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APi Group Reports Third Quarter 2023 Financial Results

-Record first nine months net revenues of $5.2 billion, representing approximately 7% reported and organic growth, with continued double-digit organic core inspection revenue growth-

-Reported net income of $54 million and adjusted EBITDA of $224 million for the third quarter, representing year-over-year net income growth of 93% and adjusted EBITDA margin expansion of 190 basis points-

-Raising the bottom end of full year adjusted EBITDA guidance-

APi Group Corporation (NYSE: APG) (“APi” or the “Company”) today reported its financial results for the three and nine months ended September 30, 2023.

Russ Becker, APi’s President and Chief Executive Officer stated: “I am pleased with the continued financial performance of the business as we remain extremely focused on delivering our financial targets detailed at our investor day last November. This quarter’s and our year-to-date performance continues to demonstrate our leaders’ ability to build on historically strong execution by delivering consistent double-digit core inspection organic growth, as well as consistently driving margin expansion across the business. We continue to deliver margin expansion by increasing higher margin inspection, service and monitoring revenue, pricing initiatives, operational improvements and a relentless focus on customer and project selection, especially in our Specialty Services and HVAC businesses.

"We believe we can create sustainable shareholder value by focusing on our “13/60/80” long-term value creation targets, with a near term laser focus on delivering adjusted EBITDA margins of 13% or more in 2025. As we look to 2024 and beyond, we have great confidence in the business, our backlog, our balance sheet, and our ability to continue to evolve APi into an even lower capex, asset light business focused on high-margin, statutorily mandated services."

Third Quarter 2023 Consolidated Results:

 

Three Months Ended September 30,

 

 

2023

 

 

 

2022

 

 

Y/Y

 

Y/Y (FFX) (a)

Net revenues

$

1,784

 

 

$

1,735

 

 

2.8

%

 

1.6

%

Organic net revenue growth (b)

 

 

 

 

 

 

1.3

%

 

 

 

 

 

 

 

 

GAAP

 

 

 

 

 

 

 

Gross profit

$

511

 

 

$

440

 

 

16.1

%

 

 

Gross margin

 

28.6

%

 

 

25.4

%

 

+ 320bps

 

 

 

 

 

 

 

 

 

 

Net income

$

54

 

 

$

28

 

 

92.9

%

 

 

Diluted EPS

$

0.15

 

 

$

0.06

 

 

150.0

%

 

 

 

 

 

 

 

 

 

 

Adjusted non-GAAP comparison

 

 

 

 

 

 

 

Adjusted gross profit

$

518

 

 

$

457

 

 

13.3

%

 

 

Adjusted gross margin

 

29.0

%

 

 

26.3

%

 

+ 270bps

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

224

 

 

$

186

 

 

20.4

%

 

19.1

%

Adjusted EBITDA as a % of net revenues

 

12.6

%

 

 

10.7

%

 

+ 190bps

 

 

 

 

 

 

 

 

 

 

Adjusted net income

$

130

 

 

$

99

 

 

31.3

%

 

 

Adjusted diluted EPS

$

0.48

 

 

$

0.37

 

 

29.7

%

 

 

Notes: Refer to non-GAAP reconciliations to the most comparable GAAP measures.

(a)

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, as further discussed under the heading "Non-GAAP Financial Measures" below.

(b) 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 2.8% driven by strong service growth across both segments, modest benefits from favorable foreign currency exchange rates and M&A. This was partially offset by planned disciplined customer and project selection, and customer project delays in Specialty Services leading to a decline in our projects business.
  • Reported and adjusted gross margin increased 320 and 270 basis points, respectively, compared to prior year period due to continued price increases, outsized growth in higher margin service revenue as well as margin expansion in both our projects and services businesses across both segments.
  • Reported net income was $54 million and diluted EPS was $0.15. Adjusted net income was $130 million and adjusted diluted EPS was $0.48, representing a $0.11 increase from prior year period driven by significant adjusted gross margin expansion in both Safety and Specialty Services, resulting from the factors mentioned above, partially offset by increased interest expense.
  • Adjusted EBITDA increased by 20.4% (19.1% on a fixed currency basis) compared to the prior year period and adjusted EBITDA margin increased 190 basis points to 12.6%, primarily due to the factors impacting gross margin, partially offset by investments to support revenue growth and the annualized investment in building our global capabilities and infrastructure.

Third Quarter 2023 Segment Results:

Safety Services

 

Three Months Ended September 30,

 

 

2023

 

 

 

2022

 

 

Y/Y

 

Y/Y (FFX) (a)

Safety Services

 

 

 

 

 

 

 

Net revenues

$

1,217

 

 

$

1,154

 

 

5.5

%

 

3.5

%

Organic net revenue growth (b)

 

 

 

 

 

 

3.0

%

 

 

 

 

 

 

 

 

GAAP

 

 

 

 

 

 

 

Gross profit

$

398

 

 

$

338

 

 

17.8

%

 

 

Gross margin

 

32.7

%

 

 

29.3

%

 

+ 340 bps

 

 

Operating Income

$

98

 

 

$

60

 

 

63.3

%

 

 

Operating margin

 

8.1

%

 

 

5.2

%

 

+ 290bps

 

 

 

 

 

 

 

 

 

 

Adjusted non-GAAP comparison

 

 

 

 

 

 

 

Adjusted gross profit

$

405

 

 

$

354

 

 

14.4

%

 

 

Adjusted gross margin

 

33.3

%

 

 

30.7

%

 

+ 260 bps

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

169

 

 

$

139

 

 

21.6

%

 

19.9

%

Adjusted EBITDA as a % of net revenues

 

13.9

%

 

 

12.0

%

 

+ 190 bps

 

 

Notes: Refer to non-GAAP reconciliations to the most comparable GAAP measures.

