Business Wire | Aug 12, 2020 07:46AM EDT

APi Group Reports Second Quarter and First Half 2020 Financial Results

Aug. 12, 2020

NEW BRIGHTON, Minn.--(BUSINESS WIRE)--Aug. 12, 2020--APi Group Corporation (NYSE: APG) ("APG", "APi" or the "Company"), today reported its financial results for the three and six months ended June 30, 2020.

Second Quarter 2020 Highlights:

* Reported net revenues were $889 million, compared to $1.1 billion in the prior year period, primarily driven by COVID-19 related impacts * Adjusted net revenues declined by 14.2% or $141 million to $849 million, compared to $990 million in the prior year period * Reported gross margin was 19.6%, slightly up compared to prior year gross margin of 19.5% * Adjusted gross margin was 24.0%, representing a 383 basis point increase compared to prior year gross margin of 20.2%, driven by improved project selection and execution in Industrial Services and a higher mix of service revenue in Safety Services * Reported operating income was $27 million, a $36 million decline from prior year operating income of $63 million * Adjusted EBITDA was $101 million or 11.9%, a 190 basis point increase over prior year period * Reported net income was $36 million, a $17 million decline from prior year net income of $53 million and reported net income was $0.17 per diluted share * Adjusted net income was $55 million and adjusted diluted EPS was $0.32, representing a $0.03 increase from prior year * Operating cash flow of $177 million, a $149 million increase from prior year operating cash flow of $28 million

First Half 2020 Highlights:

* Reported net revenues were $1.7 billion, compared to $2.0 billion in the prior year period, primarily driven by COVID-19 related impacts and improved project selection in Industrial Services * Adjusted net revenues declined by 8.8% or $162 million to $1.7 billion, compared to $1.8 billion in the prior year period * Reported gross margin was 19.2%, representing a 58 basis point increase compared to prior year gross margin of 18.7% * Adjusted gross margin was 23.0%, representing a 351 basis point increase compared to prior year gross margin of 19.5%, driven by improved project selection and execution in Industrial Services and a higher mix of service revenue in Safety Services * Reported operating loss was $207 million, a $296 million decline from prior year operating income of $89 million, largely driven by a $208 million impairment charge and additional amortization expense of $85 million * Adjusted EBITDA was $163 million or 9.8%, a 114 basis point increase over prior year period * Reported net loss was $158 million, a $232 million decline from prior year net income of $74 million, primarily driven by a $208 million impairment charge and reported net loss was $0.93 per diluted share * Adjusted net income was $77 million and adjusted diluted EPS was $0.44, representing a $0.03 increase from prior year * Operating cash flow of $232 million, a $179 million increase from prior year operating cash flow of $53 million

2020 Guidance

The Company announced it is establishing guidance for 2020 and believes that adjusted net revenues for the year will range between $3.4 to $3.5 billion, adjusted EBITDA will range between $345 to $355 million, and adjusted EPS will range between $0.94 to $1.00 based on an adjusted fully diluted share count of 174 million. The Company intends to modify its outlook on a regular basis as it moves through the balance of the year and gauges the on-going impact of COVID-19.

Russ Becker, APi's President and Chief Executive Officer said, "I am very pleased with our results. Our ability to execute amidst COVID-19 related disruptions is a testament to the strength and resiliency of our employees, the benefits of a geographically diverse business model within the U.S. and Canada, our emphasis on growing recurring revenue with well-capitalized customers across a variety of end markets, and the relative variability of our cost structure to allow us to quickly flex with the changing market. We believe that our relentless focus on service and inspection helps build a more protective moat around the business. In the middle of a challenging environment, despite an expected decline in net revenues across our three segments as a result of COVID-19, our proactive approach to managing risk across our platform and the strength of our recurring revenue services-focused business model yielded results."

"The resiliency, sacrifices and commitment shown by our approximately 15,000 team members has been inspiring. I thank them for their focus and on-going leadership efforts during these unprecedented times. As evidenced by the recent surge in cases, the pandemic is far from over. However, we remain confident in our ability to continue to execute on our long-term goals for the business."

APi Co-Chair James E. Lillie added, "As we look to the future, we believe the company continues to be well positioned to execute on our long-term goals. We believe that our early expense reduction actions, strong cash flow generation, conservative balance sheet and liquidity profile provide us with a stable foundation to continue to navigate the uncertain economic climate. Russ and the entire team have not taken their eyes off the ball. They have been preemptive and proactive in addressing the challenges and volatility in the COVID-19 impacted market. Together with Russ, we remain focused on capitalizing on opportunities in front of us. We believe that we are well positioned to capitalize on the current environment and take advantage of strategic opportunities."

Conference Call

APi will hold a webcast/dial-in conference call to discuss its financial results at 8:30 a.m. (Eastern Time) on Wednesday, August 12, 2020. Participants on the call will include Russ Becker, President and Chief Executive Officer; Tom Lydon, Chief Financial Officer; James E. Lillie and Sir Martin E. Franklin, Co-Chairmen of the Board of Directors.

To listen to the call by telephone, please dial 833-721-2905 or 929-517-9835 and provide Conference ID 8328637. 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/2546150/2ABC6F5FE6BB64652E10BF0FE7E8774C

A replay of the call will be available shortly after completion of the live call/webcast via telephone at 855-859-2056 or 404-537-3406 or via the webcast link above.

About APi

APi is a market-leading business services provider of safety, specialty and industrial services in over 200 locations, primarily in North America. 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

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 Company's positioning regarding its future business plans and long-term goals; (ii) the expected benefits of the Company's focus on service and inspection; (iii) the Company's strategies for each of its segments, including its focus on recurring revenue, its focus on margin expansion, acquisition opportunities, its strong balance sheet and variable cost structure, and the opportunities in the industries the Company serves; (iv) the impact of the Company's completed divestitures; (v) certain expected 2020 financial results, including the Company's guidance for 2020, the assumptions it made and the drivers contributing to its guidance; (vi) the Company's flexibility to capitalize on the current environment and take advantage of strategic opportunities; and (vii) the impacts of the COVID-19 pandemic on the future operating and financial performance of the Company and its customers, the Company's plans and strategies to adapt and respond to the pandemic and the expected impact of those plans and strategies. These statements, including the Company's guidance for 2020, 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, including the impacts of the COVID-19 pandemic 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) the ability to recognize the anticipated benefits of the acquisition and of the Company to take advantage of strategic opportunities; (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. 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.

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 and includes a reconciliation of these non-U.S. GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP. 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 and (c) determine certain elements of management's incentive compensation. Specifically:

* The Company's management believes that "adjusted" net revenues, "adjusted" gross margin, "adjusted" selling, general and administrative ("SG&A") expense, "adjusted" operating income (loss), "adjusted" net income, and "adjusted" earnings per share, which 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, share-based compensation, transaction and other costs related to acquisitions, amortization of intangible assets and depreciation remeasurements associated with acquisitions, net COVID-19 relief, and certain tax benefits from the acquisition of APi Group, Inc. (the "APi Acquisition"), are useful because they provide investors with a meaningful perspective on the current underlying performance of the Company's core ongoing operations. * The Company also presents changes in organic net revenues to provide a more complete understanding of underlying revenue trends by providing net revenues on a consistent basis as it excludes the impacts of significant acquisitions, planned or 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 year and the prior year local currency net revenues converted at the prior year average monthly exchange rates (excluding acquisitions and 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 defined as EBITDA excluding the impact of certain non-cash and other specifically identified items ("adjusted EBITDA"). 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.

The Company only provides adjusted net revenues, adjusted EBITDA and adjusted EPS guidance on a non-GAAP basis and does not provide reconciliations of such forward-looking non-GAAP measures 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, amortization of intangible assets, net COVID-19 relief, and certain tax benefits from the acquisition of APi Group, Inc. (the "APi Acquisition"), and other charges reflected in our reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.

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.

APi Group CorporationCondensed Consolidated Statements of Operations (GAAP)(Amounts in millions, except per share data)(Unaudited) For the three months ended For the six months ended June 30, June 30,

2020 2019 2020 2019

(Successor) (Predecessor) (Successor) (Predecessor)

Net revenues $ 889 $ 1,067 $ 1,747 $ 1,989

Cost of revenues 715 859 1,411 1,618

Gross profit 174 208 336 371

Selling, general and 147 145 335 282 administrativeexpensesImpairment of - - 208 - goodwill andintangible assetsOperating income 27 63 (207 ) 89 (loss)Interest expense, net 14 7 28 13

Investment income and (11 ) (1 ) (14 ) (3 )other, netIncome (loss) before 24 57 (221 ) 79 income tax provisionIncome tax provision (12 ) 4 (63 ) 5 (benefit)Net income (loss) $ 36 $ 53 $ (158 ) $ 74

Net income (loss) percommon shareBasic $ 0.18 N/A $ (0.93 ) N/A

Diluted $ 0.17 N/A $ (0.93 ) N/A

Weighted averageshares outstandingBasic 169 N/A 170 N/A

Diluted 176 N/A 170 N/A

APi Group CorporationCondensed Consolidated Balance Sheets (GAAP)(Amounts in millions)(Unaudited) June 30, December 31, 2020 2019 (Successor) (Successor)AssetsCurrent assets:Cash and cash equivalents $ 377 $ 256

Accounts receivable, net 646 730

Inventories 60 58

Contract assets 245 245

Prepaid expenses and other current assets 61 33

Assets held for sale 5 20

Total current assets 1,394 1,342

Property, plant and equipment, net 365 402

Operating lease right of use assets 102 105

Goodwill 780 980

Intangible assets, net 1,019 1,121

Deferred tax assets 65 -

Other assets 45 61

Total assets $ 3,770 $ 4,011

Liabilities and Shareholders' EquityCurrent liabilities:Short-term debt and current portion of long-term $ 18 $ 19debtAccounts payable 155 156

