elevator and escalator space.

Speaker Change: Okay.

Speaker Change: Either.

Speaker Change: Thank you so much and.

Speaker Change: So theres a lot a lot of ground to to really cover there.

Speaker Change: So we shared that we spent roughly $250 million.

Speaker Change: It doesn't mean that we wouldn't if we found a really highly profitable <unk> service business or something like that that we wouldn't take a peek at it but our priorities are primarily going to be in those three buckets.

Speaker Change: On bolt on M&A at really mid single digit multiples that has been a key tenant of.

Speaker Change: Our M&A playbook, if you will.

Speaker Change: Im going to say that from an international perspective, we feel like we continue to make progress in our with our international business and so we are opening up the aperture a little bit and we're looking at some opportunities internationally.

Speaker Change: Our plan and our goal is to execute kind of similarly.

Speaker Change: This year, so we plan to spend hopefully another $250 million.

Speaker Change: On bolt on M&A through the course of this year I would say that the priorities there would be in the fire life safety space, the security space and the elevator and escalator space.

Speaker Change: Where we've been I don't know if reluctance the right word, but we just didn't feel like we were necessarily ready to be doing bolt on M&A.

Speaker Change: In our international business, we've done one to date and.

Speaker Change: That doesn't mean that we win if we found a really highly profitable <unk>.

Speaker Change: But we are really looking at some opportunities internationally right now as we speak that we think would be great bolt on opportunity. So we're going to spend some time there and.

Speaker Change: <unk> service business or something like that that we wouldn't take a peek at it but our priorities are primarily going to be in those three buckets.

Speaker Change: And I suspect that that will get a couple of things accomplished internationally. This year as it relates to the elevator and escalator space what I've been sharing publicly is that our goal is to do one first and do it really well and.

Speaker Change: I am going to say that from an international perspective, we feel like we continue to make progress in our with our international business and so we are opening up the aperture a little bit and we're looking at some opportunities internationally where.

Speaker Change: Where we've been I don't know if reluctance the right word, but we just didn't feel like we were necessarily ready to be doing bolt on M&A.

Speaker Change: And what I mean by that is that when we do bolt on M&A.

Speaker Change: The company that's going to receive.

Speaker Change: In our international business, we've done one to date and.

Speaker Change: That bolt on if you will needs to be able to integrate it and we have an integration team here led by a very strong leader.

Speaker Change: But we are really looking at some opportunities internationally right now as we speak that we think could be great bolt on opportunity. So we're going to spend some time there.

Speaker Change: And but she is more of a quarterback and a coach and a facilitator and she.

Speaker Change: And I suspect that that will get a couple of things accomplished internationally. This year as it relates to the elevator and escalator space. What I have been sharing publicly is that our goal is to do one first and do it really well and.

Speaker Change: Basically helps the business. So the business has to be able to to really receive it and integrate it and we.

Speaker Change: We haven't done any bolt on M&A with elevated since since the acquisition. So we need to do one see how the company does with that and if they do if they do well and then we will turnaround and we'll do another one.

Speaker Change: And what I mean by that is that when we do bolt on M&A.

Speaker Change: And I think the worst thing, we could do would be overwhelm them with two or three bolt ons right right out of the gates. So we're going to take a measured approach and in.

Speaker Change: The company, that's going to receive that bolt on if you will needs to be able to integrate it and we have an integration team here led by a very strong leader and but she is more of a of a quarterback and a coach and a facilitator and she basically helps the business. So the.

Speaker Change: And make sure that.

Speaker Change: That we're being smart about how we approach that.

Speaker Change: And then I guess, maybe the last comment I would say is that.

Speaker Change: Our pipeline remains robust and we see a lot of opportunity for us to continue to.

Speaker Change: Business has to be able to to really receive it and integrate it and.

Speaker Change: We haven't done any bolt on M&A with elevated since since the acquisition. So we need to do one see how the company does with that and if they do if they do well and then we will turnaround and we'll do another one and.

Speaker Change: To do bolt on M&A across the breadth of our business and really specifically in the United States. The market remains highly fragmented and we think that there is.

Speaker Change: The worst thing that we could do would be overwhelm them with two or three bolt ons right right out of the gates. So we're going to take a measured approach and <unk>.

