Q2 2023 Earnings Call Forward ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-39275 APi Group Corporation (Exact Name of Registrant as Specified in its Charter) Delaware 98-1510303 (State or other jurisdicti ...

APi Group Corporation (NYSE:APG) Q1 2023 Earnings Conference Call May 4, 2023 8:30 AM ET Company Participants Adam Fee - Vice President of Investor Relations Jim Lillie - Co-Chair Russ Becker - President and Chief Executive Officer Kevin Krumm - Executive Vice President and Chief Financial Officer Conference Call Participants Andy Kaplowitz - Citigroup Kiran Patel-O'Connor - Barclays Kathryn Thompson - Thompson Research Group Andy Wittmann - Baird Chris Snyder - UBS David Paige - RBC David Ridley-Lane - Ban ...

Q1 2023 Earnings Call May 4, 2023 Forward Looking Statements and Disclaimers Please note that in this presentation 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, ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's Q1 2023 results show a 9.7% revenue increase to $1,614 million and a shift to a $26 million net income from a prior-year loss [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets were $7.77 billion as of March 31, 2023, with total liabilities decreasing to $4.80 billion and shareholders' equity slightly increasing to $2.17 billion Condensed Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $2,364 | $2,652 | | **Total Assets** | **$7,766** | **$8,091** | | **Total Current Liabilities** | $1,549 | $1,921 | | **Total Liabilities** | **$4,804** | **$5,167** | | **Total Shareholders' Equity** | $2,165 | $2,127 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company achieved a net income of $26 million in Q1 2023, a significant turnaround from a $7 million net loss in Q1 2022, driven by revenue and gross profit growth Statements of Operations Summary (in millions, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Revenues | $1,614 | $1,471 | | Gross Profit | $425 | $376 | | Operating Income (Loss) | $73 | $(7) | | Net Income (Loss) | $26 | $(7) | | Diluted EPS | $0.05 | $(0.08) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved significantly to $1 million in Q1 2023 from $118 million in Q1 2022, while financing activities used $216 million for debt and stock repurchases Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1) | $(118) | | Net cash used in investing activities | $(27) | $(2,884) | | Net cash (used in) provided by financing activities | $(216) | $1,831 | | **Net decrease in cash** | **$(242)** | **$(1,173)** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the Chubb acquisition, a $105 million restructuring program, revenue disaggregation, and debt structure, with growth shown in both company segments - The company completed its acquisition of the Chubb fire and security business in 2022 for a total net consideration of **$2,893 million**, resulting in **$1,367 million of goodwill**[27](index=27&type=chunk)[29](index=29&type=chunk) - A multi-year Chubb restructuring program is underway, estimated to cost approximately **$105 million** by fiscal year-end 2024, with **$30 million** in costs incurred as of March 31, 2023[34](index=34&type=chunk) Net Revenues by Segment (Q1 2023, in millions) | Segment | Net Revenues | | :--- | :--- | | Safety Services | $1,191 | | Specialty Services | $430 | | Corporate and Eliminations | $(7) | | **Total** | **$1,614** | Total Debt Obligations (in millions) | Date | Total Debt Obligations | | :--- | :--- | | March 31, 2023 | $2,632 | | December 31, 2022 | $2,832 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the 9.7% revenue growth, improved gross margin of 26.3%, reduced SG&A expenses, and strong liquidity position of $809 million [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q1 2023 net revenues rose 9.7% to $1,614 million, gross margin expanded by 70 basis points, and SG&A expenses fell, reversing a prior-year operating loss Consolidated Results of Operations (in millions) | Metric | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $1,614 | $1,471 | $143 | 9.7% | | Gross Profit | $425 | $376 | $49 | 13.0% | | SG&A Expenses | $352 | $383 | $(31) | (8.1)% | | Operating Income (Loss) | $73 | $(7) | $80 | NM | - The increase in net revenues was primarily driven by growth in inspection, service, and monitoring revenue within both the Safety Services and Specialty Services segments[162](index=162&type=chunk) - The decrease in SG&A expenses was mainly due to lower acquisition and integration-related expenses incurred in Q1 2023 compared to the same period in the prior year[168](index=168&type=chunk) [Operating Segment Results](index=35&type=section&id=Operating%20Segment%20Results) The Safety Services segment revenue grew 10.9% with higher margins, while the Specialty Services segment revenue increased 4.4% with significantly expanded margins Segment Performance (Q1 2023 vs Q1 2022, in millions) | Segment | Net Revenues (2023) | Net Revenues (2022) | EBITDA (2023) | EBITDA (2022) | | :--- | :--- | :--- | :--- | :--- | | Safety