APi Group exemplifies the mispricing of earnings power in niche industrials, where the market often mislabels businesses. Initially perceived as a cyclical contractor, APi has shifted its revenue mix from 30% recurring inspection and service work to 60%, enhancing margins and cash flow. The potential margin story is compelling, as inspection revenue carries significantly higher gross margins. This transformation, coupled with a strong competitive position and capable management, positions APi for substantial growth, making it an attractive investment despite its initial mischaracterization.

API Group (APG) remains a top position in our portfolio, reflecting our belief in its strong growth potential. The company has made significant strides in unlocking value from its balance sheet, evidenced by the $17.50 per share in dividends paid out since our investment. We anticipate further distributions as the company continues to monetize its assets. Our confidence in API Group is bolstered by its unique market position and the potential for continued value creation, making it a compelling investment opportunity.

APi Group Corp. (APG), a leading provider of fire and life safety, security, elevator and escalator, and specialty services, was a top contributor in the SMID Cap strategy this quarter. APG delivered record third-quarter results, with revenues up 14% (10% organic) and Adjusted EBITDA +15%. The company continued to execute its inspection-first strategy, delivering its 21st consecutive quarter of double-digit inspection growth in North America. Project demand was strong, and management highlighted durable demand across core end markets and record backlog in both segments—supporting confidence entering 2026. Overall, we continue to believe APG has a long runway for double digit EPS growth driven by strong organic inspection and service growth, margin expansion from mix shift and operational improvement in the international business, and bolt-on acquisitions.

We see clear parallels between TIC Solutions and APi Group (APG): both operate in regulatory driven, highly recurring service industries with strong free cash flow generation. APG’s share price has increased more than fivefold over the past six years, and we believe TIC may be at the beginning of a similar value-creation trajectory. Our normalized 2027 estimates imply a teens free cash flow yield, comparable to where APG traded when we first invested in 2022. We see multiple catalysts over the next two years, including broader analyst coverage and strong execution on the NV5 integration.

We are excited about APi Group as it represents a single digit PE stock that has the potential to be quality or growing. The manager highlights the importance of identifying attractively priced companies, and APi Group is mentioned as one of those in the portfolio that excites them. This aligns with our strategy of seeking value in the market, especially during times when many high-quality companies are not inexpensive.

Our investment in APG, our fire and life safety business, is a great example of our process identifying quality businesses with excellent management teams that are misunderstood and mispriced. APG remains in our top five positions due to the runway for organic growth and M&A, which should increase free cash flow per share over time. Growing volumes within Safety Services, price increases and the continued mix shift toward inspection-related revenues should provide 5-7% organic growth revenue growth into the foreseeable future. I can conservatively underwrite a 15-25% return per year during the next 3-5 years, with growth in free cash flow and slight multiple expansion as the market continues to realize the strength of APG's business.

Our investment in APG, our fire and life safety business, is a great example of our process identifying quality businesses with excellent management teams that are misunderstood and mispriced. APG shares have appreciated 5x since going public in 2020 and still check many of our boxes including scale advantages, durability, a growing industry and excellent management team who has proven to be strong operators and capital allocators. APG remains in our top five positions due to the runway for organic growth and M&A, which should increase free cash flow per share over time.

APi Group (APG) is positioned as a relatively recession-resistant business, providing elevator and fire-safety inspection services. The company is part of our strategy to own inflation beneficiaries and has a solid insider alignment. We believe that APG, along with other companies in our portfolio, is taking advantage of lower share prices through stock buybacks, which enhances its value proposition. The current market conditions create opportunities for patient investors, and we see APi Group as a key holding in our portfolio that aligns with our long-term investment philosophy.

APi Group is a premier life safety, security, monitoring, and specialty services business that operates in segments like fire detection and energy retrofits, contributing to sustainable development. The company reported good results with revenues beating analysts' expectations and hosted an investor day where management provided positive longer-term financial guidance. This reinforces our belief in investing in companies with long-term strategies that transcend fleeting policy changes, especially as APi Group navigates the uncertainties of 2025.