APi Group Announces Debt Paydown

Rhea-AI Summary

APi Group Corporation (NYSE: APG) has announced the repayment of an additional $175 million on its Term Loan due 2026, leaving $330 million outstanding. The company has repaid a total of $475 million of debt year to date and expects to end 2023 below its targeted net leverage ratio of 2.5x. APi's Chief Financial Officer, Kevin Krumm, stated that the recent paydown of debt represents a step forward in reducing leverage and strengthening the balance sheet, with plans to return to bolt-on M&A in 2023 and grow adjusted free cash flow in 2024.

Positive

• APi Group Corporation has made significant progress in reducing its debt, with a total of $475 million repaid year to date.
• The company expects to end 2023 below its targeted net leverage ratio of 2.5x, indicating a strong focus on strengthening its balance sheet.
• Plans to return to bolt-on M&A in 2023 and grow adjusted free cash flow in 2024 demonstrate the company's strategic approach to value enhancement.

Negative

• None.

Financial Analyst

APi Group Corporation's recent announcement of a significant debt repayment is a strategic move that will likely be well-received by investors and credit rating agencies. By paying down $175 million of its Term Loan, APi demonstrates a strong commitment to financial prudence and deleveraging. This action is set to improve the company's net leverage ratio, which is a key metric for assessing financial health and risk. A lower leverage ratio often results in reduced interest costs and an enhanced ability to weather economic downturns.

Looking ahead, the company's focus on improving free cash flow and free cash flow conversion is pivotal. These are critical indicators of a company's ability to generate cash and fund operations, investments and debt repayments without external financing. An improved free cash flow conversion rate suggests that a higher proportion of the company's earnings are being converted into usable cash, which is a positive sign for future capital deployment strategies, such as bolt-on mergers and acquisitions (M&A).

Investors should note that while reducing debt improves the balance sheet, it also involves using cash that could have been deployed elsewhere, such as in growth initiatives. However, given the company's intention to return to bolt-on M&A in 2023, it appears that APi is balancing debt reduction with strategic growth opportunities.

Mergers & Acquisitions Expert

The strategic implication of APi Group Corporation's debt reduction is not only a sign of financial health but also a precursor to potential M&A activities. By lowering its net leverage ratio, APi positions itself as an attractive partner for future transactions. A strong balance sheet can provide the flexibility needed to act quickly on acquisition opportunities, which can drive growth and competitive advantage.

Furthermore, the company's focus on bolt-on acquisitions is indicative of a strategy aimed at enhancing its core business rather than diversifying. Bolt-on acquisitions typically involve buying smaller companies that can be easily integrated into the existing operations, leading to synergies and increased efficiency. This focused approach to M&A can be more value-accretive than larger, transformative deals, which carry higher integration risks and complexity.

However, investors should be cognizant of the inherent risks in M&A, such as integration challenges and the potential for overpaying for acquisitions. While the company’s strategy seems sound, the success of future acquisitions will depend on diligent execution and strategic fit with the company's long-term goals.

Risk Management Specialist

From a risk management perspective, APi Group Corporation's proactive debt management is a commendable step towards reducing financial risk. By paying down debt ahead of schedule, the company is likely to benefit from a stronger credit profile, which can lead to better borrowing terms in the future. This move also mitigates the risk of financial distress in the event of an economic downturn or unexpected business challenges.

Moreover, the company's target to end 2023 with a net leverage ratio below 2.5x is a clear indication of its risk-averse financial strategy. A lower leverage ratio generally means less dependence on debt and a stronger equity base, which can be reassuring to shareholders and potential investors alike. It is also worth noting that such financial conservatism can sometimes limit a company's growth potential by curtailing aggressive investment or expansion plans.

Investors should weigh the benefits of a strong balance sheet against the potential opportunity cost of forgone investments. In the context of APi's industry, where life safety, security and specialty services may require constant innovation and investment, maintaining a balance between financial stability and growth is crucial.

NEW BRIGHTON, Minn.--(BUSINESS WIRE)-- APi Group Corporation (NYSE: APG) (“APi” or the “Company”), a global, market-leading business services provider of life safety, security and specialty services, today announced that the Company has recently paid down an additional $175 million on its Term Loan due 2026, leaving $330 million outstanding. APi has repaid a total of $475 million of debt year to date and expects to end 2023 below its targeted net leverage ratio of 2.5x.

Kevin Krumm, APi’s Chief Financial Officer stated: “The recent paydown of debt represents another step forward on our path to reducing leverage and strengthening our balance sheet, while returning to bolt-on M&A in 2023. As we look forward to 2024, we expect to grow our adjusted free cash flow and to improve our free cash flow conversion providing us with a significant opportunity for value enhancing capital deployment with our advantageous balance sheet.”

About APi:

APi is a global, market-leading business services provider of life safety, security 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

Certain statements in this press release and related comments made by management may be considered forward-looking statements within the meaning of the U.S federal securities laws. Forward-looking statements are any statements other than statements of historical fact and represent our current judgment about possible future events. In some cases, you can identify forward-looking statements by terms including “expect”, “anticipate”, “project”, “will”, “should”, “believe”, “intend”, “plan”, “estimate”, “potential”, “target”, “would”, and similar expressions, although not all forward-looking statements contain these identifying terms. While we believe these statements are reasonable, they 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) the Company’s net leverage target and its expectation regarding its net leverage by year end 2023, (ii) economic conditions, competition, inflation, or currency impacts, (iii) the ability to recognize the anticipated benefits of the Company’s acquisitions and (iv) those risks and uncertainties discussed in the “Risk Factors” section of our Form 10-K filings, and any updates to the risk factors in our Form 10-Q and 8-K filings with the U.S. Securities and Exchange Commission. Given these risks and uncertainties, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231219070837/en/

Investor Relations & Media Inquiries:

Adam Fee

Vice President of Investor Relations

Tel: +1 651-240-7252

Email: investorrelations@apigroupinc.us

Source: APi Group Corporation

What is the recent announcement made by APi Group Corporation (NYSE: APG)?

APi Group Corporation has announced the repayment of an additional $175 million on its Term Loan due 2026, leaving $330 million outstanding.

What is the total debt repaid by APi Group Corporation year to date?

APi Group Corporation has repaid a total of $475 million of debt year to date.

What is APi Group Corporation's targeted net leverage ratio for the end of 2023?

APi Group Corporation expects to end 2023 below its targeted net leverage ratio of 2.5x.

Who stated the recent paydown of debt represents a step forward in reducing leverage and strengthening the balance sheet?

Kevin Krumm, APi's Chief Financial Officer, stated that the recent paydown of debt represents a step forward in reducing leverage and strengthening the balance sheet.

What are APi Group Corporation's plans for 2023 and 2024?

APi Group Corporation plans to return to bolt-on M&A in 2023 and grow adjusted free cash flow in 2024.