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Item 7. Management’s Discussion and Analysis

2025-02-26 compared with 2024-02-28 · 273 added, 167 removed, 306 unchanged (59% of the section changed)

3 unchanged sentences

As a result of many factors, including those factors set forth in the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

We are a global, market-leading business services provider of safety and specialty services in over 500 locations worldwide.

We are a global, market-leading business services provider of fire and life safety, security, elevator and escalator, and specialty services with a substantial recurring revenue base and over 500 locations worldwide.

We provide statutorily mandated and other contracted services to a strong base of long-standing customers across industries.

3 unchanged sentences

C ERTAIN F ACTORS AND T RENDS A FFECTING OUR R ESULTS OF O PERATIONS

During 2024, we completed 13 acquisitions.

Total purchase consideration for all of the completed acquisitions of $821 million consisted of cash paid at closing of $784 million, cash deposited into escrow for future deferred payments of $8 million, and accrued consideration of $29 million.

The results of operations of these acquisitions are included in our consolidated statements of operations from their respective dates of acquisition.

For additional information about our acquisitions, see Note 4 – “Business Combinations” to our consolidated financial statements included in this Annual Report.

Restructuring

4 unchanged sentences

For additional information about our restructuring activity, see Note 6 – “Restructuring" to our consolidated financial statements included in this Annual Report.

During 2023, we completed seven acquisitions.

Total purchase consideration for all of the completed acquisitions of $94 million consisted of cash paid at closing of $79 million, cash deposited into escrow for future deferred payments of $5 million and accrued consideration of $10 million.

The results of operations of these acquisitions are included in our consolidated statements of operations from their respective dates of acquisition and were not material for the year ended December 31, 2023.

See Note 4 – “Business Combinations” for further details.

During 2023, we completed the divestiture of an infrastructure/utility operating company in our Specialty Services segment.

The sale was completed for $38 million, which was received in cash.

During the year ended December 31, 2023, we recorded an impairment charge of $12 million in selling, general, and administrative expenses in the consolidated statements of operations related to impairment of goodwill, intangible assets, and other assets of the company sold.

Economic, Industry and Market Factors

We closely monitor the effects of general changes in economic and market conditions on our customers.

General economic and market conditions can negatively affect demand for our customers’ products and services, which can affect their planned capital and maintenance budgets in certain end markets.

General economic and market conditions can positively or negatively affect demand for our customers’ products and services, which can impact their planned capital and maintenance budgets in certain end markets.

Market, regulatory, and industry factors could affect demand for our services.

Availability of transportation and transmission capacity and fluctuations in market prices for energy and other fuel sources can also affect demand for our services for pipeline and power generation construction services.

These fluctuations, as well as the highly competitive nature of our industries, have resulted, and may continue to result, in lower proposals and lower profit on the services we provide.

In the face of increased pricing pressure on key materials, such as steel, or other market developments, we strive to maintain our profit margins through productivity improvements, cost reduction programs, pricing adjustments, and business streamlining efforts.

These fluctuations, as well as the highly competitive nature of our industries, have resulted, and may

continue to result, in lower proposals and lower profit on the services we provide.

In the face of increased pricing pressure on key materials or other market developments, we strive to maintain our profit margins through productivity improvements, cost reduction programs, pricing adjustments, and business streamlining efforts.

Increased competition for skilled labor resources and higher labor costs can reduce our profitability and impact our ability to deliver timely service to our customers.

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While we actively monitor economic, industry and market factors that could affect our business, we cannot predict the effect that changes in such factors may have on our future consolidated results of operations, liquidity, and cash flows, and we may be unable to fully mitigate, or benefit from, such changes.

Effect of Seasonality and Cyclical Nature of Business

Our net revenues and results of operations can be subject to variability stemming from seasonal and other variations.

Seasonal variations can be influenced by weather conditions impacting customer spending patterns, contract award seasons, and project schedules, as well as the timing of holidays.

Consequently, net revenues for our businesses are typically lower during the first and second quarters due to the prevalence of unfavorable weather conditions within our North American companies, which can cause project delays and affect productivity.

Additionally, the industries we serve can be cyclical.

Fluctuations in end-user demand, or in the supply of services within those industries, can affect demand for our services.

As a result, our business may be adversely affected by industry declines or by delays in new projects.

Variations or unanticipated changes in project schedules in connection with large projects can create fluctuations in net revenues.

D ESCRIPTION OF K EY L INE I TEMS

21 unchanged sentences

Loss (gain) on extinguishment of debt, net

Loss (gain) on extinguishment of debt, net reflects the difference between the repurchase price and carrying amount of debt at the time of extinguishment.

Non-service pension benefit

Non-service pension benefit reflects the sum of the components of pension expense not related to service cost, i.e.

interest cost, expected return on assets, and amortizations of prior service costs and actuarial gains and losses.

Loss (gain) on extinguishment of debt, net reflects the difference between the repurchase price and the carrying amount of debt at the time of extinguishment.

Investment expense (income) and other, net

Investment expense (income) and other, net includes expense (income) from foreign currency forward contracts, cross-currency swaps, interest rate swaps agreements, joint ventures, non-service pension expense (benefit), and other miscellaneous items.

Non-service pension expense (benefit) reflects the sum of the components of pension expense not related to service expense, i.e.

interest expense, expected return on assets, and amortizations of prior service expenses and actuarial gains and losses.

R ESULTS OF O PERATIONS

1 unchanged sentence

The following financial information has been extracted from our audited consolidated financial statements included in this Annual Report.

Years Ended December 31, Change

Year Ended December 31, Change

($ in millions) 2024 2023 $ %

5 unchanged sentences

Interest expense, net 146 145 1 0.7 %

Loss (gain) on extinguishment of debt, net 7 (5) (12) NM

Non-service pension benefit (12) (42) (30) (71.4 %)

Investment income and other, net (13) (9) 4 44.4 %

Loss on extinguishment of debt, net 1 7 (6) (85.7 %)

Investment expense (income) and other, net 7 (25) 32 NM

Other expense, net 154 127 27 21.3 %

5 unchanged sentences

Net revenues for the year ended December 31, 2024 were $7,018 million compared to $6,928 million for the year ended December 31, 2023, an increase of $90 million or 1.3%.

The increase was primarily driven by revenue from acquisitions completed within the Safety Services segment, growth in inspection, service, and monitoring revenues, and

pricing improvements in our Safety Services segment, partially offset by divestitures, planned disciplined customer and project selection, as well as project delays in our HVAC business and Specialty Services segment.

The following table presents our gross profit (net revenues less cost of revenues) and gross margin (gross profit as a percentage of net revenues) for the years ended December 31, 2024 and 2023, respectively:

Year Ended December 31, Change

($ in millions) 2024 2023 $ %

Gross profit $ 2,178 $ 1,940 $ 238 12.3 %

Gross margin 31.0 % 28.0 %

Our gross profit for the year ended December 31, 2024 was $2,178 million compared to $1,940 million for the year ended December 31, 2023, an increase of $238 million, or 12.3%.

Gross margin for the year ended December 31, 2024 was 31.0%, an increase of 300 basis points compared to the prior year, primarily driven by planned disciplined customer and project selection, pricing improvements in our Safety Services segment, and savings from the Chubb restructuring program.