Services | $1,191 | $1,074 | $146 | $123 | | Specialty Services | $430 | $412 | $27 | $20 | - The increase in Safety Services operating margin was primarily the result of disciplined project and customer selection and lower acquisition and integration related expenses[181](index=181&type=chunk) - The increase in Specialty Services revenue was primarily driven by increased activity in the infrastructure and utility markets for emergency service work[182](index=182&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position of $809 million, significantly improved operating cash flow, and executed debt repayments and stock repurchases - Total liquidity as of March 31, 2023 was **$809 million**, comprising **$363 million in cash** and **$446 million available** under the Revolving Credit Facility[193](index=193&type=chunk) - Net cash used in operating activities **improved to $1 million** for Q1 2023 from **$118 million** in Q1 2022, primarily due to higher net income and lower working capital needs[198](index=198&type=chunk) - During Q1 2023, the company **repaid an aggregate of $200 million** on its term loans and **repurchased 541,316 shares** of common stock for approximately **$12 million**[207](index=207&type=chunk)[194](index=194&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from interest rates, foreign currency, and commodity prices, which it mitigates using various hedging instruments - The company mitigates interest rate risk on its term loans through interest rate swaps; a hypothetical **100-basis point increase** in rates would have **increased interest expense by approximately $4 million** for Q1 2023[215](index=215&type=chunk)[216](index=216&type=chunk) - Revenues from foreign operations represented approximately **40% of consolidated net revenues** for Q1 2023, exposing the company to foreign currency translation risk[217](index=217&type=chunk) - The company is exposed to supply chain risks, including price fluctuations for materials like copper and steel, and increases in energy prices for its vehicle fleet[221](index=221&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were not effective as of March 31, 2023, due to material weaknesses in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were **not effective** as of March 31, 2023, due to existing **material weaknesses** in internal control over financial reporting[224](index=224&type=chunk) - The material weaknesses relate to user access controls for an IT system and ineffective process-level controls over revenue recognition stemming from insufficient training[227](index=227&type=chunk) - Management has made progress on its multi-year remediation plan and believes full remediation of the material weaknesses can be achieved by the end of the year[230](index=230&type=chunk) PART II. OTHER INFORMATION [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to the risk factors previously disclosed in its 2022 Annual Report on Form 10-K - There have been **no material changes** to the company's risk factors from those contained in the Form 10-K for the year ended December 31, 2022[233](index=233&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2023, the company repurchased 541,316 shares for approximately $12 million, with $195 million remaining under its repurchase authorization Share Repurchases (Q1 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2023 | 32,754 | $18.73 | | Feb 2023 | 0 | N/A | | Mar 2023 | 508,562 | $21.63 | | **Total** | **541,316** | **$21.45** | - As of March 31, 2023, approximately **$195 million remained available** for repurchase under the company's stock repurchase program, which expires on February 29, 2024[235](index=235&type=chunk) [Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Information regarding mine safety violations and other regulatory matters is provided in Exhibit 95.1 of this report - Disclosures related to mine safety are included in Exhibit 95.1 to this quarterly report[236](index=236&type=chunk) [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including required Sarbanes-Oxley certifications and Inline XBRL data files - The report includes certifications from the CEO and CFO as required by Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk)

APi Group Corp (NYSE:APG) Q4 2022 Earnings Conference Call February 28, 2023 8:30 AM ET Company Participants James Lillie - Independent Co-Chairman Kevin Krumm - EVP & CFO Martin Franklin - Co-Chairman Russell Becker - CEO, President & Director Olivia Walton - VP, IR Conference Call Participants Christopher Snyder - UBS Kiran Patel-O'Connor - Barclays Bank David Ridley-Lane - Bank of America Merrill Lynch Kathryn Thompson - Thompson Research Group Andy Wittmann - Baird Jon Tanwanteng - CJS Securities Operat ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO | --- | --- | |---------------------------------------------------------------------|---------------------------------| | | | | Commission File Number | 001-392 ...