(a)

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, as further discussed under the heading "Non-GAAP Financial Measures" below.

(b)

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 5.5% driven by double-digit core inspection revenue growth, as well as modest benefits from favorable foreign currency exchange rates and M&A. This was partially offset by planned customer attrition in our International business, and continued discipline in customer and project selection in our HVAC business.
  • Reported and adjusted gross margin increased 340 and 260 basis points, respectively, compared to prior year period due to continued price increases, improved business mix of inspection, services and monitoring revenue as well as margin expansion in both our projects and services businesses.
  • Operating income increased by 63.3% compared to the prior year period. Operating margin was 8.1%, representing a 290 basis point increase compared to the prior year period.
  • Adjusted EBITDA increased by 21.6% (19.9% on a fixed currency basis) compared to the prior year period. Adjusted EBITDA margin was 13.9%, representing a 190 basis point increase compared to prior year period, primarily due to the factors impacting adjusted gross margin, partially offset by investments made to support revenue growth.

Specialty Services

 

Three Months Ended September 30,

 

 

2023

 

 

 

2022

 

 

Y/Y

 

Y/Y (FFX) (a)

Specialty Services

 

 

 

 

 

 

 

Net revenues

$

569

 

 

$

590

 

 

(3.6

)%

 

(3.6

)%

Organic net revenue growth (b)

 

 

 

 

 

 

(3.6

)%

 

 

 

 

 

 

 

 

GAAP

 

 

 

 

 

 

 

Gross profit

$

112

 

 

$

102

 

 

9.8

%

 

 

Gross margin

 

19.7

%

 

 

17.3

%

 

+ 240 bps

 

 

Operating Income

$

43

 

 

$

45

 

 

(4.4

)%

 

 

Operating margin

 

7.6

%

 

 

7.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted non-GAAP comparison

 

 

 

 

 

 

 

Adjusted gross profit

$

112

 

 

$

103

 

 

8.7

%

 

 

Adjusted gross margin

 

19.7

%

 

 

17.5

%

 

+ 220 bps

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

83

 

 

$

74

 

 

12.2

%

 

12.2

%

Adjusted EBITDA as a % of net revenues

 

14.6

%

 

 

12.5

%

 

+ 210 bps

 

 

Notes: Refer to non-GAAP reconciliations to the most comparable GAAP measures.

(a)

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, as further discussed under the heading "Non-GAAP Financial Measures" below.

(b)

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 and organic net revenue declined by (3.6)% due to continued disciplined customer and project selection, customer project delays in the fabrication business resulting in lower project revenues, offset by strong growth in service revenues.
  • Reported and adjusted gross margin increased 240 and 220 basis points, respectively, compared to prior year period due to strong organic growth in services revenues as well as margin expansion in both our projects and services businesses.
  • Operating income was $43 million, a decrease of (4.4)% compared to the prior year period.
  • Adjusted EBITDA increased by 12.2% compared to the prior year period. Adjusted EBITDA margin was 14.6%, representing a 210 basis point increase compared to prior year period, primarily due to the factors impacting gross margins.

Guidance

APi Group announces revised full year net revenue and adjusted EBITDA guidance

  • Net Revenues of $6,900 to $6,950 million, down from $7,015 to $7,075 million
  • Adjusted EBITDA of $775 to $785 million, up from $765 to $785 million
  • Adjusted Free Cash Flow Conversion at or above 65% remains unchanged

APi Group announces guidance for the fourth quarter of 2023

  • Net Revenues of $1,730 to $1,780 million
  • Adjusted EBITDA of $200 to $210 million

APi Co-Chair James E. Lillie concluded: “During our investor day last year, Russ detailed our strategy of focusing on growing our service based recurring revenue while slowing revenue growth in select businesses through improved project selection. Our goal of evolving away from lower margin, higher risk opportunities while focusing investments on service revenue expansion is yielding the desired results. This strategy improves margins while simultaneously reducing capital spending which in turn drives free cash flow generation. The benefit of these initiatives is shown in APi’s consistently strong and improving financial results. These results are built on a strong foundation of driving the Company’s recurring revenue, services-focused business model while expanding the financial discipline of the organization and its leadership team. The team’s relentless efforts on adhering to our strategy is driving margin expansion and we believe there is a long runway of continued margin expansion beyond our established 2025 target. As we look forward, we believe our balance sheet is even stronger following our repricing and maturity extension and we expect to end the year below our target net leverage ratio of 2.5x.”

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, November 2, 2023. 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 800-245-3047 or 203-518-9765 and provide Conference ID 4106714. You may also attend and view the presentation (live or by replay) via webcast by accessing the following URL:

https://event.on24.com/wcc/r/4080957/BC695FC270C55183EC0C6DD7B1B54653

A replay of the call will be available shortly after completion of the live call/webcast via telephone at 800-753-5212 or 402-220-2673 or via the webcast link above.