Selling, general, and administrative expenses

The following table presents selling, general, and administrative expenses for the years ended December 31, 2024 and 2023, respectively:

Year Ended December 31, Change

($ in millions) 2024 2023 $ %

Selling, general, and administrative expenses $ 1,694 $ 1,581 $ 113 7.1 %

SG&A expenses as a % of net revenues 24.1 % 22.8 %

SG&A expenses (excluding amortization and impairment) (non-GAAP) $ 1,478 $ 1,372 $ 106 7.7 %

SG&A expenses (excluding amortization and impairment) as a % of net revenues (non-GAAP) 21.1 % 19.8 %

Our SG&A expenses for the year ended December 31, 2024, were $1,694 million compared to $1,581 million for 2023, an increase of $113 million.

SG&A expenses as a percentage of net revenues was 24.1% during the year ended December 31, 2024 compared to 22.8% in 2023.

The increase in SG&A expenses was primarily driven by investments to support our Safety Services segment, SG&A expenses from acquisitions completed, and acquisitions costs in the year ended December 31, 2024.

The increase in SG&A expenses was partially offset by savings related to the Chubb restructuring program in the year ended December 31, 2024 and a $12 million impairment charge included in 2023, related to assets sold in that year.

Our SG&A expenses excluding amortization and impairment for the year ended December 31, 2024 was $1,478 million, or 21.1% of net revenues, compared to $1,372 million or 19.8% of net revenues for 2023, primarily due to the factors discussed above.

See "Non-GAAP Financial Measures" below for a discussion and reconciliation of our non-GAAP financial measures.

Interest expense, net

Interest expense was $146 million and $145 million for the years ended December 31, 2024 and 2023, respectively.

The increase in interest expense was primarily due to an increase in debt outstanding partially offset by lower interest rates on our floating interest rate debt and increased interest income generated by the investment of the equity and debt financings that were ultimately used in the Elevated acquisition.

Loss on extinguishment of debt, net

During the year ended December 31, 2024, we made a $100 million payment to pay down outstanding principal of the 2021 Term Loan.

In connection with the payment, we recognized a net loss on debt extinguishment of $1 million.

During the year ended December 31, 2023, we made payments of $375 million and $100 million to pay down outstanding

principal amounts of the 2019 Term Loan and 2021 Term Loan, respectively.

In connection with the payments, we recognized a net loss on debt extinguishment of $7 million.

Investment expense (income) and other, net

Investment expense (income) and other, net was $7 million and $(25) million for the years ended December 31, 2024 and 2023, respectively.

The change in investment expense (income) and other, net was primarily due to an increase in non-service pension costs in the current year partially offset by an increase in earnings from joint ventures.

The non-service pension expense (benefit) was $22 million and $(12) million for the years ended December 31, 2024 and 2023, respectively.

The change was due to higher interest costs as a result of higher discount rates in 2024 compared to 2023.

Income tax provision

The effective tax rate for the year ended December 31, 2024 was 24.0% compared to an effective tax rate of 33.9% for the year ended December 31, 2023.

The decrease was primarily due to current year changes to the geographical income mix and valuation allowance positions.

The Organization for Economic Co-operation and Development ("OECD") has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as "Pillar 2"), with certain aspects of Pillar 2 effective January 1, 2024 and other aspects effective January 1, 2025.

While it is uncertain whether the U.S.

will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted the legislation, and other countries are in the process of introducing legislation to implement Pillar 2.

Therefore, we have considered Pillar 2 tax within the provisions for income taxes and do not expect Pillar 2 to have a material impact on the effective tax rate or the consolidated financial statements.

Net income and Adjusted EBITDA

The following table presents net income and Adjusted EBITDA for the years ended December 31, 2024 and 2023, respectively:

Year Ended December 31, Change

($ in millions) 2024 2023 $ %

Net income $ 250 $ 153 $ 97 63.4 %

Adjusted EBITDA (non-GAAP) 893 782 111 14.2 %

Net income as a % of net revenues 3.6 % 2.2 %

Adjusted EBITDA as a % of net revenues 12.7 % 11.3 %

Net income for the year ended December 31, 2024 was $250 million compared to $153 million for the year ended December 31, 2023, an increase of $97 million.

Net income as a percentage of net revenues for the years ended December 31, 2024 and 2023 was 3.6% and 2.2%, respectively.

The net income improvement is primarily attributable to significant gross margin expansion resulting from the factors mentioned above, partially offset by SG&A expenses discussed above.

Adjusted EBITDA for the years ended December 31, 2024 and 2023 was $893 million and $782 million, respectively, an increase of $111 million.

The increase in Adjusted EBITDA was primarily driven by the factors previously discussed.

See "Non-GAAP Financial Measures" below for a discussion and reconciliation of our non-GAAP financial measures.

Operating Segment Results

Year Ended December 31, Change

($ in millions) 2024 2023 $ %

Safety Services $ 5,227 $ 4,871 $ 356 7.3 %

Specialty Services 1,798 2,079 (281) (13.5 %)

Corporate and Eliminations (7) (22) NM NM

$ 7,018 $ 6,928 $ 90 1.3 %

Segment Earnings

Year Ended December 31, Change

($ in millions) 2024 2023 $ %

Safety Services $ 809 $ 664 $ 145 21.8 %

Safety Services segment earnings as a % of net revenues 15.5 % 13.6 %

Specialty Services $ 209 $ 239 $ (30) (12.6 %)

Specialty Services segment earnings as a % of net revenues 11.6 % 11.5 %

Corporate and Eliminations $ (125) $ (121) NM NM

Adjusted EBITDA (non-GAAP) $ 893 $ 782 $ 111 14.2 %

NM = Not meaningful

The following discussion breaks down the net revenues and segment earnings by reportable segment for the years ended December 31, 2024 and 2023.

Safety Services

Safety Services net revenues for the year ended December 31, 2024 were $5,227 million compared to $4,871 million during the same period in the prior year.

The increase was primarily driven by revenue from acquisitions, increased inspection, service, and monitoring revenues, and pricing improvements, partially offset by a decline in project revenues in the HVAC business.

Safety Services segment earnings as a percentage of net revenues was 15.5% and 13.6% for the years ended December 31, 2024 and 2023, respectively.

The increase was primarily the result of planned disciplined project and customer selection, pricing improvements, savings from the Chubb restructuring program, and improved mix of inspection, services and monitoring revenues.

Specialty Services

Specialty Services net revenues for the years ended December 31, 2024 and 2023 were $1,798 million and $2,079 million, respectively.

The decrease was primarily driven by divestitures, the impact of the planned exit of a customer relationship in the Infrastructure/Utility reporting unit, project delays, and project and customer selection.

Specialty Services segment earnings as a percentage of net revenues for the years ended December 31, 2024 and 2023 was 11.6% and 11.5%, respectively.

The increase was primarily the result of planned disciplined project and customer selection during the year ended December 31, 2024.

Year ended December 31, 2023 versus year ended December 31, 2022

The following is a discussion of our financial condition and results of operations for the years ended December 31, 2023 and 2022.

The following financial information has been extracted from our audited consolidated financial statements included in this Annual Report.