Q3 2022 Performance Highlights - Record net revenues of $1.7 billion[15] - Net revenues increased on an organic basis by approximately 16.5%, driven by a double-digit increase in inspection, service and monitoring revenue[15] - Adjusted gross margin of 26.3%, representing a 208 basis point increase compared to prior year[15] - Record adjusted EBITDA of $186 million, representing a 10.7% margin[15] - Record adjusted diluted earnings per share of $0.37, representing a $0.02 increase from prior year period[15] - Adjusted free cash flow of $166 million, representing a 159% increase compared to the prior year period[15] 2022 Financial Results Overview - Net revenues increased by 16.4% on an organic basis for the three months ended September 30, 2022[17] - Adjusted gross margin was 26.3% for the three months ended September 30, 2022, a 208 basis point increase[17] - Adjusted EBITDA was $186 million with a 10.7% margin for the three months ended September 30, 2022[17] - Adjusted diluted EPS was $0.37 per share for the three months ended September 30, 2022, a $0.02 increase[17] - Net revenues increased by 14.7% on an organic basis for the nine months ended September 30, 2022[18] - Adjusted gross margin was 26.5% for the nine months ended September 30, 2022, a 280 basis point increase[18] - Adjusted EBITDA was $490 million with a 10.1% margin for the nine months ended September 30, 2022[18] - Adjusted diluted EPS was $0.96 per share for the nine months ended September 30, 2022, a $0.22 increase[18] 2022 Guidance - The company expects full year revenue outlook to range between $6.45 billion to $6.5 billion[31] - The company expects adjusted EBITDA will range between $660 million to $675 million[31] - The company now expects growth in net revenues on an organic basis at constant currencies of 10%+[31] - Q4 net revenues are expected to be $1.602 billion to $1.652 billion[33] - Q4 adjusted EBITDA is expected to be $170 million to $185 million[33] - Q4 adjusted Free Cash Flow is expected to be $190 million to $210 million[33] - Full year adjusted Free Cash Flow is expected to be $372 million to $392 million[33] - Full year adjusted Free Cash Flow Conversion is expected to be 55%+[33]

Financial Data and Key Metrics Changes - Net revenues for Q3 2022 increased by 65.7% to $1.7 billion compared to $1 billion in the prior year period, driven by acquisitions and strong organic growth [20] - Adjusted gross margin grew by 208 basis points to 26.3%, despite inflation and supply chain disruptions [21] - Adjusted diluted earnings per share increased by approximately 6% or $0.02, driven by strong operational performance and acquisition accretion [12][22] - Adjusted free cash flow was $166 million, exceeding the guided range and representing a 159% increase compared to the prior year [14][25] Business Line Data and Key Metrics Changes - Safety Services reported net revenues increased by 117% to $1.1 billion, primarily driven by acquisitions, with organic growth of 19.7% [22][23] - Specialty Services net revenues increased by 12% to $590 million, driven by increased service revenue and improved pricing [24] Market Data and Key Metrics Changes - Approximately 2/3 of organic revenue growth was driven by price and pass-through of material and labor costs, with the remaining 1/3 from volume [22] - The backlog stood at approximately $3.6 billion, slightly down from $3.7 billion, which is typical for the season [50] Company Strategy and Development Direction - The company aims for long-term organic growth above industry average, targeting an adjusted EBITDA margin of 13% by 2025 and a net leverage ratio of 2x to 2.5x [32] - The integration of Chubb remains a top priority, with plans to enhance operational efficiencies and drive organic growth [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2023 goals, supported by a strong backlog and resilient end markets [36][37] - The company is focused on mitigating margin pressures through high-margin inspection, service, and monitoring revenue [31][32] Other Important Information - The company expects to provide updates on the ongoing integration of Chubb and its strategic plans at the upcoming investor update [19] - Management highlighted the importance of disciplined customer and project selection to enhance margins [58] Q&A Session Summary Question: Visibility on 2023 goals - Management feels confident due to a strong backlog of approximately $3.6 billion