-Net revenues, excluding Industrial Services,
increased on an organic basis by 21% in the second quarter-
-Adjusted earnings per share in the second
quarter of $0.31-
-Acquisition of Chubb fire and security
business expected to close around year-end 2021-
APi Group Corporation (NYSE: APG) (“APG”, “APi” or the
“Company”) today reported its financial results for the three and
six months ended June 30, 2021.
Second Quarter 2021
Highlights:
- Reported net revenues increased by 10.0% or $89 million to $978
million compared to $889 million in the prior year period,
primarily driven by general market recoveries in Safety and
Specialty Services and revenue from acquisitions completed in the
second half of 2020 in Safety Services, partially offset by the
divestiture of two businesses in Industrial Services and the delay
and suspension of certain projects in Industrial Services
- Adjusted net revenues increased by 15.2% or $129 million to
$978 million, compared to $849 million in the prior year period,
primarily driven by general market recoveries in Safety and
Specialty Services, offset by the delay and suspension of certain
projects in Industrial Services
- Net revenues, excluding Industrial Services, increased on an
organic basis by 21.1% compared to the prior year period
- Reported gross margin was 23.7%, representing a 415 basis point
increase compared to prior year gross margin of 19.6%, driven by a
decrease in amortization expense, improved mix in Safety Services
and the divestiture of two businesses in Industrial Services,
partially offset by supply chain disruptions and inflation causing
downward pressure on margins
- Adjusted gross margin was 24.2%, representing a 27 basis point
decrease compared to prior year adjusted gross margin of 24.5%,
driven by supply chain disruptions and inflation causing downward
pressure on margins, partially offset by improved mix in Safety
Services
- Reported operating income was $47 million, an improvement of
$20 million from prior year operating income of $27 million
- Reported net income was $21 million, a $15 million decline from
prior year net income of $36 million, reflecting a non-cash $9
million loss on the extinguishment of debt and income tax expense
of $9 million compared to an income tax benefit of $12 million in
the prior year period. Reported net income was $0.09 per diluted
share
- Adjusted net income was $63 million and adjusted diluted EPS
was $0.31, representing a $0.03 decline from prior year primarily
due to the increased number of shares to 206 million from 174
million in the prior year period
- Adjusted EBITDA was $106 million or 10.8%, representing a 106
basis point decline compared to prior year adjusted EBITDA margin
of 11.9%, driven by supply chain disruptions and inflation causing
downward pressure on margins and less contribution from joint
ventures in Specialty Services than the prior year period
First Half 2021
Highlights:
- Reported net revenues increased by 1.9% or $34 million to $1.8
billion compared to $1.7 billion in the prior year period,
primarily driven by general market recoveries in Safety and
Specialty Services and revenue from acquisitions completed in the
second half of 2020 in Safety Services, partially offset by the
divestiture of two businesses in Industrial Services and the delay
and suspension of certain projects in Industrial Services
- Adjusted net revenues increased by 6.7% or $112 million to $1.8
billion, compared to $1.7 billion in the prior year period,
primarily driven by general market recoveries in Safety and
Specialty Services, offset by the delay and suspension of certain
projects in Industrial Services
- Net revenues, excluding Industrial Services, increased on an
organic basis by 11.7% compared to the prior year period
- Reported gross margin was 23.2%, representing a 396 basis point
increase compared to prior year gross margin of 19.2%, driven by a
decrease in amortization expense, improved mix in Safety Services
and the divestiture of two businesses in Industrial Services,
partially offset by supply chain disruptions and inflation causing
downward pressure on margins
- Adjusted gross margin was 23.7%, representing a 27 basis point
increase compared to prior year gross margin of 23.4%, driven by
improved mix in Safety Services, partially offset by supply chain
disruptions and inflation causing downward pressure on margins
- Reported operating income was $45 million, a $252 million
increase from prior year operating loss of $207 million, primarily
due to the impairment charge of $208 recorded in the prior year
period
- Reported net income was $13 million, a $171 million increase
from prior year net loss of $158 million, primarily due to the
impairment charge of $208 million recorded in the prior year
period. Reported net income was $0.06 per diluted share
- Adjusted net income was $87 million and adjusted diluted EPS
was $0.43, representing a $0.06 decline from prior year due to the
increased number of shares to 203 million from 174 million in the
prior year period
- Adjusted EBITDA was $167 million or 9.4%, representing a 39
basis point decline compared to prior year adjusted EBITDA margin
of 9.8%, driven by supply chain disruptions and inflation causing
downward pressure on margins and less contribution from joint
ventures in Specialty Services than the prior year period
Russ Becker, APi’s President and Chief Executive Officer stated:
“We are encouraged by the progress towards recovery since the
height of the pandemic at this time last year. As we have discussed
throughout the quarter, COVID-19 continues to impact our business
despite our team’s agility as we manage the rise in the number of
COVID-19 cases, coupled with supply chain disruptions and
inflation. These supply chain issues impact our work and the work
of others on certain projects and ultimately have an effect on our
efficiency, causing downward pressure on margins. We expect these
negative variables will be with us through the balance of the year,
however we do not believe they limit us in achieving our long-term
goals. I am incredibly grateful for the leaders across our
organization who remain dedicated to meeting robust demand across
our key end markets.
