APi (US:APG)2022-05-03 16:00Acquisition and Growth - The company completed the acquisition of the Chubb fire and security business for $2,935 million, enhancing its Safety Services segment and providing opportunities for cross-selling products and services [188]. - Net revenues for the three months ended March 31, 2022 were $1,471 million, an increase of $668 million or 83.2% compared to $803 million in the same period in 2021, driven by acquisitions and market recoveries [210]. - Safety Services segment revenues increased by $608 million or 130.5% to $1,074 million, driven by acquisitions and market recoveries [221]. - Specialty Services segment revenues rose by $68 million or 19.8% to $412 million, reflecting growth in inspection and service revenue [221]. Financial Performance - Gross profit for the same period was $376 million, up $195 million or 107.7%, with a gross margin of 25.6%, an increase of 310 basis points year-over-year [212]. - Operating loss for the three months ended March 31, 2022 was $(7) million, compared to $(2) million in the same period in 2021, reflecting a 250.0% increase in losses [219]. - Net loss for the period was $(7) million, an improvement of $1 million from $(8) million in the prior year, with net loss as a percentage of net revenues at (0.5)% compared to (1.0)% [219]. - EBITDA for the three months ended March 31, 2022 was $80 million, an increase of $29 million or 56.9% compared to $51 million in the same period in 2021 [219]. - Consolidated EBITDA for Q1 2022 was $80 million, compared to $51 million in Q1 2021, reflecting improved operational performance [233]. Expenses and Margins - Selling, general, and administrative (SG&A) expenses rose to $383 million, an increase of $200 million or 109.3%, representing 26.0% of net revenues compared to 22.8% in the prior year [214]. - Safety Services operating margin for Q1 2022 was approximately 5.9%, down from 9.7% in Q1 2021, primarily due to supply chain disruptions and inflation [225]. - Specialty Services operating margin improved to approximately (1.7)% in Q1 2022 from (5.2)% in Q1 2021, attributed to higher productivity levels [227]. Market Conditions and Challenges - Economic and market conditions, including the Russia-Ukraine conflict, have increased direct costs and created uncertainty in demand for services [195]. - The company has experienced supply chain disruptions affecting material availability and skilled labor resources, impacting project execution [193]. - Seasonal variations typically result in lower net revenues during the first and second quarters due to unfavorable weather conditions [196]. - The company continues to monitor the impacts of COVID-19, with ongoing uncertainty regarding future disruptions to operations [194]. Liquidity and Financing - Total liquidity as of March 31, 2022, was $713 million, consisting of $315 million in cash and cash equivalents and $398 million available under the Revolving Credit Facility [237]. - Net cash used in investing activities was $2,884 million for Q1 2022, primarily due to the Chubb Acquisition [242]. - Net cash provided by financing activities was $1,831 million for Q1 2022, driven by proceeds from the issuance of the 2021 Term Loan and Series B Preferred Stock [243]. - The company completed a private offering of $350 million aggregate principal amount of 4.125% Senior Notes due 2029, with interest payable semi-annually [248]. - The company also completed a private offering of $300 million aggregate principal amount of 4.750% Senior Notes due 2029, used to finance a portion of the Chubb Acquisition [249]. Shareholder Actions - The company repurchased 531,431 shares of common stock for approximately $11 million under its stock repurchase program during Q1 2022 [238]. - The Board of Directors authorized a stock repurchase program with a maximum value of $250 million, which may be executed until February 29, 2024 [273]. - The total number of shares purchased as part of publicly announced plans or programs was 531,431 shares [273]. Debt and Leverage - The first lien net leverage ratio as of March 31, 2022, was 2.93:1.00, indicating the company's leverage position [246]. - As of March 31, 2022, the company had $1,127 million and $1,085 million of indebtedness outstanding on the 2019 Term Loan and 2021 Term Loan, respectively [247]. - A 100-basis point increase in applicable interest rates would have increased the company's interest expense by approximately $5 million for the three months ended March 31, 2022 [255]. Foreign Operations - Revenues from foreign operations represented approximately 40% of consolidated net revenues for the three months ended March 31, 2022 [257]. - The company reported foreign currency translation losses of approximately $(59) million for the three months ended March 31, 2022 [257]. Internal Controls - The company is executing remediation plans to address material weaknesses in internal control over financial reporting, with improvements noted since December 31, 2021 [269]. - The company plans to continue enhancing its internal control over financial reporting and risk assessment processes over the next couple of years [270].