Year Ended December 31, Change

($ in millions) 2023 2022 $ %

Net revenues $ 6,928 $ 6,558 $ 370 5.6 %

Cost of revenues 4,988 4,844 144 3.0 %

Gross profit 1,940 1,714 226 13.2 %

Selling, general, and administrative expenses 1,581 1,552 29 1.9 %

Operating income 359 162 197 121.6 %

Interest expense, net 145 125 20 16.0 %

Loss (gain) on extinguishment of debt, net

Investment income and other, net

(25) (51) 26 NM

Other expense, net 127 69 58 84.1 %

Income before income taxes 232 93 139 149.5 %

Income tax provision 79 20 59 295.0 %

Net income $ 153 $ 73 $ 80 109.6 %

NM = Not meaningful

Net revenues for the year ended December 31, 2023 were $6,928 million compared to $6,558 million for the year ended December 31, 2022, an increase of $370 million or 5.6%.

The increase in net revenues was attributable to the Safety Services and Specialty Services segments and was primarily driven by growth in inspection, service, and monitoring revenue.

Years Ended December 31, Change

Year Ended December 31, Change

($ in millions) 2023 2022 $ %

2 unchanged sentences

Our gross profit for the year ended December 31, 2023 was $1,940 million compared to $1,714 million in the year ended December 31, 2022, an increase of $226 million, or 13.2%.

Gross margin for the year ended December 31, 2023 was 28.0%, an increase of 190 basis points compared to the prior year, primarily due to disciplined project and customer selection, pricing improvements in our Safety Services segment, and an improved mix of inspection, service, and monitoring revenue, which generates higher margins.

Gross margin for the year ended December 31, 2023 was 28.0%, an increase of 190 basis points compared to the prior year, primarily due to planned disciplined project and customer selection, pricing improvements in our Safety Services segment, and an improved mix of inspection, service, and monitoring revenue, which generates higher margins.

Selling, general, and administrative expenses

The following table presents operating expenses and operating margin (operating income as a percentage of net revenues) for the years ended December 31, 2023 and 2022, respectively:

Years Ended December 31, Change

The following table presents selling, general, and administrative expenses for the years ended December 31, 2023 and 2022, respectively:

Year Ended December 31, Change

($ in millions) 2023 2022 $ %

1 unchanged sentence

SG&A expenses as a % of net revenues 22.8 % 23.7 %

Operating margin 5.2 % 2.5 %

SG&A expenses (excluding amortization and impairment) (non-GAAP) $ 1,372 $ 1,355 $ 17 1.3 %

2 unchanged sentences

SG&A expenses as a percentage of net revenues was 22.8% during the year ended December 31, 2023 compared to 23.7% in 2022.

The decrease in SG&A expenses as a percentage of net revenues was primarily driven by lower acquisition and integration related expenses incurred, partially offset by an impairment charge of $12 million related to assets sold in the current year and investments to support our Safety Services and Specialty Services segments.

The decrease in SG&A expenses as a percentage of net revenues was primarily driven by lower acquisition and integration related expenses incurred, partially offset by an impairment charge of $12 million related to assets sold in 2023 and investments to support our Safety Services and Specialty Services segments.

Our SG&A expenses excluding amortization and impairment for the year ended December 31, 2023 was $1,372 million, or 19.8% of net revenues, compared to $1,355 million or 20.7% of net revenues for 2022, primarily due to the factors discussed above.

See the discussion and reconciliation of our non-U.S.

GAAP financial measures below.

See "Non-GAAP Financial Measures" below for a discussion and reconciliation of our non-GAAP financial measures.

Interest expense, net

Interest expense was $145 million and $125 million for the years ended December 31, 2023 and 2022, respectively.

The increase in interest expense was primarily due to higher interest rates on our floating interest rate debt in the current year, partially offset by a decrease in the outstanding principal amounts of floating rate debt reflecting the debt repayments described below.

The increase in interest expense was primarily due to higher interest rates on our floating interest rate debt in 2023, partially offset by a decrease in the outstanding principal amounts of floating rate debt reflecting the debt repayments described below.

Loss (gain) on extinguishment of debt, net

11 unchanged sentences

The effective tax rate for the year ended December 31, 2023 was 33.9% compared to an effective tax rate of 22.0% for the year ended December 31, 2022.

The increase was primarily due to current year changes to the geographical income mix and valuation allowance positions.

The increase was primarily due to changes in 2023 to the geographical income mix and valuation allowance positions.

Additionally, a benefit for withholding taxes on foreign earnings reduced the effective tax rate in the prior year.

The Organization for Economic Co-operation and Development has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as "Pillar 2"), with certain aspects of Pillar 2 effective January 1, 2024 and other aspects effective January 1, 2025.

While it is uncertain whether the U.S.

will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted the legislation, and other countries are in the process of introducing legislation to implement Pillar 2.

We are continuing to evaluate and monitor but does not expect for Pillar 2 to have a material impact on the effective tax rate or the consolidated financial statements.

Net income and EBITDA

Years Ended December 31, Change

Net income and Adjusted EBITDA

The following table presents net income and Adjusted EBITDA for the years ended December 31, 2023 and 2022, respectively:

Year Ended December 31, Change

($ in millions) 2023 2022 $ %

Net income $ 153 $ 73 $ 80 109.6 %

EBITDA (non-GAAP) 680 522 158 30.3 %

Adjusted EBITDA (non-GAAP) 782 673 109 16.2 %

Net income as a % of net revenues 2.2 % 1.1 %

EBITDA as a % of net revenues 9.8 % 8.0 %

Adjusted EBITDA as a % of net revenues 11.3 % 10.3 %

Net income for the year ended December 31, 2023 was $153 million compared to $73 million for the year ended December 31, 2022, an increase of $80 million.

Net income as a percentage of net revenues for the years ended December 31, 2023 and 2022 was 2.2% and 1.1%, respectively.

The improvement is primarily attributable to disciplined project and customer selection, pricing improvements within our Safety Services and Specialty Services segments and growth in inspection, service, and monitoring revenue, as well as savings in our Safety Services segment related to the Chubb restructuring program.

The net income increase was partially offset by an impairment charge of $12 million related to assets sold in the current year, an increase in interest expense of $20 million, and an increase in the income tax provision of $59 million.

EBITDA for the years ended December 31, 2023 and 2022 was $680 million and $522 million, respectively, an increase of $158 million.

The increase in EBITDA was primarily driven by the factors previously discussed.

See the discussion and reconciliation of our non-U.S.

GAAP financial measures below.

The improvement is primarily attributable to planned disciplined project and customer selection, pricing improvements within our Safety Services and Specialty Services segments, and growth in inspection, service, and monitoring revenue, as well as savings in our Safety Services segment related to the Chubb restructuring program.

The net income increase was partially offset by an impairment charge of $12 million related to assets sold in 2023, an increase in interest expense of $20 million, and an increase in the income tax provision of $59 million.

Adjusted EBITDA for the years ended December 31, 2023 and 2022 was $782 million and $673 million, respectively, an increase of $109 million.

With the exception of savings in our Safety Services segment related to the Chubb restructuring program, which is excluded from adjusted EBITDA, the increase in adjusted EBITDA was primarily driven by the factors previously discussed.