Speaker Change: A lot of opportunity for us to continue to complement our geographic footprint through through bolt on M&A from a transformational M&A perspective.

Speaker Change: We continue to do work on a number of different opportunities in this space.

Speaker Change: And make sure that.

Speaker Change: That we're being smart about how we approach that.

Speaker Change: We are very very disciplined.

Speaker Change: And then I guess, maybe the last comment I would say is that.

Speaker Change: And we need to make sure that there's rate opportunity do I think that we're in a position where we're going to put another leg under the stool like we feel like we did with the elevator and escalator space.

Speaker Change: Our pipeline remains robust and we see a lot of opportunity for us to continue.

Speaker Change: To do bolt on M&A across the breadth of our business.

Speaker Change: Not so sure about that I mean, we just really got into the elevator and escalator space. So I feel like there's just a lot of work for us to do.

Speaker Change: Specifically in the United States the market remains highly fragmented and we think that there is.

Speaker Change: We've said it today again, we think that's a $1 billion platform for us.

Speaker Change: A lot of opportunity for us to continue to complement our geographic footprint through through bolt on M&A from a transformational M&A perspective.

Speaker Change: I think we have a lot of work to do to demonstrate two to yourself into others that this is something that we can execute on and so the focus will be on the verticals that we're operating in today and I don't want to say that we wouldnt.

Speaker Change: We continue to do work on a number of different opportunities in this space.

Speaker Change: Our very very disciplined and.

Speaker Change: And we need to make sure that there's the right opportunity do I think that we're in a position where we're going to put another leg under the stool like we feel like we did with the elevator and escalator space.

Speaker Change: Because that's.

Speaker Change: That would be a little bit of a putting ourselves in a corner but.

Speaker Change: Right now as we sit here I think the focus is on what we have are there some bigger things out there that are of interest to us for sure and but it needs to be at the right valuation for us and specifically in the fire life safety space Youre seeing some of the larger companies the multiples that these businesses are trading.

Speaker Change: Not so sure about that I mean, we've just really got into the elevator and escalator space. So I feel like there's just a lot of work for us to do.

Speaker Change: We've said it today again that we think that's $1 billion platform for us.

Speaker Change: I think we have a lot of work to do to.

Speaker Change: For our.

Speaker Change: Demonstrate two two yourself into others that this is something that we can execute on and so the focus will be on the verticals that we're operating in today and I don't want to say that we wouldnt because that's.

Speaker Change: In our opinion much too high and.

Speaker Change: We feel like we're going to stay disciplined and stay focused and if the right opportunity comes along we'll do the work and we'll dig in.

Speaker Change: <unk>.

Speaker Change: We will make sure that we're doing doing right by our shareholders.

Speaker Change: That would be a little bit of putting ourselves in a corner but.

Speaker Change: Right now as we sit here I think the focus is on what we have are there some bigger things out there that are of interest to us for sure and but it needs to be at the right valuation for us and specifically in the fire life safety space Youre seeing some of the larger companies the multiples that these businesses are trading.

Speaker Change: Great. Thank you for all the color and I guess.

Speaker Change: Just on the revenue guidance, so you guys.

Speaker Change: To achieve the high end of the guidance.

Speaker Change: Can you talk about some of the drivers.

Speaker Change: Sure.

Speaker Change: You talked about FX. So if you could just I guess based on the efforts today.

Speaker Change: For our.

Speaker Change: This implies.

Speaker Change: In our opinion much too high and.

Speaker Change: Currency impact.

Speaker Change: Pricing expectations are you expecting that to.

Speaker Change: We feel like we're going to stay disciplined and stay focused and if the right opportunity comes along we'll do the work and we'll dig in.

Speaker Change: Continue running mid single digit.

Speaker Change: Yes, just any drivers.

Speaker Change: But that would get you to the high end of.

Speaker Change: And.

Speaker Change: We will make sure that we're doing doing right by our shareholders.

Speaker Change: Guidance would be helpful. Thank you.

Speaker Change: Yes, hey, thank you for that question.

Speaker Change: Great. Thank you for all the color and I guess Jim.

Speaker Change: I guess, what I'd say on that is it.

Speaker Change: Just on the revenue guidance I guess.

