-Second quarter net revenues of $1.7 billion,
with continued double-digit inspection growth-
-Record second quarter net income of $69
million, representing year-over-year growth of 44%-
-Record second quarter adjusted EBITDA of $231
million, representing year-over-year growth of 14%-
-Record second quarter free cash flow
generation, with strong conversion-
APi Group Corporation (NYSE: APG) (“APi” or the “Company”) today
reported its financial results for the three and six months ended
June 30, 2024.
Russ Becker, APi’s President and Chief Executive Officer stated:
“APi delivered strong financial results in the second quarter and
the first half of the year. The business continues to perform well,
with double digit U.S. Life Safety inspection growth, record
adjusted EBITDA margin, and record free cash flow generation. I
believe our leaders’ can generate continued momentum in the
business, build on historically strong execution, consistently
drive margin expansion, and return to historical levels of organic
growth in the back half of the year and into 2025. We believe we
can create sustainable shareholder value by focusing on our
long-term value creation targets and we feel confident in our
ability to achieve our 13% or more adjusted EBITDA margin target in
2025."
Second Quarter
2024 Consolidated Results:
Three Months Ended June
30,
2024
2023
Y/Y
Net revenues
$
1,730
$
1,771
(2.3
)%
Organic net revenue growth (a)
(3.1
)%
GAAP
Gross profit
$
544
$
496
9.7
%
Gross margin
31.4
%
28.0
%
+ 340 bps
Net income
$
69
$
48
43.8
%
Diluted EPS
$
0.22
$
0.12
83.3
%
Adjusted non-GAAP comparison
Adjusted gross profit
$
549
$
502
9.4
%
Adjusted gross margin
31.7
%
28.3
%
+ 340 bps
Adjusted EBITDA
$
231
$
203
13.8
%
Adjusted EBITDA margin
13.4
%
11.5
%
+ 190 bps
Adjusted net income
$
136
$
111
22.5
%
Adjusted diluted EPS
$
0.49
$
0.41
19.5
%
Notes: Refer to non-GAAP reconciliations
to the most comparable GAAP measures.
(a)
Organic change in net revenues provides a
consistent basis for a year-over-year comparison in net revenues as
it excludes the impacts of material acquisitions, divestitures, and
the impact of changes due to foreign currency translation.
- Reported net revenue declined by 2.3% (3.1% organic decline)
due to a decline in project revenues driven by disciplined customer
and project selection and project delays, partially offset by
growth in inspection, service, and monitoring revenue and
acquisitions completed in the Safety Services segment.
- Reported and adjusted gross margin each increased 340 basis
points compared to prior year period due to disciplined customer
and project selection, pricing improvements, improved business mix
in higher margin services revenue as well as significant margin
expansion in both service and project revenues across both
segments.
- Reported net income was $69 million and diluted EPS was $0.22,
representing an 83.3% increase compared to prior year period.
Adjusted net income was $136 million and adjusted diluted EPS was
$0.49, representing a 19.5% increase compared to prior year period
driven by significant adjusted gross margin expansion and decreased
interest expense, partially offset by an increase in adjusted
diluted weighted average shares outstanding.
- Adjusted EBITDA increased by 13.8% (14.0% on a fixed currency
basis) compared to the prior year period and adjusted EBITDA margin
increased 190 basis points to a second quarter record of 13.4%,
primarily due to the increase in gross margins, partially offset by
lower fixed cost absorption.
Second Quarter
2024 Segment Results:
Safety Services
Three Months Ended June
30,
2024
2023
Y/Y
Safety Services
Net revenues
$
1,279
$
1,225
4.4
%
Organic net revenue growth (a)
1.5
%
GAAP
Gross profit
$
447
$
391
14.3
%
Gross margin
34.9
%
31.9
%
+ 300 bps
Operating income
$
139
$
98
41.8
%
Operating margin
10.9
%
8.0
%
+ 290 bps
Adjusted non-GAAP comparison
Adjusted gross profit
$
452
$
397
13.9
%
Adjusted gross margin
35.3
%
32.4
%
+ 290 bps
Adjusted EBITDA
$
201
$
159
26.4
%
Adjusted EBITDA margin
15.7
%
13.0
%
+ 270 bps
Notes: Refer to non-GAAP reconciliations
to the most comparable GAAP measures.
(a)
Organic change in net revenues provides a
consistent basis for a year-over-year comparison in net revenues as
it excludes the impacts of material acquisitions, divestitures, and
the impact of changes due to foreign currency translation.
- Reported net revenue growth of 4.4% (1.5% organic) driven by
strong growth in inspection, service and monitoring, price
improvements as well as acquisitions completed in the last year,
partially offset by planned customer attrition in our international
business and disciplined customer and project selection,
specifically in our HVAC business.
- Reported and adjusted gross margin increased 300 and 290 basis
points, respectively, compared to prior year period driven by
pricing improvements, value capture initiatives, improved business
mix in higher margin services revenue as well as significant margin
expansion in both service and project revenues.
- Operating income increased by 41.8% compared to the prior year
period. Operating margin was 10.9%, representing a 290 basis point
increase compared to the prior year period.
- Adjusted EBITDA increased by 26.4% (26.7% on a fixed currency
basis) compared to the prior year period. Adjusted EBITDA margin
was 15.7%, representing a 270 basis point increase compared to
prior year period, primarily due to the increase in adjusted gross
margins, partially offset by operating costs growing faster than
revenues.