The acquisition of Chubb fire and security business, which we
anticipate will close around year end, will elevate APi to the
world’s leading life safety services provider and create growth
opportunities for our leaders, and accelerated earnings growth for
our shareholders. Similar to APi, Chubb is a people-centered
business. We look forward to welcoming Chubb’s 13,000 employees to
our family of businesses and supporting their development as
leaders, as the business shifts from a non-core asset to a
paramount strategic priority within APi. We believe our combined
leadership team will drive towards maximizing business performance
and capitalizing on future cross-selling opportunities. We believe
there is significant future value creation opportunity as we
combine our two organizations and realize revenue as well as cost
synergies.”
APi Co-Chair James E. Lillie added: “Our progress this year is
meaningful and we are even more excited by the long-term future of
APi following the strategic Chubb transaction. While COVID-19
continues to impact our business, as well as those of our customers
and suppliers, we remain confident in our ability to execute on our
long-term goals for the business.
We believe Chubb is a sleeping giant and will be a core asset
for us that we plan to invest behind in the years to come. We
believe the transaction will be highly accretive with compelling
synergies, complement revenue growth through cross-selling certain
products and services and provide meaningful opportunity for margin
expansion. Importantly, we estimate that 50%+ of our revenue will
be service-based, statutorily-required, recurring revenue.
Our near-term focus will be on closing the transaction and then
deleveraging through our asset-light, high free cash flow
conversion operating model, while continuing to invest in our
leaders and business process improvements. We expect to be at a pro
forma net leverage ratio of around 4.25x at closing with the goal
of returning to below 3.0x net leverage expeditiously.”
Conference Call
APi will hold a webcast/dial-in conference call to discuss its
financial results at 8:30 a.m. (Eastern Time) on Wednesday, August
11, 2021. Participants on the call will include Russ Becker,
President and Chief Executive Officer; Tom Lydon, Chief Financial
Officer; and James E. Lillie and Sir Martin E. Franklin,
Co-Chairs.
To listen to the call by telephone, please dial 877-876-9173 or
785-424-1667 and provide Conference ID 6548827. 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/3303564/F831B4F02051AA0AF54667BF99578379
A replay of the call will be available shortly after completion
of the live call/webcast via telephone at 800-839-5127 or
402-220-2692 or via the webcast link above.
About APi:
APi is a market-leading business services provider of safety,
specialty and industrial services in over 200 locations in North
America and Europe. 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
Certain statements in this announcement are forward-looking
statements which 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, including expectations regarding: (i) the
Company’s long-term targets, goals and strategies; (ii) certain
expected future financial results of the Company; (iii) the
expected benefits of the acquisition of Chubb, including the
creation of growth opportunities for the Company’s leaders, the
acceleration of earnings for the Company’s stockholders, the global
expansion of the Company’s business, cross-selling and cost synergy
opportunities, and organic growth and margin expansion
opportunities; (iv) the Company’s intention to invest in Chubb and
make it a core asset of the Company; and (v) the impacts of the
COVID-19 pandemic on the future operating and financial performance
of the Company and its customers, the Company’s plans and
strategies to adapt and respond to the pandemic and the expected
impact of those plans and strategies. 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 and other risks that may affect the
Company’s future performance, including the impacts of the COVID-19
pandemic 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) the inability of the Company to successfully or
timely consummate the acquisition of Chubb; (iii) failure to
realize the anticipated benefits of the acquisition of Chubb; (iv)
changes in applicable laws or regulations; (v) the possibility that
the Company may be adversely affected by other economic, business,
and/or competitive factors; and (vi) other risks and uncertainties.
Given these risks and uncertainties, prospective investors are
cautioned not to place undue reliance on forward-looking
statements. Forward-looking statements speak only as of the date of
such statements 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 otherwise.
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. Specifically:
•
The Company’s management believes that
adjusted net revenues, 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, share-based compensation, transaction and other
costs related to acquisitions, amortization of intangible assets
and depreciation remeasurements associated with acquisitions, net
COVID-19 relief, 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.