Speaker Change: To achieve the high end of the guidance could you talk about some of the drivers that you would need to see there.

Speaker Change: Our our revenue guide for the year.

Speaker Change: Is largely based on on the flywheel that we've talked about in the past which is.

Speaker Change: I know you talked about FX. So if you could just I guess based on the efforts today.

Speaker Change: Mid to upper single digit growth in service revenue.

Speaker Change: This implies.

Speaker Change: Low mid single digit project revenue growth and that really gets it to the to the midpoint of our guide. So when you think about what are the factors that could get you more to the top end.

Speaker Change: The currency impact.

Speaker Change: No pricing expectations are you expecting that to continue running mid single digit in the year.

Speaker Change: Yes, just any drivers.

Speaker Change: Obviously, it's continue.

Speaker Change: But that would get you to the high end.

Speaker Change: Acceleration in progress on the service side, but I'd say, it's probably looking more towards that project book and how quickly or if that gets over the low to mid single digit.

Speaker Change: Items would be helpful. Thank you.

Speaker Change: Yes. Thank.

Speaker Change: Thank you for that question.

Speaker Change: I guess, what I'd say on that is is our our revenue guide for the year is largely based on.

Speaker Change: That's the foundation of our guide and our growth story.

Speaker Change: The only thing the only thing I would add to David's remarks is price will obviously play play a factor in that for us and.

Speaker Change: On the flywheel that we've talked about in the past which is.

Speaker Change: Mid to upper single digit growth in service revenue.

Speaker Change: We need to make sure that we're diligent about taking price, where we can and also the end markets that we plan and.

Speaker Change: Low mid single digit project revenue growth and that really gets you to the midpoint of our guide. So when you think about what are the factors that could get you more to the top end.

Speaker Change: One of the things.

Speaker Change: When you think about might even my remarks about our branch our branch leaders and the importance of our branch leaders.

Speaker Change: Obviously, it's continued.

Speaker Change: Acceleration in progress on the service side, but I'd say, it's probably looking more towards that project book and how quickly or if that gets over the low to mid single digit mid.

Speaker Change: One of the areas that our branch leaders need to be more strategic.

As in the with who they choose to deploy their people to I.

Speaker Change: It's a foundation of our guide and our growth story.

Speaker Change: E who they are who their customers are going to be which is a direct relation to the end markets that they choose to play in and there are certain end markets that.

Speaker Change: I think the only thing I would add to David's remarks price will obviously play play a factor in that for us.

Speaker Change: We are much stronger and much more resilient to some of the macros.

Speaker Change: We need to make sure that we're diligent about taking price, where we can and also the end markets that we plan and.

Speaker Change: That are going out there.

Speaker Change: And then last thing and David kind of touched on this but we could open the spigot, if we wanted to but that would be at the expense of margin.

Speaker Change: One of the things.

When you think about might even my remarks about our branch our branch leader and the importance of our branch leaders.

Speaker Change: And we need to.

Speaker Change: Demonstrating to you and to our investors that we can grow in that mid single digit organic growth rate and still expand our margins simultaneously and we believe that.

Speaker Change: One of the areas that our branch leaders need to be more strategic is indeed with who they choose to deploy their people to I E.

Speaker Change: Well, we're going to do it and we're going to show you that we can do it.

Speaker Change: Who their customers are going to be which is a direct relation to the end markets that they choose to play in and there are certain end markets that.

Speaker Change: Thank you <unk>.

Speaker Change: Turn it over.

Speaker Change: Are much stronger and much more resilient to some of the macros that are going out there.

Speaker Change: Your next question comes from the line of Andy Wittmann with Baird.

Speaker Change: Please go ahead.

Speaker Change: And then last thing and David kind of touched on this but we could open the spigot if we wanted to.

Andy Wittmann: Great Good morning, and thanks for taking my questions.

Andy Wittmann: I mean, you've been asked this question I'm about to ask several times. So I wanted to just see.

Speaker Change: But that would be at the expense of margin and we need to.

Andy Wittmann: On the.

Andy Wittmann: On the strategic outs.

Speaker Change: <unk> demonstrated to you and to our investors that we can grow in that mid single digit organic great.

Andy Wittmann: Outlook for your business.

