TIDMJTWO TIDMJTOW
RNS Number : 9864T
API Group Corporation
20 November 2019
APi Group Reports Third Quarter and Nine Month 2019 Financial
Results
Net revenue increase of 12.2% to $3.0 billion year to date
Organic net revenue growth of 9.3% year to date
Confirms estimated full-year revenue and adjusted EBITDA
guidance
New Brighton, Minnesota - November 20, 2019 - APi Group
Corporation (OTC:JJAQF; LSE:JTWO) ("APi" or the "Company"), today
reported financial results of APi Group, Inc. for the three and
nine month periods ended September 30, 2019.
Third Quarter 2019 Highlights:
-- Organic net revenue grew 10.3% or $104 million
-- Net revenue for the quarter grew 10.3% or $104 million to
$1.1 billion, compared to $1.0 billion in the prior year period
-- Gross margin was 21.0%, compared to 21.6% for the same period in 2018
-- Adjusted EBITDA of $119 million or 10.7%, a $7.9 million increase over prior year
-- Reported net income of $14.3 million, a $56.6 million decline
from prior year net income of $70.9 million, which was largely
impacted by transaction related and non-recurring expenses;
-- Pro forma adjusted net income of $66.9 million, representing
a $0.8 million increase over prior year and pro forma adjusted EPS
of $0.38, which is consistent with prior year
Nine Months 2019 Highlights:
-- Organic net revenue grew 9.3% or $230 million
-- Net revenue for the nine months ended September 30, 2019 grew
12.2% or $330 million to $3.0 billion, compared to $2.7 billion in
the prior year period with segment growth of 8.2% in Safety
Solutions, 10.7% in Specialty Services and 25.3% in Industrial
Solutions
-- Gross margin was 20.1%, compared to 20.7% for the same period in 2018
-- Adjusted EBITDA of $273 million or 9.0%, a $30.1 million increase over prior year
-- Reported net income of $76.2 million, a $41.5 million decline
from prior year net income of $118 million, which was largely
impacted by transaction related and non-recurring expenses;
-- Pro forma adjusted net income of $136 million, representing a
$18.8 million increase over prior year and pro forma adjusted EPS
of $0.78, an $0.11 increase over prior year
Russ Becker, APi Group's President and Chief Executive Officer
said, "We are pleased to report strong financial results within our
core operating segments. Through the first nine months of 2019, we
have realized the strength of our operating model and diversified
end markets, with particularly positive results in our Safety
Solutions and Specialty Services segments. We achieved $3.0 billion
year to date in net revenue and adjusted EBITDA margins of 9.0%,
excluding non-recurring and transaction related items."
"I am immensely proud of the leadership displayed throughout our
organization during this transition period and the financial
results we have achieved. We continue to see on-going growth
opportunities and supportive macro trends within the industries and
core end markets we serve. We look to leverage our scale and
operational expertise to capitalize on these opportunities for the
balance of the year and as we move into 2020."
APi Co-Chairman James E. Lillie added, "We are excited about the
future for APi. The results for the third quarter as well as the
year to date results reinforce our view of the potential for the
Company. With the investments we are making coupled with leveraging
our scale, we expect to improve margins and improve cash generation
as we focus on growing the company organically and through
opportunistic M&A, we expect this growth to continue while
maintaining a conservative balance sheet. We look forward to
finishing the year in line with the guidance we have provided while
focusing on building a solid plan for 2020."
2019 Guidance
The Company continues to expect full year 2019 revenue of
approximately $4.0 billion and adjusted EBITDA of approximately
$400 million.
Recent Developments
As previously announced, the Company is in the process of
listing its ordinary shares on the New York Stock Exchange under
the symbol APG and changing its jurisdiction of incorporation to
Delaware, which is expected to occur late in the first quarter of
2020. The Company's ordinary shares continue to be traded on the
OTC market in the U.S. under the symbol JJAQF. The Company expects
its initial registration statement on to be filed with the SEC
later this quarter.
In the next few days, the Company expects to complete a process
that would result in certain trades of our ordinary shares on the
over-the-counter market in the U.S. being eligible for settlement
through the DTC.