See "Non-GAAP Financial Measures" below for a discussion and reconciliation of our non-GAAP financial measures.

Operating Segment Results

Years Ended December 31, Change

($ in millions) 2023 2022 $ %

Safety Services $ 4,871 $ 4,575 $ 296 6.5 %

Specialty Services 2,079 2,030 49 2.4 %

Corporate and Eliminations (22) (47) NM NM

$ 6,928 $ 6,558 $ 370 5.6 %

Operating Income (Loss)

Years Ended December 31, Change

Year Ended December 31, Change

($ in millions) 2023 2022 $ %

Safety Services $ 4,871 $ 4,575 $ 296 6.5 %

Safety Services operating margin 8.1 % 5.6 %

Specialty Services 2,079 2,030 49 2.4 %

Specialty Services operating margin 5.2 % 4.8 %

Corporate and Eliminations (22) (47) NM NM

$ 6,928 $ 6,558 $ 370 5.6 %

Years Ended December 31, Change

Segment Earnings

Year Ended December 31, Change

($ in millions) 2023 2022 $ %

Safety Services $ 664 $ 559 $ 105 18.8 %

Safety Services EBITDA as a % of net revenues 12.5 % 10.8 %

Safety Services segment earnings as a % of net revenues 13.6 % 12.2 %

Specialty Services $ 239 $ 210 $ 29 13.8 %

Specialty Services EBITDA as a % of net revenues 10.4 % 10.1 %

Specialty Services segment earnings as a % of net revenues 11.5 % 10.3 %

Corporate and Eliminations $ (121) $ (96) NM NM

$ 680 $ 522 $ 158 30.3 %

Adjusted EBITDA (non-GAAP) $ 782 $ 673 $ 109 16.2 %

NM = Not meaningful

The following discussion breaks down the net revenues, operating income (loss), and EBITDA by operating segment for the years ended December 31, 2023 and 2022.

The following discussion breaks down the net revenues and segment earnings by reportable segment for the years ended December 31, 2023 and 2022.

Safety Services

2 unchanged sentences

This increase was also due to continued strength in our end markets and strategic pricing improvements.

Safety Services operating margin for the years ended December 31, 2023 and 2022 was 8.1% and 5.6%, respectively.

The increase was primarily the result of disciplined project and customer selection, pricing improvements, improved mix of inspection, service, and monitoring revenue, which generates higher margins, and savings in our Safety Services segment related to the Chubb restructuring program.

The increase was also driven by lower acquisition and integration related expenses incurred for the year ended December 31, 2023 compared to 2022.

Safety Services EBITDA as a percentage of net revenues was 12.5% and 10.8% for the years ended December 31, 2023 and 2022, respectively.

This increase was primarily related to the factors discussed above.

Safety Services segment earnings as a percentage of net revenues was 13.6% and 12.2% for the years ended December 31, 2023 and 2022, respectively.

The increase was primarily the result of planned disciplined project and customer selection, pricing improvements, and improved mix of inspection, service, and monitoring revenue, which generates higher margins.

Specialty Services

1 unchanged sentence

The increase was primarily due to strong growth in the service business during the year ended December 31, 2023 compared to the same period in the prior year.

The increase was partially offset by continued disciplined customer and project selection and customer project delays in the fabrication business.

Specialty Services operating margin for the years ended December 31, 2023 and 2022 was 5.2% and 4.8%, respectively.

The increase was primarily the result of disciplined project and customer selection during the year ended December 31, 2023 compared to the same period in 2022.

Specialty Services EBITDA as a percentage of net revenues for the years ended December 31, 2023 and 2022 was 10.4% and 10.1%, respectively, due to the factors discussed above.

Year ended December 31, 2022 versus year ended December 31, 2021

For a discussion of our 2022 results of operations, including a discussion of our financial results for the fiscal year ended December 31, 2022 compared to the fiscal year ended December 31, 2021, refer to Part I, Item 7, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023.

The increase was partially offset by continued planned disciplined customer and project selection and customer project delays in the fabrication business.

Specialty Services segment earnings as a percentage of net revenues was 11.5% and 10.3% for the years ended December 31, 2023 and 2022, respectively.

The increase was primarily the result of planned disciplined project and customer selection during the year ended December 31, 2023 compared to the same period in 2022.

N ON -G AAP F INANCIAL M EASURES

We supplement our reporting of consolidated financial information determined in accordance with U.S.

GAAP with SG&A expenses (excluding amortization and impairment) and EBITDA (defined below), which are non-U.S.

GAAP financial measures.

We use these non-U.S.

GAAP financial measures to evaluate our performance, both internally and as compared with our peers, because they exclude certain items that may not be indicative of our core operating results.

Management believes these measures are useful to investors since they (a) permit investors to view our performance using the same tools that management uses to evaluate our past performance, reportable business segments and prospects for future performance, (b) permit investors to compare us with our peers, and (c) in the case of EBITDA, determines certain elements of management’s incentive compensation.

These non-U.S.

GAAP financial measures, however, have limitations as analytical tools and should not be considered in isolation from, a substitute for, or superior to, the related financial information that we report in accordance with U.S.

The principal limitation of these non-U.S.

GAAP financial measures is that they exclude significant expenses that are required by U.S.

GAAP to be recorded in our financial statements and may not be comparable to similarly titled measures of other companies due to potential differences in calculation methods.

In addition, these measures are subject to inherent limitations as they reflect the exercise of judgment by management about which items are excluded or included in determining these non-U.S.

GAAP financial measures.

Investors are encouraged to review the following reconciliations of these non-U.S.

GAAP financial measures to the most comparable U.S.

GAAP financial measures and not to rely on any single financial measure to evaluate our business.

We supplement our reporting of consolidated financial information determined in accordance with GAAP with SG&A expenses (excluding amortization and impairment) and adjusted EBITDA (defined below), which are non-GAAP financial measures.

We use these non-GAAP financial measures to evaluate our performance, both internally and as compared with our peers, because they exclude certain items that may not be indicative of our core operating results.

Management believes these measures are useful to investors since they (a) permit investors to view our performance using the same tools that management uses to evaluate our past performance and prospects for future performance, (b) permit investors to compare us with our peers, (c) in the case of adjusted EBITDA, determine certain elements of management’s incentive compensation, and (d) provide more consistent period-to-period comparisons of the results.

These non-GAAP financial measures, however, have limitations as analytical tools and should not be considered in isolation from, a substitute for, or superior to, the related financial information that we report in accordance with GAAP.

The principal limitation of these non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded in our financial statements and may not be comparable to similarly titled measures of other companies due to potential differences in calculation methods.

In addition, these measures are subject to inherent limitations as they reflect the exercise of judgment by management about which items are excluded or included in determining these non-GAAP financial measures.

Investors are encouraged to review the following reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measures and not to rely on any single financial measure to evaluate our business.

SG&A expenses (excluding amortization and impairment)

SG&A expenses (excluding amortization and impairment) is a measure of operating costs used by management to manage the business and its segments.

We believe this non-U.S.

GAAP measure provides meaningful information and helps investors understand our core selling, general, and administrative expenses excluding acquisition-related amortization expense and impairment charges to better enable investors to understand our financial results and assess our prospects for future performance.