Andy Wittmann: Notice that the multiples for pure play fire life safety companies are trading at multiples that youre not interested in paying for your shareholders. I mean these are.

Speaker Change: And still expand our margins simultaneously and we believe that.

Andy Wittmann: Quarterly in the high teens, or maybe even a little better than that.

Speaker Change: While we're going to do it and we're going to show you that we can do it.

Andy Wittmann: So just with the benefit of some of these trades happening in the marketplace does that change how you are looking at.

Speaker Change: Thank you for all the color.

Speaker Change: I'll turn it over.

Andy Wittmann: The composition of your business in the specialty business in particular strategically with some of these trades having happened.

Speaker Change: Your next question comes from the line of Andy Wittmann with Baird. Please go ahead.

Andy Wittmann: Great. Good morning, and thanks for taking my questions. So Russ I mean, you've been asked this question I'm about to ask several times. So I wanted to just see.

Thanks, Andy I was wondering when we're going to yet get to you. So I hope I hope youre well.

Speaker Change: On the.

Andy Wittmann: We continue and I think I alluded to it in my remarks, I mean, we continue to look at.

Speaker Change: On the strategic.

Speaker Change: Outlook for your business and you noted that the multiples for pure play fire life safety companies are trading at multiples that youre not interested in paying for your shareholders. I mean these are.

Andy Wittmann: I'm, telling you we really look at all aspects of our business not just specialty.

Andy Wittmann: Like if we have a branch that's in our North American safety business is not performing I'm thinking of one actually that we closed last year and.

Speaker Change: Quarterly in the high teens, or maybe even a little better than that.

Speaker Change: So just with the benefit of some of these trades happening in the marketplace does that change how you are looking at.

Andy Wittmann: And so we look at every aspect of our of our business and we have expectations that it's going to.

Speaker Change: The composition of your business in the specialty business in particular strategically with some of these trades having happened.

Andy Wittmann: Be additive to our long term margin expansion goals and there is a direct correlation between EBITDA margin.

Andy Wittmann: Thanks, Andy I was wondering when we're going to yet get to you. So I hope your I hope Youre well.

Andy Wittmann: The valuations that are shares will ultimately trade at and we understand and we know that so were taken.

Andy Wittmann: We continue and I think I alluded to it in my remarks, I mean, we continue to look at.

Andy Wittmann: The approach as we sit here today that we are going to do selective pruning.

Andy Wittmann: I'm, telling you we really look at all aspects of our business not just specialty.

Andy Wittmann: Across our business, including specialty if.

Andy Wittmann: Like if we have a branch that's in our North American safety business is not performing I'm thinking of one actually that we closed last year and.

Andy Wittmann: If we have businesses that don't fit our long term margin expansion goals and we have some work that we know that we have to to continue to do there.

Andy Wittmann: And so we look at every aspect of our of our business and we have expectations that it's going to.

Andy Wittmann: And we will continue to evaluate all options for our business and make sure that we're making the best decisions for our shareholders long term.

Be additive to our long term margin expansion goals and there is a direct correlation between EBITDA margin.

Andy Wittmann: But as it sits right now today.

Andy Wittmann: The valuations that are shares will ultimately trade at and we understand and we know that so were taken.

Andy Wittmann: That's the that's the tack and Thats the approach that we're taking.

Andy Wittmann: Okay.

Speaker Change: Fair enough then I just wanted to kind of get a little bit more detail on the transformation costs in the quarter. They were a market step up.

Andy Wittmann: The approach as we sit here today that we are going to do selective pruning.

Andy Wittmann: This quarter over any other quarter really in your company's history.

Andy Wittmann: Across our business, including specialty if.

Andy Wittmann: So I was wondering.

Andy Wittmann: What drove that in the quarter so high.

Andy Wittmann: If we have businesses that don't fit our long term margin expansion goals and we have some work that we know that we have to to continue to do there.

Andy Wittmann: The budget for this number is in 2025, given that it's relatively significant here in the fourth quarter to know if there's going to be a continuation of this level of.

Andy Wittmann: And we will continue to evaluate all options for our business and make sure that we're making the best decisions for our shareholders long term.

Andy Wittmann: Transformation costs going forward.