About APi:

APi is a global, market-leading business services provider of life safety, security 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 the acquisition of the Chubb fire and security business 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 the conflict between Russia and Ukraine; (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; and (xv) other risks and uncertainties, including those discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 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 and (c) determine certain elements of management’s incentive compensation (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, net COVID-19 relief, non-service pension benefit, severance related costs related to corporate leadership changes and certain tax benefits from the acquisition of APi Group, Inc. (the “APi Acquisition”) 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 2023.
  • 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, and one-time and other events such as post-measurement period purchase accounting adjustments for acquisitions, 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.

Beginning with the first quarter of 2023, the Company simplified the presentation of the non-GAAP reconciliations, by combining certain adjustment line items. Certain prior year amounts have been reclassified to conform to this presentation and the information in the tables below has been retroactively adjusted to reflect these changes in adjustment categories. Specifically, amounts previously classified as “integration and reorganization” have been reclassified and included with “business process transformation,” and prior period amounts classified as “acquisition expenses” and “recent acquisition transition expenses” have been combined and categorized as “acquisition related expenses.”

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, net COVID-19 relief, and certain tax benefits from the APi Acquisition, 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 September 30,

 

Nine Months Ended September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net revenues

$

1,784

 

 

$

1,735

 

 

$

5,169

 

 

$

4,855

 

Cost of revenues

 

1,273

 

 

 

1,295

 

 

 

3,737

 

 

 

3,604

 

Gross profit

 

511

 

 

 

440

 

 

 

1,432

 

 

 

1,251

 

Selling, general, and administrative expenses

 

407

 

 

 

379

 

 

 

1,148

 

 

 

1,138

 

Operating income

 

104

 

 

 

61

 

 

 

284

 

 

 

113

 

Interest expense, net

 

37

 

 

 

33

 

 

 

112

 

 

 

88

 

(Gain) loss on extinguishment of debt, net

 

 

 

 

(5

)

 

 

3

 

 

 

(5

)

Non-service pension benefit

 

(3

)

 

 

(10

)

 

 

(9

)

 

 

(32

)

Investment income and other, net

 

(4

)

 

 

(3

)

 

 

(9

)

 

 

(5

)

Other expense, net

 

30

 

 

 

15

 

 

 

97

 

 

 

46

 

Income before income taxes

 

74

 

 

 

46

 

 

 

187

 

 

 

67

 

Income tax provision

 

20

 

 

 

18

 

 

 

59

 

 

 

16

 

Net income

$

54

 

 

$

28

 

 

$

128

 

 

$

51

 

Net income attributable to common shareholders:

 

 

 

Stock dividend on Series B Preferred Stock

 

(11

)

 

 

(11

)

 

 

(33

)

 

 

(33

)

Net income attributable to common shareholders

$

43

 

 

$

17

 

 

$

95

 

 

$

18

 

Net income per common share

 

 

 

 

 

 

 

Basic

$

0.15

 

 

$

0.06

 

 

$

0.32

 

 

$

0.06

 

Diluted

 

0.15

 

 

 

0.06

 

 

 

0.32

 

 

 

0.06

 

Weighted average shares outstanding

 

 

 

 

 

 

 

Basic

 

235

 

 

 

234

 

 

 

235

 

 

 

233

 

Diluted

 

270

 

 

 

266

 

 

 

269

 

 

 

266

 

APi Group Corporation

Condensed Consolidated Balance Sheets (GAAP)

(Amounts in millions)

(Unaudited)

 

 

September 30, 2023

 

December 31, 2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

461

 

$

605

Accounts receivable, net

 

1,280

 

 

1,313

Inventories

 

155

 

 

163

Contract assets

 

530

 

 

459

Prepaid expenses and other current assets

 

226

 

 

112

Total current assets

 

2,652

 

 

2,652

Property and equipment, net

 

377

 

 

407

Operating lease right of use assets

 

227

 

 

222

Goodwill

 

2,404

 

 

2,382

Intangible assets, net

 

1,624

 

 

1,784

Deferred tax assets

 

107

 

 

108

Pension and post-retirement assets

 

407

 

 

392

Other assets

 

151

 

 

144

Total assets

$

7,949

 

$

8,091

Liabilities, Redeemable Convertible Preferred Stock, and Shareholders’ Equity

 

 

Current liabilities:

 

 

 

Short-term and current portion of long-term debt

$

256

 

$

206

Accounts payable

 

431

 

 

490

Accrued liabilities

 

666

 

 

689

Contract liabilities

 

474

 

 

463

Operating and finance leases

 

72

 

 

73

Total current liabilities

 

1,899

 

 

1,921

Long-term debt, less current portion

 

2,342

 

 

2,583

Pension and post-retirement obligations

 

37

 

 

40

Operating and finance leases

 

170

 

 

166

Deferred tax liabilities

 

340

 

 

340

Other noncurrent liabilities

 

132

 

 

117

Total liabilities

 

4,920

 

 

5,167

Total redeemable convertible preferred stock

 

797

 

 

797

Total shareholders' equity

 

2,232

 

 

2,127

Total liabilities, redeemable convertible preferred stock, and shareholders’ equity

$

7,949

 

$

8,091

APi Group Corporation

Condensed Consolidated Statements of Cash Flows (GAAP)

(Amounts in millions)

(Unaudited)

 

Nine Months Ended September 30,

 

 

2023

 

 

 

2022

 

Cash flows from operating activities:

 

 

 

Net income

$

128

 

 