We believe this non-GAAP measure provides meaningful information and helps investors understand our operational selling, general, and administrative expenses excluding acquisition-related amortization expense and impairment charges to better enable investors to understand our financial results and assess our prospects for future performance.

The following tables present reconciliations of SG&A expenses to SG&A expenses (excluding amortization and impairment) for the periods indicated:

Years Ended December 31,

Year Ended December 31,

($ in millions) 2024 2023 2022

Reported SG&A expenses $ 1,694 $ 1,581 $ 1,552

Adjustments to reconcile to SG&A expenses to SG&A expenses (excluding amortization and impairment)

Adjustments to reconcile SG&A expenses to SG&A expenses (excluding amortization and impairment)

Amortization expense (216) (197) (197)

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SG&A expenses (excluding amortization and impairment) $ 1,478 $ 1,372 $ 1,355

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is the measure of profitability used by management to manage its segments and, accordingly, in its segment reporting.

We supplement the reporting of our consolidated financial information with EBITDA.

We believe this non-U.S.

GAAP measure provides meaningful information and helps investors understand our financial results and assess our prospects for future performance.

Consolidated EBITDA is calculated in a manner consistent with segment EBITDA, which is a measure of segment profitability.

The following table presents a reconciliation of net income to EBITDA for the periods indicated:

Years Ended December 31,

Adjusted EBITDA

Adjusted Earnings before interest, taxes, depreciation and amortization after adjustments for non-recurring items (“Adjusted EBITDA”) is the measure of profitability used by management.

Adjustments include expenses that are non-recurring in nature and that may not be indicative of the Company’s core operating results, including business transformation and other expenses for the integration of acquired businesses, the impact and results of businesses classified as assets held-for-sale and divested, and one-time and other infrequent events such as impairment charges, restructuring costs, transaction and other costs related to acquisitions, and non-service pension cost or benefit.

We supplement the reporting of our consolidated financial information with Adjusted EBITDA.

We believe this non-GAAP measure provides meaningful information and helps investors understand our financial results and assess our prospects for future performance.

The following table presents a reconciliation of net income to Adjusted EBITDA for the periods indicated:

Year Ended December 31,

($ in millions) 2024 2023 2022

Reported net income $ 250 $ 153 $ 73

Adjustments to reconcile net income to EBITDA:

Adjustments to reconcile net income to adjusted EBITDA:

Interest expense, net 146 145 125

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Amortization 222 224 227

EBITDA $ 680 $ 522

Contingent consideration and compensation 3 14 9

Non-service pension cost (benefit) 22 (12) (42)

Inventory step-up — — 9

Business process transformation expenses 52 30 31

Acquisition related expenses 13 7 121

Loss (gain) on extinguishment of debt, net

Restructuring program related costs 32 46 30

Other (8) 10 (2)

Adjusted EBITDA $ 893 $ 782 $ 673

L IQUIDITY AND C APITAL R ESOURCES

Our primary sources of liquidity are cash flows from the operating activities of our consolidated subsidiaries, available cash and cash equivalents, our access to our $500 million five-year senior secured revolving credit facility (the “Revolving Credit Facility”), and the proceeds from debt offerings.

We believe these sources will be sufficient to fund our liquidity requirements for at least the next twelve months.

Although we believe we have sufficient resources to fund our future cash requirements, there are many factors with the potential to influence our cash flow position including weather, seasonality, commodity prices, market conditions, and inflation, over which we have no control.

As of December 31, 2023, we had $974 million of total liquidity, comprising $479 million in cash and cash equivalents and $495 million ($500 million less outstanding letters of credit of approximately $5 million, which reduce availability) of available borrowings under our Revolving Credit Facility.

During 2022, we issued and sold 800,000 shares of our Series B Preferred Stock (defined below) for an aggregate purchase price of $800 million and entered into the Second Amendment to our Credit Agreement.

As of December 31, 2024, we had $993 million of total liquidity, comprising $499 million in cash and cash equivalents and $494 million ($500 million less outstanding letters of credit of approximately $6 million, which reduces availability) of available borrowings under our Revolving Credit Facility.

During 2022, we completed the Second Amendment to our credit agreement.

As part of this amendment, we entered into a $1,100 million seven-year incremental term loan ("2021 Term Loan"), the Revolving Credit Facility was upsized by $200 million to $500 million, the maturity date of the Revolving Credit Facility was extended five years, and the letter of credit limit was increased by $100 million to $250 million.

During 2023, we completed the Fourth Amendment to our credit agreement, repricing our 2019 Term Loan and 2021 Term Loan.

The repricing reduces the applicable margin on all outstanding amounts by 25 basis points.

The repricing reduced the applicable margin on all outstanding amounts by 25 basis points.

Additionally, $422 million of the 2019 Term Loan was extended to the 2021 Term Loan and assumed all the same terms as the repriced 2021 Term Loan.

We made a repayment of $100 million on the 2019 Term Loan concurrent with the close of this transaction.

During the first quarter of 2024, we completed the Fifth Amendment to our credit agreement, upsizing our 2021 Term Loan by $300 million.

The loan proceeds were directed as consideration for a portion of the purchase price for the Series B Preferred Stock Conversion.

During the second quarter of 2024, we completed the Sixth Amendment to our credit agreement, upsizing and repricing the 2021 Term Loan and repaying the 2019 Term Loan.

We incurred approximately $550 million of incremental principal on our 2021 Term Loan.

The proceeds were used to repay the remaining $330 million of the 2019 Term Loan, repay $100 million of the Revolving Credit Facility outstanding, and for general corporate purposes, including to partially fund the Elevated acquisition.

During the second quarter of 2024, we issued 12,650,000 shares of Company common stock in a public underwritten offering.

The proceeds from this offering totaled approximately $458 million, net of related expenses.

The net proceeds from this offering were used for general corporate purposes and to partially fund the Elevated acquisition.

During the fourth quarter of 2024, we made a repayment of $100 million on the 2021 Term Loan.

In February 2025, we completed the Seventh Amendment to our credit agreement, repricing the 2021 Term Loan.

The repricing reduced the applicable margin on the 2021 Term Loan by 25 basis points.

We expect to continue to be able to access the capital markets through equity and debt offerings for liquidity purposes as needed.

Our principal liquidity requirements have been, and we expect will continue to be, for working capital and general corporate purposes, including capital expenditures and debt service, any accrued consideration and compensation due to selling shareholders, including tax payments in connection therewith, as well as to identify, execute, and integrate strategic acquisitions and business transformation transactions or initiatives.

Our principal liquidity requirements have been, and we expect will continue to be, for working capital and general corporate purposes, including capital expenditures and debt service, identifying, executing, and integrating strategic acquisitions and business transformation transactions or initiatives, as well as any accrued consideration and compensation due to selling shareholders, including tax payments in connection therewith.

Our capital expenditures were approximately $84 million and $86 million in the years ended December 31, 2024 and 2023, respectively.

In 2022, our Board of Directors authorized a stock repurchase program ("SRP"), authorizing the purchase of up to an aggregate of $250 million of common stock through February 2024.

During the twelve months ended December 31, 2023 and 2022, we repurchased 1,626,493 and 2,505,723 shares of common stock for approximately $41 million and $44 million, respectively.