Andy Wittmann: Yeah, Hey, thanks for the question Andy I'll handle this one so when you look at what we've got in our adjustments.

Andy Wittmann: But as it sits right now today.

Andy Wittmann: That's the that's the tack and that's the approach that we're taking.

Andy Wittmann: Contingent consideration.

Andy Wittmann: Okay.

Andy Wittmann: We will largely carryover into 2025.

Speaker Change: Fair enough then I just wanted to kind of get.

Speaker Change: A little bit more detail on the transformation costs in the quarter they were a market step up.

We've got non service pension costs and benefit that can be a good guy in some years that can be a bad guy in some years, we're going to continue to.

Speaker Change: This quarter over any other quarter really in your company's history.

Andy Wittmann: Adjust that out because we believe that doing so.

Speaker Change: So I was wondering.

Speaker Change: What drove that in the quarter so high the.

Andy Wittmann: US and investors a clearer view of the underlying performance of our business.

Speaker Change: The budget for this number is in 2025, given that it's relatively significant here in the fourth quarter to know if there's going to be a continuation of this level of.

Andy Wittmann: We had restructuring costs in the quarter those are largely related to our value capture program.

Speaker Change: Transformation costs going forward.

Andy Wittmann: Those did increase in the fourth quarter versus the rest of the year and.

Andy Wittmann: Yeah, Hey, thanks for the question Andy I'll handle this one so when you look at what we've got in our adjustments.

Andy Wittmann: And we expect that to come to an end in 2025 years.

Andy Wittmann: We closed out that program and then BTT cost as you mentioned, we're up in the quarter now Thats cost, where we include integration costs for the Chubb business the elevated transaction.

Andy Wittmann: And a contingent consideration will largely in a carryover into 2025.

Andy Wittmann: We've got non service pension costs and benefit that can be a good guy in some years that can be a bad guy in some years, we're going to continue to.

Andy Wittmann: It's also a bucket where.

Andy Wittmann: We include costs for our Sox deployment, the final steps of our fiber build out and things like that and so as we go into 2025.

Andy Wittmann: Just that because we believe that doing so again.

Andy Wittmann: US and investors a clearer view of the underlying performance of our business.

Andy Wittmann: We largely expect the Sox deployment work now is behind US we're in the very last inning of our cyber rollout and so I guess, what you could expect to see in 2025 is integration costs should we do a larger platform type deal.

Andy Wittmann: We had restructuring costs in the quarter those are largely related to our chub value capture program. Those did increase in the fourth quarter versus the rest of the year.

And we expect that to come to an end in 2025 as we close out that program and then BTT cost as you mentioned, we're up in the quarter now Thats cost, where we include integration costs for the Chubb business the elevated transaction.

Andy Wittmann: Or any system investment costs, as we look towards opportunities to capture.

Andy Wittmann: Benefits from our global scale and our global platform.

Andy Wittmann: Okay. Thank you.

Andy Wittmann: It's also a bucket where.

Speaker Change: Thanks, and our next question comes from the line of John <unk> with CJS.

Andy Wittmann: We includes costs for our Sox deployment the final steps of our fiber build out and things like that and so as we go into 2025.

Speaker Change: Please go ahead.

Speaker Change: Hi, good morning, and thank you for taking my questions.

Andy Wittmann: We largely we expect the Sox deployment work now is behind Us we're.

Jack: Hey, Jack.

Jack: Good morning.

Jack: You mentioned the semiconductor projects that pushed out.

Andy Wittmann: We're in the very last inning of our cyber rollout and so I guess, what you could expect to see in 2025 is is integration costs should we do a larger platform type deal.

Speaker Change: Obviously, one of your board.

Jack: <unk> has had.

Jack: Management at that kind of profitability in the last year, and we know that as chip that may have some issues as well in terms of funding with what's going on in the Trump administration I'm just wondering if you see any risk there.

Andy Wittmann: Or any system investment costs, as we look towards opportunities to capture.

Andy Wittmann: Benefits from our global scale and our global platform.

Jack: And what kind of exposure you might have.

Jack: Alright.

Andy Wittmann: Okay. Thank you.

Jack: Other income for semiconductors.

Speaker Change: Thanks, and our next question comes from the line of Jon <unk> with CJS Securities.

