TRG | The Bottom Line – 4/19

APi Group (APG) has launched into 2024 with a variety of initiatives focused on both growth and improving overall shareholder quality. TRG recently marketed with the company, and ever focused on gaining a “boots on the ground” view, TRG also hosted a field trip to a Boston-area APG site inspection. Takeaways from the day, combined with recent company news, point to a company that has grown up since its debut to public equity markets in 2020, simultaneously improving the business mix, cleaning up its capital structure, and further enhancing its shareholder base. Operationally the company has steadily improved margins (11.3% in FY’23 with goal of 13%+ by 2025), increased service-oriented work (now at 52% with goal of 60%+), increased recurring revenue opportunities, and most recently expanded service offerings to elevator service and repair (70% service work, expands TAM by $10B). Capital structure wise, this year alone the company has removed the 32.5MM preferred series B shares (originally from the Chubb acquisition and a source of overhang concern), bought back 16.2MM of those shares and launched a secondary of 12.1MM of those shares. Earlier this week, APG also successfully completed another 11MM share public offering. From our perspective, the stock offerings provided an opportunity for APG to improve its shareholder base (i.e., increase the mix of long-only/fundamental-focused funds) to the mix, while also maintaining a clean balance sheet and keeping dry powder for M&A initiatives.