•
Adjusted net revenues is defined as net
revenues excluding the impact and results of businesses classified
as assets held-for-sale and businesses divested. The Company’s
management believes that this measure is useful as a supplement to
enable investors to compare period-over-period results on a more
consistent basis without the effects of businesses classified as
assets held-for-sale and businesses divested, which more
meaningfully reflects the Company’s core ongoing operations and
performance. The Company uses adjusted net revenues 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.
•
The Company also presents organic changes
in net revenues on a consolidated basis, segment specific basis, or
on a consolidated basis excluding certain segments, 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 the prior year average
monthly exchange rates (excluding acquisitions and divestitures).
The remainder is divided by the prior year net revenues, excluding
the impacts of material acquisitions and completed divestitures.
This press release also includes net revenues excluding Industrial
Services on an organic basis in order to provide a more complete
understanding for investors of the financial results of our two
most significant segments for which organic growth is a key
metric.
•
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 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 adjusted 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, impacts of
businesses classified as assets held-for-sale and businesses
divested, and one-time and other events such as 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 does not provide reconciliations of forward-looking
non-U.S. GAAP adjusted net revenues and adjusted EBITDA guidance 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, amortization of intangible assets, net COVID-19
relief, and certain tax benefits from the APi Acquisition, and
other charges reflected in our reconciliation of historic numbers,
the amount of which, based on historical experience, could be
significant.
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.
APi Group Corporation
Condensed Consolidated Statements
of Operations (GAAP)
(Amounts in millions, except per
share data)
(Unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Net revenues
$
978
$
889
$
1,781
$
1,747
Cost of revenues
746
715
1,368
1,411
Gross profit
232
174
413
336
Selling, general and administrative
expenses
185
147
368
335
Impairment of goodwill and intangible
assets
-
-
-
208
Operating income (loss)
47
27
45
(207
)
Interest expense, net
14
14
29
28
Loss on extinguishment of debt
9
-
9
-
Investment income and other, net
(6
)
(11
)
(9
)
(14
)
Other expense, net
17
3
29
14
Income (loss) before income taxes
30
24
16
(221
)
Income tax provision (benefit)
9
(12
)
3
(63
)
Net income (loss)
$
21
$
36
$
13
$
(158
)
Net income (loss) per common
share
Basic
$
0.09
$
0.18
$
0.06
$
(0.93
)
Diluted
0.09
0.17
0.06
(0.93
)
Weighted average shares
outstanding
Basic
201
169
197
170
Diluted
206
176
202
170
APi Group Corporation
Condensed Consolidated Balance
Sheets (GAAP)
(Amounts in millions)
(Unaudited)
June 30, 2021
December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
686
$
515
Accounts receivable, net
664
639
Inventories
69
64
Contract assets
184
142
Prepaid expenses and other current
assets
82
77
Total current assets
1,685
1,437
Property and equipment, net
348
355
Operating lease right of use assets
105
107
Goodwill
1,079
1,082
Intangible assets, net
912
965
Deferred tax assets
87
89
Other assets
27
30
Total assets
$
4,243
$
4,065
Liabilities and Shareholders'
Equity
Current liabilities:
Short-term and current portion of
long-term debt
$
13
$
18
Accounts payable
180
150
Accrued liabilities
276
356
Deferred consideration
-
67
Contract liabilities
232
219
Operating and finance leases
29
31
Total current liabilities
730
841
Long-term debt, less current portion
1,457
1,397
Deferred tax liabilities
46
45
Operating and finance leases
81
96
Other noncurrent liabilities
101
128
Total liabilities
2,415
2,507
Total shareholders' equity
1,828
1,558
Total liabilities and shareholders'
equity
$
4,243
$
4,065
APi Group Corporation
Condensed Consolidated Statements
of Cash Flows (GAAP)
(Amounts in millions)
(Unaudited)
For the Six Months Ended June
30,
2021
2020
Cash flows from operating activities:
Net income (loss)
$
13
$
(158
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
102
144
Impairment of goodwill and intangible
assets
-
208
Deferred taxes
(1
)
(50
)
Share-based compensation expense
6
2
Profit-sharing expense
7
6
Non-cash lease expense
16
14
Loss on extinguishment of debt