$

51

 

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

226

 

 

 

225

 

Restructuring charges, net of cash paid

 

17

 

 

 

12

 

Deferred taxes

 

5

 

 

 

(9

)

Share-based compensation expense

 

19

 

 

 

14

 

Profit-sharing expense

 

14

 

 

 

10

 

Non-cash lease expense

 

55

 

 

 

49

 

Net periodic pension benefit

 

(9

)

 

 

(32

)

Loss (gain) on extinguishment of debt, net

 

3

 

 

 

(5

)

Other, net

 

3

 

 

 

13

 

Pension contributions

 

(3

)

 

 

(27

)

Changes in operating assets and liabilities, net of effects of acquisitions

 

(241

)

 

 

(219

)

Net cash provided by operating activities

$

217

 

 

$

82

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Acquisitions, net of cash acquired

$

(57

)

 

$

(2,881

)

Purchases of property and equipment

 

(64

)

 

 

(60

)

Proceeds from sales of property, equipment, and businesses

 

13

 

 

 

10

 

Net cash used in investing activities

$

(108

)

 

$

(2,931

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Proceeds from long-term borrowings

$

 

 

$

1,104

 

Payments on long-term borrowings

 

(206

)

 

 

(33

)

Repurchases of long-term borrowings

 

 

 

 

(30

)

Payments of debt issuance costs

 

 

 

 

(25

)

Repurchases of common stock

 

(41

)

 

 

(33

)

Proceeds from equity issuances

 

 

 

 

797

 

Payments of acquisition-related consideration

 

(4

)

 

 

(6

)

Restricted shares tendered for taxes

 

(2

)

 

 

(1

)

Net cash (used in) provided by financing activities

$

(253

)

 

$

1,773

 

Effect of foreign currency exchange rate on cash, cash equivalents, and restricted cash

 

(1

)

 

 

(17

)

Net decrease in cash, cash equivalents, and restricted cash

$

(145

)

 

$

(1,093

)

Cash, cash equivalents, and restricted cash, beginning of period

 

607

 

 

 

1,491

 

Cash, cash equivalents, and restricted cash, end of period

$

462

 

 

$

398

 

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 September 30, 2023

 

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

5.5 %

 

2.0 %

 

3.5 %

 

0.5 %

 

3.0 %

Specialty Services

(3.6) %

 

— %

 

(3.6) %

 

— %

 

(3.6) %

Consolidated

2.8 %

 

1.2 %

 

1.6 %

 

0.3 %

 

1.3 %

 

Nine Months Ended September 30, 2023

 

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

7.7 %

 

(0.4) %

 

8.1 %

 

0.2 %

 

7.9 %

Specialty Services

2.2 %

 

— %

 

2.2 %

 

— %

 

2.2 %

Consolidated

6.5 %

 

(0.3) %

 

6.8 %

 

0.2 %

 

6.6 %

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 2023.

(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 September 30, 2023.

(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 September 30,

 

Nine Months Ended September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Gross profit (as reported)

 

$

511

 

 

$

440

 

 

$

1,432

 

 

$

1,251

 

Adjustments to reconcile gross profit to adjusted gross profit:

Backlog amortization

(a)

 

7

 

 

 

15

 

 

 

20

 

 

 

22

 

Inventory step-up

(b)

 

 

 

 

 

 

 

 

 

 

9

 

Restructuring program related costs

(c)

 

 

 

 

2

 

 

 

 

 

 

4

 

Adjusted gross profit

 

$

518

 

 

$

457

 

 

$

1,452

 

 

$

1,286

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

1,784

 

 

$

1,735

 

 

$

5,169

 

 

$

4,855

 

Adjusted gross margin

 

 

29.0

%

 

 

26.3

%

 

 

28.1

%

 

 

26.5

%

Adjusted SG&A

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Selling, general, and administrative expenses ("SG&A") (as reported)

 

$

407

 

 

$

379

 

 

$

1,148

 

 

$

1,138

 

Adjustments to reconcile SG&A to adjusted SG&A:

Amortization of intangible assets

(d)

 

(49

)

 

 

(36

)

 

 

(147

)

 

 

(143

)

Contingent consideration and compensation

(e)

 

(4

)

 

 

(3

)

 

 

(8

)

 

 

(8

)

Business process transformation expenses

(f)

 

(6

)

 

 

(6

)

 

 

(17

)

 

 

(23

)

Acquisition related expenses

(g)

 

(1

)

 

 

(33

)

 

 

(7

)

 

 

(89

)

Restructuring program related costs

(c)

 

(17

)

 

 

(5

)

 

 

(24

)

 

 

(14

)

Other

(h)

 

(11

)

 

 

 

 

 

1

 

 

 

 

Adjusted SG&A expenses

 

$

319

 

 

$

296

 

 

$

946

 

 

$

861

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

1,784

 

 

$

1,735

 

 

$

5,169

 

 

$

4,855

 

Adjusted SG&A as a % of net revenues

 

 

17.9

%

 

 

17.1

%

 

 

18.3

%

 

 

17.7

%

Notes:

(a)

Adjustment to reflect the addback of amortization expense related to backlog intangible assets.

(b)

Adjustment to reflect the elimination of costs related to the fair value step-up of acquired inventory.

(c)

Adjustment to reflect the elimination of expenses associated with restructuring programs and related costs.

(d)

Adjustment to reflect the addback of amortization expense.

