APG Q2 Deep Dive: Organic Growth, M&A Momentum, and Strong Backlog Fuel Outlook

Safety and specialty services provider APi (NYSE:APG) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 15.1% year on year to $1.99 billion. On top of that, next quarter’s revenue guidance ($2.01 billion at the midpoint) was surprisingly good and 4.6% above what analysts were expecting. Its non-GAAP profit of $0.39 per share was 4.2% above analysts’ consensus estimates.

Is now the time to buy APG? Find out in our full research report (it’s free).

StockStory’s Take

APi’s second quarter results drew a positive market response, driven by robust organic revenue growth and notable execution in both core business segments. Management attributed the outperformance to a combination of strong project activity, expanding inspection and service revenues, and continued pricing improvements. CEO Russell Becker highlighted the significance of double-digit inspection revenue growth in North America and a resilient international performance, stating, “Our North American Safety business achieved double-digit inspection growth for the 20th straight quarter.” CFO Glenn Jackola pointed to a record backlog and the impact of disciplined customer and project selection as additional key factors supporting margins and growth.

Looking forward, APi’s raised guidance reflects management’s confidence in sustained organic growth, ongoing margin expansion, and the successful integration of recent acquisitions. Leaders emphasized their focus on scaling the inspection and service business, leveraging technology for operational efficiency, and pursuing disciplined M&A to accelerate platform growth. Jackola explained that the guidance increase was supported by “overdelivery in the second quarter, incremental M&A, and an improved outlook for the second half of the year.” Becker also noted, “We are confident in our leaders’ ability to execute our strategy and deliver against our long-term financial targets.”

Key Insights from Management’s Remarks

Management cited robust project execution, backlog expansion, and progress in key initiatives as primary contributors to second quarter performance and the updated outlook.

• Inspection and service momentum: APi’s North American Safety business delivered its 20th consecutive quarter of double-digit inspection revenue growth, with management underscoring inspections as a bellwether for ongoing service expansion and recurring revenues.
• Specialty Services rebound: The Specialty Services segment returned to organic growth, converting backlog into revenue, despite margin pressure from higher material costs and a greater mix of project starts, which typically carry lower initial margins.
• Record backlog achieved: For the first time, APi’s backlog surpassed $4 billion, with management noting healthy growth across both segments and contributions from targeted cross-selling and disciplined project selection.
• Accelerated M&A activity: Six acquisitions were completed in the quarter, including an elevator business and several fire and security firms, all considered accretive to long-term results. Management remains disciplined but sees a robust pipeline for future bolt-ons.
• Technology and margin initiatives: Investments in technology, including AI-driven tools, are expected to improve operational efficiency and support margin expansion, while ongoing systems upgrades are progressing as planned, with field and branch leader input guiding implementation.

Drivers of Future Performance

APi’s updated outlook is built on sustained inspection and service growth, margin expansion initiatives, and disciplined M&A integration.

• Inspection-driven recurring growth: Management believes the expansion of APi’s inspection, service, and monitoring business will be the core engine of recurring revenue, supported by pricing improvements and digital tools to enhance productivity and customer value.
• Margin expansion focus: The company is prioritizing higher-margin project selection, disciplined cost control, and technology investments. Management expects these levers—alongside improved operational execution—to drive adjusted EBITDA margin closer to long-term targets, despite headwinds from material costs and tariffs.
• Strategic M&A integration: APi’s acquisition pipeline remains active, with bolt-on deals in fire, security, and elevator services expected to contribute incremental revenue and operational synergies. Management cautions, however, that successful integration and maintaining discipline in deal selection are critical to sustaining accretive growth.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will closely monitor (1) the pace of margin improvement in the Specialty Services segment as material cost pressures and project ramp-up effects moderate, (2) the execution and integration of recent acquisitions, particularly in the elevator and fire/security verticals, and (3) continued growth in recurring inspection and service revenues, which underpin APi’s shift toward a higher-margin, service-focused model. The company’s adoption of digital tools and progress on systems investments will also be key indicators of future operational leverage.

APi currently trades at $35.60, up from $34.45 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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