9
-
Other, net
4
2
Changes in operating assets and
liabilities, net of effects of business acquisitions
(137
)
64
Net cash provided by operating
activities
19
232
Cash flows from investing activities:
Acquisitions, net of cash acquired
(12
)
(5
)
Purchases of property and equipment
(34
)
(17
)
Proceeds from disposals of property,
equipment and held for sale assets and businesses
11
6
Net cash used in investing
activities
(35
)
(16
)
Cash flows from financing activities:
Proceeds from long-term borrowings
350
1
Payments on long-term borrowings
(318
)
(11
)
Payments of debt issuance costs
(4
)
-
Proceeds from warrant exercises
230
-
Payments of acquisition-related
consideration
(70
)
(86
)
Restricted shares tendered for taxes
(1
)
-
Net cash provided by (used in)
financing activities
187
(96
)
Effect of foreign currency exchange rate
on cash and cash equivalents
3
1
Net increase in cash and cash
equivalents
174
121
Cash, cash equivalents, and restricted
cash, beginning of period
515
256
Cash, cash equivalents, and restricted
cash, end of period
$
689
$
377
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
Net revenues and adjusted net
revenues (non-GAAP)
Organic change in net revenues
(non-GAAP)
(Amounts in millions)
(Unaudited)
Adjusted net revenues
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Net revenues (as reported)
$
978
$
889
$
1,781
$
1,747
Adjustments to reconcile net revenues to
adjusted net revenues:
Divested businesses
(a)
-
(40
)
-
(78
)
Adjusted net revenues
$
978
$
849
$
1,781
$
1,669
Organic change in net revenues
For the Three Months Ended
June 30, 2021
Net revenues
change
Acquisitions and
Foreign currency
Organic change in
(as reported)
divestitures, net (b)
translation (c)
net revenues (d)
Safety Services
38.0 %
13.2 %
(1.6) %
26.4 %
Specialty Services
18.9 %
-
-
18.9 %
Industrial Services
(60.7) %
(10.3) %
(0.8) %
(49.6) %
Consolidated
10.0 %
0.8 %
(0.8) %
10.0 %
Consolidated, excluding Industrial
Services
27.1 %
6.8 %
(0.8) %
21.1 %
For the Six Months Ended June
30, 2021
Net revenues
change
Acquisitions and
Foreign currency
Organic change in
(as reported)
divestitures, net (b)
translation (c)
net revenues (d)
Safety Services
23.0 %
11.5 %
(1.1) %
12.6 %
Specialty Services
13.4 %
-
-
13.4 %
Industrial Services
(70.0) %
(9.3) %
(0.4) %
(60.3) %
Consolidated
1.9 %
0.8 %
(0.6) %
1.7 %
Consolidated, excluding Industrial
Services
17.5 %
6.4 %
(0.6) %
11.7 %
Notes:
(a)
Adjustment to reflect the elimination of
amounts related to businesses divested and classified as
held-for-sale.
(b)
Adjustments 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, 2021.
(c)
Represents the effect of foreign currency
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 the prior year average
monthly exchange rates (excluding acquisitions and
divestitures).
(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
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Gross profit (as reported)
$
232
$
174
$
413
$
336
Adjustments to reconcile gross profit to
adjusted gross profit:
Divested businesses
(a)
-
(1
)
-
(1
)
Backlog amortization
(b)
2
23
3
45
Depreciation remeasurement
(c)
3
12
6
11
Adjusted gross profit
$
237
$
208
$
422
$
391
Adjusted net revenues
(d)
$
978
$
849
$
1,781
$
1,669
Adjusted gross margin
24.2
%
24.5
%
23.7
%
23.4
%
Adjusted SG&A
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Selling, general and administrative
expenses ("SG&A") (as reported)
$
185
$
147
$
368
$
335
Adjustments to reconcile SG&A to
adjusted SG&A:
Divested businesses
(a)
(1
)
(1
)
(1
)
(2
)
Contingent consideration and
compensation
(e)
6
10
4
3
Amortization of intangible assets
(f)
(30
)
(28
)
(60
)
(58
)
Depreciation remeasurement
(c)
(2
)
3
(3
)
(1
)
Business process transformation costs
(g)
(8
)
(2
)
(14
)
(4
)
Public company registration, listing and
compliance
(h)
-
(1
)
-
(5
)
Acquisition expenses
(i)
-
-
(3
)
-
COVID-19 severance costs at Canadian
subsidiaries
(j)
$
-
(1
)
-
(1
)
Adjusted SG&A expenses
$
150
$
127
$
291
$
267
Adjusted net revenues
(d)
$
978
$
849
$
1,781
$
1,669
Adjusted SG&A as a percentage of
adjusted net revenues
15.3
%
15.0
%
16.3
%
16.0
%
Notes:
(a)
Adjustment to reflect the elimination of
amounts related to businesses divested and classified as
held-for-sale.
(b)
Adjustment to reflect the addback of
amortization expense related to backlog intangible assets.
(c)
Adjustment to reflect annualized
depreciation expense of $60 million, which is approximately
equivalent to medium to long-term cash capital expenditures, and
excludes a portion of depreciation arising from purchase accounting
step up to fair value of property and equipment.
