APi Group Completes Acquisition of Elevated Facility Services Group

Rhea-AI Summary

APi Group (NYSE: APG) has completed its acquisition of Elevated Facility Services Group for approximately $570 million. Elevated, based in Tampa, Florida, and operating in over 18 states, is expected to generate about $220 million in annual revenue with an adjusted EBITDA margin of 20%. This acquisition marks APi's entry into the $10+ billion U.S. elevator and escalator services market and is anticipated to boost the company’s financial profile.

APi has raised its full-year 2024 guidance, now expecting net revenues between $7,150 and $7,350 million, and adjusted EBITDA between $875 and $925 million. The company projects organic revenue growth of 5% to 9% in the second half of the year and expects to achieve record profitability. APi's acquisition strategy, supported by a strong balance sheet, aims to drive further growth in the fragmented market.

Positive

• Completed $570 million acquisition of Elevated Facility Services Group.
• Elevated expected to contribute $220 million in annual revenue.
• Adjusted EBITDA margin of 20% anticipated from Elevated.
• Expansion into the $10+ billion U.S. elevator and escalator services market.
• Raised full-year 2024 revenue guidance to $7,150 - $7,350 million.
• Increased adjusted EBITDA guidance to $875 - $925 million.
• Projected organic revenue growth of 5% to 9% in the second half of the year.
• Anticipates record profitability in the second half of 2024.

Negative

• Acquisition cost of $570 million may impact short-term liquidity.
• Projected full-year 2024 interest expense remains high at $145 million.
• No change in adjusted free cash flow conversion at approximately 70%.

Insights

Financial Analyst

The acquisition of Elevated Facility Services Group for $570 million is a substantial strategic move for APi Group. The acquisition is expected to contribute approximately $220 million in annual revenue with an approximate 20% adjusted EBITDA margin. This indicates a significant addition to APi’s earnings potential and aligns with their strategy to pivot towards inspection, service and monitoring revenues, which are generally more stable and recurring.

Notably, APi has raised its full-year guidance for net revenue and adjusted EBITDA, suggesting confidence in the integration and performance of Elevated. Net Revenues are projected to be between $7,150 million and $7,350 million, an increase from the previous guidance. Adjusted EBITDA is forecasted to be between $875 million and $925 million, also up from the earlier projection.

From a financial perspective, this acquisition should enhance APi's earnings profile by bolstering its high-margin service revenue. However, the long-term success will depend on the effective integration of Elevated and the realization of synergies. Investors should also note the unchanged adjusted free cash flow conversion of approximately 70%, which underscores the company's efficient cash generation capability.

Market Research Analyst

The entrance into the $10+ billion U.S. elevator and escalator services market is a notable development for APi Group. This market is characterized by high fragmentation, presenting ample opportunities for organic growth and further acquisitions. By acquiring Elevated, APi positions itself to capitalize on the mandatory nature of elevator and escalator maintenance services, which ensures a consistent demand base.

The business mix shift towards inspection, service and monitoring is strategic, as these segments typically offer higher margins and recurring revenue streams compared to installation or manufacturing segments. This shift aligns with broader industry trends where companies are focusing on service and maintenance to build stable revenue bases.

While the move seems promising, it's important to observe how APi navigates competitive pressures and market dynamics in this new space. The long-term impact on the company’s market position and profitability will depend on its ability to integrate Elevated’s operations efficiently and leverage cross-selling opportunities within its existing customer base.

-Establishes new statutorily mandated service platform in the highly attractive elevator and escalator services space-

-Accelerates business mix shift towards 60% of revenues from inspection, service, and monitoring-

-Company raises full year guidance-

NEW BRIGHTON, Minn.--(BUSINESS WIRE)-- APi Group Corporation (NYSE: APG) (“APi” or the “Company”) today announced that it has completed its previously announced acquisition of Elevated Facility Services Group (“Elevated”) from a fund managed by L Squared Capital Partners for approximately $570 million.

Headquartered in Tampa, Florida, Elevated has approximately 600 leaders and serves customers in over 18 states. Elevated is a premier provider of contractually based services for all major brands of elevator and escalator equipment. Elevated is expected to contribute approximately $220 million in annual revenue at an approximate 20% adjusted EBITDA margin.

Russ Becker, APi’s President and Chief Executive Officer stated: “Today we welcome our 600 new teammates to the APi family and begin our work leveraging the opportunities created by this acquisition. We are excited to collaborate with Elevated and its talented leadership team as we expand into the $10+ billion U.S. elevator and escalator services market. This acquisition further strengthens APi’s financial profile and represents a continuation of our focus on building a robust line of businesses that provide mandatorily required life safety services."

Becker continued, “We believe there is a long runway of opportunity for Elevated to grow organically and through acquisition. The strength of our balance sheet today and our track record executing complementary bolt-on M&A over the last 20 years makes APi the perfect owner to help Elevated accelerate its growth in the fragmented elevator and escalator services market. We expect the second half of 2024 to bring record profitability and a return to strong organic revenue growth. Our updated full year guidance for net revenues including Elevated represents reported revenue growth of approximately 7% to 11% and organic revenue growth of approximately 5% to 9% in the back half of year.”

2024 Full Year Guidance

APi is raising its full year net revenue and adjusted EBITDA guidance.

• Net Revenues of $7,150 to $7,350 million, up from $7,050 to $7,250 million
• Adjusted EBITDA of $875 to $925 million, up from $855 to $905 million
• Adjusted Free Cash Flow Conversion of approximately 70% remains unchanged

	Net Revenues								Adjusted EBITDA
February 2024	$	7,050		–		$	7,250		$	855		–		$	905
(-) Current FX Impact (1)				–								–
(-) Specialty Services Divestitures				($20	)							($2	)
(+) Safety Services Acquisitions	$	120		–		$	130		$	23		–		$	24
June 2024	$	7,150		–		$	7,350		$	875		–		$	925

Note: All amounts shown in millions

(1) Reflects change in impact from February 2024 guide to June 2024 guide.

APi now expects full year 2024 interest expense to be approximately $145 million, down from $150 million. Prior expectations for full year 2024 depreciation of approximately $80 million, capital expenditures of approximately $95 million, adjusted effective tax rate of approximately 23% and adjusted weighted average share count of approximately 279 million remain unchanged.

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.

Non-GAAP Financial Measures

This press release contains a non-U.S. GAAP financial measure within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The Company uses the non-U.S. GAAP financial measure 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 this non-U.S. GAAP financial measures and the information it provides is useful to investors since this measure (a) permits 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) permits investors to compare the Company with its peers,(c) determines certain elements of management’s incentive compensation and (d) provides consistent period-to-period comparisons of the results. Specifically:

• 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 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.

While the Company believes this non-U.S. GAAP measure is 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, this non-U.S. GAAP financial measure may differ from similar measures presented by other companies.

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.

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 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 include (i) the Company’s expectations and beliefs regarding the acquisition of Elevated, including with respect to the Company’s market position, the Company’s long-term strategies and targets, the expected revenue contribution, that the acquisition will be accretive, and the expected synergies.

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) failure to realize the anticipated benefits of the acquisition of Elevated and its ability to successfully execute the Company’s bolt-on acquisition strategy to acquire other businesses and successfully integrate them into its operations; (iii) changes in applicable laws or regulations; (iv) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and (v) 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240604823338/en/

Investor Relations and Media Inquiries:

Adam Fee

Vice President of Investor Relations

Tel: +1 651-240-7252

Email: investorrelations@apigroupinc.us

Source: APi Group Corporation

FAQ

What is the expected contribution of Elevated Facility Services to APi's revenue?

Elevated Facility Services is expected to contribute approximately $220 million in annual revenue.

How much did APi Group pay to acquire Elevated Facility Services?

APi Group paid approximately $570 million to acquire Elevated Facility Services.

What are the new revenue and EBITDA guidance figures for APi Group in 2024?

APi Group raised its full-year 2024 revenue guidance to $7,150 - $7,350 million and adjusted EBITDA to $875 - $925 million.

In which market segment does APi's acquisition of Elevated Facility Services position the company?

The acquisition positions APi in the $10+ billion U.S. elevator and escalator services market.

What is APi Group's projected organic revenue growth for the second half of 2024?

APi Group projects an organic revenue growth of 5% to 9% for the second half of 2024.

What are the expected profitability outcomes for APi Group following the acquisition?

APi Group anticipates record profitability in the second half of 2024.

What is the anticipated adjusted EBITDA margin from Elevated Facility Services?

The anticipated adjusted EBITDA margin from Elevated Facility Services is approximately 20%.