As of December 31, 2023, we had approximately $165 million of authorized repurchases remaining under the SRP.

On February 26, 2024, our Board of Directors authorized a stock repurchase program to purchase up to an aggregate of $1,000 million of shares of our common stock.

This stock repurchase program is indefinite, unless otherwise modified or terminated by our Board of Directors at any time in its sole discretion.

In 2022, our Board of Directors authorized a stock repurchase program, authorizing the purchase of up to an aggregate of $250 million, which expired in February 2024.

As a result of the program's expiration, on February 26, 2024, our Board of Directors authorized a stock repurchase program to purchase up to an aggregate of $1,000 million of shares of our common stock.

This stock repurchase program will expire when the authorized amount is exhausted, unless otherwise modified or terminated by our Board of Directors at any time in its sole discretion.

During the year ended December 31, 2024, we repurchased 16,260,160 shares of common stock for approximately $600 million.

As of December 31, 2024, we had approximately $400 million of authorized repurchases remaining under the stock repurchase program.

The following table summarizes net cash flows with respect to our operating, investing, and financing activities for the periods indicated:

Years Ended December 31,

Year Ended December 31,

($ in millions) 2024 2023

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Net cash used in investing activities (829) (115)

Net cash (used in) provided by financing activities (532) 1,756

Net cash provided by (used in) financing activities 245 (532)

Effect of foreign currency exchange rate change on cash, cash equivalents, and restricted cash (15) 6

Net decrease in cash, cash equivalents, and restricted cash $ (127) $ (884)

Net increase (decrease) in cash, cash equivalents, and restricted cash $ 21 $ (127)

Cash, cash equivalents, and restricted cash, end of period $ 501 $ 480

Net cash provided by operating activities

Net cash provided by operating activities was $514 million in the year ended December 31, 2023 compared to $270 million of cash provided for the same period in 2022.

The increase in cash flows provided by operating activities is primarily due to an increase in net income in the period.

This increase in cash provided by operating activities is also driven by lower working capital needs associated with the various services we provide.

Net cash provided by operating activities was $620 million for the year ended December 31, 2024 compared to $514 million of cash provided in 2023.

The increase in cash provided by operating activities was primarily due to an increase in net income in the period.

This increase in cash was also driven by lower working capital needs associated with the various services we provided in 2024 compared to 2023.

Cash flow from operations is primarily driven by changes in the mix and timing of demand for our services and working capital needs associated with the various services we provide.

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Net cash used in investing activities was $829 million and $115 million in the years ended December 31, 2024 and 2023, respectively.

During 2023, we utilized $83 million for acquisitions, compared to $2,839 million for the Chubb Acquisition for the same period in 2022.

Net cash (used in) provided by financing activities

Net cash used in financing activities was $532 million for the year ended December 31, 2023 compared to $1,756 million provided by financing activities for the same period in 2022.

The decrease in cash provided by financing activities was primarily driven by equity and debt issuances for the year ended December 31, 2022 related to the Chubb Acquisition.

For the year ended December 31, 2022, cash provided by financing activities was higher due to $1,104 million of proceeds from the issuance of the 2021 Term Loan and other debt, and $797 million of proceeds from the issuance of Series B Preferred Stock.

The cash used in financing activities for the year ended December 31, 2023 was also driven by $475 million of aggregate payments on the 2019 Term Loan and the 2021 Term Loan.

During 2024, we completed the Elevated acquisition and several other acquisitions, resulting in the use of $778 million for acquisitions, compared to $83 million in 2023.

Net cash provided by (used in) financing activities

Net cash provided by financing activities was $245 million for the year ended December 31, 2024 compared to $532 million used in financing activities in 2023.

The increase in cash provided by financing activities was primarily driven by equity and debt issuances in 2024.

During 2024, cash provided by financing activities was higher due to $850 million of proceeds from the repricing and upsizing transactions of the 2021 Term Loan and $458 million of proceeds from the issuance of common shares.

The increase in cash used in financing activities in 2024 was partially offset by $437 million of payments on long-term borrowings and $600 million of share repurchases in connection with the conversion of the Series B Preferred Stock.

Year ended December 31, 2023 versus year ended December 31, 2022

For a discussion of our Liquidity and Capital Resources for the fiscal year ended December 31, 2022 compared to the fiscal year ended December 31, 2021, refer to Part I, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023.

For a discussion of our Liquidity and Capital Resources for the fiscal year ended December 31, 2023 compared to the fiscal year ended December 31, 2022, refer to Part I, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024.

Financing Activities

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We have entered into a Credit Agreement by and among APi Group DE, Inc., our wholly-owned subsidiary, as borrower ("APi Group DE"), APG as a guarantor, the subsidiary guarantors from time to time party thereto, the lenders from time to time party thereto, and Citibank N.A., as administrative agent and as collateral agent (the “Credit Agreement”) which provides for:

(1) a term loan facility, pursuant to which we incurred the $1,200 million term loan ("2019 Term Loan") used to fund a part of the cash portion of the purchase price in the APi Acquisition, and the $1,100 million 2021

Term Loan used to fund a portion of the purchase price in the Chubb acquisition, and (2) a $500 million Revolving Credit Facility of which up to $250 million can be used for the issuance of letters of credit.

On October 11, 2023, we completed repricing of our 2019 Term Loan and 2021 Term Loan.

The repricing reduces the applicable margin on all outstanding amounts by 25 basis points.

incremental term loan ("2021 Term Loan") used to fund a portion of the purchase price in the Chubb Acquisition, and (2) a $500 million Revolving Credit Facility of which up to $250 million can be used for the issuance of letters of credit.

In 2023, we completed repricing of our 2019 Term Loan and 2021 Term Loan.

The repricing reduced the applicable margin on all outstanding amounts by 25 basis points.

Additionally, $422 million of the 2019 Term Loan was extended to the 2021 Term Loan and assumed all the same terms as the repriced 2021 Term Loan.

Following the debt repricing transaction, the amended interest rate applicable to the 2019 Term Loan is, at our option, either (a) a base rate plus an applicable margin equal to 1.25% or (b) a Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.25% plus a credit spread adjustment ("CSA").

Principal payments on the 2019 Term Loan are due in quarterly installments on the last day of each fiscal quarter, unless prepayments are made, for a total annual amount equal to 1.00% of the initial aggregate principal amount of the 2019 Term Loan.

The 2019 Term Loan matures on October 1, 2026.

Based on the early prepayments we have made, we do not owe any quarterly principal amounts for the remainder of the 2019 Term Loan.

Following the debt repricing transaction, the amended interest rate applicable to the 2021 Term Loan is, at our option, either (a) a base rate plus an applicable margin equal to 1.50% or (b) a Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.50% plus a CSA.

Principal payments on the 2021 Term Loan will be made in quarterly installments on the last day of each fiscal quarter, for a total annual amount equal to 1.00% of the initial aggregate principal amount of the 2021 Term Loan.

During the first quarter of 2024, we completed the Fifth Amendment to our credit agreement, upsizing our 2021 Term Loan by an aggregate principal amount equal to $300 million.

The loan proceeds were directed as consideration for a portion of the purchase price for the Series B Preferred Stock Conversion.