Jack: While this list.

Jack: This slippage had nothing to do with money.

Andy Wittmann: Please go ahead.

Jack: It had everything to do.

Speaker Change: Hi, good morning, and thank you for taking my questions.

Jack: Yes.

Jack: Just trying to think of.

Jeff: Hey, Jeff.

Jack: What I can say or not say I mean.

Speaker Change: Good morning is just you mentioned the semiconductor project that pushed out.

Jack: Want to be respectful to our to our client.

Jeff: Obviously, one of your larger customers is headed.

Jack: But this had nothing to do with funding our money I mean everything is moving forward. They just made they made some changes in the leadership, that's probably the best way for me to put it in they made some changes in the leadership of the project.

Speaker Change: Difficulties with management and kind of.

Profitability in the last year, and we know Thats chipset may have some issues as well in terms of funding with what's going on in the Trump administration I'm just wondering if you see any risk there.

Jack: <unk>.

Jack: And when you make of these major projects when they make changes like that it just is going to be kind of takes some time to smooth things out and that's all done and thats all behind them and moving forward and I would say that they are there.

Speaker Change: And then what kind of exposure you might have.

Speaker Change: Got it.

Speaker Change: For that customer for semiconductors.

Speaker Change: While this list.

Speaker Change: This slippage had nothing to do with money and had everything to do.

Jack: They are committed and.

Speaker Change: Just trying to think of.

Jack: Regardless of what happens with the chips Act, so I'm not I'm not worried about it I am not.

Sure.

Speaker Change: What I, just can't say or not say I mean, I want to be respectful to our to our client and.

Jack: I'm not concerned about it.

Speaker Change: But this had nothing to do with funding our money I mean everything is moving forward. They just made they made some changes in the leadership, that's probably the best way for me to put it in they made some changes in the leadership of the project and.

Jack: That's one of the things that is positive about are positive about our business.

Jack: Versus some of the peers that folks want to compare us to like so on some of these larger whether it's data centers, our semiconductor facilities or even some of these advanced manufacturing facilities.

Speaker Change: When you make these major <unk>.

Speaker Change: <unk> when they make changes like that it just is going to be it's going to take some time to smooth things out and that's all done and thats, all behind them and moving forward and I would say that there.

Jack: We're for us like on the fire side or fire life safety like large project related contract is 8 million Bucks 9 million box, it's not $400 million box you know what I mean, so that if something gets delayed.

Speaker Change: They are committed and.

Speaker Change: Regardless of what happens with the chips Act, so I'm not I'm not worried about it I am not.

Jack: Material, I mean that $400 million a HVAC.

Speaker Change: I'm not concerned about it.

Jack: <unk> contract gets delayed.

Speaker Change: I think thats one of the things that is positive about are positive about our business.

Jack: Going to cause a hole.

Jack: And whoever's doing that work and for us.

Speaker Change: First as some of the peers that folks want to compare us to like so on some of these larger whether it's data centers, our semiconductor facilities or even in some of these advanced manufacturing facilities.

Jack: We're doing the fire, it's $8 million and so thats not material and it's much easier for us to just kind of move fast that kind of keep keep the train train moving down the tracks.

Speaker Change: For us like on the fire side or fire life safety like large project related contract is 8 million Bucks 9 million box, it's not $400 million box you know what I mean, so that is something that gets delayed.

Jack: I mean thats one of the reasons that we're building our business the way we're building it I mean, I don't really I mean, I love. The fact that the data center market is as hot as it is and we want to make sure that we're doing everything to take advantage of it but at the end of the day, we still want the inspection service and monitoring more than we want the project work and Thats.

Speaker Change: Material, I mean that $400 million HVAC.

Speaker Change: MEP contract gets delayed that's going to cause a hole.

Jack: How we're building our model and we want to do we want to do project work for our clients, where we're doing the inspection service and monitoring and that is just a violent.

Speaker Change: And whoever's doing that work and for us.

Speaker Change: We've deferred during the fire, it's $8 million and so thats not material and it's much easier for us to just kind of move fast.

Jack: Difference in our approach compared to some of our peers peers in the industry. So I don't feel like.

Speaker Change: Keep keep the train train moving down the tracks.