Other accrued liabilities 324 355

Deferred consideration 62 73

Contract liabilities 235 193

Operating and finance leases 27 27

Total current liabilities 821 823

Long-term debt, less current portion 1,163 1,171

Deferred tax liabilities 24 23

Operating and finance leases 91 95

Other noncurrent liabilities 106 142

Total liabilities 2,205 2,254

Total shareholders' equity 1,565 1,757

Total liabilities and shareholders' equity $ 3,770 $ 4,011

APi Group CorporationCondensed Consolidated Statements of Cash Flows (GAAP)(Amounts in millions)(Unaudited) For the six months ended June 30,

2020 2019

(Successor) (Predecessor)Cash flows from operating activities:Net income (loss) $ (158 ) $ 74

Adjustments to reconcile net income (loss) to netcash provided by operating activities:Depreciation and amortization 144 51

Impairment of goodwill and intangible assets 208 -

Deferred taxes (50 ) -

Share-based compensation expense 2 -

Other, net 2 7

Changes in operating assets and liabilities, net of 84 (79 )effects of business acquisitionsNet cash provided by operating activities 232 53

Cash flows from investing activities:Acquisitions, net of cash acquired (5 ) (4 )

Purchases of property and equipment (17 ) (40 )

Proceeds from sales of property and equipment 2 4

Proceeds from disposal of business 4 -

Other, net - (1 )

Net cash used in investing activities (16 ) (41 )

Cash flows from financing activities:Net short-term debt - 25

Proceeds from long-term borrowings 1 8

Payments on long-term borrowings (11 ) (16 )

Payments of acquisition-related consideration (86 ) (18 )

Distributions paid - (34 )

Net cash provided by (used in) financing activities (96 ) (35 )

Effect of foreign currency exchange rate on cash 1 - and cash equivalentsNet increase (decrease) in cash and cash 121 (23 )equivalentsCash and cash equivalents at beginning of period 256 54

Cash and cash equivalents at end of period $ 377 $ 31

APi Group CorporationReconciliations of GAAP to Non-GAAP Financial MeasuresNet Revenues and Adjusted Net Revenues and Organic Revenue Growth (non-GAAP)

(Amounts in millions)(Unaudited) For the three months ended For the six months ended June 30, June 30,

2020 2019 2020 2019

(Successor) (Predecessor) (Successor) (Predecessor)

Net revenues (as reported) $ 889 $ 1,067 $ 1,747 $ 1,989

Adjustments to reconcile netrevenues to adjusted netrevenues:Businesses classified as (a) (40 ) (77 ) (78 ) (158 )held-for-saleAdjusted net revenues $ 849 $ 990 $ 1,669 $ 1,831

Organic Revenue Growth

For the three months ended June 30, 2020 (Successor) AS Acquisitions REPORTED Net and planned Foreign Organic net revenue currency change divestitures, net translation revenue change (b) (c) (d)Safety Services (16.4 )% - 0.2 % (16.6 )%

Specialty Services (15.7 )% - - (15.7 )%

Industrial Services (18.4 )% (16.9 )% - (1.5 )%

Consolidated (16.7 )% (2.5 )% 0.1 % (14.3 )%

For the six months ended June 30, 2020 (Successor) AS Acquisitions REPORTED Net and planned Foreign Organic net revenue currency change divestitures, net translation revenue change (b) (c) (d)Safety Services (8.6 )% - 0.2 % (8.8 )%

Specialty Services (7.3 )% - - (7.3 )%

Industrial Services (27.1 )% (14.0 )% - (13.1 )%

Consolidated (12.2 )% (3.3 )% 0.1 % (9.0 )%

Notes: (a) Adjustment to reflect the elimination of amounts related to businesses classified as held-for-sale and businesses divested as of June 30, 2020.

Acquisitions include pre-acquisition net revenues in their respective (b) years of acquisition. Planned divestitures exclude net revenues for all periods for the Company's businesses divested or classified as held-for-sale at June 30, 2020.

Represents the effect of foreign currency on reported net revenues, calculated as the difference between the reported net revenues for the (c) year and the prior year local currency net revenues converted at the prior year average monthly exchange rates (excluding acquisitions and divestitures).

Organic net revenue change provides a consistent basis for a (d) year-over-year comparison in net revenues as it excludes the impacts of acquisitions, planned and completed divestitures, and the impact of changes due to foreign currency translation.

APi Group CorporationReconciliations of GAAP to Non-GAAP Financial MeasuresGross Profit and Adjusted Gross Profit (non-GAAP)

(Amounts in millions)(Unaudited) For the three months ended For the six months ended June 30, June 30,

2020 2019 2020 2019

(Successor) (Predecessor) (Successor) (Predecessor)Gross profit (as $ 174 $ 208 $ 336 $ 371 reported)Adjustments toreconcile gross profitto adjusted grossprofit:Businesses (1 ) (5 ) (1 ) (8 )classified as (a)held-for-saleBacklog (b) 23 - 45 - amortizationDepreciation (c) 8 (3 ) 4 (6 )remeasurementAdjusted gross $ 204 $ 200 $ 384 $ 357 profit Adjusted net (d) $ 849 $ 990 $ 1,669 $ 1,831 revenuesAdjusted gross 24.0 % 20.2 % 23.0 % 19.5 %margin

Notes: (a) Adjustment to reflect the elimination of amounts related to businesses classified as held-for-sale and businesses divested as of June 30, 2020.

(b) Adjustment to reflect the addback of amortization expense related to backlog intangible assets.

Adjustment to reflect the remeasurement of depreciation expense as a result of the finalization of step-up in fixed assets acquired in the APi Acquisition. For the three and six months ended June 30, 2020, reflects the reversal of depreciation expense remeasurement recorded during the three months ended June 30, 2020, which related to prior (c) periods, and the reclassification between cost of revenues and selling, general and administrative expenses. For the three and six months ended June 30, 2019 is as adjusted to reflect an increase in depreciation expense as if the APi Acquisition had occurred on January 1, 2019, and the reclassification between cost of revenues and selling, general and administrative expenses.

(d) Adjusted net revenues based on non-GAAP reconciliations included in this press release.

APi Group Corporation

Reconciliations of GAAP to Non-GAAP Financial Measures

SG&A and Adjusted SG&A (non-GAAP)

(Amounts in millions)

(Unaudited)

For the three months ended For the six months ended June 30, June 30,

2020 2019 2020 2019

(Successor) (Predecessor) (Successor) (Predecessor)

Selling, general and $ 147 $ 145 $ 335 $ 282 administrative expenses ("SG&A")(as reported)Adjustments to reconcile SG&Ato adjusted SG&A:Businesses classified as (a) (1 ) (2 ) (2 ) (6 )held-for-saleContingent consideration and (b) 10 (5 ) 3 (9 )compensationAmortization of intangible (c) (28 ) (9 ) (58 ) (18 )assetsDepreciation remeasurement (d) 4 - 2 -

Business process (e) (2 ) - (4 ) - transformation costsPublic company registration, (f) (1 ) - (5 ) - listing and complianceCOVID-19 severance costs at (g) (1 ) - (1 ) - foreign subsidiariesExpenses related to prior (h) - (6 ) - (7 )ownershipAdjusted selling, general and $ 128 $ 123 $ 270 $ 242 administrative expenses Adjusted net revenues (i) $ 849 $ 990 $ 1,669 $ 1,831

Adjusted SG&A as a percentage 15.1 % 12.4 % 16.2 % 13.2 %of adjusted net revenues

Notes: (a) Adjustment to reflect the elimination of amounts related to businesses classified as held-for-sale and businesses divested as of June 30, 2020.

Adjustment to reflect the elimination of expense attributable to (b) deferred payments to prior owners of acquired businesses not expected to continue or recur.

(c) Adjustment to reflect the elimination of amortization of intangible assets.

Adjustment to reflect the remeasurement of depreciation expense as a result of the finalization of step-up in fixed assets acquired in the APi Acquisition. For the three and six months ended June 30, 2020, reflects the reversal of depreciation expense remeasurement recorded during the three months ended June 30, 2020, which related to prior (d) periods, and the reclassification between cost of revenues and selling, general and administrative expenses. For the three and six months ended June 30, 2019 is as adjusted to reflect an increase in depreciation expense as if the APi Acquisition had occurred on January 1, 2019, and the reclassification between cost of revenues and selling, general and administrative expenses.

(e) Adjustment to reflect the elimination of non-recurring costs related to business process transformation.

(f) Adjustment to reflect the elimination of costs relating to public company registration, listing and compliance.

(g) Adjustment to reflect the elimination of severance costs at non-U.S. subsidiaries related to COVID-19.

(h) Adjustment to reflect the elimination of costs under prior ownership not expected to continue or recur following the APi Acquisition.

(i) Adjusted net revenues based on non-GAAP reconciliations included in this press release.

APi Group CorporationReconciliations of GAAP to Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA (non-GAAP)

(Amounts in millions)

(Unaudited) For the three months ended For the six months ended June 30, June 30,

2020 2019 2020 2019

(Successor) (Predecessor) (Successor) (Predecessor)Net income (loss) $ 36 $ 53 $ (158 ) $ 74 (as reported)Adjustments toreconcile netincome (loss) toEBITDA:Interest expense, 14 7 28 13 netIncome tax (12 ) 4 (63 ) 5 provisionDepreciation and 74 26 144 51 amortizationEBITDA $ 112 $ 90 $ (49 ) $ 143

Adjustments toreconcile EBITDAto adjustedEBITDA:Businesses (1 ) (2 ) 6 (1 )classified as (a)held-for-saleContingent (10 ) 5 (3 ) 9 consideration and (b)compensationImpairment of - - 203 - goodwill and (c)intangible assetsBusiness process 2 - 4 - transformation (d)costsPublic companyregistration, (e) 1 - 5 - listing andcomplianceCOVID-19 relief (3 ) - (3 ) - at foreign (f)subsidiaries, netExpenses related - 6 - 7 to prior (g)ownershipAdjusted EBITDA $ 101 $ 99 $ 163 $ 158

Adjusted net (h) $ 849 $ 990 $ 1,669 $ 1,831 revenuesAdjusted EBITDAas a percentage 11.9 % 10.0 % 9.8 % 8.6 %of adjusted netrevenues

Notes: (a) Adjustment to reflect the elimination of amounts related to businesses classified as held-for-sale and businesses divested as of June 30, 2020.

Adjustment to reflect the elimination of expense attributable to (b) deferred payments to prior owners of acquired businesses not expected to continue or recur.

(c) Adjustment to reflect the elimination of non-cash impairment charges related to goodwill and intangibles.

(d) Adjustment to reflect the elimination of non-recurring costs related to business process transformation.

(e) Adjustment to reflect the elimination of costs relating to public company registration, listing and compliance.

(f) Adjustment to reflect the elimination of miscellaneous income related to COVID-19 relief, net of severance costs, at our non-U.S. subsidiaries.

(g) Adjustment to reflect the elimination of costs under prior ownership not expected to continue or recur following the APi Acquisition.

(h) Adjusted net revenues based on non-GAAP reconciliations included in this press release.

APi Group Corporation

Reconciliations of GAAP to Non-GAAP Financial Measures

Income (Loss) before Income Tax, Net Income (Loss) and EPS and Adjusted Incomebefore Income Tax, Net Income and EPS (non-GAAP)

(Amounts in millions, except per share data)

(Unaudited)

For the three months ended For the six months ended June 30, June 30,

2020 2019 2020 2019

(Successor) (Predecessor) (Successor) (Predecessor)Income (loss)before income tax $ 24 $ 57 $ (221 ) $ 79 provision (asreported)Adjustments to reconcile income (loss) beforeincome tax provision to adjusted income (loss)before income tax provision:Businesses - (2 ) 6 (1 )classified as (a)held-for-saleAmortization of (b) 51 9 103 18 intangible assetsDepreciation (c) 4 (3 ) 2 (6 )remeasurementContingent (10 ) 5 (3 ) 9 consideration and (d)compensationImpairment of - - 203 - goodwill and (e)intangible assetsBusiness process 2 - 4 - transformation (f)costsPublic companyregistration, (g) 1 - 5 - listing andcomplianceCOVID-19 relief (3 ) - (3 ) - at foreign (h)subsidiaries, netInterest expense (i) - (8 ) - (16 )

Expenses related - 6 - 7 to prior (j)ownershipAdjusted income $ 69 $ 64 $ 96 $ 90 before income taxprovision Income taxprovision $ (12 ) $ 4 $ (63 ) $ 5 (benefit) (asreported)Adjustments to reconcile incometax provision (benefit) toadjusted income tax provision:Income tax (k) 26 9 82 13 provisionadjustmentAdjusted income $ 14 $ 13 $ 19 $ 18 tax provision Adjusted income $ 69 $ 64 $ 96 $ 90 before income taxprovisionAdjusted income 14 13 19 18 tax provisionAdjusted net $ 55 $ 51 $ 77 $ 72 income Diluted weightedaverage shares 176 N/A 170 N/A outstanding (asreported)Adjustments to reconcile diluted weighted averageshares outstanding to adjusted diluted weightedaverage shares outstanding:Dilutive impact (l) (2 ) - 4 - of PreferredShares and RSU'sDilutive impactof shares issued (m) - 174 - 174 in the APiAcquisitionAdjusted dilutedweighted average 174 174 174 174 sharesoutstanding Adjusted diluted $ 0.32 $ 0.29 $ 0.44 $ 0.41 EPS

Notes: (a) Adjustment to reflect the elimination of amounts related to businesses classified as held-for-sale and businesses divested as of June 30, 2020.

(b) Adjustment to reflect the addback of pre-tax amortization expense related to intangible assets.

Adjustment to reflect the remeasurement of depreciation expense as a result of the finalization of step-up in fixed assets acquired in the APi Acquisition. For the three and six months ended June 30, 2020, reflects the reversal of depreciation expense remeasurement recorded during the three months ended June 30, 2020, which related to prior (c) periods, and the reclassification between cost of revenues and selling, general and administrative expenses. For the three and six months ended June 30, 2019 is as adjusted to reflect an increase in depreciation expense as if the APi Acquisition had occurred on January 1, 2019, and the reclassification between cost of revenues and selling, general and administrative expenses.

Adjustment to reflect the elimination of expense attributable to (d) deferred payments to prior owners of acquired businesses not expected to continue or recur.

(e) Adjustment to reflect the elimination of pre-tax non-cash impairment charges related to goodwill and intangibles.

(f) Adjustment to reflect the elimination of non-recurring costs related to business process transformation.

(g) Adjustment to reflect the elimination of costs relating to public company registration, listing and compliance.

(h) Adjustment to reflect the elimination of miscellaneous income related to COVID-19 relief, net of severance costs, at our non-U.S. subsidiaries.

Adjustment to reflect an increase in pre-tax interest expense of $13 million and $26 million for the three-month and six-month periods related to the $1.2 billion Term Loan at a rate of 4.29% issued in connection with the APi Acquisition and $2 million and $3 million for (i) the three-month and six-month periods related to pre-tax amortization of debt issuance costs and commitment fees, partially offset by elimination of $7 million and $13 million for the three-month and six-month periods related to pre-tax interest expense related to the Predecessor's Term Loan and Revolving Credit Facility.

(j) Adjustment to reflect the elimination of expense under prior ownership not expected to continue or recur following the APi Acquisition.

Adjustment to reflect an adjusted effective tax rate of 20% (taking into consideration the tax benefits associated with the realization of (k) accelerated depreciation attributable to the approximately $350 million tax asset acquired with the APi Acquisition) applied to resulting adjusted pre-tax income inclusive of the adjustments shown above.

Adjustment for the three and six months ended June 30, 2020 reflects addition of the GAAP dilutive impact of 4 million shares associated with the deemed conversion of Preferred Shares and restricted stock units. (l) Adjustment for the three months ended June 30, 2020 is offset by the elimination of 6 million shares reflecting the dilutive effect of the Preferred Share dividend as the dividend is contingent upon the share price the last ten days of the calendar year and was not earned as of June 30, 2020.

Adjustment to reflect the diluted weighted average shares outstanding as (m) if the APi Acquisition had occurred on January 1, 2019. Excludes 64.5 million warrants outstanding, which are exercisable at a price of $11.50 per share for a total of 21.5 million ordinary shares.

APi Group CorporationAdjusted Segment Financial Information (non-GAAP)

(Amounts in millions)(Unaudited) For the three months ended For the six months ended June 30, June 30,

2020 (a) 2019 (a) 2020 (a) 2019 (a)

(Successor) (Predecessor) (Successor) (Predecessor)Safety ServicesAdjusted net revenues $ 371 $ 444 $ 795 $ 870

Adjusted gross profit 118 130 246 256

Adjusted EBITDA 47 57 100 113

Adjusted gross margin 31.8 % 29.3 % 30.9 % 29.4 %

Adjusted EBITDA as a percentage 12.7 % 12.8 % 12.6 % 13.0 %of adjusted net revenues Specialty ServicesAdjusted net revenues $ 349 $ 414 $ 649 $ 700

Adjusted gross profit 62 63 97 93

Adjusted EBITDA 51 47 69 63

Adjusted gross margin 17.8 % 15.2 % 14.9 % 13.3 %

Adjusted EBITDA as a percentage 14.6 % 11.4 % 10.6 % 9.0 %of adjusted net revenues Industrial ServicesAdjusted net revenues $ 133 $ 135 $ 232 $ 267

Adjusted gross profit 24 7 41 8

Adjusted EBITDA 20 9 31 8

Adjusted gross margin 18.0 % 5.2 % 17.7 % 3.0 %

Adjusted EBITDA as a percentage 15.0 % 6.7 % 13.4 % 3.0 %of adjusted net revenues Corporate and EliminationsAdjusted net revenues $ (4 ) $ (3 ) $ (7 ) $ (6 )

Adjusted EBITDA (17 ) (14 ) (37 ) (26 )

Total ConsolidatedAdjusted net revenues $ 849 $ 990 $ 1,669 $ 1,831

Adjusted gross profit 204 200 384 357

Adjusted EBITDA 101 99 163 158

Adjusted gross margin 24.0 % 20.2 % 23.0 % 19.5 %

Adjusted EBITDA as a percentage 11.9 % 10.0 % 9.8 % 8.6 %of adjusted net revenues

Notes: (a) Information based on non-GAAP reconciliations included in this press release.

APi Group CorporationReconciliations of GAAP to Non-GAAP Financial Measures

Adjusted Segment Financial Information (non-GAAP)

(Amounts in millions)

(Unaudited) For the three months ended For the six months ended June 30, June 30,