and continued growth in inspection revenue [36] Question: Performance of Chubb by region - Chubb's revenue is resilient, with over 60% coming from inspection service and monitoring, providing stability amid potential recessions [39] Question: Cash flow improvement and conversion - The company expects continued improvement in cash flow conversion, aiming to return to traditional levels in 2023 [42] Question: Organic growth performance - Strong performance was noted in data centers, semiconductors, and healthcare, with limited exposure to retail and hospitality [46] Question: Supply chain disruptions - Mixed improvements were observed, with some costs decreasing while others, like semiconductors, remain challenging [48] Question: Backlog trends - The backlog is slightly down but remains strong, with a year-over-year increase of 8% [50][52] Question: Pricing strategies - The company continues to push for price increases and utilize fuel surcharges to manage inflationary pressures [52] Question: Integration costs for Chubb - Integration costs are expected to carry into 2023, but the company aims for a cost-neutral transition [84]

Financial Performance - Net revenues for Q3 2022 were $1,735 million, a 65.7% increase from $1,047 million in Q3 2021, primarily driven by acquisitions in the Safety Services segment [229]. - Cost of revenues for Q3 2022 was $1,295 million, up 62.9% from $795 million in Q3 2021 [229]. - Gross profit for Q3 2022 increased to $440 million, representing a 74.6% increase from $252 million in Q3 2021 [229]. - Selling, general, and administrative expenses rose to $379 million in Q3 2022, a 79.6% increase from $211 million in Q3 2021 [229]. - Operating income for Q3 2022 was $61 million, up 48.8% from $41 million in Q3 2021 [229]. - Net income for Q3 2022 was $28 million, compared to $19 million in Q3 2021, reflecting a 47.4% increase [229]. - EBITDA for the same period was $152 million, up $56 million or 58.3% from $96 million in 2021 [241]. - Net revenues for the nine months ended September 30, 2022, were $4,855 million, an increase of $2,027 million or 71.7% compared to $2,828 million in 2021, primarily driven by acquisitions and market recoveries [251]. - Gross profit for the same period was $1,251 million, up $586 million or 88.1%, with a gross margin of 25.8%, an increase of 230 basis points from 2021 [252]. - Operating income for the nine months ended September 30, 2022, was $113 million, an increase of $27 million or 31.4% compared to $86 million in 2021 [261]. - Net income for the period was $51 million, an increase of $19 million or 59.4%, with net income as a percentage of net revenues remaining at 1.1% [260]. - EBITDA for the nine months ended September 30, 2022, was $380 million, an increase of $137 million or 56.4% compared to $243 million in 2021 [260]. Segment Performance - Safety Services net revenues increased by $621 million or 116.5% to $1,154 million, primarily due to recent acquisitions [245]. - Specialty Services net revenues rose by $63 million or 12.0% to $590 million, driven by increased activity in infrastructure and utility markets [247]. - Safety Services segment net revenues increased by $1,863 million or 123.3% to $3,374 million, driven by acquisitions and market recoveries [264]. - Specialty Services segment net revenues rose by $173 million or 12.8% to $1,520 million, reflecting growth in service offerings [261]. - Specialty Services operating margin improved to approximately 4.6% for the nine months ended September 30, 2022, compared to 2.7% in the same period of 2021, attributed to higher productivity levels [267]. Expenses and Margins - Gross margin improved to 25.4%, up 130 basis points from 24.1% in the prior year, driven by acquisitions and a better revenue mix [231]. - SG&A expenses rose to $379 million, an increase of $168 million or 79.6% from $211 million in 2021, with SG&A as a percentage of net revenues at 21.8% [234]. - Operating margin decreased to 3.5% for the three months ended September 30, 2022, down from 3.9% in the same period of 2021 [233]. - Selling, general, and administrative (SG&A) expenses rose to $1,138 million, an increase of $559 million or 96.5%, with SG&A as a percentage of net revenues at 23.4% compared to 20.5% in 2021 [255]. Debt and Interest - Interest expense, net, increased to $33 million in Q3 2022, a 135.7% rise from $14 million in Q3 2021 [229]. - Interest expense increased to $88 