During the second quarter of 2024, we completed the Sixth Amendment to our credit agreement, upsizing and repricing the 2021 Term Loan and repaying the 2019 Term Loan.

The repricing reduced the applicable margin on the 2021 Term Loan by 50 basis points and removed the credit spread adjustment ("CSA").

As part of the transaction, we incurred approximately $550 million of incremental principal our 2021 Term Loan.

As of December 31, 2024, the amended interest rate applicable to the 2021 Term Loan was, at our option, either (a) a base rate plus an applicable margin equal to 1.00% or (b) a Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.00%.

The 2021 Term Loan matures on January 3, 2029.

The 2021 Term Loan is subject to the same mandatory prepayment provisions as the 2019 Term Loan.

Subject to certain exceptions, the 2021 Term Loan may be subject to mandatory prepayments using (i) proceeds from non-ordinary course asset dispositions, (ii) proceeds from certain incurrences of debt or (iii) a portion of the Company’s annual excess cash flows based upon certain leverage ratios.

Based on the early prepayments we have made, we do not owe any quarterly principal amounts for the remainder of the 2021 Term Loan.

In February 2025, we completed the Seventh Amendment to our credit agreement, repricing the 2021 Term Loan.

The repricing reduced the applicable margin on the 2021 Term Loan by 25 basis points.

The interest rate applicable to borrowings under the Revolving Credit Facility is, at our option, either (a) a base rate plus an applicable margin equal to 1.25% or (2) a Term SOFR rate (adjusted for statutory reserves) plus an applicable margin equal to 2.25% plus a CSA.

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Our first lien net leverage ratio as of December 31, 2024 was 1.6:1.0.

During 2023, we repaid an aggregate amount of $375 million and $100 million to the 2019 Term Loan and 2021 Term Loan, respectively.

As a result, as of December 31, 2023, the 2019 Term Loan and the 2021 Term Loan have remaining principal amounts of $330 million and $1,407 million, respectively.

During 2024, we made a repayment of $100 million to the 2021 Term Loan.

As a result, as of December 31, 2024, we had no principal outstanding under the 2019 Term Loan and $2,157 million of principal outstanding under the 2021 Term Loan.

We had no amounts outstanding under the Revolving Credit Facility, under which $494 million was available after giving effect to $6 million of outstanding letters of credit, which reduces availability.

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The 4.125% Senior Notes will mature on July 15, 2029, unless redeemed earlier, and bear interest at a rate of 4.125% per year until maturity, payable semi-annually in arrears.

We used the net proceeds from the sale of the 4.125% Senior Notes to repay the previously outstanding term loan, prepay a portion of the 2019 Term Loan and for general corporate purposes.

We used the net proceeds from the sale of the 4.125% Senior Notes to

repay the previously outstanding term loan, prepay a portion of the 2019 Term Loan and for general corporate purposes.

During the year ended December 31, 2022, we repurchased $13 million of outstanding principal amount of the 4.125% Senior Notes and recognized a net gain of $2 million on the debt extinguishment.

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On October 21, 2021, a wholly-owned subsidiary of the Company completed a private offering of $300 million aggregate principal amount of 4.750% Senior Notes due 2029 (the “4.750% Senior Notes”) issued under an indenture dated October 21, 2021, as supplemented by a supplemental indenture dated January 3, 2022.

The 4.750% Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by us and certain subsidiaries.

The 4.750% Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by us and certain of our subsidiaries.

The 4.750% Senior Notes will mature on October 15, 2029, unless earlier redeemed, and bear interest at a rate of 4.750% per year until maturity, payable semi-annually in arrears.

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Debt Covenants

As of December 31, 2023 and 2022, we were in compliance with all covenants contained in the indentures governing the 4.125% Senior Notes and the 4.750% Senior Notes, and the Credit Agreement.

Issuance of Series B Preferred Stock

As of December 31, 2024 and 2023, we were in compliance with all covenants contained in the indentures governing the 4.125% Senior Notes and 4.750% Senior Notes and the Credit Agreement.

Issuance and Conversion of Series B Preferred Stock

During 2022, we issued and sold 800,000 shares of our 5.5% Series B Redeemable Convertible Preferred Stock, par value $0.0001 per share (the "Series B Preferred Stock"), for an aggregate purchase price of $800 million, pursuant to securities purchase agreements entered into on July 26, 2021 with certain investors.

The net proceeds from the Series B Preferred Stock issuance were used to fund a portion of the consideration for the Chubb Acquisition.

The holders of the Series B Preferred Stock are entitled to dividends at the rate of 5.5% per annum, payable in cash or common stock, at our election.

The Series B Preferred Stock ranks senior to our common stock and Series A Preferred Stock with respect to dividend rights and rights upon the voluntary or involuntary liquidation, dissolution, or winding up of our affairs.

The Series B Preferred Stock is convertible, at the holder’s option, into shares of our common stock at a conversion price equal to $24.60 per share, subject to certain customary adjustments.

The holders of Series B Preferred Stock have certain other rights including voting rights on an as-converted basis, certain pre-emptive rights on our private equity offerings, certain registration rights, and, in the case of certain holders, certain director designation rights, as provided in the certificate of designation governing the Series B Preferred Stock.

We may, at our option, effect conversion of the outstanding shares of Series B Preferred Stock to common stock, but only if the volume-weighted average price of our common stock exceeds $36.90 per share for 15 consecutive trading days.

On February 28, 2024, we entered into a Conversion and Repurchase Agreement with Juno Lower Holdings L.P.

("Juno Lower Holdings"), FD Juno Holdings L.P.

("FD Juno Holdings," and together with Juno Lower Holdings, "Blackstone"), Viking Global Equities Master Ltd.

("VGEM") and Viking Global Equities II L.P.

(VGE II, and collectively with VGEM, "Viking" and collectively with the Blackstone, the "Series B Holders") pursuant to which Blackstone and Viking agreed to convert all of the outstanding shares of the Series B Preferred Stock that they hold, which represents all of the Series B Preferred Stock outstanding.

The transactions contemplated by the agreement (the "Series B Preferred Stock Conversion") were also consummated on February 28, 2024.

Under the terms of the agreement, (i) the Series B Holders each agreed to exercise their respective right to convert all of their Series B Preferred Stock into common stock, resulting in a total of 800,000 shares of Series B Preferred Stock being converted into approximately 32,803,519 shares of common stock (inclusive of approximately 283,196 shares attributable to accrued and unpaid dividends thereon (the "Conversion Shares") and (ii) upon issuance of the Conversion Shares, we agreed to immediately repurchase one-half of the Conversion Shares, on a pro rata basis, from the Series B Holders for an aggregate purchase price of $600 million.

The repurchase price was financed by (i) an incremental term facility of $300 million and (ii) cash and available credit from the balance sheet.

Material Cash Requirements from Known Contractual and Other Obligations

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Our capital expenditures are typically less than 1.5% of annual net revenues.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

R ECENTLY I SSUED A CCOUNTING P RONOUNCEMENTS

We review new accounting standards to determine the expected impact, if any, of the adoption of such standards will have on our financial position and/or results of operations.

See Note 3 – “Recent Accounting Pronouncements” for

further information regarding new accounting standards, including the anticipated dates of adoption and the effects on our consolidated financial position, results of operations or liquidity.