Specialty Services
Three Months Ended June
30,
2024
2023
Y/Y
Specialty Services
Net revenues
$
453
$
555
(18.4
)%
Organic net revenue growth (a)
(15.3
)%
GAAP
Gross profit
$
97
$
106
(8.5
)%
Gross margin
21.4
%
19.1
%
+ 230 bps
Operating income
$
35
$
41
(14.6
)%
Operating margin
7.7
%
7.4
%
+ 30 bps
Adjusted non-GAAP comparison
Adjusted gross profit
$
97
$
106
(8.5
)%
Adjusted gross margin
21.4
%
19.1
%
+ 230 bps
Adjusted EBITDA
$
62
$
69
(10.1
)%
Adjusted EBITDA margin
13.7
%
12.4
%
+ 130 bps
Notes: Refer to non-GAAP reconciliations
to the most comparable GAAP measures.
(a)
Organic change in net revenues provides a
consistent basis for a year-over-year comparison in net revenues as
it excludes the impacts of material acquisitions, divestitures, and
the impact of changes due to foreign currency translation.
- Reported net revenue declined by 18.4% (15.3% organic decline)
due to planned disciplined customer and project selection, project
delays, as well as the divestiture of an Infrastructure/Utility
operating company in 2023.
- Reported and adjusted gross margin each increased 230 basis
points compared to prior year period due to margin improvement in
services revenues and disciplined customer and project selection
driving margin improvement in project revenues.
- Operating income was $35 million and operating margin was
7.7%.
- Adjusted EBITDA decreased by 10.1% due to lower revenues.
Adjusted EBITDA margin was 13.7%, representing a 130 basis point
increase compared to prior year period, primarily due to the
increase in adjusted gross margins, partially offset by lower fixed
cost absorption.
Guidance
APi Group reaffirms full year net revenue guidance and narrows
full year adjusted EBITDA range
- Net Revenues of $7,150 to $7,350 million
- Adjusted EBITDA of $885 to $915 million
- Adjusted Free Cash Flow Conversion of approximately 70% of
adjusted EBITDA
APi Group announces guidance for the third quarter of 2024
- Net Revenues of $1,860 to $1,910 million
- Adjusted EBITDA of $240 to $250 million
Conference Call
APi will hold a webcast/dial-in conference call to discuss its
financial results at 8:30 a.m. (Eastern Time) on Thursday, August
1, 2024. Participants on the call will include Russell A. Becker,
President and Chief Executive Officer; Kevin S. Krumm, Executive
Vice President and Chief Financial Officer; and James E. Lillie and
Sir Martin E. Franklin, Co-Chairs.
To listen to the call by telephone, please dial 800-715-9871 or
646-307-1963 and provide Conference ID 6524854. You may also attend
and view the presentation (live or by replay) via webcast by
accessing the following URL:
https://events.q4inc.com/attendee/713309061
A replay of the call will be available shortly after completion
of the live call/webcast via the webcast link above.
About APi:
APi is 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. APi provides statutorily mandated and
other contracted services to a strong base of long-standing
customers across industries. We have a winning leadership culture
driven by entrepreneurial business leaders to deliver innovative
solutions for our customers. More information can be found at
www.apigroupcorp.com.
Forward-Looking Statements and
Disclaimers
Please note that in this press release the Company may discuss
events or results that have not yet occurred or been realized,
commonly referred to as forward-looking statements. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by or on behalf of APi Group
Corporation (“APi” or the “Company”). Such discussion and
statements may contain words such as “expect,” “anticipate,”
“will,” “should,” “believe,” “intend,” “plan,” “estimate,”
“predict,” “seek,” “continue,” “pro forma” “outlook,” “may,”
“might,” “should,” “can have,” “have,” “likely,” “potential,”
“target,” “indicative,” “illustrative,” and variations of such
words and similar expressions, and relate in this press release,
without limitation, to statements, beliefs, projections and
expectations about future events. Such statements are based on the
Company’s expectations, intentions and projections regarding the
Company’s future performance, anticipated events or trends and
other matters that are not historical facts.
These statements are not guarantees of future performance and
are subject to 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,
including: (i) economic conditions, competition, political risks,
and other risks that may affect the Company’s future performance,
including the impacts of inflationary pressures and other
macroeconomic factors on the Company’s business, markets, supply
chain, customers and workforce, on the credit and financial
markets, on the alignment of expenses and revenues and on the
global economy generally; (ii) supply chain constraints and
interruptions, and the resulting increases in the cost, or
reductions in the supply, of the materials and commodities the
Company uses in its business and for which the Company bears the
risk of such increases; (iii) risks associated with the Company’s
expanded international operations; (iv) failure to realize the
anticipated benefits of our acquisitions and restructuring program,
and our ability to successfully execute the Company’s bolt-on
acquisition strategy to acquire other businesses and successfully
integrate them into its operations; (v) failure to fully execute
the Company’s inspection first strategy or to realize the expected
service revenue from such inspections; (vi) risks associated with
the Company’s decentralized business model and participation in
joint ventures; (vii) improperly managed projects or project
delays; (viii) adverse developments in the credit markets which
could impact the Company’s ability to secure financing in the
future; (ix) the Company’s substantial level of indebtedness; (x)
risks associated with the Company’s contract portfolio; (xi)
changes in applicable laws or regulations; (xii) the possibility
that the Company may be adversely affected by other economic,
business, and/or competitive factors; (xiii) the impact of a global
armed conflict; (xiv) the trading price of the Company’s common
stock, which may be positively or negatively impacted by market and
economic conditions, the availability of the Company’s common
stock, the Company’s financial performance or determinations
following the date of this press release to use the Company’s funds
for other purposes; (xv) geopolitical risks; and (xvi) other risks
and uncertainties, including those discussed in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2023
under the heading “Risk Factors.” Given these risks and
uncertainties, you are cautioned not to place undue reliance on
forward-looking statements. Additional information concerning these
risks, uncertainties and other factors that could cause actual
results to vary is, or will be, included in the periodic and other
reports filed by the Company with the Securities and Exchange
Commission. Forward-looking statements included in this press
release speak only as of the date hereof and, except as required by
applicable law, the Company does not undertake any obligation to
update or revise publicly any forward-looking statements, whether
as a result of new information, future events or circumstances
after the date of this press release.