Jack: We've got that same level of risk is say other firms would have.

Speaker Change: That's one of the reasons that we are building our business the way we're building. It I mean, I don't really I mean, I love. The fact that the data center market is as hot as it is and we want to make sure that we're doing everything to take take advantage of it but at the end of the day, we still want the inspection service and monitoring more than we want the project work and Thats.

Speaker Change: Got it that's very helpful. Thank you and then a question for David I think I heard you say you expect interest expense to be $145 million is which would be flat.

Jack: I was wondering it.

Speaker Change: That lines up with your expectation for free cash flow in.

Speaker Change: We're building our model and we want to do we want to do project work for our clients, where we're doing the inspection service and monitoring and that is just a violent difference in our approach compared to some of our peers peers in the industry. So I don't feel like.

Jack: On capital allocation for acquisitions or not.

Jack: Yeah. Thanks for the question John You did hear right. We expect our interest rate guide for the full year 2000 $25 million to $145 million.

Jack: That feeds into our adjusted free cash flow conversion guidance, 75%.

Speaker Change: So we've got that same level of risk is say other firms would have.

Jack: Which is still going to give about 10 10 more than 10% year over year increase in adjusted free cash flow for the business and I guess, what I'd say about our adjusted free cash flow guidance is it will be invested in networking capital to grow the business organically in 2025.

Speaker Change: Got it that's very helpful. Thank you and then a question for David I think I heard you say you expect interest expense to be $145 million this year, which would be flat.

Speaker Change: I was wondering how that lines up with your expectation for free cash flow.

Jack: And we will improve our working capital right in order to fund that.

Speaker Change: Capital allocation for acquisitions or not.

Speaker Change: Yeah. Thanks for the question John You did hear right, we expect our interest rate.

Speaker Change: I'm just wondering why the interest expenses.

Jack: It will go down.

Jack: I don't think you are spending on other things.

Speaker Change: For the full year 2000 $25 million to $145 million.

Jack: Yes.

Jack: John it's as much of an accounting question as it is anything else we had a prior period I'd say good guy.

Speaker Change: That feeds into our adjusted free cash flow conversion guidance, 75%.

Speaker Change: Which is still going to give it about 10 10 more than 10% year over year increase in adjusted free cash flow for the business and I guess, what I'd say about our adjusted free cash flow guidance is it will be invested in net working capital to grow the business organically in 2025.

Jack: Interest expense in 2024 that we don't expect to repeat in 2025.

Speaker Change: Got it thank you.

Speaker Change: That concludes our call.

Question.

Speaker Change: That concludes our question and answer session I will now turn the call back over to Ross President and CEO for closing remarks. Please go ahead.

Speaker Change: We will improve our working capital right.

Speaker Change: To fund that.

Speaker Change: I'm just wondering why the interest expenses is expected to go down.

Speaker Change: I don't know if youre spending on other things.

Speaker Change: Thank you so much and closing I would like to thank all of our team members for their continued support and dedication to our business. We believe our people are the foundation on which everything else is built without them. We do not exist I would also like to thank our long term shareholders as well as those that are new are recently join.

Speaker Change: Yes.

Speaker Change: John it's as much of an accounting question as it is anything else we had a prior period I'd say good guy.

Speaker Change: Interest expense in 2024 that we don't expect to repeat in 2025.

Speaker Change: As for their support we appreciate your ownership of API and we look forward to updating you on our progress throughout the remainder of the year. Thank you everybody for taking the time to join our call.

Speaker Change: Got it thank you.

Speaker Change: That concludes our call.

Speaker Change: Good question.

Speaker Change: That concludes our question and answer session I will now turn the call back over to Ross Becker, President and CEO for closing remarks. Please go ahead.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Speaker Change: Yes.

Speaker Change: Thank you so much and closing I would like to thank all of our team members for their continued support and dedication to our business. We believe our people are the foundation on which everything else is built without them. We do not exist I would also like to thank our long term shareholders as well as those that are new or recently joined us for their support.

Speaker Change: We appreciate your ownership of API and we look forward to updating you on our progress throughout the remainder of the year. Thank you everybody for taking the time to join our call.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Speaker Change: Okay.

Speaker Change: Yes.