APi Group Corporation (NYSE: APG) (“APi” or the “Company”) today reported its financial results for the three and six months ended June 30, 2023.
Russ Becker, APi’s President and Chief Executive Officer stated: “APi delivered record financial results in the second quarter and the first half of the year. The business continues to perform well and deliver on its commitments, driven by strong organic growth, led by U.S. Life Safety’s organic growth of approximately 12% and 16% for the second quarter and first half of 2023, respectively, and solid operational performance. I continue to be gratified by our leaders’ ability to build on historically strong execution and consistently drive margin expansion across variable macroeconomic environments through growing high-margin inspection, service and monitoring revenue, executing strategic pricing initiatives, and their relentless focus on customer and project selection.
We believe that we have strong momentum as we enter the back half of the year across our global platform allowing us to again increase our financial guidance. While we remain focused on executing in the back half of the year, I am proud of our team and how we delivered on our commitments and produced record financial results so far in 2023. Our field leaders continue to be the driving force of our performance."
Second Quarter 2023 Consolidated Results:
For the Three Months Ended June 30, | ||||||||||||||||
2023 | 2022 | Y/Y | Y/Y (FFX) (a) | |||||||||||||
Net revenues | $ | 1,771 | $ | 1,649 | 7.4 | % | 7.6 | % | ||||||||
Organic net revenue growth (b) | 7.6 | % | ||||||||||||||
GAAP | ||||||||||||||||
Gross profit | $ | 496 | $ | 435 | 14.0 | % | ||||||||||
Gross margin | 28.0 | % | 26.4 | % | + 160 bps | |||||||||||
Net income | $ | 48 | $ | 30 | 60.0 | % | ||||||||||
Diluted EPS | $ | 0.12 | $ | 0.06 | 100.0 | % | ||||||||||
Adjusted non-GAAP comparison | ||||||||||||||||
Adjusted gross profit | $ | 502 | $ | 441 | 13.8 | % | ||||||||||
Adjusted gross margin | 28.3 | % | 26.7 | % | + 160 bps | |||||||||||
Adjusted EBITDA | $ | 203 | $ | 176 | 15.3 | % | 16.7 | % | ||||||||
Adjusted EBITDA as a % of net revenues | 11.5 | % | 10.7 | % | + 80 bps | |||||||||||
Adjusted net income | $ | 111 | $ | 99 | 12.1 | % | ||||||||||
Adjusted diluted EPS | $ | 0.41 | $ | 0.37 | 10.8 | % | ||||||||||
NM = Not Meaningful | ||||||||||||||||
Notes: Refer to non-GAAP reconciliations to the most comparable GAAP measures. | ||
(a) | Amount represents the year-over-year change when comparing both years after eliminating the impact of fluctuations in foreign exchange rates by translating foreign currency denominated results at fixed foreign currency ("FFX") rates for both periods, as further discussed under the heading "Non-GAAP Financial Measures" below. | |
(b) | 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. | |
- Reported net revenue growth of 7.4% and organic net revenue growth of 7.6% compared to the prior year period driven by strong growth in both Safety and Specialty Services, led by double-digit service revenue growth.
- Reported and adjusted gross margin both increased 160 basis points compared to prior year period due to pricing initiatives, outsized growth in services revenue as well as project margin expansion across both segments. These factors were partially offset by inflation, which caused downward pressure on margins.
- Reported net income was $48 million and diluted EPS was $0.12. Adjusted net income was $111 million and adjusted diluted EPS was $0.41, representing a $0.04 increase from prior year period driven by organic growth in Safety and Specialty Services and an increase in adjusted gross margin and adjusted EBITDA margin, partially offset by increased interest expense.
- Adjusted EBITDA increased by 15.3% (16.7% on a fixed currency basis) compared to the prior year period and adjusted EBITDA margin increased 80 basis points to 11.5%, primarily due to the factors impacting gross margin, partially offset by investments to support revenue growth and the continued build-out of our global capabilities and infrastructure.