(e) Adjustment to reflect the elimination of the expense attributable to deferred consideration to prior owners of acquired businesses not expected to continue or recur.
(f)

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.

(g)

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.

(h)

Adjustment includes various miscellaneous non-recurring items, such as eliminations of changes in fair value estimates to acquired liabilities and impairment recorded on assets held-for-sale.

APi Group Corporation

Reconciliations of GAAP to Non-GAAP Financial Measures

EBITDA and adjusted EBITDA (non-GAAP)

(Amounts in millions)

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net income (as reported)

 

$

54

 

 

$

28

 

 

$

128

 

 

$

51

 

Adjustments to reconcile net income to EBITDA:

 

 

 

 

 

 

 

 

Interest expense, net

 

 

37

 

 

 

33

 

 

 

112

 

 

 

88

 

Income tax provision

 

 

20

 

 

 

18

 

 

 

59

 

 

 

16

 

Depreciation and amortization

 

 

77

 

 

 

73

 

 

 

226

 

 

 

225

 

EBITDA

 

$

188

 

 

$

152

 

 

$

525

 

 

$

380

 

Adjustments to reconcile EBITDA to adjusted EBITDA:

Contingent consideration and compensation

(a)

 

4

 

 

 

3

 

 

 

8

 

 

 

8

 

Non-service pension benefit

(b)

 

(3

)

 

 

(10

)

 

 

(9

)

 

 

(32

)

Inventory step-up

(c)

 

 

 

 

 

 

 

 

 

 

9

 

Business process transformation expenses

(d)

 

6

 

 

 

6

 

 

 

17

 

 

 

23

 

Acquisition related expenses

(e)

 

1

 

 

 

33

 

 

 

7

 

 

 

89

 

(Gain) loss on extinguishment of debt, net

(f)

 

 

 

 

(5

)

 

 

3

 

 

 

(5

)

Restructuring program related costs

(g)

 

17

 

 

 

7

 

 

 

24

 

 

 

18

 

Other

(h)

 

11

 

 

 

 

 

 

(1

)

 

 

 

Adjusted EBITDA

 

$

224

 

 

$

186

 

 

$

574

 

 

$

490

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

1,784

 

 

$

1,735

 

 

$

5,169

 

 

$

4,855

 

Adjusted EBITDA as a % of net revenues

 

 

12.6

%

 

 

10.7

%

 

 

11.1

%

 

 

10.1

%

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 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 costs related to the fair value step-up of acquired inventory.

(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 (gain) 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 eliminations of changes in fair value estimates to acquired liabilities and impairment recorded on assets held-for-sale.

APi Group Corporation

Reconciliations of GAAP to Non-GAAP Financial Measures

Income (loss) before income tax, net income (loss) and EPS and

Adjusted income before income tax, net income (loss) and EPS (non-GAAP)

(Amounts in millions, except per share data)

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Income before income tax provision (as reported)

 

$

74

 

 

$

46

 

 

$

187

 

 

$

67

 

Adjustments to reconcile income before income tax provision to adjusted income before income tax provision:

Amortization of intangible assets

(a)

 

56

 

 

 

51

 

 

 

167

 

 

 

165

 

Contingent consideration and compensation

(b)

 

4

 

 

 

3

 

 

 

8

 

 

 

8

 

Non-service pension benefit

(c)

 

(3

)

 

 

(10

)

 

 

(9

)

 

 

(32

)

Inventory step-up

(d)

 

 

 

 

 

 

 

 

 

 

9

 

Business process transformation expenses

(e)

 

6

 

 

 

6

 

 

 

17

 

 

 

23

 

Acquisition related expenses

(f)

 

1

 

 

 

33

 

 

 

7

 

 

 

89

 

(Gain) loss on extinguishment of debt, net

(g)

 

 

 

 

(5

)

 

 

3

 

 

 

(5

)

Restructuring program related costs

(h)

 

17

 

 

 

7

 

 

 

24

 

 

 

18

 

Other

(i)

 

11

 

 

 

 

 

 

(1

)

 

 

 

Adjusted income before income tax provision

 

$

166

 

 

$

131

 

 

$

403

 

 

$

342

 

 

 

 

 

 

 

 

 

 

Income tax provision (as reported)

 

$

20

 

 

$

18

 

 

$

59

 

 

$

16

 

Adjustments to reconcile income tax provision to adjusted income tax provision:

Income tax provision adjustment

(j)

 

16

 

 

 

14

 

 

 

34

 

 

 

66

 

Adjusted income tax provision

 

$

36

 

 

$

32

 

 

$

93

 

 

$

82

 

 

 

 

 

 

 

 

 

 

Adjusted income before income tax provision

 

$

166

 

 

$

131

 

 

$

403

 

 

$

342

 

Adjusted income tax provision

 

 

36

 

 

 

32

 

 

 

93

 

 

 

82

 

Adjusted net income

 

$

130

 

 

$

99

 

 

$

310

 

 

$

260

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding (as reported)

 

 

270

 

 

 

266

 

 

 

269

 

 

 

266

 

Adjustments to reconcile diluted weighted average shares outstanding to adjusted diluted weighted average shares outstanding:

Dilutive impact of Series A Preferred Stock

(k)

 

2

 

 

 

4

 

 

 

3

 

 

 

4

 

Adjusted diluted weighted average shares outstanding

 

 

272

 

 

 

270

 

 

 

272

 

 

 

270

 

 

 

 

 

 

 

 

 

 

Adjusted diluted EPS

 

$

0.48

 

 

$

0.37

 

 

$

1.14

 

 

$

0.96

 

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 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 costs related to the fair value step-up of acquired inventory.