million from $43 million, primarily due to increased debt from the Chubb Acquisition and higher interest rates [256]. - The first lien net leverage ratio as of September 30, 2022 was 2.72:1.00, below the maximum allowable ratio of 4.00:1.00 for fiscal quarters ending in 2021 [290]. - The company is exposed to a potential increase in interest expense of approximately $11 million for a 100-basis point increase in applicable interest rates [302]. Tax and Effective Rates - The effective tax rate for the three months ended September 30, 2022 was 40.5%, compared to 38.5% in the same period of 2021 [240]. - The effective tax rate for the nine months ended September 30, 2022, was 24.2%, down from 31.3% in the same period of 2021, influenced by discrete and nondeductible permanent items [259]. Cash Flow and Liquidity - Net cash provided by operating activities was $82 million for the nine months ended September 30, 2022, compared to $68 million for the same period in 2021, primarily due to an increase in net income [284]. - Net cash used in investing activities was $(2,931) million for the nine months ended September 30, 2022, significantly higher than $(81) million in the same period of 2021, mainly due to the Chubb Acquisition [285]. - Net cash provided by financing activities was $1,773 million for the nine months ended September 30, 2022, compared to $629 million in the same period of 2021, driven by proceeds from debt issuances [286]. - As of September 30, 2022, total liquidity was $819 million, consisting of $395 million in cash and cash equivalents and $424 million available under the Revolving Credit Facility [278]. Acquisitions and Restructuring - The acquisition of the Chubb fire and security business was completed for $2,893 million, expected to enhance revenue growth opportunities within the Safety Services segment [211]. - The company initiated a multi-year restructuring program in 2022, incurring total restructuring costs of $25 million, primarily related to workforce reductions [209]. - The company issued 800,000 shares of 5.5% Series B Redeemable Convertible Preferred Stock for an aggregate purchase price of $800 million to fund a portion of the Chubb Acquisition [294]. Stock Repurchase and Shareholder Returns - The company authorized a stock repurchase program of up to $250 million, with approximately $217 million remaining for future repurchases as of September 30, 2022 [281]. - During the three months ended September 30, 2022, the company purchased a total of 738,572 shares at an average price of $14.89 per share [321]. - The company has authorized a stock repurchase program to buy up to $250 million of its common stock, set to expire on February 29, 2024 [323]. Internal Controls and Remediation - The company is executing remediation plans to address material weaknesses in internal control over financial reporting, with no material changes reported during the quarter ended September 30, 2022 [317]. - Management has seen improved results in remediation efforts compared to December 31, 2021, but full remediation is expected to take a couple of years [318]. - The company is enhancing its internal control environment by hiring additional qualified personnel and refining existing controls [319]. - The company is implementing additional training programs for personnel responsible for newly implemented processes and controls [319]. - The company is enhancing controls over critical processes, including revenue recognition and financial reporting [318]. - The company is monitoring the effectiveness of its remediation plans and will make necessary adjustments as determined by management [318]. - The company is committed to improving its financial systems and enhancing information and communication controls [319]. Foreign Operations and Currency - Revenues from foreign operations represented approximately 35% and 38% of consolidated net revenues for the three and nine months ended September 30, 2022, respectively [304]. - Foreign currency translation losses totaled approximately $86 million and $311 million for the three and nine months ended September 30, 2022, respectively [304]. Capital Expenditures - The company expects capital expenditures to be approximately 1.5% of annual net revenues [299]. - The company had no amounts outstanding under the Revolving Credit Facility, with $424 million available after accounting for $76 million of outstanding letters of credit [291].