9 Apr 2020 07:00
APi Group Reports Fourth Quarter and Full Year 2019 Financial Results
Combined 2019 net revenues of $4.1 billion
Combined 2019 adjusted EBITDA of $393 million
Combined 2019 cash provided by operating activities of $295 million
2019 combined adjusted free cash flow conversion of 90%
New Brighton, Minnesota - April 8, 2020 - APi Group Corporation (OTC:JJAQF; LSE:JTWO) ("APG" or the "Company"), today reported its financial results for the three months and year ended December 31, 2019.
The Company has classified two subsidiaries in its Industrial Services segment as assets held-for-sale as of December 31, 2019. The results presented in this announcement on an as adjusted basis include non-cash and other specifically identified adjustments in addition to excluding the impact of these two subsidiaries, which represent a combined $290 million and $229 million of net revenues in 2019 and 2018, respectively. In addition, all of the full year 2019 financial results presented in this announcement combine the results of APi Group, Inc. (the "Predecessor") for the period prior to the October 1, 2019 closing of its acquisition by the Company and the results of the Company following such acquisition (the "Successor").
Fourth Quarter 2019 Highlights:
· Reported net revenues were $985 million, compared to $992 million in the prior year period
· Adjusted net revenues grew organically by 1.0% or $9.0 million to $926 million, compared to $917 million in the prior year period
· Reported gross margin was 20.1%, representing a 208 basis point decline compared to prior year gross margin of 22.2%, primarily due to an additional $22 million in cost of revenues from the amortization of backlog intangible assets recorded in purchase accounting
· Adjusted gross margin was 23.4%, compared to 23.3% for the same period in 2018
· Reported operating loss was $138 million, a $151 million decline from prior year operating income of $13 million, which was largely impacted by transaction related and non-recurring expenses
· Adjusted EBITDA was $109 million or 11.8%, a 97 basis point increase over prior year
· Reported net loss was $150 million, a $145 million decline from prior year net loss of $5 million, which was largely impacted by transaction related and non-recurring expenses and reported net loss was $0.89 per diluted share
· Adjusted net income was $61 million, representing a $11 million increase over prior year and adjusted diluted EPS of $0.35, a $0.06 increase over prior year
Full Year 2019 Highlights:
· Combined net revenues were $4.1 billion (Predecessor $3.1 billion and Successor $985 million), an increase of $364 million or 9.8% over prior year
· Adjusted combined net revenues grew 8.7% or $303 million to $3.8 billion, compared to $3.5 billion in the prior year period with segment growth of 4.2% in Safety Services, 9.9% in Specialty Services and 10.7% in Industrial Services
· Adjusted combined net revenues grew organically by 7.7% or $272 million to $3.8 billion, compared to $3.5 billion in the prior year period with organic growth of 4.5% in Safety Services, 7.0% in Specialty Services and 10.9% in Industrial Services
· Reported combined gross margin was 19.6%, representing a 151 basis point decline compared to prior year gross margin of 21.1%, primarily due to an additional $22 million in cost of revenues from the amortization of backlog intangible assets recorded in purchase accounting
· Adjusted combined gross margin was 21.5%, compared to 22.0% in 2018, driven primarily by a decline in the Industrial Services segment
· Reported combined operating loss was $59 million, a $221 million decline from prior year operating income of $162 million, which was largely impacted by transaction related and non-recurring expenses
· Adjusted combined EBITDA was $393 million or 10.3%, a 51 basis point increase over prior year
· Reported combined net loss was $67 million, a $203 million decline from prior year net income of $136 million, which was largely impacted by transaction related and non-recurring expenses, and reported net loss was $1.15 per share
· Adjusted combined net income of $212 million, representing a $29 million increase over prior year and adjusted combined diluted EPS was $1.22, a $0.17 increase over prior year
Russ Becker, APi Group's President and Chief Executive Officer said, "Our organic revenue growth and increasing margin profile reflects the continued shift in our business towards more profitable, recurring service opportunities while maintaining a strong adjusted EBITDA margin of 10.3%."
"Facing the worldwide shock wave of COVID-19 has brought out the best in APi's culture and our leadership organization. I need and want to thank each of our employees for their sacrifices. They have put APi first. The safety, health and well-being of all our employees remains paramount, and we will continue to be proactive in taking measures that we expect to help protect our business and all of our constituencies."