(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 to reflect the elimination of (gain) loss on extinguishment of debt resulting from early repayments and repurchases of long-term debt.

(h)

Adjustment to reflect the elimination of expenses associated with restructuring programs and related costs.

(i)

Adjustment includes various miscellaneous non-recurring items, such as eliminations of changes in fair value estimates to acquired liabilities and impairment recorded on assets held-for-sale.

(j)

Adjustment to reflect an adjusted effective cash tax rate of 23% for the nine months ended September 30, 2023 and 24% for the three and nine months ended 2022. The adjustment for the three months ended September 30, 2023 is the amount required to adjust the nine month period to 23%.

(k)

Adjustment for the three and nine months ended September 30, 2022 reflects addition of the dilutive impact of 4 million shares associated with the deemed conversion of Series A Preferred Stock. The adjustment for the three and nine months ended September 30, 2023 is partially offset by the elimination of 2 million and 1 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 September 30, 2023.

APi Group Corporation

Adjusted Segment Financial Information (non-GAAP)

(Amounts in millions)

(Unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2023 (a)

 

2022 (a)

 

2023 (a)

 

2022 (a)

Safety Services

 

 

 

 

 

 

 

 

Net revenues

 

$

1,217

 

 

$

1,154

 

 

$

3,633

 

 

$

3,374

 

Adjusted gross profit

 

 

405

 

 

 

354

 

 

 

1,177

 

 

 

1,043

 

Adjusted EBITDA

 

 

169

 

 

 

139

 

 

 

475

 

 

 

401

 

 

 

 

 

 

 

 

 

 

Adjusted gross margin

 

 

33.3

%

 

 

30.7

%

 

 

32.4

%

 

 

30.9

%

Adjusted EBITDA as a % of net revenues

 

 

13.9

%

 

 

12.0

%

 

 

13.1

%

 

 

11.9

%

 

 

 

 

 

 

 

 

 

Specialty Services

 

 

 

 

 

 

 

 

Net revenues

 

$

569

 

 

$

590

 

 

$

1,554

 

 

$

1,520

 

Adjusted gross profit

 

 

112

 

 

 

103

 

 

 

275

 

 

 

243

 

Adjusted EBITDA

 

 

83

 

 

 

74

 

 

 

180

 

 

 

157

 

 

 

 

 

 

 

 

 

 

Adjusted gross margin

 

 

19.7

%

 

 

17.5

%

 

 

17.7

%

 

 

16.0

%

Adjusted EBITDA as a % of net revenues

 

 

14.6

%

 

 

12.5

%

 

 

11.6

%

 

 

10.3

%

 

 

 

 

 

 

 

 

 

Total net revenues before corporate and eliminations

(b)

$

1,786

 

 

$

1,744

 

 

$

5,187

 

 

$

4,894

 

Total adjusted EBITDA before corporate and eliminations

(b)

 

252

 

 

 

213

 

 

 

655

 

 

 

558

 

Adjusted EBITDA as a % of net revenues before corporate and eliminations

(b)

 

14.1

%

 

 

12.2

%

 

 

12.6

%

 

 

11.4

%

 

 

 

 

 

 

 

 

 

Corporate and Eliminations

 

 

 

 

 

 

 

 

Net revenues

 

$

(2

)

 

$

(9

)

 

$

(18

)

 

$

(39

)

Adjusted EBITDA

 

 

(28

)

 

 

(27

)

 

 

(81

)

 

 

(68

)

 

 

 

 

 

 

 

 

 

Total Consolidated

 

 

 

 

 

 

 

 

Net revenues

 

$

1,784

 

 

$

1,735

 

 

$

5,169

 

 

$

4,855

 

Adjusted gross profit

 

 

518

 

 

 

457

 

 

 

1,452

 

 

 

1,286

 

Adjusted EBITDA

 

 

224

 

 

 

186

 

 

 

574

 

 

 

490

 

 

 

 

 

 

 

 

 

 

Adjusted gross margin

 

 

29.0

%

 

 

26.3

%

 

 

28.1

%

 

 

26.5

%

Adjusted EBITDA as a % of net revenues

 

 

12.6

%

 

 

10.7

%

 

 

11.1

%

 

 

10.1

%

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 September 30, 2023

 

Three Months Ended September 30, 2022

 

As Reported

 

Adjustments

 

As Adjusted

 

As Reported

 

Adjustments

 

As Adjusted

Safety Services

 

 

 

 

 

 

 

 

 

 

Net revenues

$

1,217

 

 

$

 

 

$

1,217

 

 

$

1,154

 

 

$

 

 

$

1,154

 

Cost of revenues

 

819

 

 

 

(7

)

(a)

 

812

 

 

 

816

 

 

 

(14

)

(a)

 

800

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

(b)

 

Gross profit

$

398

 

 

$

7

 

 

$

405

 

 

$

338

 

 

$

16

 

 

$

354

 

Gross margin

 

32.7

%

 

 

 

 

33.3

%

 

 

29.3

%

 

 

 

 

30.7

%

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Services

 

 

 

 

 

 

 

 

 

 

Net revenues

$

569

 