Conference Call
APi Group will host a webcast/dial-in conference call to discuss
its financial results at 8:30 a.m. (Eastern Time) on Wednesday,
November 20, 2019. Participants on the call will include Russ
Becker, President and Chief Executive Officer; Tom Lydon, Chief
Financial Officer; James E. Lillie and Martin E. Franklin,
Co-Chairmen.
To listen to the call by telephone, please dial 866-342-8591 or
203-518-9713 and provide Conference ID APi3Q19. 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/2138554-1/3AA981295773D9AB516969F169B9A50A
A replay of the call will be available shortly after completion
of the live call on the webcast or by telephone, 800-839-4018 or
402-220-2985.
About APi
APi Group Corporation is a market leading provider of commercial
life safety solutions and industrial specialty services. The
Company is a top-5 specialty services contractor in the U.S. with a
diversified, blue chip customer and supplier base, a robust service
offering, and a track record of successful acquisitions. The
Company operates three segments in over 200 locations primarily in
the U.S., with its international operations in Canada and the UK.
More information can be found at https://www.apigroupinc.com/.
Investor Relations Inquiries:
email: investorrelations@apigroupinc.us
Media Contacts:
Liz Cohen
Kekst CNC
+1 212-521-4845
Liz.Cohen@kekstcnc.com
Special Note Regarding Consolidated Financial Statements and
Supplementary Information
The attached Condensed Consolidated Financial Statements and
Supplementary Information for APi Group, Inc. and its subsidiaries
have been prepared based on the U.S. accounting principles and
standards ("U.S. GAAP") applicable to private companies (the
"Historical Financial Statements"). APi Group, Inc. was acquired by
the Company on October 1, 2019. In connection with the anticipated
registration statement to be filed by the Company pursuant to the
Securities Act of 1933, as amended (the "Securities Act") the
Historical Financial Statements of APi Group Inc. will be revised
to comply with U.S. GAAP applicable to public companies (the
"Public Company Financial Statements"). In preparing the Public
Company Financial Statements, the Company will need to apply
certain accounting standards under U.S. GAAP applicable to public
companies that were not applicable to these historical financial
statements. As a result, the Public Company Financial Statements,
which were not available as of this announcement, may differ
materially from the Historical Financial Statements. The actual
type and amount of the impact of the conversion on APi Group,
Inc.'s consolidated balance sheets and statements of operations and
cash flows are not yet known.
Based on information available as of the Announcement Date, the
expected differences are as follows:
(i) We expect the application of ASC 606 (related to revenue
recognition) to be adopted as of January 1, 2018, using the
modified-retrospective method of adoption, will decrease revenues
and gross profit by less than 1%. The net difference on the income
statement will also increase current assets. As of January 1, 2018,
a cumulative effective adjustment will be recorded which is
expected to increase current assets for the treatment of
capitalized fulfillment costs. This adjustment will be offset with
a corresponding adjustment to opening retained earnings.
(ii) The application of ASC 842 (related to leases)
prospectively as of January 1, 2019 is expected to result in an
increase in fixed assets related to "right of use assets" of
between $105 and $115 million and a corresponding lease liability.
The effect on 2019 earnings, based upon 2018 data, is expected to
be minimal.
(iii) We have historically accounted for business combinations
and goodwill in accordance with U.S. GAAP applicable to private
companies. In the Public Company Financial Statements, goodwill
will be restated to a) separately classify certain identifiable
intangible asset amounts such as customer relationship, b) reverse
the effects of amortizing goodwill, and c) adjust for any
impairment charges not previously recorded under U.S. GAAP
application to private companies.
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 and the
timing for such registration and listing, and until such time, the
ability to make its ordinary shares eligible for settlement through
the DTCC; (ii) continued trading of the Company's ordinary shares
on the OTC market; (iii) the future operating and financial
performance of the Company, including the Company's guidance for
full year 2019; (iv) the trends in the industries and end markets
in which the Company operates and the Company's ability to
capitalize on those trends; (v) the impact to the Historical
Financial Statements as a result of applying accounting standards
applicable to public companies and the differences between the
Historical Financial Statements and the Public Company Financial
Statements; and (v) the ability of the Company to capitalize on
growth and expansion opportunities, generate cash flows, drive
long-term shareholder value, achieve estimates of organic growth,
successfully complete strategic acquisitions and delever. 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; (ii) the risk that
securities markets will react negatively to the acquisition of APi
Group, Inc. or other actions by the Company following the
acquisition; (iii) the risk that the acquisition disrupts current
plans and operations as a result of the consummation of the
transaction; (iv) the ability to recognize the anticipated benefits
of the acquisition and of the Company to take advantage of
strategic opportunities; (v) the limited liquidity and trading of
the Company's securities; (vi) changes in applicable laws or
regulations; (vii) the possibility that the Company may be
adversely affected by other economic, business, and/or competitive
factors; and (viii) 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
In this press release, the Company presents adjusted EBITDA and
adjusted EBITDA margin, pro forma adjusted EBIT, profit before tax
net income and EPS and organic revenue growth, which are non-U.S.
GAAP financial measures. The Company believes these non-U.S. GAAP
financial measures provide meaningful information and help
investors understand the Company's financial results and assess its
prospects for future performance. 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. The Company
uses these non-U.S. GAAP financial measures 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 for its reportable segments, as
well as items that can vary widely across different industries or
among companies within the same industry, and for noncash
stock-based compensation expense, can also be subject to volatility
from changes in the market price per share of the Company's common
stock or variations in the value of shares granted. The Company
presents non-U.S. GAAP financial measures on a pro forma basis,
including pro forma adjusted EBIT, pro forma adjusted net income,
and pro forma adjusted EPS, to illustrate the impact of the APi
Group, Inc. acquisition. Specifically, the pro forma financial
metrics reflect the debt facilities incurred by the Company in
connection with the acquisition had they been incurred at the
beginning of the periods presented, adjust for the long-term tax
benefit from the acquisition and factor in the capitalization of
the Company post-acquisition. The Company believes that these pro
forma measures provide a more complete picture of our results after
factoring in the Company's current debt and capitalization
structure. The Company uses organic revenue growth, which excludes
revenue from companies acquired during the periods presented, to
assess its performance without the impact of acquisitions in order
to provide a useful period-to-period comparison. The Company
believes that organic revenue growth is useful to investors to help
understand the Company's growth in revenues not attributable to
acquired businesses. A reconciliation of these Non-U.S. GAAP
financial measures is included later in this press release.
APi Group, Inc.
Condensed Consolidated Statements of Operations
(In thousands) (Unaudited)
For the three months For the nine months
ended ended
September 30, September 30,
------------------------------------------ ----------------------------------------
2019 2018 2019 2018
-------------------- -------------------- ------------------- -------------------
Net revenues $ 1,113,470 $ 1,009,586 $ 3,025,784 $ 2,696,185
Cost of sales 879,424 791,916 2,418,793 2,137,212
Gross profit 234,046 217,670 606,991 558,973
Selling, general and
administrative
expenses 215,810 127,027 479,423 378,102
Amortization and earnout
expense,
net 2,733 16,915 37,448 54,297
Income from operations 15,503 73,728 90,120 126,574
Interest expense, net 6,388 5,499 19,161 14,490
Other income, net (7,164) (3,960) (10,505) (9,963)
Income before income
taxes 16,279 72,189 81,464 122,047
Foreign and state income
taxes 1,926 1,248 4,962 4,073
Net income, including
noncontrolling
interests 14,353 70,941 76,502 117,974
Less: net income
attributable to
noncontrolling
interests 91 81 269 252
Net income attributable
to the Company $ 14,262 $ 70,860 $ 76,233 $ 117,722
==================== ==================== =================== ===================
APi Group, Inc.