Non-GAAP Financial
Measures
This press release contains non-U.S. GAAP financial measures
within the meaning of Regulation G promulgated by the Securities
and Exchange Commission. The Company uses certain non-U.S. GAAP
financial measures that are included in this press release and the
additional financial information both in explaining its results to
shareholders and the investment community and in its internal
evaluation and management of its businesses. The Company’s
management believes that these non-U.S. GAAP financial measures and
the information they provide are useful to investors since these
measures (a) permit investors to view the Company’s performance
using the same tools that management uses to evaluate the Company’s
past performance, reportable business segments and prospects for
future performance, (b) permit investors to compare the Company
with its peers, (c) determine certain elements of management’s
incentive compensation, and (d) provide consistent period-to-period
comparisons of the results. Specifically:
- The Company’s management believes that adjusted gross profit,
adjusted selling, general and administrative (“SG&A”) expenses,
adjusted net income, and adjusted earnings per share, which are
non-GAAP financial measures that exclude business transformation
and other expenses for the integration of acquired businesses, the
impact and results of businesses classified as assets held-for-sale
and businesses divested, and one-time and other events such as
impairment charges, restructuring costs, transaction and other
costs related to acquisitions, amortization of intangible assets,
and non-service pension cost or benefit are useful because they
provide investors with a meaningful perspective on the current
underlying performance of the Company’s core ongoing
operations.
- The Company discloses fixed currency net revenues and adjusted
EBITDA (“FFX”) on a consolidated basis or segment specific basis to
provide a more complete understanding of underlying revenue and
adjusted EBITDA trends by providing net revenues and adjusted
EBITDA on a consistent basis. Under U.S. GAAP, income statement
results are translated in U.S. Dollars at the average exchange
rates for the period presented. Management believes that the fixed
currency non-GAAP measures are useful in providing period-to-period
comparisons of the results of the Company’s operational
performance, as it excludes the translation impact of exchange rate
fluctuations on our international results. Fixed currency amounts
included in this release are based on translation into U.S. dollars
at the fixed foreign currency exchange rates established by
management at the beginning of 2024.
- The Company also presents organic changes in net revenues on a
consolidated basis or segment specific basis to provide a more
complete understanding of underlying revenue trends by providing
net revenues on a consistent basis as it excludes the impacts of
material acquisitions, completed divestitures, and changes in
foreign currency from year-over-year comparisons on reported net
revenues, calculated as the difference between the reported net
revenues for the current period and reported net revenues for the
current period converted at fixed foreign currency exchange rates
(excluding material acquisitions and divestitures). The remainder
is divided by prior year fixed currency net revenues, excluding the
impacts of completed divestitures.
- 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. The
Company supplements the reporting of its consolidated financial
information with certain non-U.S. GAAP financial measures,
including EBITDA and adjusted EBITDA, which is defined as EBITDA
excluding the impact of certain non-cash and other specifically
identified items (“adjusted EBITDA”). Adjusted EBITDA margin is
calculated as adjusted EBITDA divided by net revenues. The Company
believes these non-U.S. GAAP measures provide meaningful
information and help investors understand the Company’s financial
results and assess its prospects for future performance. The
Company uses EBITDA and adjusted EBITDA to evaluate its
performance, both internally and as compared with its peers,
because it excludes certain items that may not be indicative of the
Company’s core operating results. Consolidated EBITDA is calculated
in a manner consistent with segment EBITDA, which is a measure of
segment profitability.
- The Company presents free cash flow, adjusted free cash flow
and adjusted free cash flow conversion, which are liquidity
measures used by management as factors in determining the amount of
cash that is available for working capital needs or other uses of
cash, however, it does not represent residual cash flows available
for discretionary expenditures. Free cash flow is defined as cash
provided by (used in) operating activities less capital
expenditures. Adjusted free cash flow is defined as cash provided
by (used in) operating activities plus or minus events including,
but not limited to, transaction and other costs related to
acquisitions, business transformation and other expenses for the
integration of acquired businesses, payments on acquired
liabilities, payments made for restructuring programs, impacts of
businesses classified as assets held-for-sale and businesses
divested, one-time and other events such as post-measurement period
purchase accounting adjustments for acquisitions and public
offerings, and COVID-19 related payroll tax deferral and relief
items. Adjusted free cash flow conversion is defined as adjusted
free cash flow as a percentage of adjusted EBITDA.
- The Company calculates its leverage ratio in accordance with
its debt agreements which include different adjustments to EBITDA
from those included in the adjusted EBITDA numbers reported
externally.
While the Company believes these non-U.S. GAAP measures are
useful in evaluating the Company’s performance, this information
should be considered as supplemental in nature and not as a
substitute for or superior to the related financial information
prepared in accordance with U.S. GAAP. Additionally, these non-U.S.
GAAP financial measures may differ from similar measures presented
by other companies. A reconciliation of these non-U.S. GAAP
financial measures is included later in this press release.
The Company does not provide reconciliations of forward-looking
non-U.S. GAAP adjusted EBITDA and growth in organic net revenues to
GAAP due to the inherent difficulty in forecasting and quantifying
certain amounts that are necessary for such reconciliations,
including adjustments that could be made for acquisitions and
divestitures, business transformation and other expenses for the
integration of acquired businesses, one-time and other events such
as impairment charges, transaction and other costs related to
acquisitions, restructuring costs, amortization of intangible
assets, and other charges reflected in the Company’s reconciliation
of historic numbers, the amount of which, based on historical
experience, could be significant.
APi Group Corporation
Condensed Consolidated Statements
of Operations (GAAP)
(Amounts in millions, except per
share data)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Net revenues
$
1,730
$
1,771
$
3,331
$
3,385
Cost of revenues
1,186
1,275
2,295
2,464
Gross profit
544
496
1,036
921
Selling, general, and administrative
expenses
418
389
810
741
Operating income
126
107
226
180
Interest expense, net
35
38
69
75
Loss on extinguishment of debt, net
—
—
—
3
Investment expense (income) and other,
net
2
(6
)
5
(11
)
Other expense, net
37
32
74
67
Income before income taxes
89
75
152
113
Income tax provision
20
27
38
39
Net income
$
69
$
48
$
114
$
74
Net income (loss) attributable to common
shareholders:
Stock dividend on Series B Preferred
Stock
—
(11
)
(7
)
(22
)
Conversion of Series B Preferred Stock
—
—
(372
)
—
Net income (loss) attributable to common
shareholders
$
69
$
37
$
(265
)
$
52
Net income (loss)
per common share:
Basic
$
0.23
$
0.12
$
(1.02
)
$
0.17
Diluted
0.22
0.12
(1.02
)
0.17
Weighted average
shares outstanding:
Basic
272
235
261
235
Diluted
276
270
261
268
APi Group Corporation
Condensed Consolidated Balance
Sheets (GAAP)
(Amounts in millions)
(Unaudited)
June 30, 2024
December 31,
2023
Assets
Current assets:
Cash and cash equivalents
$
324
$
479
Accounts receivable, net
1,314
1,395
Inventories
155
150
Contract assets
509
436
Prepaid expenses and other current
assets
152
122
Total current assets
2,454
2,582
Property and equipment, net
383
385
Operating lease right of use assets
251
233
Goodwill
2,825
2,471
Intangible assets, net
1,773
1,620
Deferred tax assets
50
113
Pension and post-retirement assets
103
111
Other assets
122
75
Total assets
$
7,961
$
7,590
Liabilities, Redeemable Convertible
Preferred Stock, and Shareholders’ Equity
Current liabilities:
Short-term and current portion of
long-term debt
$
4
$
5
Accounts payable
424
472
Accrued liabilities
605
729
Contract liabilities
547
526
Operating and finance leases
82
75
Total current liabilities
1,662
1,807
Long-term debt, less current portion
2,844
2,322
Pension and post-retirement
obligations
50
50
Operating and finance leases
185
172
Deferred tax liabilities
236
233
Other noncurrent liabilities
149
138
Total liabilities
5,126
4,722
Total redeemable convertible preferred
stock
—
797
Total shareholders’ equity
2,835
2,071
Total liabilities, redeemable convertible
preferred stock, and shareholders’ equity
$
7,961
$
7,590
APi Group Corporation
Condensed Consolidated Statements
of Cash Flows (GAAP)
(Amounts in millions)
(Unaudited)
Six Months Ended June
30,
2024
2023
Cash flows from operating
activities:
Net income
$
114
$
74
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
144
149
Restructuring charges, net of cash
paid
(10
)
4
Deferred taxes
(1
)
3
Share-based compensation expense
17
11
Profit-sharing expense
11
10
Non-cash lease expense
48
36
Net periodic pension expense (benefit)
12
(6
)
Loss on extinguishment of debt, net
—
3
Other, net
(18
)
(9
)
Changes in operating assets and
liabilities, net of effects of acquisitions
(200
)
(202
)
Net cash provided by operating
activities
$
117
$
73
Cash flows from investing
activities:
Acquisitions, net of cash acquired
$
(606
)
$
(45
)
Purchases of property and equipment
(44
)
(46
)
Proceeds from sales of property and
equipment
27
9
Net cash used in investing activities
$
(623
)
$
(82
)
Cash flows from financing
activities:
Proceeds from long-term borrowings
$
850
$
—
Payments on long-term borrowings
(334
)
(204
)
Repurchases of common stock
—
(23
)
Proceeds from issuance of common
shares
458
—
Conversion of Series B Preferred Stock
(600
)
—
Payments of acquisition-related
consideration
(2
)
(3
)
Restricted shares tendered for taxes
(11
)
(2
)
Other financing activities
(4
)
—
Net cash provided by (used in) financing
activities
$
357
$
(232
)
Effect of foreign currency exchange rate
change on cash, cash equivalents, and restricted cash
(5
)
4
Net decrease in cash, cash equivalents,
and restricted cash
$
(154
)
$
(237
)
Cash, cash equivalents, and restricted
cash, beginning of period
480
607
Cash, cash equivalents, and restricted
cash, end of period
$
326
$
370
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
Organic Change in Net Revenues
(non-GAAP)
(Unaudited)
Organic change in net
revenues
Three Months Ended June 30,
2024
Net revenues
Foreign
Net revenues
Organic
change
currency
change
Acquisitions and
change in
(as reported)
translation (a)
(fixed currency) (b)
divestitures, net (c)
net revenues (d)
Safety Services
4.4
%
(0.3
)%
4.7
%
3.2
%
1.5
%
Specialty Services
(18.4
)%
—
%
(18.4
)%
(3.1
)%
(15.3
)%
Consolidated
(2.3
)%
(0.3
)%
(2.0
)%
1.1
%
(3.1
)%
Six Months Ended June 30,
2024
Net revenues
Foreign
Net revenues
Organic
change
currency
change
Acquisitions and
change in
(as reported)
translation (a)
(fixed currency) (b)
divestitures, net (c)
net revenues (d)
Safety Services
3.2
%
—
%
3.2
%
2.3
%
0.9
%
Specialty Services
(14.5
)%
—
%
(14.5
)%
(2.7
)%
(11.8
)%
Consolidated
(1.6
)%
—
%
(1.6
)%
0.7
%
(2.3
)%
Notes:
(a)
Represents the effect of foreign currency
on reported net revenues, calculated as the difference between
reported net revenues and net revenues at fixed currencies for both
periods. Fixed currency amounts are based on translation into U.S.
Dollars at fixed foreign currency exchange rates established by
management at the beginning of 2024.
(b)
Amount represents the year-over-year
change when comparing both years after eliminating the impact of
fluctuations in foreign exchange rates by translating foreign
currency denominated results at fixed foreign currency ("FFX")
rates for both periods.
(c)
Adjustment to exclude net revenues from
material acquisitions from their respective dates of acquisition
until the first year anniversary from date of acquisition and net
revenues from divestitures for all periods for businesses divested
as of June 30, 2024.
(d)
Organic change in net revenues provides a
consistent basis for a year-over-year comparison in net revenues as
it excludes the impacts of material acquisitions, divestitures, and
the impact of changes due to foreign currency translation.
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
Gross profit and adjusted gross
profit (non-GAAP)
SG&A and adjusted SG&A
(non-GAAP)
(Amounts in millions)
(Unaudited)
Adjusted gross profit
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Gross profit (as reported)
$
544
$
496
$
1,036
$
921
Adjustments to reconcile gross profit to
adjusted gross profit:
Backlog amortization
(a)
3
6
3
13
Restructuring program related costs
(b)
$
2
$
—
$
2
$
—
Adjusted gross profit
$
549
$
502
$
1,041
$
934
Net revenues
$
1,730
$
1,771
$
3,331
$
3,385
Adjusted gross margin
31.7
%
28.3
%
31.3
%
27.6
%
Adjusted SG&A
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Selling, general, and administrative
expenses ("SG&A") (as reported)
$
418
$
389
$
810
$
741
Adjustments to reconcile SG&A to
adjusted SG&A:
Amortization of intangible assets
(c)
(52
)
(50
)
(102
)
(98
)
Contingent consideration and
compensation
(d)
(2
)
(2
)
(4
)
(4
)
Business process transformation
expenses
(e)
(7
)
(7
)
(13
)
(11
)
Acquisition related expenses
(f)
(8
)
(2
)
(9
)
(6
)
Restructuring program related costs
(b)
(6
)
(7
)
(11
)
(7
)
Other
(g)
(1
)
—
8
12
Adjusted SG&A expenses
$
342
$
321
$
679
$
627
Net revenues
$
1,730
$
1,771
$
3,331
$
3,385
Adjusted SG&A as a % of net
revenues
19.8
%
18.1
%
20.4
%
18.5
%
Notes:
(a)
Adjustment to reflect the addback of
amortization expense related to backlog intangible assets.
(b)
Adjustment to reflect the elimination of
expenses associated with restructuring programs and related
costs.
(c)
Adjustment to reflect the addback of
amortization expense.
(d)
Adjustment to reflect the elimination of
the expense attributable to deferred consideration to prior owners
of acquired businesses not expected to continue or recur.
(e)
Adjustment to reflect the elimination of
expenses associated with the integration and reorganization of
newly acquired businesses and non-operational costs related to
business process transformation, including system and process
development costs and implementation of processes and compliance
programs related to the Sarbanes-Oxley Act of 2002.
(f)
Adjustment to reflect the elimination of
transaction costs related to potential and completed acquisitions
and expenses associated with the transition of newly acquired
businesses from prior ownership into APi Group.
(g)
Adjustment includes various miscellaneous
non-recurring items, such as the gain on the sale of a building,
costs associated with the Series B Preferred Stock conversion,
elimination of changes in fair value estimates to acquired
liabilities, and impairment recorded on disposed assets.
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
EBITDA and adjusted EBITDA
(non-GAAP)
(Amounts in millions)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Net income (as reported)
$
69
$
48
$
114
$
74
Adjustments to reconcile net income to
EBITDA:
Interest expense, net
35
38
69
75
Income tax provision
20
27
38
39
Depreciation and amortization
75
75
144
149
EBITDA
$
199
$
188
$
365
$
337
Adjustments to reconcile EBITDA to
adjusted EBITDA:
Contingent consideration and
compensation
(a)
2
2
4
4
Non-service pension cost (benefit)
(b)
6
(3
)
10
(6
)
Business process transformation
expenses
(c)
7
7
13
11
Acquisition related expenses
(d)
8
2
9
6
Loss on extinguishment of debt, net
(e)
—
—
—
3
Restructuring program related costs
(f)
8
7
13
7
Other
(g)
1
—
(8
)
(12
)
Adjusted EBITDA
$
231
$
203
$
406
$
350
Net revenues
$
1,730
$
1,771
$
3,331
$
3,385
Adjusted EBITDA margin
13.4
%
11.5
%
12.2
%
10.3
Notes:
(a)
Adjustment to reflect the elimination of
the expense attributable to deferred consideration to prior owners
of acquired businesses not expected to continue or recur.
(b)
Adjustment to reflect the elimination of
non-service pension cost (benefit), which consists of interest
cost, expected return on plan assets and amortization of actuarial
gains/losses of the pension programs assumed as part of the Chubb
acquisition.
(c)
Adjustment to reflect the elimination of
expenses associated with the integration and reorganization of
newly acquired businesses and non-operational costs related to
business process transformation, including system and process
development costs and implementation of processes and compliance
programs related to the Sarbanes-Oxley Act of 2002.
(d)
Adjustment to reflect the elimination of
transaction costs related to potential and completed acquisitions
and expenses associated with the transition of newly acquired
businesses from prior ownership into APi Group.