(d)
Adjusted net revenues derived from
non-GAAP reconciliations included elsewhere in this press
release.
(e)
Adjustment to reflect the elimination of
the expense, or reversal of previously recorded expense,
attributable to deferred consideration to prior owners of acquired
businesses not expected to continue or recur.
(f)
Adjustment to reflect the addback of
amortization expense.
(g)
Adjustment to reflect the elimination of
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.
(h)
Adjustment to reflect the elimination of
costs relating to public company registration, listing and
compliance.
(i)
Adjustment to reflect the elimination of
potential and completed acquisition-related expenses.
(j)
Adjustment to reflect the elimination of
severance costs in Canada related to COVID-19.
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
EBITDA and adjusted EBITDA
(non-GAAP)
(Amounts in millions)
(Unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Net income (loss) (as reported)
$
21
$
36
$
13
$
(158
)
Adjustments to reconcile net income (loss)
to EBITDA:
Interest expense, net
14
14
29
28
Income tax provision (benefit)
9
(12
)
3
(63
)
Depreciation and amortization
52
74
102
144
EBITDA
$
96
$
112
$
147
$
(49
)
Adjustments to reconcile EBITDA to
adjusted EBITDA:
Divested businesses
(a)
(1
)
(1
)
(1
)
6
Contingent consideration and
compensation
(b)
(6
)
(10
)
(4
)
(3
)
Impairment of goodwill and intangible
assets
(c)
-
-
-
203
Business process transformation costs
(d)
8
2
14
4
Public company registration, listing and
compliance
(e)
-
1
-
5
Acquisition expenses
(f)
-
-
4
-
COVID-19 relief at Canadian subsidiaries,
net
(g)
-
(3
)
(2
)
(3
)
Loss on extinguishment of debt
(h)
9
-
9
-
Adjusted EBITDA
$
106
$
101
$
167
$
163
Adjusted net revenues
(i)
$
978
$
849
$
1,781
$
1,669
Adjusted EBITDA as a percentage of
adjusted net revenues
10.8
%
11.9
%
9.4
%
9.8
%
Notes:
(a)
Adjustment to reflect the elimination of
amounts related to businesses divested and classified as
held-for-sale, inclusive of impairment charges and gain/(loss) on
sale.
(b)
Adjustment to reflect the elimination of
the expense, or reversal of previously recorded 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-cash impairment charges related to goodwill and intangible
assets.
(d)
Adjustment to reflect the elimination of
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
costs relating to public company registration, listing and
compliance.
(f)
Adjustment to reflect the elimination of
potential and completed acquisition-related expenses.
(g)
Adjustment to reflect the elimination of
miscellaneous income in Canada related to COVID-19 relief, net of
severance costs.
(h)
Adjustment to reflect the elimination of
loss on extinguishment of debt resulting from early repayments of
long-term debt.
(i)
Adjusted net revenues derived from
non-GAAP reconciliations included elsewhere in this press
release.
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)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Income (loss) before income tax provision
(as reported)
$
30
$
24
$
16
$
(221
)
Adjustments to reconcile income (loss)
before income tax provision to adjusted income before income tax
provision:
Divested businesses
(a)
(1
)
-
(1
)
6
Amortization of intangible assets
(b)
32
51
63
103
Depreciation remeasurement
(c)
5
9
9
12
Contingent consideration and
compensation
(d)
(6
)
(10
)
(4
)
(3
)
Impairment of goodwill and intangible
assets
(e)
-
-
-
203
Business process transformation costs
(f)
8
2
14
4
Public company registration, listing and
compliance
(g)
-
1
-
5
Acquisition expenses
(h)
-
-
4
-
COVID-19 relief at Canadian subsidiaries,
net
(i)
-
(3
)
(2
)
(3
)
Loss on extinguishment of debt
(j)
9
-
9
-
Adjusted income before income tax
provision (benefit)
$
77
$
74
$
108
$
106
Income tax provision (benefit) (as
reported)
$
9
$
(12
)
$
3
$
(63
)
Adjustments to reconcile income tax
provision (benefit) to adjusted income tax provision:
Income tax provision adjustment
(k)
5
27
18
84
Adjusted income tax provision
$
14
$
15
$
21
$
21
Adjusted income before income tax
provision
$
77
$
74
$
108
$
106
Adjusted income tax provision
14
15
21
21
Adjusted net income
$
63
$
59
$
87
$
85
Diluted weighted average shares
outstanding (as reported)
206
176
202
170
Adjustments to reconcile diluted weighted
average shares outstanding to adjusted diluted weighted average
shares outstanding:
Dilutive impact of Preferred Shares
(l)
-
(2
)
1
4
Adjusted diluted weighted average shares
outstanding
206
174
203
174
Adjusted diluted EPS
$
0.31
$
0.34
$
0.43
$
0.49
Notes:
(a)
Adjustment to reflect the elimination of
amounts related to businesses divested and classified as
held-for-sale, inclusive of impairment charges and gain/(loss) on
sale.