CRITICAL ACCOUNTING ESTIMATES

See Note 3 – “Recent Accounting Pronouncements” for further information regarding new accounting standards, including the anticipated dates of adoption and the effects on our consolidated financial position, results of operations or liquidity.

C RITICAL A CCOUNTING E STIMATES

The preparation of financial statements and related disclosures in conformity with U.S.

GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and income and expenses during the periods reported.

generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and income and expenses during the periods reported.

Actual results could materially differ from those estimates.

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We have a right to payment for performance completed to date at any time throughout our performance of a contract, including in the event of a cancellation, and as such, revenue is recognized over time.

These performance obligations use the cost-to-cost input method to measure our progress towards complete satisfaction of the performance obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on the contracts.

These performance obligations use the cost-to-cost input method to measure our progress towards complete satisfaction of the performance

obligation as we believe it best depicts the transfer of control to the customer which occurs as we incur costs on the contracts.

Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised on an on-going basis.

For those performance obligations for which net revenues are recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made.

When the current estimate of total costs for a performance obligation indicates a loss, a

provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.

When the current estimate of total costs for a performance obligation indicates a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.

The timing of revenue recognition may differ from the timing of invoicing to customers.

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Management’s estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates, which could result in impairment charges in the future.

Due to the time required to obtain the necessary data for each acquisition, U.S.

GAAP provides a “measurement period” of up to one year from the date of acquisition in which to finalize these fair value determinations.

Due to the time required to obtain the necessary data for each acquisition, GAAP provides a “measurement period” of up to one year from the date of acquisition in which to finalize these fair value determinations.

During the measurement period, preliminary fair value estimates may be revised if new information is obtained about the facts and circumstances existing as of the date of acquisition, or based on the final net assets and working capital of the acquired business, as prescribed in the applicable purchase agreement.

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Based on the annual test, no goodwill impairment was indicated for any of the reporting units:

Life Safety, Heating, Ventilation and Air Conditioning ("HVAC"), Infrastructure/Utility, Fabrication, and Specialty Contracting.

North American Life Safety, International Life Safety, Heating, Ventilation and Air Conditioning ("HVAC"), Infrastructure/Utility, Fabrication, and Specialty Contracting.

While we believe we have made reasonable estimates and assumptions to calculate the fair values of the reporting units, it is possible changes could occur.

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Interest Rate Risk

As of December 31, 2023, our outstanding variable interest rate debt was primarily related to our 2019 Term Loan and our 2021 Term Loan.

As of December 31, 2023, we had $330 million outstanding on the 2019 Term Loan, and $1,407 million outstanding on the 2021 Term Loan.

To mitigate increases in variable interest rates, we have a $720 million interest

rate swap, exchanging one-month SOFR for a rate of 3.59% per annum and a $400 million interest rate swap exchanging one-month SOFR for a rate of 3.41% per annum.

In addition, interest expense will be offset by the amortization through October 2024 of the remaining gain of $14 million recognized from the termination of the previously outstanding $720 million notional amount interest rate swap.

After the repricing transaction, the remaining floating rate portfolio will bear interest based on one-month SOFR plus CSA plus 225 basis points (for the 2019 Term Loan) or one-month SOFR plus CSA plus 250 basis points (for the 2021 Term Loan).

As of December 31, 2023, excluding letters of credit outstanding of $5 million, we had no amounts of outstanding revolving loans under our Credit Agreement.

As of December 31, 2024, our outstanding variable interest rate debt was primarily related to our $2,157 million 2021 Term Loan.

To mitigate increases in variable interest rates, we have a $720 million interest rate swap exchanging one-month SOFR for a rate of 3.59% per annum, maturing October 2026, and a $400 million interest rate swap exchanging one-month SOFR for a rate of 3.41% per annum, maturing January 2028.

During 2024, we entered into a $720 million notional amount forward starting interest rate swap commencing in October 2026 and maturing in January 2029 that exchanges a variable rate of interest (SOFR) for an average fixed rate of interest of approximately 3.13% over the term of the agreement.

The remaining floating rate portfolio will bear interest based on one-month SOFR plus 200 basis points.

As of December 31, 2024, excluding letters of credit outstanding of $6 million, we had no outstanding revolving loans under our Credit Agreement.

A one percentage point increase in the average interest rate on our floating rate debt at December 31, 2024 would increase future interest expense by approximately $10 million per year.

Foreign Currency Risk

We have operations are in over 20 countries globally.

We have operations in over 20 countries globally.

Revenues generated from foreign operations represented approximately 38% of our consolidated net revenues for the year ended December 31, 2024.

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Such transactions were not material to our operations during the year ended December 31, 2024.

These foreign currency transaction gains and losses, including hedging impacts, are classified in investment income and other, net, in the consolidated statements of operations and were a gain (loss) of $1 million, $(2) million and $(3) million for the years ended December 31, 2023, 2022 and 2021, respectively.

These foreign currency transaction gains and losses, including hedging impacts, are classified in investment expense (income) and other, net, in the consolidated statements of operations and were a (loss) gain of $(2) million, $1 million, and $(2) million for the years ended December 31, 2024, 2023 and 2022, respectively.

These net foreign currency transaction gains and losses include derivative instruments designed to reduce foreign currency exchange rate risks.

Translation gains or losses, which are recorded in accumulated other comprehensive loss in the consolidated balance sheets, result from translation of the assets and liabilities of our foreign subsidiaries into U.S.

Foreign currency translation gains (losses) totaled approximately $61 million, $(164) million and $(11) million for the years ended December 31, 2023, 2022, and 2021, respectively.

Foreign currency translation (losses) gains totaled approximately $(107) million, $61 million, and $(164) million for the years ended December 31, 2024, 2023, and 2022, respectively.

Our exposure to fluctuations in foreign currency exchange rates has increased as a result of our international presence and may continue to increase in the future if we continue to expand our operations outside of the U.S.

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In order to manage foreign currency risk related to transactions in foreign currencies and the intercompany financing structure, we entered into cross-currency swaps to manage the foreign currency risk of certain intercompany loans.

We also use foreign currency contracts as a way to mitigate foreign currency exposure.

We also use foreign currency forward contracts as a way to mitigate foreign currency exposure.

Other Market Risk

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Disruptions in our supply chain can occur due to market inefficiencies but can also be driven by other events, like cybersecurity breaches, pandemics, or similar disruptive events.

While we believe we can increase our contract prices to adjust for some price increases in commodities, there can be no assurance that such price increases, if they were to occur, would be recoverable.

While we believe we can increase our contract prices to

adjust for some price increases in commodities, there can be no assurance that such price increases, if they were to occur, would be recoverable.

Additionally, some of our fixed price contracts do not allow us to adjust prices and, as a result, increases in material costs could reduce profitability with respect to projects in progress.

Significant declines in market prices for oil and gas and other fuel sources may also impact our operations.

Prolonged periods of low oil and gas prices may result in projects being delayed or cancelled and in a low oil and gas price environment, certain of our businesses could become less profitable or incur losses.

Prolonged periods of low oil and gas prices may result in projects being delayed or canceled and in a low oil and gas price environment, certain of our businesses could become less profitable or incur losses.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis