-Second quarter net revenues of $1.7 billion, with continued double-digit inspection growth-

-Record second quarter net income of $69 million, representing year-over-year growth of 44%-

-Record second quarter adjusted EBITDA of $231 million, representing year-over-year growth of 14%-

-Record second quarter free cash flow generation, with strong conversion-

APi Group Corporation (NYSE: APG) (“APi” or the “Company”) today reported its financial results for the three and six months ended June 30, 2024.

Russ Becker, APi’s President and Chief Executive Officer stated: “APi delivered strong financial results in the second quarter and the first half of the year. The business continues to perform well, with double digit U.S. Life Safety inspection growth, record adjusted EBITDA margin, and record free cash flow generation. I believe our leaders’ can generate continued momentum in the business, build on historically strong execution, consistently drive margin expansion, and return to historical levels of organic growth in the back half of the year and into 2025. We believe we can create sustainable shareholder value by focusing on our long-term value creation targets and we feel confident in our ability to achieve our 13% or more adjusted EBITDA margin target in 2025."

• Reported net revenue declined by 2.3% (3.1% organic decline) due to a decline in project revenues driven by disciplined customer and project selection and project delays, partially offset by growth in inspection, service, and monitoring revenue and acquisitions completed in the Safety Services segment.
• Reported and adjusted gross margin each increased 340 basis points compared to prior year period due to disciplined customer and project selection, pricing improvements, improved business mix in higher margin services revenue as well as significant margin expansion in both service and project revenues across both segments.
• Reported net income was $69 million and diluted EPS was $0.22, representing an 83.3% increase compared to prior year period. Adjusted net income was $136 million and adjusted diluted EPS was $0.49, representing a 19.5% increase compared to prior year period driven by significant adjusted gross margin expansion and decreased interest expense, partially offset by an increase in adjusted diluted weighted average shares outstanding.
• Adjusted EBITDA increased by 13.8% (14.0% on a fixed currency basis) compared to the prior year period and adjusted EBITDA margin increased 190 basis points to a second quarter record of 13.4%, primarily due to the increase in gross margins, partially offset by lower fixed cost absorption.

• Reported net revenue growth of 4.4% (1.5% organic) driven by strong growth in inspection, service and monitoring, price improvements as well as acquisitions completed in the last year, partially offset by planned customer attrition in our international business and disciplined customer and project selection, specifically in our HVAC business.
• Reported and adjusted gross margin increased 300 and 290 basis points, respectively, compared to prior year period driven by pricing improvements, value capture initiatives, improved business mix in higher margin services revenue as well as significant margin expansion in both service and project revenues.
• Operating income increased by 41.8% compared to the prior year period. Operating margin was 10.9%, representing a 290 basis point increase compared to the prior year period.
• Adjusted EBITDA increased by 26.4% (26.7% on a fixed currency basis) compared to the prior year period. Adjusted EBITDA margin was 15.7%, representing a 270 basis point increase compared to prior year period, primarily due to the increase in adjusted gross margins, partially offset by operating costs growing faster than revenues.

• Reported net revenue declined by 18.4% (15.3% organic decline) due to planned disciplined customer and project selection, project delays, as well as the divestiture of an Infrastructure/Utility operating company in 2023.
• Reported and adjusted gross margin each increased 230 basis points compared to prior year period due to margin improvement in services revenues and disciplined customer and project selection driving margin improvement in project revenues.
• Operating income was $35 million and operating margin was 7.7%.
• Adjusted EBITDA decreased by 10.1% due to lower revenues. Adjusted EBITDA margin was 13.7%, representing a 130 basis point increase compared to prior year period, primarily due to the increase in adjusted gross margins, partially offset by lower fixed cost absorption.

Guidance

APi Group reaffirms full year net revenue guidance and narrows full year adjusted EBITDA range

• Net Revenues of $7,150 to $7,350 million
• Adjusted EBITDA of $885 to $915 million
• Adjusted Free Cash Flow Conversion of approximately 70% of adjusted EBITDA

APi Group announces guidance for the third quarter of 2024

• Net Revenues of $1,860 to $1,910 million
• Adjusted EBITDA of $240 to $250 million

Conference Call

APi will hold a webcast/dial-in conference call to discuss its financial results at 8:30 a.m. (Eastern Time) on Thursday, August 1, 2024. Participants on the call will include Russell A. Becker, President and Chief Executive Officer; Kevin S. Krumm, Executive Vice President and Chief Financial Officer; and James E. Lillie and Sir Martin E. Franklin, Co-Chairs.

To listen to the call by telephone, please dial 800-715-9871 or 646-307-1963 and provide Conference ID 6524854. You may also attend and view the presentation (live or by replay) via webcast by accessing the following URL:

https://events.q4inc.com/attendee/713309061

A replay of the call will be available shortly after completion of the live call/webcast via the webcast link above.

About APi:

APi is a global, market-leading business services provider of fire and life safety, security, elevator and escalator, and specialty services with a substantial recurring revenue base and over 500 locations worldwide. APi provides statutorily mandated and other contracted 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 www.apigroupcorp.com.

Forward-Looking Statements and Disclaimers

Please note that in this press release 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,” “will,” “should,” “believe,” “intend,” “plan,” “estimate,” “predict,” “seek,” “continue,” “pro forma” “outlook,” “may,” “might,” “should,” “can have,” “have,” “likely,” “potential,” “target,” “indicative,” “illustrative,” and variations of such words and similar expressions, and relate in this press release, without limitation, to statements, beliefs, projections and expectations about future events. Such statements 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.

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, political risks, and other risks that may affect the Company’s future performance, including the impacts of inflationary pressures and other macroeconomic factors on the Company’s business, markets, supply chain, customers and workforce, on the credit and financial markets, on the alignment of expenses and revenues and on the global economy generally; (ii) supply chain constraints and interruptions, and the resulting increases in the cost, or reductions in the supply, of the materials and commodities the Company uses in its business and for which the Company bears the risk of such increases; (iii) risks associated with the Company’s expanded international operations; (iv) failure to realize the anticipated benefits of our acquisitions and restructuring program, and our ability to successfully execute the Company’s bolt-on acquisition strategy to acquire other businesses and successfully integrate them into its operations; (v) failure to fully execute the Company’s inspection first strategy or to realize the expected service revenue from such inspections; (vi) risks associated with the Company’s decentralized business model and participation in joint ventures; (vii) improperly managed projects or project delays; (viii) adverse developments in the credit markets which could impact the Company’s ability to secure financing in the future; (ix) the Company’s substantial level of indebtedness; (x) risks associated with the Company’s contract portfolio; (xi) changes in applicable laws or regulations; (xii) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; (xiii) the impact of a global armed conflict; (xiv) the trading price of the Company’s common stock, which may be positively or negatively impacted by market and economic conditions, the availability of the Company’s common stock, the Company’s financial performance or determinations following the date of this press release to use the Company’s funds for other purposes; (xv) geopolitical risks; and (xvi) other risks and uncertainties, including those discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 under the heading “Risk Factors.” Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. Additional information concerning these risks, uncertainties and other factors that could cause actual results to vary is, or will be, included in the periodic and other reports filed by the Company with the Securities and Exchange Commission. Forward-looking statements included in this press release speak only as of the date hereof 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 circumstances after the date of this press release.

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. 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, (c) determine certain elements of management’s incentive compensation, and (d) provide consistent period-to-period comparisons of the results. Specifically:

• The Company’s management believes that adjusted gross profit, adjusted selling, general and administrative (“SG&A”) expenses, adjusted net income, and adjusted earnings per share, which are non-GAAP financial measures that exclude business transformation and other expenses for the integration of acquired businesses, the impact and results of businesses classified as assets held-for-sale and businesses divested, and one-time and other events such as impairment charges, restructuring costs, transaction and other costs related to acquisitions, amortization of intangible assets, and non-service pension cost or benefit are useful because they provide investors with a meaningful perspective on the current underlying performance of the Company’s core ongoing operations.
• The Company discloses fixed currency net revenues and adjusted EBITDA (“FFX”) on a consolidated basis or segment specific basis to provide a more complete understanding of underlying revenue and adjusted EBITDA trends by providing net revenues and adjusted EBITDA on a consistent basis. Under U.S. GAAP, income statement results are translated in U.S. Dollars at the average exchange rates for the period presented. Management believes that the fixed currency non-GAAP measures are useful in providing period-to-period comparisons of the results of the Company’s operational performance, as it excludes the translation impact of exchange rate fluctuations on our international results. Fixed currency amounts included in this release are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2024.
• The Company also presents organic changes in net revenues on a consolidated basis or segment specific basis to provide a more complete understanding of underlying revenue trends by providing net revenues on a consistent basis as it excludes the impacts of material acquisitions, completed divestitures, and changes in foreign currency from year-over-year comparisons on reported net revenues, calculated as the difference between the reported net revenues for the current period and reported net revenues for the current period converted at fixed foreign currency exchange rates (excluding material acquisitions and divestitures). The remainder is divided by prior year fixed currency net revenues, excluding the impacts of completed divestitures.
• 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 is defined as EBITDA excluding the impact of certain non-cash and other specifically identified items (“adjusted EBITDA”). Adjusted EBITDA margin is calculated as adjusted EBITDA divided by net revenues. 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. Free cash flow is defined as cash provided by (used in) operating activities less capital expenditures. Adjusted free cash flow is defined as cash provided by (used in) operating activities plus or minus events including, but not limited to, transaction and other costs related to acquisitions, business transformation and other expenses for the integration of acquired businesses, payments on acquired liabilities, payments made for restructuring programs, impacts of businesses classified as assets held-for-sale and businesses divested, one-time and other events such as post-measurement period purchase accounting adjustments for acquisitions and public offerings, and COVID-19 related payroll tax deferral and relief items. Adjusted free cash flow conversion is defined as adjusted free cash flow as a percentage of adjusted EBITDA.
• The Company calculates its leverage ratio in accordance with its debt agreements which include different adjustments to EBITDA from those included in the adjusted EBITDA numbers reported externally.

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.

The Company does not provide reconciliations of forward-looking non-U.S. GAAP adjusted EBITDA and growth in organic net revenues to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for acquisitions and divestitures, business transformation and other expenses for the integration of acquired businesses, one-time and other events such as impairment charges, transaction and other costs related to acquisitions, restructuring costs, amortization of intangible assets, and other charges reflected in the Company’s reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.