 

$

 

 

$

569

 

 

$

590

 

 

$

 

 

$

590

 

Cost of revenues

 

457

 

 

 

 

 

 

457

 

 

 

488

 

 

 

(1

)

(a)

 

487

 

Gross profit

$

112

 

 

$

 

 

$

112

 

 

$

102

 

 

$

1

 

 

$

103

 

Gross margin

 

19.7

%

 

 

 

 

19.7

%

 

 

17.3

%

 

 

 

 

17.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and Eliminations

 

 

 

 

 

 

 

 

 

 

Net revenues

$

(2

)

 

$

 

 

$

(2

)

 

$

(9

)

 

$

 

 

$

(9

)

Cost of revenues

 

(3

)

 

 

 

 

 

(3

)

 

 

(9

)

 

 

 

 

 

(9

)

Gross profit

$

1

 

 

$

 

 

$

1

 

 

$

 

 

$

 

 

$

 

Gross margin

 

(50.0

%)

 

 

 

 

(50.0

%)

 

 

%

 

 

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Total Consolidated

 

 

 

 

 

 

 

 

 

 

Net revenues

$

1,784

 

 

$

 

 

$

1,784

 

 

$

1,735

 

 

$

 

 

$

1,735

 

Cost of revenues

 

1,273

 

 

 

(7

)

(a)

 

1,266

 

 

 

1,295

 

 

 

(15

)

(a)

 

1,278

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

(b)

 

Gross profit

$

511

 

 

$

7

 

 

$

518

 

 

$

440

 

 

$

17

 

 

$

457

 

Gross margin

 

28.6

%

 

 

 

 

29.0

%

 

 

25.4

%

 

 

 

 

26.3

%

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)

 

Nine Months Ended September 30, 2023

 

Nine Months Ended September 30, 2022

 

As Reported

 

Adjustments

 

As Adjusted

 

As Reported

 

Adjustments

 

As Adjusted

Safety Services

 

 

 

 

 

 

 

 

 

 

Net revenues

$

3,633

 

 

$

 

 

$

3,633

 

 

$

3,374

 

 

$

 

 

$

3,374

 

Cost of revenues

 

2,476

 

 

 

(20

)

(a)

 

2,456

 

 

 

2,363

 

 

 

(19

)

(a)

 

2,331

 

 

 

 

 

 

 

 

 

 

 

 

(9

)

(b)

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

(c)

 

Gross profit

$

1,157

 

 

$

20

 

 

$

1,177

 

 

$

1,011

 

 

$

32

 

 

$

1,043

 

Gross margin

 

31.8

%

 

 

 

 

32.4

%

 

 

30.0

%

 

 

 

 

30.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Services

 

 

 

 

 

 

 

 

 

 

Net revenues

$

1,554

 

 

$

 

 

$

1,554

 

 

$

1,520

 

 

$

 

 

$

1,520

 

Cost of revenues

 

1,279

 

 

 

 

 

 

1,279

 

 

 

1,280

 

 

 

(3

)

(a)

 

1,277

 

Gross profit

$

275

 

 

$

 

 

$

275

 

 

$

240

 

 

$

3

 

 

$

243

 

Gross margin

 

17.7

%

 

 

 

 

17.7

%

 

 

15.8

%

 

 

 

 

16.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and Eliminations

Net revenues

$

(18

)

 

$

 

 

$

(18

)

 

$

(39

)

 

$

 

 

$

(39

)

Cost of revenues

 

(18

)

 

 

 

 

 

(18

)

 

 

(39

)

 

 

 

 

 

(39

)

Gross profit

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Gross margin

 

%

 

 

 

 

%

 

 

%

 

 

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Total Consolidated

 

 

 

 

 

 

 

 

 

 

Net revenues

$

5,169

 

 

$

 

 

$

5,169

 

 

$

4,855

 

 

$

 

 

$

4,855

 

Cost of revenues

 

3,737

 

 

 

(20

)

(a)

 

3,717

 

 

 

3,604

 

 

 

(22

)

(a)

 

3,569

 

 

 

 

 

 

 

 

 

 

 

 

(9

)

(b)

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

(c)

 

Gross profit

$

1,432

 

 

$

20

 

 

$

1,452

 

 

$

1,251

 

 

$

35

 

 

$

1,286

 

Gross margin

 

27.7

%

 

 

 

 

28.1

%

 

 

25.8

%

 

 

 

 

26.5

%

Notes:

(a)

Adjustment to reflect the addback of amortization expense related to backlog intangible assets.

(b)

Adjustment to reflect the elimination of costs related to the fair value step-up of acquired inventory.

