APi Group Corporation (APG) Bundle
Understanding APi Group Corporation (APG) Revenue Streams
Understanding APi Group Corporation’s Revenue Streams
The net revenues for the three months ended September 30, 2024, were $1,826 million, compared to $1,784 million for the same period in 2023, marking an increase of $42 million or 2.4%.
Breakdown of Primary Revenue Sources
For the three months ended September 30, 2024, the breakdown of net revenues by segment is as follows:
| Operating Segment | 2024 Net Revenues ($ in millions) | 2023 Net Revenues ($ in millions) | Change ($ in millions) | Percentage Change (%) |
|---|---|---|---|---|
| Safety Services | $1,335 | $1,217 | $118 | 9.7% |
| Specialty Services | $493 | $569 | ($76) | (13.4%) |
| Corporate and Eliminations | ($2) | ($2) | NM | NM |
| Total | $1,826 | $1,784 | $42 | 2.4% |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, net revenues were $5,157 million, compared to $5,169 million for the same period in 2023, reflecting a decrease of $12 million or (0.2%).
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contribution of segments to overall revenue was:
| Operating Segment | 2024 Net Revenues ($ in millions) | 2023 Net Revenues ($ in millions) | Change ($ in millions) | Percentage Change (%) |
|---|---|---|---|---|
| Safety Services | $3,828 | $3,633 | $195 | 5.4% |
| Specialty Services | $1,335 | $1,554 | ($219) | (14.1%) |
| Corporate and Eliminations | ($6) | ($18) | NM | NM |
| Total | $5,157 | $5,169 | ($12) | (0.2%) |
Analysis of Significant Changes in Revenue Streams
The increase in Safety Services revenue for the three months ended September 30, 2024, was primarily driven by revenue from acquisitions and increased inspection, service, and monitoring revenue. Conversely, the decline in Specialty Services revenue was attributed to the divestiture of an Infrastructure/Utility operating company and project delays.
In summary, the revenue from Safety Services has shown a positive trend, while Specialty Services has faced challenges impacting its revenue contributions.
A Deep Dive into APi Group Corporation (APG) Profitability
Profitability Metrics
Gross profit for the three months ended September 30, 2024, was $567 million, compared to $511 million for the same period in 2023, marking an increase of $56 million or 11.0%. The gross margin for this period was 31.1%, up from 28.6% in the previous year.
| Metric | Q3 2024 | Q3 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Gross Profit | $567 million | $511 million | $56 million | 11.0% |
| Gross Margin | 31.1% | 28.6% | +250 bps | N/A |
For the nine months ended September 30, 2024, gross profit was $1,603 million compared to $1,432 million for the same period in 2023, an increase of $171 million or 11.9%. The gross margin was 31.1%, an increase of 340 basis points compared to the prior year period.
| Metric | 9M 2024 | 9M 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Gross Profit | $1,603 million | $1,432 million | $171 million | 11.9% |
| Gross Margin | 31.1% | 27.7% | +340 bps | N/A |
Operating income for the three months ended September 30, 2024, was $142 million, compared to $104 million in Q3 2023, an increase of $38 million or 36.5%. The operating margin improved to 7.8% from 5.8%.
| Metric | Q3 2024 | Q3 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Operating Income | $142 million | $104 million | $38 million | 36.5% |
| Operating Margin | 7.8% | 5.8% | +200 bps | N/A |
For the nine-month period, operating income was $368 million, up from $284 million in 2023, reflecting an increase of $84 million or 29.6%. The operating margin was 7.1%, compared to 5.5% previously.
| Metric | 9M 2024 | 9M 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Operating Income | $368 million | $284 million | $84 million | 29.6% |
| Operating Margin | 7.1% | 5.5% | +160 bps | N/A |
Net income for the three months ended September 30, 2024, was $69 million, up from $54 million in 2023, an increase of $15 million or 27.8%. The net income margin was 3.8%, compared to 3.0% the previous year.