Consolidated Balance Sheets
(In thousands) (Unaudited)
September December
30, 31,
2019 2018
--------------------- ------------------
Assets
Current assets:
Cash and cash equivalents $ 133,610 $ 54,093
Accounts receivable 772,616 764,995
Inventories 60,325 56,159
Costs and estimated earnings in excess of billings
on uncompleted contracts 299,724 241,552
Other current assets 26,835 17,993
Total current assets 1,293,110 1,134,792
Noncurrent assets:
Related-party notes receivable and investments 13,024 12,292
Other assets 34,140 34,555
Intangibles, net 51,343 58,221
Goodwill, net 381,542 421,255
Property and equipment, net 331,123 327,780
Total assets 2,104,282 1,988,895
===================== ==================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 190,404 $ 173,678
Current related-party liabilities - 49,077
Accrued liabilities and income taxes payable 379,700 284,865
Billings in excess of costs and estimated earnings
on uncompleted contracts 184,113 193,488
Current maturities of long-term debt 20,205 33,985
Revolving line of credit 342,000 261,117
Total current liabilities 1,116,422 996,210
Long-term debt, less current maturities 301,592 304,975
Noncurrent related-party liabilities 70,587 54,161
Other noncurrent liabilities 18,533 56,850
Total liabilities 1,507,134 1,412,196
Total stockholders' equity 597,004 575,513
Non-controlling interests 144 1,186
Total equity 597,148 576,699
Total liabilities and equity $ 2,104,282 $ 1,988,895
===================== ==================
APi Group, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
For the nine months
ended
September 30,
------------------------------------------
2019 2018
-------------------- --------------------
Cash flows from operating activities:
Net income, including noncontrolling interests $ 76,502 $ 117,974
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 103,217 90,730
Gain on sale of property and equipment (1,289) (2,046)
Stock compensation expense 37,500 750
Changes in operating assets and liabilities, net
of effects of business acquisitions (82,385) (182,708)
Net cash provided by operating activities 133,545 24,700
-------------------- --------------------
Cash flows from investing activities:
Acquisitions, net of cash acquired (5,096) (235,579)
Purchases of property and equipment (56,114) (50,777)
Proceeds from sales of property and equipment 7,031 2,046
Advances on notes receivable (4,610) (10,051)
Payments received on notes receivable 5,969 5,456
Change in investments (2,366) 543
Net cash used in investing activities (55,186) (288,362)
-------------------- --------------------
Cash flows from financing activities:
Receipts on long-term borrowings and revolving
line of credit 1,010,165 1,569,898
Payments on long-term borrowings and revolving
line of credit (945,914) (1,230,213)
Earnout expenses paid (16,164) (20,634)
Distributions to shareholders (46,983) (51,972)
Net cash provided by financing activities 1,104 267,079
-------------------- --------------------
Effect of foreign currency exchange rate change
on cash and cash equivalents 54 (3,448)
Net increase (decrease) in cash and cash equivalents 79,517 (31)
Cash and cash equivalents at beginning of year 54,093 41,466
Cash and cash equivalents at end of period $ 133,610 $ 41,435
==================== ====================
APi Group, Inc.
Segment Financial Report
(In thousands) (Unaudited)
For the nine months
ended
September 30,
--------------------------------------
2019 2018
------------------ ------------------
Safety Solutions $ 1,320,761 $ 1,220,711
Specialty Services 1,093,703 987,734
Industrial Solutions 611,320 487,740
Total net revenues $ 3,025,784 $ 2,696,185
================== ==================
Safety Solutions $ 147,846 $ 122,840
Specialty Services 67,052 53,395
Industrial Solutions (1,634) 3,878
Corporate (123,145) (53,539)
Total operating income $ 90,119 $ 126,574
================== ==================
Safety Solutions $ 168,552 $ 144,842
Specialty Services 115,941 104,543
Industrial Solutions 26,484 28,874
Corporate (37,717) (35,082)
Total adjusted EBITDA $ 273,260 $ 243,177
================== ==================
APi Group, Inc.
Reconciliations of GAAP to Non-GAAP Financial Measures
(In thousands) (Unaudited)
For the three months For the nine months
ended ended
September 30, September 30,
----------------------------------------- -----------------------------------------
Adjusted EBITDA 2019 2018 2019 2018
------------------ --------------------- ------------------ ---------------------
Reported net income $ 14,262 $ 70,860 $ 76,233 $ 117,722
Adjustments to reconcile
to net income
(loss)
Interest expense, net 6,388 5,499 19,161 14,490
Foreign & state income
taxes 1,926 1,248 4,962 4,073
Depreciation and
amortization 35,675 30,241 103,217 90,730
Earnout expense
(income), net (a) (14,420) 409 (13,864) 1,340
Non-recurring expenses
(b) 19,308 - 22,226 -
Non-recurring expenses
related to
prior ownership (c) 45,339 1,824 50,514 13,022
Transaction related
expenses 10,811 1,313 10,811 1,800
Adjusted EBITDA $ 119,289 $ 111,394 $ 273,260 $ 243,177
================== ===================== ================== =====================
Notes:
(a) Reflects contingent consideration based on financial
performance of acquired businesses.
