APi Group Reports Third Quarter and Nine Month 2021 Financial Results

Net revenues increased on an organic basis by 13% in the third quarter, excluding Industrial Services

Reported and adjusted gross margin expansion of 90 and 34 basis points, respectively, for the third quarter

Acquisition of Chubb fire and security business on track 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 nine months ended September 30, 2021.

Third Quarter 2021 Highlights:

• Reported net revenues increased by 9.3% or $89 million to $1.0 billion compared to $958 million in the prior year period, driven by strong growth in Safety and Specialty Services and revenue from acquisitions completed in the prior twelve months in Safety Services, partially offset by the anticipated decline in Industrial Services

• Adjusted net revenues increased by 9.9% or $94 million to $1.0 billion, compared to $953 million in the prior year period, driven by strong growth in Safety and Specialty Services, partially offset by the anticipated decline in Industrial Services
• Net revenues increased on an organic basis by 13.4% compared to the prior year period, excluding Industrial Services
• Reported gross margin was 24.1%, representing a 90 basis point increase compared to prior year period gross margin of 23.2%, driven by a decrease in amortization expense, outsized growth in the higher margin Safety Services segment and an improved mix of inspection and service revenue, partially offset by expected supply chain disruptions and modest inflation causing downward pressure on margins

• Adjusted gross margin was 24.3%, representing a 34 basis point increase compared to prior year period adjusted gross margin of 23.9%, driven by outsized growth in the higher margin Safety Services segment and an improved mix of inspection and service revenue, partially offset by expected supply chain disruptions and modest inflation causing downward pressure on margins
• Reported net income was $19 million, representing a decline of $8 million from prior year period net income of $27 million. Reported net income was $0.08 per diluted share
• Adjusted net income was $72 million and adjusted diluted EPS was $0.35, representing a $0.01 decline from prior year period primarily due to the increased number of shares to 210 million from 178 million in the prior year period
• Reported EBITDA was $96 million, a decline of $24 million from prior year period EBITDA of $120 million primarily due to an increase in acquisition related expenses, costs related to business process transformation and a favorable adjustment related to impairment expense that was recorded in the prior year period, partially offset by an improved mix of inspection and service revenue
• Adjusted EBITDA was $125 million with an adjusted EBITDA margin of 11.9%, relatively consistent with prior year period adjusted EBITDA margin of 12.1%, driven by outsized growth in the higher margin Safety Services segment and an improved mix of inspection and service revenue, more than offset by expected supply chain disruptions and modest inflation causing downward pressure on margins and less contribution from joint ventures in Specialty Services than the prior year period

Nine Months 2021 Highlights:

• Reported net revenues increased by 4.5% or $123 million to $2.8 billion compared to $2.7 billion in the prior year period, primarily driven by general market recoveries in Safety and Specialty Services and revenue from acquisitions completed in the prior twelve months 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 7.9% or $206 million to $2.8 billion, compared to $2.6 billion in the prior year period, primarily driven by general market recoveries in Safety and Specialty Services, partially offset by the delay and suspension of certain projects in Industrial Services
• Net revenues increased on an organic basis by 12.0% compared to the prior year period, excluding Industrial Services
• Reported gross margin was 23.5%, representing a 289 basis point increase compared to prior year period gross margin of 20.6%, driven by a decrease in amortization expense, outsized growth in the higher margin Safety Services segment, improved mix of inspection and service revenue and the divestiture of two businesses in Industrial Services, partially offset by expected supply chain disruptions and modest inflation causing downward pressure on margins
• Adjusted gross margin was 23.7%, representing a 50 basis point increase compared to prior year period adjusted gross margin of 23.2%, driven by outsized growth in the higher margin Safety Services segment and an improved mix of inspection and service revenue, partially offset by expected supply chain disruptions and modest inflation causing downward pressure on margins
• Reported net income was $32 million, representing a $163 million increase from prior year period net loss of $131 million, primarily due to the impairment charge of $197 million recorded in the prior year period. Reported net income was $0.14 per diluted share
• Adjusted net income was $152 million and adjusted diluted EPS was $0.74, representing a $0.05 decline from prior year period primarily due to the increased number of shares to 205 million from 176 million in the prior year period
• Reported EBITDA was $243 million, a $172 million increase from prior year period EBITDA of $71 million, primarily due to the impairment charge of $197 recorded in the prior year period and an improved mix of inspection and service revenue, partially offset by an increase in acquisition related expenses and costs related to business process transformation
• Adjusted EBITDA was $292 million with an adjusted EBITDA margin of 10.3%, representing a 28 basis point decline compared to prior year period adjusted EBITDA margin of 10.6%, driven by outsized growth in the higher margin Safety Services segment and an improved mix of inspection and service revenue, more than offset by expected supply chain disruptions and modest 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: “I am pleased with our continued ability to execute this year and in the third quarter. Net revenues increased on an organic basis by 13.4% in the third quarter compared to the prior year period, excluding Industrial Services, led by strong growth in our core Safety and Specialty Services segments. While supply chain disruptions and modest inflation caused some downward pressure on margins as expected, our proactive approach to mitigating the impact through measures such as pricing, combined with our disciplined approach to project and customer selection and the strength of our recurring revenue, services-focused business model yielded results.

As we look to the future, we believe the company is well-positioned to achieve our long-term goals. Our backlog is at an all-time high and we have seen increases across all three of our segments relative to prior year levels. Backlog is up more than 20% for our Safety and Specialty Services segments. We continue to see strong demand across our key end markets such as data centers, fulfillment and distribution centers, healthcare and high-tech.

We remain focused on achieving continued success within our existing core businesses and are also spending a considerable amount of time planning for the opportunities 2022 and beyond will bring. Since announcing the acquisition of the Chubb fire and security business on July 27^th, which remains on track to close around year-end, the level of excitement from our international customers and our teams about the long-term opportunities the combined platform will bring has continued to validate our belief in the combination. We intend to leverage the best practices of both organizations across all aspects of the business and look forward to creating an environment in which the combined 26,000 team members can continue to grow and flourish.”

APi Co-Chair James E. Lillie added: “We believe that the Company is operating well in this environment despite situational supply chain disruptions and sporadic inflationary cost pressure on materials. Our cost focused culture continues to concentrate on minimizing the effects of these disruptions while delivering desired outcomes for our diversified customer base. We believe these disruptions may continue into next year but the short-term nature and small average size of less than $100,000 of our projects are competitive advantages which allow us to stay focused on real-time pricing and operational efficiency to ensure true costs are reflected in projects we take on.

It is very gratifying to see strong underlying demand for our services as reflected in our organic revenue growth in our core business segments and the elevated year-over-year backlog across our segments. We believe this has given us healthy momentum in the third quarter and provides us continued momentum as we move into the fourth quarter and plan for 2022 and the acquisition and integration of the Chubb fire and security business.”

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, November 10, 2021. Participants on the call will include Russ Becker, President and Chief Executive Officer; Kevin 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 877-876-9173 or 785-424-1667 and provide Conference ID 8464719. 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/3470149/364668B15CBB5E2E951B2CEBECD607EF

A replay of the call will be available shortly after completion of the live call/webcast via telephone at 800-938-0997 or 402-220-1541 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) the impact of the Company’s backlog and continued demand on future results; (iii) the expected benefits of the acquisition of the Chubb fire and security business, including the global expansion of the Company’s business, the long-term opportunities for and anticipated synergies of the combined platform, and the anticipated timing for closing of the acquisition; (iv) the Company’s ability to successfully manage supply chain disruptions and inflationary cost pressures through its cost focused culture and business strategies; 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 the Chubb fire and security business; (iii) failure to realize the anticipated benefits of the acquisition of the Chubb fire and security business; (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 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.

Organic change in net revenues

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