(e)
Adjustment to reflect the elimination of
loss on extinguishment of debt resulting from early repayments and
repurchases of long-term debt.
(f)
Adjustment to reflect the elimination of
expenses associated with restructuring programs and related
costs.
(g)
Adjustment includes various miscellaneous
non-recurring items, such as the gain on the sale of a building,
costs associated with the Series B Preferred Stock conversion,
elimination of changes in fair value estimates to acquired
liabilities, and impairment recorded on disposed assets.
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
Income before income tax, net
income and EPS and
Adjusted income before income
tax, net income and EPS (non-GAAP)
(Amounts in millions, except per
share data)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Income before income tax provision (as
reported)
$
89
$
75
$
152
$
113
Adjustments to reconcile income before
income tax provision to adjusted income before income tax
provision:
Amortization of intangible assets
(a)
55
56
105
111
Contingent consideration and
compensation
(b)
2
2
4
4
Non-service pension cost (benefit)
(c)
6
(3
)
10
(6
)
Business process transformation
expenses
(d)
7
7
13
11
Acquisition related expenses
(e)
8
2
9
6
Loss on extinguishment of debt, net
(f)
—
—
—
3
Restructuring program related costs
(g)
8
7
13
7
Other
(h)
1
—
(8
)
(12
)
Adjusted income before income tax
provision
$
176
$
146
$
298
$
237
Income tax provision (as reported)
$
20
$
27
$
38
$
39
Adjustments to reconcile income tax
provision to adjusted income tax provision:
Income tax provision adjustment
(i)
20
8
30
18
Adjusted income tax provision
$
40
$
35
$
68
$
57
Adjusted income before income tax
provision
$
176
$
146
$
298
$
237
Adjusted income tax provision
40
35
68
57
Adjusted net income
$
136
$
111
$
230
$
180
Diluted weighted average shares
outstanding (as reported)
276
270
261
268
Adjustments to reconcile diluted weighted
average shares outstanding to adjusted diluted weighted average
shares outstanding:
Dilutive impact of shares from GAAP net
loss
(j)
—
—
1
—
Dilutive impact of Series A Preferred
Stock
(k)
1
2
4
4
Dilutive impact of conversion of Series B
Preferred Stock
(l)
—
—
11
—
Adjusted diluted weighted average shares
outstanding
277
272
277
272
Adjusted diluted EPS
$
0.49
$
0.41
$
0.83
$
0.66
Notes:
(a)
Adjustment to reflect the addback of
pre-tax amortization expense related to intangible assets.
(b)
Adjustment to reflect the elimination of
the expense attributable to deferred consideration to prior owners
of acquired businesses not expected to continue or recur.
(c)
Adjustment to reflect the elimination of
non-service pension cost (benefit), which consists of interest
cost, expected return on plan assets and amortization of actuarial
gains/losses of the pension programs assumed as part of the Chubb
acquisition.
(d)
Adjustment to reflect the elimination of
expenses associated with the integration and reorganization of
newly acquired businesses and non-operational costs related to
business process transformation, including system and process
development costs and implementation of processes and compliance
programs related to the Sarbanes-Oxley Act of 2002.
(e)
Adjustment to reflect the elimination of
transaction costs related to potential and completed acquisitions
and expenses associated with the transition of newly acquired
businesses from prior ownership into APi Group.
(f)
Adjustment to reflect the elimination of
loss on extinguishment of debt resulting from early repayments and
repurchases of long-term debt.
(g)
Adjustment to reflect the elimination of
expenses associated with restructuring programs and related
costs.
(h)
Adjustment includes various miscellaneous
non-recurring items, such as the gain on the sale of a building,
costs associated with the Series B Preferred Stock conversion,
elimination of changes in fair value estimates to acquired
liabilities, and impairment recorded on disposed assets.
(i)
Adjustment to reflect an adjusted
effective tax rate of 23% which reflects the Company's estimated
expectations for taxes to be paid on its adjusted non-GAAP
earnings.
(j)
Adjustment to add the dilutive impact of
options and RSUs which were anti-dilutive and excluded from the
diluted weighted average shares outstanding (as reported).
(k)
Adjustment for the six months ended June
30, 2024 and 2023 reflects the addition of the dilutive impact of 4
million shares associated with the deemed conversion of Series A
Preferred Stock. The adjustment for the three months ended June 30,
2024 and 2023 is partially offset by the elimination of 3 million
and 2 million shares, respectively, reflecting the dilutive effect
of the Preferred Share dividend as the dividend is contingent upon
the share price the last ten days of the calendar year and was not
earned as of June 30, 2024 or 2023.
(l)
Adjustment for the weighted average impact
of the Series B Preferred Stock that were convertible into
approximately 33 million common shares and were outstanding for two
months of the year. On February 28, 2024, all Series B Preferred
Stock was converted to common stock and there is no longer any
dilutive impact from the Series B Preferred Stock.