(b) Non-recurring expenses unrelated to the acquisition
including primarily items for which the Seller has indemnified the
Company.
(c) Includes non-recurring costs and expenses related to
completing the acquisition.
For the three months For the nine months
Pro forma adjusted net income and ended ended
EPS September 30, September 30,
------------------------------------ ------------------------------------
2019 2018 2019 2018
----------------- ----------------- ----------------- -----------------
Adjusted EBITDA $ 119,289 $ 111,394 $ 273,260 $ 243,177
Depreciation (a) 18,695 11,815 56,114 50,777
Pro forma adjusted EBIT 100,594 99,579 217,146 192,400
Pro forma interest expense (b) 13,672 13,744 41,052 40,751
Pro forma adjusted profit before
tax 86,922 85,835 176,094 151,649
Tax (c) 19,992 19,742 40,502 34,879
Pro forma adjusted net income 66,930 66,093 135,592 116,770
Pro forma shares outstanding (d) 173,902 173,902 173,902 173,902
Pro forma adjusted EPS $ 0.38 $ 0.38 $ 0.78 $ 0.67
================= ================= ================= =================
Notes:
(a) Utilized actual capital expenditures to provide a
directional cash amount for this pro forma calculation. Does not
reflect an estimate of any fair valuations to be obtained in
conjunction with the acquisition.
(b) Interest expense calculated as new senior secured term debt
issued in conjunction with acquisition plus interest on assumed
debt at an assumed annual rate of 4.5%.
(c) Assumes 23.0% tax rate which adjusts the expected GAAP
effective tax rate to take in account of the long-term annualized
cash tax benefit from the acquisition.
(d) Represents total ordinary shares outstanding as of the
closing of the acquisition including approximately 170 million
ordinary shares and 4.0 million founder preferred shares. Excludes
unvested restricted stock units and warrants outstanding.
For the nine months
ended
Segment Adjusted EBITDA September 30,
------------------------------------------
2019 2018
------------------- ---------------------
Safety Solutions
Operating income $ 147,846 $ 122,840
Other income, net 1,555 971
Depreciation and amortization 21,205 20,816
Earnout (income) expense, net (a) (5,210) 215
Non-recurring expenses (d) 2,076 -
Non-recurring expenses related to prior ownership
(c) 1,080 -
Safety Solutions adjusted EBITDA $ 168,552 $ 144,842
=================== =====================
Specialty Services
Operating income $ 67,052 $ 53,395
Other income, net 6,760 6,936
Depreciation and amortization 49,959 43,087
Earnout (income) expense, net (a) (8,989) 1,125
Non-recurring expenses (b) 1,159 -
Specialty Services adjusted EBITDA $ 115,941 $ 104,543
=================== =====================
Industrial Solutions
Operating (loss) income (1,634) 3,878
Other income, net 1,720 980
Depreciation and amortization 26,063 24,016
Earnout expense, net (a) 335 -
Industrial Solutions adjusted EBITDA $ 26,484 $ 28,874
=================== =====================
Notes:
(a) Reflects contingent consideration based on financial
performance against targets of acquired businesses following the
acquisition.
(b) Non-recurring expenses unrelated to the acquisition
including primarily items for which the Seller has indemnified the
Company.
(c) Includes costs and expenses related to prior ownership that
have not continued after the acquisition closed.
(d) Includes non-recurring costs and expenses related to
completing the acquisition.
For the nine months
ended
September 30,
Organic Growth Reconciliation 2019
--------------------------
Specialty
Solutions
Consolidated Segment
------------- -----------
Reported net revenue growth 12.2% 10.7%
Growth due to acquisitions 2.9% 9.9%
Organic growth 9.3% 0.8%
============= ===========
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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