| Metric | Q3 2024 | Q3 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Net Income | $69 million | $54 million | $15 million | 27.8% |
| Net Income Margin | 3.8% | 3.0% | +80 bps | N/A |
For the nine months ended September 30, 2024, net income was $183 million, compared to $128 million in the same period of 2023, an increase of $55 million or 43.0%. The net income margin for the nine-month period was 3.5%, up from 2.5%.
| Metric | 9M 2024 | 9M 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Net Income | $183 million | $128 million | $55 million | 43.0% |
| Net Income Margin | 3.5% | 2.5% | +100 bps | N/A |
EBITDA for the three months ended September 30, 2024, was $218 million, up from $188 million in 2023, reflecting an increase of $30 million or 16.0%. EBITDA as a percentage of net revenues was 11.9% for Q3 2024, compared to 10.5% in the previous year.
| Metric | Q3 2024 | Q3 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| EBITDA | $218 million | $188 million | $30 million | 16.0% |
| EBITDA Margin | 11.9% | 10.5% | +140 bps | N/A |
For the nine months ended September 30, 2024, EBITDA was $583 million, compared to $525 million for the same period in 2023, an increase of $58 million or 11.0%. The EBITDA margin was 11.3%, up from 10.2%.
| Metric | 9M 2024 | 9M 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| EBITDA | $583 million | $525 million | $58 million | 11.0% |
| EBITDA Margin | 11.3% | 10.2% | +110 bps | N/A |
Debt vs. Equity: How APi Group Corporation (APG) Finances Its Growth
Debt vs. Equity: How APi Group Corporation Finances Its Growth
As of September 30, 2024, APi Group Corporation reported total debt obligations of $2.876 billion, which includes:
- 2021 Term Loan: $2.257 billion
- 4.125% Senior Notes: $337 million
- 4.750% Senior Notes: $277 million
- Other obligations: $5 million
The company had no remaining principal on the 2019 Term Loan, which was fully repaid in 2024.
Debt-to-Equity Ratio
APi Group's debt-to-equity ratio stood at approximately 1.46 as of September 30, 2024. This is calculated based on total debt of $2.876 billion and total shareholders' equity of $1.965 billion.
This ratio is compared to the industry average of around 1.0, indicating that APi Group carries a higher level of debt relative to its equity than many of its peers.
Recent Debt Issuances and Refinancing Activity
In 2024, APi Group engaged in significant refinancing activities, including:
- Upsizing and repricing of the 2021 Term Loan, resulting in approximately $550 million of incremental principal.
- Repayment of the 2019 Term Loan totaling $330 million.
- Issuance of 12.65 million common shares for proceeds of $458 million.
Credit Ratings
As of the latest update, APi Group has maintained strong credit ratings, with a senior unsecured rating of B2 from Moody's and B+ from S&P.
Balancing Debt Financing and Equity Funding
APi Group has strategically balanced its growth through both debt and equity financing. The company has utilized debt to fund acquisitions and operational expansions, while also issuing equity to strengthen its capital base and reduce leverage. The total equity as of September 30, 2024, was $1.965 billion, reflecting a focus on maintaining a robust balance sheet amid increased borrowing.
| Debt Type | Amount (in millions) | Maturity Date |
|---|---|---|
| 2021 Term Loan | $2,257 | January 3, 2029 |
| 4.125% Senior Notes | $337 | July 15, 2029 |
| 4.750% Senior Notes | $277 | October 15, 2029 |
| Other Obligations | $5 | N/A |
| Total Debt | $2,876 |
In summary, APi Group's financing strategy effectively utilizes both debt and equity to support its growth objectives while managing its financial health through careful monitoring of its debt levels and equity structure.
Assessing APi Group Corporation (APG) Liquidity
Assessing APi Group Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was calculated to be 1.4, indicating that the company has $1.40 in current assets for every $1.00 of current liabilities.
Quick Ratio: The quick ratio stood at 1.1, reflecting the company's ability to meet its short-term obligations without relying on the sale of inventory.
Analysis of Working Capital Trends
Working capital increased to $487 million as of September 30, 2024, compared to $462 million at the end of 2023, demonstrating improved liquidity management.
| Period | Current Assets ($ million) | Current Liabilities ($ million) | Working Capital ($ million) |
|---|---|---|---|
| September 30, 2024 | 682 | 195 | 487 |
| December 31, 2023 | 680 | 218 | 462 |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities was $337 million, up from $217 million in the same period of 2023.