(c)

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

September 30,

 

Nine Months Ended

September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Safety Services

 

 

 

 

 

 

 

 

Safety Services EBITDA

 

$

153

 

 

$

116

 

 

$

449

 

 

$

360

 

Adjustments to reconcile EBITDA to adjusted EBITDA:

Contingent consideration and compensation

(a)

 

4

 

 

 

2

 

 

 

7

 

 

 

4

 

Non-service pension benefit

(b)

 

(3

)

 

 

(10

)

 

 

(9

)

 

 

(32

)

Inventory step-up

(c)

 

 

 

 

 

 

 

 

 

 

9

 

Acquisition related expenses

(d)

 

 

 

 

23

 

 

 

5

 

 

 

33

 

Business process transformation expenses

(e)

 

 

 

 

1

 

 

 

1

 

 

 

9

 

Restructuring program related costs

(f)

 

17

 

 

 

7

 

 

 

24

 

 

 

18

 

Other

(h)

 

(2

)

 

 

 

 

 

(2

)

 

 

 

Safety Services adjusted EBITDA

 

$

169

 

 

$

139

 

 

$

475

 

 

$

401

 

 

 

 

 

 

 

 

 

 

Specialty Services

 

 

 

 

 

 

 

 

Specialty Services EBITDA

 

$

70

 

 

$

73

 

 

$

166

 

 

$

153

 

Adjustments to reconcile EBITDA to adjusted EBITDA:

Contingent consideration and compensation

(a)

 

 

 

 

1

 

 

 

1

 

 

 

4

 

Other

(h)

 

13

 

 

 

 

 

 

13

 

 

 

 

Specialty Services adjusted EBITDA

 

$

83

 

 

$

74

 

 

$

180

 

 

$

157

 

 

 

 

 

 

 

 

 

 

Corporate and Eliminations

 

 

 

 

 

 

 

 

Corporate and Eliminations EBITDA

 

$

(35

)

 

$

(37

)

 

$

(90

)

 

$

(133

)

Adjustments to reconcile EBITDA to adjusted EBITDA:

Business process transformation expenses

(e)

 

6

 

 

 

5

 

 

 

16

 

 

 

14

 

Acquisition related expenses

(d)

 

1

 

 

 

10

 

 

 

2

 

 

 

56

 

(Gain) loss on extinguishment of debt, net

(g)

 

 

 

 

(5

)

 

 

3

 

 

 

(5

)

Other

(h)

 

 

 

 

 

 

 

(12

)

 

 

 

Corporate and Eliminations adjusted EBITDA

 

$

(28

)

 

$

(27

)

 

$

(81

)

 

$

(68

)

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 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 costs related to the fair value step-up of acquired inventory.

(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 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 expenses associated with restructuring programs and related costs.

(g)

Adjustment to reflect the elimination of (gain) loss on extinguishment of debt resulting from early repayments and repurchases of long-term debt.

(h)

Adjustment includes various miscellaneous non-recurring items, such as eliminations of changes in fair value estimates to acquired liabilities and impairment recorded on assets held-for-sale.

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 September 30, 2023

 

Change in

Adjusted EBITDA

(public rates) (a)

 

Foreign

currency

translation (b)

 

Change in

Adjusted EBITDA

(fixed currency) (c)

Safety Services

21.6 %

 

1.7 %

 

19.9 %

Specialty Services

12.2 %

 

— %

 

12.2 %

Consolidated

20.4 %

 

1.3 %

 

19.1 %

 

Nine Months Ended September 30, 2023

 

Change in

Adjusted EBITDA

(public rates) (a)

 

Foreign

currency

translation (b)

 

Change in

Adjusted EBITDA

(fixed currency) (c)

Safety Services

18.5 %

 

(0.8) %

 

19.3 %

Specialty Services

14.6 %

 

— %

 

14.6 %

Consolidated

17.1 %

 

(0.8) %

 

17.9 %

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 2023.

(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

September 30,

 

Nine Months Ended

September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net cash provided by operating activities

(a)

$

144

 

 

$

146

 

 

$

217

 

 

$

82

 

Less: Purchases of property and equipment

(a)

 

(18

)

 

 

(26

)

 

 

(64

)

 

 

(60

)

Free cash flow

 

$

126

 

 

$

120

 

 

$

153

 

 

$

22

 

Add: Cash payments related to following items:

Contingent compensation

(b)

$

 

 

$

1

 

 

$

18

 

 

$

3

 

Pension contributions

(c)

 

 

 

 

 

 

 

 

 

 

27

 

Business process transformation expenses

(d)

 

9

 

 

 

13

 

 

 

22

 

 

 

26

 

Acquisition related expenses

(e)

 

 

 

 

29

 

 

 

5

 

 

 

98

 

Restructuring payments

(f)

 

7

 

 

 

3

 

 

 

18

 

 

 

6

 

Payroll tax deferral

(g)

 

 

 

 

 

 

 

9

 

 

 

 

Other

(h)

 

4

 

 

 

 

 

 

12

 

 

 

 

Adjusted free cash flow

 

$

146

 

 

$

166

 

 

$

237

 

 

$

182

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

(i)

$

224

 

 

$

186

 

 

$

574

 

 

$

490

 

Adjusted free cash flow conversion

 

 

65.2

%

 

 

89.2

%

 

 

41.3

%

 

 

37.1

%

Notes:

(a)

Operating cash flows and purchases of property and equipment for the nine months ended September 30, 2023, and 2022 are as reported. Amounts for the three months ended September 30, 2023 and 2022 are calculated as the nine months ended less the amounts reported for the six months ended June 30, 2023 and 2022, respectively.

(b)

Adjustment to reflect the elimination of deferred payments to prior owners of acquired businesses not expected to continue or recur.

(c)

Adjustment to reflect the elimination of initial pension contribution payment related to the Chubb acquisition not expected to continue or recur.

(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 payments made for restructuring programs.

(g)

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.

(h)

Adjustment includes various miscellaneous non-recurring items, such as eliminations of payments made on acquired liabilities.

(i)

Adjusted EBITDA derived from non-GAAP reconciliations included elsewhere in this press release.

 

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