2020 2019 2020 2019

(Successor) (Predecessor) (Successor) (Predecessor)Safety ServicesSafety Services $ 49 $ 57 $ 67 $ 112 EBITDAAdjustments toreconcile EBITDAto adjustedEBITDA:Contingent 1 - 2 1 consideration and (a)compensationImpairment ofgoodwill, (b) - - 34 - intangibles, andlong-lived assetsCOVID-19 relief (3 ) - (3 ) - at foreign (d)subsidiaries, netSafety Services $ 47 $ 57 $ 100 $ 113 adjusted EBITDASpecialtyServicesSpecialty $ 62 $ 44 $ (46 ) $ 58 Services EBITDAAdjustments toreconcile EBITDAto adjustedEBITDA:Contingent (11 ) 3 (5 ) 5 consideration and (a)compensationImpairment ofgoodwill, (b) - - 120 - intangibles, andlong-lived assetsSpecialty $ 51 $ 47 $ 69 $ 63 Services adjustedEBITDAIndustrialServicesIndustrial $ 21 $ 9 $ (24 ) $ 6 Services EBITDAAdjustments toreconcile EBITDAto adjustedEBITDA:Businesses (1 ) (2 ) 6 (1 )classified as (c)held-for-saleContingent - 2 - 3 consideration and (a)compensationImpairment ofgoodwill, (b) - - 49 - intangibles, andlong-lived assetsIndustrial $ 20 $ 9 $ 31 $ 8 Services adjustedEBITDACorporate andeliminationsCorporate and $ (20 ) $ (20 ) $ (46 ) $ (33 )eliminationsEBITDAAdjustments toreconcile EBITDAto adjustedEBITDA:Business process (e) 2 - 4 - transformationPublic companyregistration, (f) 1 - 5 - listing andcomplianceExpenses related - 6 - 7 to prior (g)ownershipCorporate and $ (17 ) $ (14 ) $ (37 ) $ (26 )eliminationsadjusted EBITDA

Notes: Adjustment to reflect the elimination of expense attributable to (a) deferred payments to prior owners of acquired businesses not expected to continue or recur.

(b) Adjustment to reflect the elimination of non-cash impairment charges related to goodwill and intangibles.

Adjustment to reflect the elimination of pre-tax amounts related to (c) businesses classified as held-for-sale and businesses divested as of June 30, 2020.

(d) Adjustment to reflect the elimination of miscellaneous income related to COVID-19 relief, net of severance costs, at our non-U.S. subsidiaries.

(e) Adjustment to reflect the elimination of non-recurring costs related to business process transformation.

(f) Adjustment to reflect the elimination of costs relating to public company registration, listing and compliance.

(g) Adjustment to reflect the elimination of expense under prior ownership not expected to continue or recur following the APi Acquisition.

APi Group CorporationReconciliations of GAAP to Non-GAAP Financial Measures

Adjusted Segment Financial Information (non-GAAP)

(Amounts in millions)(Unaudited) For the three months ended June 30, For the three months ended June 30, 2020 2019 As Reported Adjustments As As Reported Adjustments As Adjusted AdjustedSafety Services (Successor) (Predecessor)Net revenues $ 371 $ - $ 371 $ 444 $ - $ 444

Cost of revenues 263 (11 ) (b) 253 314 - 314

1 (c)

Gross profit $ 108 $ 10 $ 118 $ 130 $ - $ 130

Gross margin 29.1 % 31.8 % 29.3 % 29.3 %



Specialty ServicesNet revenues $ 349 $ - $ 349 $ 414 $ - $ 414

Cost of revenues 301 (8 ) (b) 287 349 2 (c) 351

(6 ) (c)

Gross profit $ 48 $ 14 $ 62 $ 65 $ (2 ) $ 63

Gross margin 13.8 % 17.8 % 15.7 % 15.2 %



Industrial ServicesNet revenues $ 173 $ (40 ) (a) $ 133 $ 212 $ (77 ) (a) $ 135

Cost of revenues 155 (39 ) (a) 109 199 (72 ) (a) 128

(4 ) (b) 1 (c)

(3 ) (c)

Gross profit $ 18 $ 6 $ 24 $ 13 $ (6 ) $ 7

Gross margin 10.4 % 18.0 % 6.1 % 5.2 %



Corporate and Eliminations

Net revenues $ (4 ) $ - $ (4 ) $ (3 ) $ - $ (3 )

Cost of revenues (4 ) - (4 ) (3 ) - (3 )



Total ConsolidatedNet revenues $ 889 $ (40 ) (a) $ 849 $ 1,067 $ (77 ) (a) $ 990

Cost of revenues 715 (39 ) (a) 645 859 (72 ) (a) 790

(23 ) (b) 3 (c)

(8 ) (c)

Gross profit $ 174 $ 30 $ 204 $ 208 $ (8 ) $ 200

Gross margin 19.6 % 24.0 % 19.5 % 20.2 %

Notes: (a) Adjustment to reflect the elimination of amounts related to businesses classified as held-for-sale and businesses divested as of June 30, 2020.

(b) Adjustment to reflect the addback of amortization expense related to backlog intangible assets.

Adjustment to reflect the remeasurement of depreciation expense as a result of the finalization of step-up in fixed assets acquired in the APi Acquisition. For the three and six months ended June 30, 2020, reflects the reversal of depreciation expense remeasurement recorded during the three months ended June 30, 2020, which related to prior (c) periods, and the reclassification between cost of revenues and selling, general and administrative expenses. For the three and six months ended June 30, 2019 is as adjusted to reflect an increase in depreciation expense as if the APi Acquisition had occurred on January 1, 2019, and the reclassification between cost of revenues and selling, general and administrative expenses.