APi Co-Chairman James E. Lillie added, "We continue to be encouraged by the long-term opportunities that lie ahead for the business. Since joining forces with the APi leadership team we have made progress as planned on all of the short-term milestones and objectives for the Company. The financial results for 2019 speak to the strength of APi's operating model and the team's focus on driving higher margin growth as well as our ability to generate cash and run the business with a strong balance sheet. We believe we are prepared to seize opportunities as we move through 2020 and continue to execute on our long-term goals for the business."
Conference Call
APi Group will host a webcast/dial-in conference call to discuss its 2019 financial results at 8:30 a.m. (Eastern Time) on Wednesday, April 8, 2020. Participants on the call will include Russ Becker, President and Chief Executive Officer; Tom Lydon, Chief Financial Officer; James E. Lillie and Sir Martin E. Franklin, Co-Chairmen.
To listen to the call by telephone, please dial 833-721-2905 or 929-517-9835 and provide Conference ID 2764874. 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/2253890/5C1738E2B85521CA6F22DD67A0557E64
A replay of the call will be available shortly after completion of the live call on the webcast or by telephone, 855-859-2056 or 404-537-3406.
About APi
APi Group is a market-leading business services provider of life safety, specialty and industrial services in over 200 locations, primarily in North America. APi Group provides statutorily mandated 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 https://www.apigroupinc.com/.
Investor Relations Inquiries:
Olivia Walton
Vice President of Investor Relations
+1 814-312-3981
email: investorrelations@apigroupinc.us
Media Contact:
Liz Cohen
Kekst CNC
+1 212-521-4845
Liz.Cohen@kekstcnc.com
Forward-Looking Statements and Disclaimers
This announcement does not constitute or form part of any offer or invitation to purchase, otherwise acquire, issue, subscribe for, sell or otherwise dispose of any securities, nor any solicitation of any offer to purchase, otherwise acquire, issue, subscribe for, sell, or otherwise dispose of any securities. The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions.
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 ability of the Company to meet the eligibility criteria and effect a registration under the Securities Act of its securities, a listing of its securities on the New York Stock Exchange, its domestication and the timing for such registration, listing and domestication; (ii) the Company's positioning regarding its future business plans and long-term goals; (iii) the Company's strategies for each of its segments and the opportunities in the industries the Company serves; (iv) the impact of the Company's planned divestiture of two subsidiaries in its Industrial Services segment; (v) certain expected 2020 financial results and (vi) the impacts of the COVID-19 pandemic on the future operating and financial performance of the Company, 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, and on the global economy generally; (ii) the ability to recognize the anticipated benefits of the acquisition and of the Company to take advantage of strategic opportunities; (iii) the limited liquidity and trading of the Company's securities; (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. Nothing in this announcement constitutes or should be construed as constituting a profit forecast. This announcement contains inside information as defined in article 7 of the Market Abuse Regulation (EU) No 596/2014.
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 and includes a reconciliation of these non-U.S. GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP. 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 margin, "adjusted" SG&A expense, "adjusted" operating income (loss), "adjusted" earnings per share, "adjusted" interest and "adjusted" tax rates, which exclude business transformation and other expenses for the integration of acquired businesses, the impact and results of two subsidiaries in the Company's Industrial Services segment which the Company has classified as assets held-for-sale as of December 31, 2019, and one-time and other events such as impairment charges, share-based compensation, transaction and other costs related to acquisitions, amortization of intangible assets associated with acquisitions, and certain tax benefits from 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 also presents changes in organic net revenues to provide a more complete understanding of underlying revenue trends by providing net revenues on a consistent basis as it excludes the impacts of significant acquisitions, planned or completed divestitures, and changes in foreign currency from year-over-year comparisons.
· 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"). 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.
· The Company presents non-U.S. GAAP financial measures on a combined basis to illustrate the impact of the combined Predecessor and Successor periods as a result of the APi Acquisition. The Company believes that these combined measures are useful in understanding the overall operating performance of the combined business during 2019 as compared to the performance in the prior year period and provide a more complete picture of the Company's results after factoring in its current debt and capitalization structure.
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.