(b)
Adjustment to reflect the addback of
pre-tax amortization expense related to intangible assets.
(c)
Adjustment to reflect annualized
depreciation expense of $60 million, which is approximately
equivalent to medium to long-term cash capital expenditures, and
excludes a portion of depreciation arising from purchase accounting
step up to fair value of property and equipment.
(d)
Adjustment to reflect the elimination of
the expense, or reversal of previously recorded expense,
attributable to deferred consideration to prior owners of acquired
businesses not expected to continue or recur.
(e)
Adjustment to reflect the elimination of
non-cash impairment charges related to goodwill and intangible
assets.
(f)
Adjustment to reflect the elimination of
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
costs relating to public company registration, listing and
compliance.
(h)
Adjustment to reflect the elimination of
potential and completed acquisition-related expenses.
(i)
Adjustment to reflect the elimination of
miscellaneous income in Canada related to COVID-19 relief, net of
severance costs.
(j)
Adjustment to reflect the elimination of
loss on extinguishment of debt resulting from early repayments of
long-term debt.
(k)
Adjustment to reflect an adjusted
effective cash tax rate of 20% for the six months ended June 30,
2021 and 20% for the three and six months ended June 30, 2020
(taking into consideration the tax benefits associated with the
realization of accelerated depreciation attributable to the
approximately $350 million tax asset acquired with the APi
Acquisition) applied to resulting adjusted pre-tax income inclusive
of the adjustments shown above. The adjustment for the three months
ended June 30, 2021 is the amount required to adjust the six-month
period to 20%.
(l)
Adjustment for the three and six months
ended June 30, 2021 and 2020 reflects addition of the GAAP dilutive
impact of 4 million shares associated with the deemed conversion of
Preferred Shares. Adjustment for the three and six months ended
June 30, 2021 is offset by the elimination of 4 million and 3
million shares, respectively, to reflect 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, 2021. Adjustment for the three months ended
June 30, 2020 is offset by the elimination of 6 million shares
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, 2020.
APi Group Corporation
Adjusted Segment Financial
Information (non-GAAP)
(Amounts in millions)
(Unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021 (a)
2020 (a)
2021 (a)
2020 (a)
Safety Services
Adjusted net revenues
$
512
$
371
$
978
$
795
Adjusted gross profit
163
118
310
247
Adjusted EBITDA
75
47
138
100
Adjusted gross margin
31.8
%
31.8
%
31.7
%
31.1
%
Adjusted EBITDA as a percentage of
adjusted net revenues
14.6
%
12.7
%
14.1
%
12.6
%
Specialty Services
Adjusted net revenues
$
415
$
349
$
736
$
649
Adjusted gross profit
71
66
112
104
Adjusted EBITDA
48
51
70
69
Adjusted gross margin
17.1
%
18.9
%
15.2
%
16.0
%
Adjusted EBITDA as a percentage of
adjusted net revenues
11.6
%
14.6
%
9.5
%
10.6
%
Industrial Services
Adjusted net revenues
$
68
$
133
$
93
$
232
Adjusted gross profit
3
24
-
40
Adjusted EBITDA
2
20
(4
)
31
Adjusted gross margin
4.4
%
18.0
%
-
17.2
%
Adjusted EBITDA as a percentage of
adjusted net revenues
2.9
%
15.0
%
(4.3
) %
13.4
%
Total adjusted net revenues before
corporate and eliminations
(b)
$
995
$
853
$
1,807
$
1,676
Total adjusted EBITDA before corporate and
eliminations
(b)
125
118
204
200
Adjusted EBITDA as a percentage of
adjusted net revenues before corporate and eliminations
(b)
12.6
%
13.8
%
11.3
%
11.9
%
Corporate and Eliminations
Adjusted net revenues
$
(17
)
$
(4
)
$
(26
)
$
(7
)
Adjusted EBITDA
(19
)
(17
)
(37
)
(37
)
Total Consolidated
Adjusted net revenues
$
978
$
849
$
1,781
$
1,669
Adjusted gross profit
237
208
422
391
Adjusted EBITDA
106
101
167
163
Adjusted gross margin