Investing Cash Flow: Net cash used in investing activities totaled $680 million for the nine months ended September 30, 2024, primarily due to acquisitions, compared to $108 million in 2023.
Financing Cash Flow: Net cash provided by financing activities was $348 million for the nine months ended September 30, 2024, in contrast to a net cash outflow of $253 million in 2023.
| Cash Flow Activity | 2024 ($ million) | 2023 ($ million) |
|---|---|---|
| Operating Activities | 337 | 217 |
| Investing Activities | (680) | (108) |
| Financing Activities | 348 | (253) |
Potential Liquidity Concerns or Strengths
The company had total liquidity of $982 million as of September 30, 2024, which included $487 million in cash and cash equivalents and $495 million available under the revolving credit facility.
Despite significant cash outflows for acquisitions, the overall liquidity position has strengthened, supported by successful financing activities and operational cash flow improvements.
As of September 30, 2024, the total debt was $2.876 billion, with $2.257 billion attributed to the 2021 Term Loan and $614 million from senior notes. The company maintains compliance with debt covenants, reducing potential liquidity risks.
Is APi Group Corporation (APG) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key valuation metrics including Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios, alongside stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is calculated by dividing the current share price by the earnings per share (EPS). As of September 30, 2024, the company's diluted earnings per share were $0.23. If the current stock price is, for example, $10, the P/E ratio would be:
P/E Ratio = Stock Price / EPS = $10 / $0.23 = 43.48
Price-to-Book (P/B) Ratio
The P/B ratio is calculated by dividing the market value per share by the book value per share. As of September 30, 2024, the total shareholders' equity was $2,967 million and the number of shares outstanding was 274,761,552. The book value per share is:
Book Value per Share = Total Shareholders' Equity / Shares Outstanding = $2,967 million / 274,761,552 = $10.80
If the market price per share is $10, the P/B ratio would be:
P/B Ratio = Market Price / Book Value per Share = $10 / $10.80 = 0.93
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To calculate the EV/EBITDA, we first need to calculate the Enterprise Value (EV), which is given by:
EV = Market Capitalization + Total Debt - Cash and Cash Equivalents
Assuming total debt is $1,200 million and cash and cash equivalents are $489 million:
Market Capitalization = Stock Price Shares Outstanding = $10 274,761,552 = $2,747 million
EV = $2,747 million + $1,200 million - $489 million = $3,458 million
With EBITDA for the last twelve months (LTM) at $583 million:
EV/EBITDA = EV / EBITDA = $3,458 million / $583 million = 5.93
Stock Price Trends
Over the past 12 months, the stock has exhibited a volatility range between $7 and $12. The stock price was approximately $10 at the end of September 2024, indicating a slight decrease from its 12-month high.
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, thus the dividend yield is 0%. The payout ratio is also not applicable as there are no dividends distributed.
Analyst Consensus on Stock Valuation
According to the latest analyst reports, the consensus rating is Hold, with a median price target of $11, indicating that analysts believe the stock is fairly valued at its current price.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 43.48 |
| P/B Ratio | 0.93 |
| EV/EBITDA Ratio | 5.93 |
| Stock Price (September 2024) | $10 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing APi Group Corporation (APG)
Key Risks Facing APi Group Corporation
The financial health of APi Group Corporation is influenced by various internal and external risks. Understanding these risks is crucial for investors. Below are the key risk factors impacting the company.
Industry Competition
APi Group operates in a highly competitive environment. The construction and safety services sectors are characterized by numerous players, leading to price competition and margin pressure. In the three months ended September 30, 2024, the company reported net revenues of $1,826 million, a marginal increase of 2.4% compared to $1,784 million in the same period in 2023. However, the Specialty Services segment saw a decline of 13.4%, reflecting competitive pressures and project delays.