APi Group CorporationReconciliations of GAAP to Non-GAAP Financial Measures

Adjusted Segment Financial Information (non-GAAP)

(Amounts in millions)(Unaudited) For the six months ended June 30, 2020 For the six months ended June 30, 2019 As Reported Adjustments As As Reported Adjustments As Adjusted AdjustedSafety Services (Successor) (Predecessor)Net revenues $ 795 $ - $ 795 $ 870 $ - $ 870

Cost of revenues 569 (21 ) (b) 549 614 - 614

1 (c)

Gross profit $ 226 $ 20 $ 246 $ 256 $ - $ 256

Gross margin 28.4 % 30.9 % 29.4 % 29.4 %



Specialty ServicesNet revenues $ 649 $ - $ 649 $ 700 $ - $ 700

Cost of revenues 571 (16 ) (b) 552 604 3 (c) 607

(3 ) (c)

Gross profit $ 78 $ 19 $ 97 $ 96 $ (3 ) $ 93

Gross margin 12.0 % 14.9 % 13.7 % 13.3 %



Industrial ServicesNet revenues $ 310 $ (78 ) (a) $ 232 $ 425 $ (158 ) (a) $ 267

Cost of revenues 278 (77 ) (a) 191 406 (150 ) (a) 259

(8 ) (b) 3 (c)

(2 ) (b)

Gross profit $ 32 $ 9 $ 41 $ 19 $ (11 ) $ 8

Gross margin 10.3 % 17.7 % 4.5 % 3.0 %



Corporate and Eliminations

Net revenues $ (7 ) $ - $ (7 ) $ (6 ) $ - $ (6 )

Cost of revenues (7 ) - (7 ) (6 ) - (6 )



Total ConsolidatedNet revenues $ 1,747 $ (78 ) (a) $ 1,669 $ 1,989 $ (158 ) (a) $ 1,831

Cost of revenues 1,411 (77 ) (a) 1,285 1,618 (150 ) (a) 1,474

(45 ) (b) 6 (c)

(4 ) (b)

Gross profit $ 336 $ 48 $ 384 $ 371 $ (14 ) $ 357

Gross margin 19.2 % 23.0 % 18.7 % 19.5 %

Notes: (a) Adjustment to reflect the elimination of amounts related to businesses classified as held-for-sale and businesses divested as of June 30, 2020.

(b) Adjustment to reflect the addback of amortization expense related to backlog intangible assets.

Adjustment to reflect the remeasurement of depreciation expense as a result of the finalization of step-up in fixed assets acquired in the APi Acquisition. For the three and six months ended June 30, 2020, reflects the reversal of depreciation expense remeasurement recorded during the three months ended June 30, 2020, which related to prior (c) periods, and the reclassification between cost of revenues and selling, general and administrative expenses. For the three and six months ended June 30, 2019 is as adjusted to reflect an increase in depreciation expense as if the APi Acquisition had occurred on January 1, 2019, and the reclassification between cost of revenues and selling, general and administrative expenses.

APi Group CorporationReconciliations of GAAP to Non-GAAP Financial Measures

Free Cash Flow and Adjusted Free Cash Flow and Conversion (non-GAAP)

(Amounts in millions)(Unaudited) For the six months ended June 30, 2020 2019

(Successor) (Predecessor)Net cash provided by operating activities (as $ 232 $ 53 reported)Less: Purchases of property and equipment (17 ) (40 )

Free cash flow $ 215 $ 13

Add (deduct): Cash payments (sources) related tofollowing items:Businesses classified as held-for-sale (a) (4 ) 1

Contingent consideration and compensation (b) 6 1

Business process transformation costs (c) 4 -

Public company registration, listing and (d) 5 - complianceCOVID-19 relief at foreign subsidiaries, net (e) (3 ) -

Expenses related to prior ownership (f) - 7

Adjusted free cash flow $ 223 $ 22

Adjusted EBITDA (g) $ 163 $ 158

Adjusted free cash flow conversion 136.8 % 13.9 %

Notes: Adjustment to reflect the elimination of operating cash and purchases of (a) property and equipment related to businesses classified as held-for-sale and businesses divested as of June 30, 2020.

Adjustment to reflect the elimination of expense attributable to (b) deferred payments to prior owners of acquired businesses not expected to continue or recur.

(c) Adjustment to reflect the elimination of operating cash used for business process transformation costs.

(d) Adjustment to reflect the elimination of operating cash used for public company registration, listing and compliance costs.

Adjustment to reflect the elimination of operating cash used for prior (e) ownership costs not expected to continue or recur following the APi Acquisition.

(f) Adjustment to reflect the elimination of cash received for COVID-19 relief, net of severance costs paid, at our non-U.S. subsidiaries.

(g) Adjusted EBITDA based on non-GAAP reconciliation included in this press release.

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CONTACT: Investor Relations Inquiries: Olivia Walton Vice President of Investor Relations +1 651-604-2773 investorrelations@apigroupinc.us Media Contact: Liz Cohen Kekst CNC +1 212-521-4845 Liz.Cohen@kekstcnc.com