24.2
%
24.5
%
23.7
%
23.4
%
Adjusted EBITDA as a percentage of
adjusted net revenues
10.8
%
11.9
%
9.4
%
9.8
%
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)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Safety Services
Safety Services EBITDA
$
73
$
49
$
138
$
67
Adjustments to reconcile EBITDA to
adjusted EBITDA:
Contingent consideration and
compensation
(a)
1
1
1
2
Impairment of goodwill and intangible
assets
(b)
-
-
-
34
Business process transformation
(e)
1
-
1
-
COVID-19 relief at Canadian subsidiaries,
net
(c)
-
(3
)
(2
)
(3
)
Safety Services adjusted EBITDA
$
75
$
47
$
138
$
100
Specialty Services
Specialty Services EBITDA
$
55
$
62
$
75
$
(46
)
Adjustments to reconcile EBITDA to
adjusted EBITDA:
Contingent consideration and
compensation
(a)
(7
)
(11
)
(5
)
(5
)
Impairment of goodwill and intangible
assets
(b)
-
-
-
120
Specialty Services adjusted EBITDA
$
48
$
51
$
70
$
69
Industrial Services
Industrial Services EBITDA
$
3
$
21
$
(3
)
$
(24
)
Adjustments to reconcile EBITDA to
adjusted EBITDA:
Divested businesses
(d)
(1
)
(1
)
(1
)
6
Impairment of goodwill and intangible
assets
(b)
-
-
-
49
Industrial Services adjusted EBITDA
$
2
$
20
$
(4
)
$
31
Corporate and Eliminations
Corporate and eliminations EBITDA
$
(35
)
$
(20
)
$
(63
)
$
(46
)
Adjustments to reconcile EBITDA to
adjusted EBITDA:
Business process transformation
(e)
7
2
13
4
Public company registration, listing and
compliance
(f)
-
1
-
5
Acquisition expenses
(g)
-
-
4
-
Loss on extinguishment of debt
(h)
9
-
9
-
Corporate and Eliminations adjusted
EBITDA
$
(19
)
$
(17
)
$
(37
)
$
(37
)
Notes:
(a)
Adjustment to reflect the elimination of
the expense, or reversal of previously recorded 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-cash impairment charges related to goodwill and intangible
assets.
(c)
Adjustment to reflect the elimination of
miscellaneous income in Canada related to COVID-19 relief, net of
severance costs.
(d)
Adjustment to reflect the elimination of
amounts related to businesses divested and classified as
held-for-sale, inclusive of impairment charges and gain/(loss) on
sale.
(e)
Adjustment to reflect the elimination of
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
costs relating to public company registration, listing and
compliance.
(g)
Adjustment to reflect the elimination of
potential and completed acquisition-related expenses.
(h)
Adjustment to reflect the elimination of
loss on extinguishment of debt resulting from early repayments of
long-term debt.
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
Adjusted Segment Financial
Information (non-GAAP)
(Amounts in millions)
(Unaudited)
For the Three Months Ended
June 30, 2021
For the Three Months Ended
June 30, 2020
As Reported
Adjustments
As Adjusted
As Reported
Adjustments
As Adjusted
Safety Services
Net revenues
$
512
$
-
$
512
$
371
$
-
$
371
Cost of revenues
350
(1
)
(a)
349
263
(11
)
(a)
253
1
(b)
Gross profit
$
162
$
1
$
163
$
108
$
10
$
118
Gross margin
31.6
%
31.8
%
29.1
%
31.8
%
Specialty Services
Net revenues
$
415
$
-
$
415
$
349
$
-
$
349
Cost of revenues
348
(1
)
(a)
344
301
(8
)
(a)
283
(3
)
(b)
(10
)
(b)
Gross profit
$
67
$
4
$
71
$
48
$
18
$
66
Gross margin
16.1
%
17.1
%
13.8
%
18.9
%
Industrial Services
Net revenues
$
68
$
-
$
68
$
173
$
(40
)
(c)
$
133
Cost of revenues
65
-
65
155
(39
)
(c)
109
(4
)
(a)
(3
)
(b)
Gross profit
$
3
$
-
$
3
$
18
$
6
$
24
Gross margin
4.4
%
4.4
%
10.4
%
18.0
%
Corporate and Eliminations
Net revenues
$
(17
)
$
-
$
(17
)
$
(4
)
$
-
$
(4
)
Cost of revenues
(17
)
-
(17
)
(4
)
-
(4
)
Total Consolidated
Net revenues
$
978
$
-
$
978
$
889
$
(40
)
(c)
$
849
Cost of revenues
746
(2
)
(a)
741
715
(39
)
(c)
641
(3
)
(b)
(23
)
(a)
(12
)
(b)
Gross profit
$
232
$
5
$
237
$
174
$
34
$
208
Gross margin
23.7
%
24.2
%
19.6
%
24.5
%
Notes:
(a)
Adjustment to reflect the addback of
amortization expense related to backlog intangible assets.