APi Group Corporation
Adjusted Segment Financial
Information (non-GAAP)
(Amounts in millions)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024 (a)
2023 (a)
2024 (a)
2023 (a)
Safety Services
Net revenues
$
1,279
$
1,225
$
2,493
$
2,416
Adjusted gross profit
452
397
875
772
Adjusted EBITDA
201
159
375
306
Adjusted gross margin
35.3
%
32.4
%
35.1
%
32.0
%
Adjusted EBITDA margin
15.7
%
13.0
%
15.0
%
12.7
%
Specialty Services
Net revenues
$
453
$
555
$
842
$
985
Adjusted gross profit
97
106
166
163
Adjusted EBITDA
62
69
96
97
Adjusted gross margin
21.4
%
19.1
%
19.7
%
16.5
%
Adjusted EBITDA margin
13.7
%
12.4
%
11.4
%
9.8
%
Total net revenues before corporate and
eliminations
(b)
$
1,732
$
1,780
$
3,335
$
3,401
Total adjusted EBITDA before corporate and
eliminations
(b)
263
228
471
403
Adjusted EBITDA margin before corporate
and eliminations
(b)
15.2
%
12.8
%
14.1
%
11.8
%
Corporate and Eliminations
Net revenues
$
(2
)
$
(9
)
$
(4
)
$
(16
)
Adjusted EBITDA
(32
)
(25
)
(65
)
(53
)
Total Consolidated
Net revenues
$
1,730
$
1,771
$
3,331
$
3,385
Adjusted gross profit
549
502
1,041
934
Adjusted EBITDA
231
203
406
350
Adjusted gross margin
31.7
%
28.3
%
31.3
%
27.6
%
Adjusted EBITDA margin
13.4
%
11.5
%
12.2
%
10.3
%
Notes:
(a)
Information derived from non-GAAP
reconciliations included elsewhere in this press release.
(b)
Calculated from results of the Company's
operating segments shown above, excluding Corporate and
Eliminations.
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
Adjusted Segment Financial
Information (non-GAAP)
(Amounts in millions)
(Unaudited)
Three Months Ended June 30,
2024
Three Months Ended June 30,
2023
As Reported
Adjustments
As Adjusted
As Reported
Adjustments
As Adjusted
Safety Services
Net revenues
$
1,279
$
—
$
1,279
$
1,225
$
—
$
1,225
Cost of revenues
832
(3
)
(a)
827
834
(6
)
(a)
828
(2
)
(b)
—
Gross profit
$
447
$
5
$
452
$
391
$
6
$
397
Gross margin
34.9
%
35.3
%
31.9
%
32.4
%
Specialty Services
Net revenues
$
453
$
—
$
453
$
555
$
—
$
555
Cost of revenues
356
—
356
449
—
449
Gross profit
$
97
$
—
$
97
$
106
$
—
$
106
Gross margin
21.4
%
21.4
%
19.1
%
19.1
%
Corporate and Eliminations
Net revenues
$
(2
)
$
—
$
(2
)
$
(9
)
$
—
$
(9
)
Cost of revenues
(2
)
—
(2
)
(8
)
—
(8
)
Total Consolidated
Net revenues
$
1,730
$
—
$
1,730
$
1,771
$
—
$
1,771
Cost of revenues
1,186
(3
)
(a)
1,181
1,275
(6
)
(a)
1,269
(2
)
(b)
—
Gross profit
$
544
$
5
$
549
$
496
$
6
$
502
Gross margin
31.4
%
31.7
%
28.0
%
28.3
%
Notes:
(a)
Adjustment to reflect the addback of
amortization expense related to backlog intangible assets.
(b)
Adjustment to reflect the elimination of
expenses associated with restructuring programs and related
costs.
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
Adjusted Segment Financial
Information (non-GAAP)
(Amounts in millions)
(Unaudited)
Six Months Ended June 30,
2024
Six Months Ended June 30,
2023
As Reported
Adjustments
As Adjusted
As Reported
Adjustments
As Adjusted
Safety Services
Net revenues
$
2,493
$
—
$
2,493
$
2,416
$
—
$
2,416
Cost of revenues
1,623
(3
)
(a)
1,618
1,657
(13
)
(a)
1,644
(2
)
(b)
—
Gross profit
$
870
$
5
$
875
$
759
$
13
$
772
Gross margin
34.9
%
35.1
%
31.4
%
32.0
%
Specialty Services
Net revenues
$
842
$
—
$
842
$
985
$
—
$
985
Cost of revenues
676
—
676
822
(a)
822
Gross profit
$
166
$
—
$
166
$
163
$
—
$
163
Gross margin
19.7
%
19.7
%
16.5
%
16.5
%
Corporate and Eliminations
Net revenues
$
(4
)
$
—
$
(4
)
$
(16
)
$
—
$
(16
)
Cost of revenues
(4
)
—
(4
)
(15
)
—
(15
)
Total Consolidated
Net revenues
$
3,331
$
—
$
3,331
$
3,385
$
—
$
3,385
Cost of revenues
2,295
(3
)
(a)
2,290
2,464
(13
)
(a)
2,451
(2
)
(b)
—
Gross profit
$
1,036
$
5
$
1,041
$
921
$
13
$
934
Gross margin
31.1
%
31.3
%
27.2
%
27.6
%
Notes:
(a)
Adjustment to reflect the addback of
amortization expense related to backlog intangible assets.
(b)
Adjustment to reflect the elimination of
expenses associated with restructuring programs and related
costs.
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
Adjusted Segment Financial
Information (non-GAAP)
(Amounts in millions)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Safety Services
Safety Services EBITDA
$
184
$
150
$
347
$
296
Adjustments to reconcile EBITDA to
adjusted EBITDA:
Contingent consideration and
compensation
(a)
2
2
4
3
Non-service pension cost (benefit)
(b)
6
(3
)
10
(6
)
Acquisition related expenses
(c)
—
2
—
5
Business process transformation
expenses
(d)
1
1
2
1
Restructuring program related costs
(e)
8
7
13
7
Other
(f)
—
—
(1
)
—
Safety Services adjusted EBITDA
$
201
$
159
$
375
$
306
Specialty Services
Specialty Services EBITDA
$
62
$
69
$
95
$
96
Adjustments to reconcile EBITDA to
adjusted EBITDA:
Other
(f)
—
—
1
1
Specialty Services adjusted EBITDA
$
62
$
69
$
96
$
97
Corporate and Eliminations
Corporate and Eliminations EBITDA
$
(47
)
$
(31
)
$
(77
)
$
(55
)
Adjustments to reconcile EBITDA to
adjusted EBITDA:
Business process transformation
expenses
(d)
6
6
11
10
Acquisition related expenses
(c)
8
—
9
1
Loss on extinguishment of debt, net
(g)
—
—
—
3
Other
(f)
1
—
(8
)
(12
)
Corporate and Eliminations adjusted
EBITDA
$
(32
)
$
(25
)
$
(65
)
$
(53
)
Notes:
(a)
Adjustment to reflect the elimination of
the expense attributable to deferred consideration to prior owners
of acquired businesses not expected to continue or recur.
(b)
Adjustment to reflect the elimination of
non-service pension cost (benefit), which consists of interest
cost, expected return on plan assets and amortization of actuarial
gains/losses of the pension programs assumed as part of the Chubb
acquisition.
(c)
Adjustment to reflect the elimination of
transaction costs related to potential and completed acquisitions
and expenses associated with the transition of newly acquired
businesses from prior ownership into APi Group.
(d)
Adjustment to reflect the elimination of
expenses associated with the integration and reorganization of
newly acquired businesses and non-operational costs related to
business process transformation, including system and process
development costs and implementation of processes and compliance
programs related to the Sarbanes-Oxley Act of 2002.
(e)
Adjustment to reflect the elimination of
expenses associated with restructuring programs and related
costs.
(f)
Adjustment includes various miscellaneous
non-recurring items, such as the gain on the sale of a building,
costs associated with the Series B Preferred Stock conversion,
elimination of changes in fair value estimates to acquired
liabilities, and impairment recorded on disposed assets.
(g)
Adjustment to reflect the elimination of
loss on extinguishment of debt resulting from early repayments and
repurchases of long-term debt.
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
Change in adjusted EBITDA
(non-GAAP)
(Unaudited)
Change in adjusted
EBITDA
Three Months Ended June 30,
2024
Change in
Adjusted EBITDA
(public rates) (a)
Foreign
currency
translation (b)
Change in
Adjusted EBITDA
(fixed currency) (c)
Safety Services
26.4
%
(0.3
)%
26.7
%
Specialty Services
(10.1
)%
—
%
(10.1
)%
Consolidated
13.8
%
(0.2
)%
14.0
%
Six Months Ended June 30,
2024
Change in
Foreign
Change in
Adjusted EBITDA
currency
Adjusted EBITDA
(public rates) (a)
translation (b)
(fixed currency) (c)
Safety Services
22.5
%
0.4
%
22.1
%
Specialty Services
(1.0
)%
—
%
(1.0
)%
Consolidated
16.0
%
—
%
16.0
%
Notes:
(a)
Adjusted EBITDA derived from non-GAAP
reconciliations included elsewhere in this press release.
(b)
Adjusted to eliminate the impact of
foreign currency on adjusted EBITDA amounts, calculated as the
difference between adjusted EBITDA at public currency rates and
adjusted EBITDA at fixed currency rates for both periods. Fixed
currency amounts are based on translation into U.S. Dollars at
fixed foreign currency exchange rates established by management at
the beginning of 2024.
(c)
Amount represents the year-over-year
change when comparing both years after eliminating the impact of
fluctuations in foreign exchange rates by translating foreign
currency denominated results at fixed foreign currency ("FFX")
rates for both periods.
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
Free cash flow and adjusted free
cash flow and conversion (non-GAAP)
(Amounts in millions)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Net cash provided by (used in) operating
activities (as reported)
$
110
$
74
$
117
$
73
Less: Purchases of property and
equipment
(22
)
(25
)
(44
)
(46
)
Free cash flow
$
88
$
49
$
73
$
27
Add: Cash payments related to following
items:
Contingent compensation
(a)
6
18
11
18
Business process transformation
expenses
(b)
8
8
14
13
Acquisition related expenses
(c)
8
1
9
5
Restructuring program related payments
(d)
9
6
21
11
Payroll tax deferral
(e)
—
1
—
9
Other
(f)
3
8
6
8
Adjusted free cash flow
$
122
$
91
$
134
$
91
Adjusted EBITDA
(g)
$
231
$
203
$
406
$
350
Adjusted free cash flow conversion
52.8
%
44.8
%
33.0
%
26.0
%
Notes:
(a)
Adjustment to reflect the elimination of
deferred payments to prior owners of acquired businesses not
expected to continue or recur.
(b)
Adjustment to reflect the elimination of
expenses associated with the integration and reorganization of
newly acquired businesses and non-operational costs related to
business process transformation, including system and process
development costs and implementation of processes and compliance
programs related to the Sarbanes-Oxley Act of 2002.
(c)
Adjustment to reflect the elimination of
transaction costs related to potential and completed acquisitions
and expenses associated with the transition of newly acquired
businesses from prior ownership into APi Group.
(d)
Adjustment to reflect payments made for
restructuring programs and related costs.
(e)
Adjustment reflects the elimination of
operating cash for the impact of the Coronavirus Aid Relief and
Economic Security (CARES) Act. During the first quarter of 2020,
the CARES Act was passed, allowing the Company to defer the payment
of the employer's share of Social Security taxes until December
2021 and December 2022. The final payments were made on the amount
deferred in 2020 during the first half of 2023.
(f)
Adjustment includes various miscellaneous
non-recurring items, such as elimination of payments made on the
Series B Preferred Stock conversion, and payments made related to
the debt repricing transaction.
(g)
Adjusted EBITDA derived from non-GAAP
reconciliations included elsewhere in this press release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240801218407/en/
Investor Relations and Media
Inquiries: Adam Fee Vice President of Investor Relations
Tel: +1 651-240-7252 Email: investorrelations@apigroupinc.us
APi (NYSE:APG)
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