Second Quarter 2023 Segment Results:
Safety Services
For the Three Months Ended June 30, | ||||||||||||||||
2023 | 2022 | Y/Y | Y/Y (FFX) (a) | |||||||||||||
Safety Services | ||||||||||||||||
Net revenues | $ | 1,225 | $ | 1,146 | 6.9 | % | 7.3 | % | ||||||||
Organic net revenue growth (b) | 7.3 | % | ||||||||||||||
GAAP | ||||||||||||||||
Gross profit | $ | 391 | $ | 346 | 13.0 | % | ||||||||||
Gross margin | 31.9 | % | 30.2 | % | + 170 bps | |||||||||||
Operating Income | $ | 98 | $ | 63 | 55.6 | % | ||||||||||
Operating margin | 8.0 | % | 5.5 | % | + 250 bps | |||||||||||
Adjusted non-GAAP comparison | ||||||||||||||||
Adjusted gross profit | $ | 397 | $ | 351 | 13.1 | % | ||||||||||
Adjusted gross margin | 32.4 | % | 30.6 | % | + 180 bps | |||||||||||
Adjusted EBITDA | $ | 159 | $ | 135 | 17.8 | % | 18.7 | % | ||||||||
Adjusted EBITDA as a % of net revenues | 13.0 | % | 11.8 | % | + 120 bps | |||||||||||
Notes: Refer to non-GAAP reconciliations to the most comparable GAAP measures. | ||
(a) | Amount represents the year-over-year change when comparing both years after eliminating the impact of fluctuations in foreign exchange rates by translating foreign currency denominated results at fixed foreign currency ("FFX") rates for both periods, as further discussed under the heading "Non-GAAP Financial Measures" below. | |
(b) | 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. | |
- Reported net revenue growth of 6.9% and organic net revenue growth of 7.3% compared to prior period, driven by strategic pricing initiatives, double-digit fire suppression inspection revenue growth, and high single-digit growth in contract revenues.
- Reported and adjusted gross margin increased 170 and 180 basis points, respectively, compared to prior year period due to pricing initiatives, improved business mix of service, inspection, and monitoring revenue, and significant improvement in contract margins resulting from disciplined project and customer selection, partially offset by inflationary costs causing downward pressure on margins.
- Operating income increased by 55.6% compared to the prior year period. Operating margin was 8.0%, representing a 250 basis point increase compared to the prior year period.
- Adjusted EBITDA increased by 17.8% (18.7% on a fixed currency basis) compared to the prior year period. Adjusted EBITDA margin was 13.0%, representing a 120 basis point increase compared to prior year period, primarily due to the factors impacting adjusted gross margin, partially offset by investments made to support revenue growth.
Specialty Services
For the Three Months Ended June 30, | ||||||||||||||||
2023 | 2022 | Y/Y | Y/Y (FFX) (a) | |||||||||||||
Specialty Services | ||||||||||||||||
Net revenues | $ | 555 | $ | 518 | 7.1 | % | 7.1 | % | ||||||||
Organic net revenue growth (b) | 7.1 | % | ||||||||||||||
GAAP | ||||||||||||||||
Gross profit | $ | 106 | $ | 89 | 19.1 | % | ||||||||||
Gross margin | 19.1 | % | 17.2 | % | + 190 bps | |||||||||||
Operating Income | $ | 41 | $ | 32 | 28.1 | % | ||||||||||
Operating margin | 7.4 | % | 6.2 | % | + 120 bps | |||||||||||
Adjusted non-GAAP comparison | ||||||||||||||||
Adjusted gross profit | $ | 106 | $ | 90 | 17.8 | % | ||||||||||
Adjusted gross margin | 19.1 | % | 17.4 | % | + 170 bps | |||||||||||
Adjusted EBITDA | $ | 69 | $ | 60 | ||||||||||||