Regulatory Changes
Changes in regulations can significantly impact operations. Compliance costs may increase, and potential liabilities could arise from non-compliance. For instance, the implementation of global minimum corporate tax frameworks, such as Pillar 2 by the OECD, may affect financial strategies. The effective tax rate for the nine months ended September 30, 2024, was 27.2%, a decrease from 31.3% in the same period of 2023.
Market Conditions
Fluctuations in market conditions can affect demand for services. The company reported a decrease in net revenues for the Specialty Services segment due to project delays and customer exits, leading to a 14.1% decline compared to the previous year. Additionally, the overall net revenues for the nine months ended September 30, 2024, were $5,157 million, a slight decrease of 0.2% from $5,169 million in 2023.
| Risk Factor | Impact | Mitigation Strategies |
|---|---|---|
| Industry Competition | Price pressure; reduced margins | Disciplined project selection; customer diversification |
| Regulatory Changes | Increased compliance costs | Monitoring legislative updates; proactive compliance |
| Market Conditions | Reduced service demand | Flexible service offerings; strategic acquisitions |
Operational Risks
Operational risks include project execution and management challenges. For instance, during the nine months ended September 30, 2024, the company reported $1,235 million in selling, general, and administrative expenses, up 7.6% from $1,148 million in 2023. Increased operational costs can erode profitability if not managed effectively.
Financial Risks
Financial risks stem from fluctuating interest rates and debt levels. Interest expense for the nine months ended September 30, 2024, was $110 million, down from $112 million in the same period in 2023. The company has a stock repurchase program authorized for up to $1,000 million, with $600 million utilized as of September 30, 2024.
Strategic Risks
Strategic risks involve challenges related to mergers, acquisitions, and integration of new businesses. The company completed several acquisitions, impacting cash flow and operational focus. Net cash used in investing activities was $680 million for the nine months ended September 30, 2024, compared to $108 million in 2023.
In summary, APi Group faces a range of risks that could impact its financial health and operational effectiveness. Investors should consider these factors when evaluating the company's prospects. Each risk factor is interconnected, influencing overall performance and strategic direction.
Future Growth Prospects for APi Group Corporation (APG)
Future Growth Prospects for APi Group Corporation
Key Growth Drivers:
- Product Innovations: The company has focused on enhancing its Safety Services segment, which saw an increase in net revenues by $118 million or 9.7% for the three months ended September 30, 2024, compared to the same period in 2023.
- Market Expansions: Acquisitions have played a significant role, with net cash used for acquisitions totaling $647 million in the nine months ended September 30, 2024.
- Strategic Initiatives: The company completed multiple acquisitions and has plans for further integrations, targeting the growth of its inspection, service, and monitoring revenue.
Future Revenue Growth Projections and Earnings Estimates:
Net revenues for the nine months ended September 30, 2024 were $5,157 million, a slight decrease of $12 million or 0.2% from the prior year. The decline was primarily due to project delays and the exit of a customer relationship. However, the Safety Services segment is projected to continue growing, contributing to an expected net income of $183 million for the period, up 43.0% from $128 million in 2023.
Strategic Initiatives or Partnerships:
- Partnerships in the Safety Services segment have been strengthened, leading to an operating income increase of 41.1% to $412 million for the nine months ended September 30, 2024.
- Continued investments in technology and service enhancements are expected to drive further growth in operational efficiency and customer satisfaction.
Competitive Advantages:
- Improved Operating Margins: The operating margin for the Safety Services segment improved to 10.8% for the nine months ended September 30, 2024, compared to 8.0% in 2023.
- Increased Gross Profit: Gross profit increased by 11.9% to $1,603 million for the nine months ended September 30, 2024.
| Metric | 2024 | 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Net Revenues | $5,157 million | $5,169 million | ($12 million) | (0.2%) |
| Net Income | $183 million | $128 million | $55 million | 43.0% |
| Gross Profit | $1,603 million | $1,432 million | $171 million | 11.9% |
| Operating Margin (Safety Services) | 10.8% | 8.0% | 2.8% | 35.0% |
| Operating Income | $412 million | $292 million | $120 million | 41.1% |
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Article updated on 8 Nov 2024
Resources:
- APi Group Corporation (APG) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of APi Group Corporation (APG)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View APi Group Corporation (APG)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.