(b)
Adjustment to reflect annualized
depreciation expense of $60 million, which is approximately
equivalent to medium to long-term cash capital expenditures, and
excludes a portion of depreciation arising from purchase accounting
step up to fair value of property and equipment.
(c)
Adjustment to reflect the elimination of
amounts related to businesses divested and classified as
held-for-sale.
APi Group Corporation
Reconciliations of GAAP to
Non-GAAP Financial Measures
Adjusted Segment Financial
Information (non-GAAP)
(Amounts in millions)
(Unaudited)
For the Six Months Ended June
30, 2021
For Six Months Ended June 30,
2020
As Reported
Adjustments
As Adjusted
As Reported
Adjustments
As Adjusted
Safety Services
Net revenues
$
978
$
-
$
978
$
795
$
-
$
795
Cost of revenues
669
(1
)
(a)
668
569
(21
)
(a)
548
Gross profit
$
309
$
1
$
310
$
226
$
21
$
247
Gross margin
31.6
%
31.7
%
28.4
%
31.1
%
Specialty Services
Net revenues
$
736
$
-
$
736
$
649
$
-
$
649
Cost of revenues
632
(2
)
(a)
624
571
(16
)
(a)
545
(6
)
(b)
(10
)
(b)
Gross profit
$
104
$
8
$
112
$
78
$
26
$
104
Gross margin
14.1
%
15.2
%
12.0
%
16.0
%
Industrial Services
Net revenues
$
93
$
-
$
93
$
310
$
(78
)
(c)
$
232
Cost of revenues
93
-
93
278
(77
)
(c)
192
(8
)
(a)
(1
)
(a)
Gross profit
$
-
$
-
$
-
$
32
$
8
$
40
Gross margin
-
-
10.3
%
17.2
%
Corporate and Eliminations
Net revenues
$
(26
)
$
-
$
(26
)
$
(7
)
$
-
$
(7
)
Cost of revenues
(26
)
-
(26
)
(7
)
-
(7
)
Total Consolidated
Net revenues
$
1,781
$
-
$
1,781
$
1,747
$
(78
)
(c)
$
1,669
Cost of revenues
1,368
(3
)
(a)
1,359
1,411
(77
)
(c)
1,278
(6
)
(b)
(45
)
(a)
(11
)
(a)
Gross profit
$
413
$
9
$
422
$
336
$
55
$
391
Gross margin
23.2
%
23.7
%
19.2
%
23.4
%
(a)
Adjustment to reflect the addback of
amortization expense related to backlog intangible assets.
(b)
Adjustment to reflect annualized
depreciation expense of $60 million, which is approximately
equivalent to medium to long-term cash capital expenditures, and
excludes a portion of depreciation arising from purchase accounting
step up to fair value of property and equipment.
(c)
Adjustment to reflect the elimination of
amounts related to businesses divested and classified as
held-for-sale.
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)
For the Six Months Ended June
30,
2021
2020
Net cash provided by operating activities
(as reported)
$
19
$
232
Less: Purchases of property and
equipment
(34
)
(17
)
Free cash flow
$
(15
)
$
215
Add (deduct): Cash payments (sources)
related to following items:
Divested businesses
(a)
-
(4
)
Contingent consideration and
compensation
(b)
19
6
Business process transformation costs
(c)
14
4
Public company registration, listing and
compliance
(d)
-
5
Acquisition expenses
(e)
4
-
COVID-19 relief at Canadian subsidiaries,
net
(f)
(2
)
(3
)
Adjusted free cash flow
$
20
$
223
Adjusted EBITDA
(g)
$
167
$
163
Adjusted free cash flow conversion
12.0
%
136.8
%
Notes:
(a)
Adjustment to reflect the elimination of
operating cash and purchases of property and equipment related to
businesses divested and classified as held-for-sale.
(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
operating cash used for 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
operating cash used for public company registration, listing and
compliance costs.
(e)
Adjustment to reflect the elimination of
potential and completed acquisition-related costs.
(f)
Adjustment to reflect the elimination of
cash received in Canada for COVID-19 relief, net of severance costs
paid, not expected to continue or recur.
(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/20210811005425/en/
Investor Relations Inquiries: Olivia Walton Vice
President of Investor Relations Tel: +1 651-604-2773 Email:
investorrelations@apigroupinc.us
Media Contact: Liz Cohen Kekst CNC Tel: +1 212-521-4845
Email: Liz.Cohen@kekstcnc.com
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