# APi Group (APG) — Financial Analysis

**Exchange:**   
**Coverage as of:** 2026-Q2  
**Updated:** 2026-06-10  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/APG/thesis · /stocks/APG/memo

## Financial Snapshot

---
source: coverage-next-full
step: 04
ticker: APG
company: APi Group Corporation
date: 2026-06-09
---

### Step 04 — Financial Quality: APi Group Corporation (APG)

#### 1. Financial Statement Quality Assessment

##### Key Accounting Adjustments Required

APi Group's GAAP financial statements require significant adjustment to understand the company's true economic earnings power. Three primary distortions:

**1. Purchase Price Amortization (PPA):** APi has made 140+ acquisitions; each generates substantial intangible asset amortization that flows through the income statement. FY2025 amortization = $242M — a non-cash charge that reduces GAAP operating income but has no economic significance. GAAP operating margin (7.0%) is therefore a misleading metric; adj. EBITDA margin (13.2%) is far more representative. [S1]

**2. Preferred Stock Accrual Distortion:** Series A Preferred Stock accrues a non-cash dividend (~$590M in FY2025 vs. $95M in FY2024) that reduces income attributable to common shareholders, making GAAP EPS per common share deeply negative ($-0.69 in FY2025) despite positive net income ($302M). This is a pure accounting reclassification of earnings between equity classes, not an economic cash outflow. [S1, S2]

**3. Restructuring / Transaction Costs:** Chubb integration restructuring charges, one-time M&A costs, and ERP implementation costs are recurring in the sense that APi is always integrating acquisitions. These should be assessed on a normalized basis. [S2]

##### Adjusted vs. GAAP Bridge (FY2025)

| Metric | GAAP | Adjusted | Bridge |
|--------|------|---------|--------|
| Operating income | $554M (7.0% margin) | ~$796M (~10.1%) | + $242M amortization |
| Net income to common | ($288M) | ~$540M | + $590M preferred accrual + $242M amortization - tax adj. |
| EPS (diluted) | ($0.69) | $1.48 | Same adjustments; $1.48 adj. EPS consensus |
| EBITDA | ~$881M (11.1%) | $1,041M (13.2%) | + restructuring, SBC, other |

The gap between $302M GAAP net income and $1.41B in non-cash/non-recurring charges demonstrates how significantly reported earnings understate economic earning power. [S1, S2]

#### 2. Income Statement Quality Analysis

##### Revenue Quality: HIGH
- 53% of revenue is inspection/testing/maintenance under contractual terms — high predictability
- Revenue recognized as services are performed (ASC 606); no aggressive revenue acceleration
- Project revenue is percentage-of-completion; appropriate for long-duration contracts
- No material revenue concentration risk; top customer likely <2% of revenue [S2]

##### Gross Margin Trend: IMPROVING AND SUSTAINABLE

| Period | Revenue ($M) | Gross Profit ($M) | Gross Margin |
|--------|-------------|------------------|-------------|
| FY2023 | $6,928 | $1,940 | 28.0% |
| FY2024 | $7,018 | $2,178 | 31.0% |
| FY2025 | $7,911 | $2,487 | 31.4% |
| Q1 2026 | $1,982 | — | ~32% (est.) |

300+ bps gross margin expansion from FY2023 to FY2025 reflects: (1) mix shift toward higher-margin inspection revenue, (2) operational improvement in acquired Chubb businesses, (3) pricing discipline in Safety Services. [S1, S2]

##### SG&A Quality: ELEVATED BUT TRENDING
SG&A as % of revenue: 24.4% in FY2025 (vs. 24.1% in FY2024). This is elevated relative to pure specialty contractors because APi maintains a significant corporate overhead structure to support its acquisition platform and national account capabilities. The ERP investment ($multi-year) also runs through SG&A. Operating leverage will be positive as revenue scales; management targets bring SG&A leverage as the primary path to margin expansion beyond gross profit gains. [S2]

##### Cash Conversion: EXCELLENT

| Period | Net Income ($M) | Operating CF ($M) | FCF ($M) | FCF/NI |
|--------|-----------------|-------------------|---------|--------|
| FY2023 | $153 | $514 | $428 | 2.8x |
| FY2024 | $250 | $620 | $536 | 2.1x |
| FY2025 | $302 | $759 | $663 | 2.2x |

FCF consistently exceeds net income by 2–3x, driven by large non-cash charges (amortization $242M, preferred accrual, SBC $44M). This is the hallmark of an asset-light acquisition compounding model. Adj. FCF (as reported by management) = $836M in FY2025, reflecting $663M GAAP FCF + approximately $173M in adjustments (restructuring payments, acquisition costs). [S1]

##### CapEx Quality: WELL-CONTROLLED
CapEx = $96M in FY2025 (1.2% of revenue). APi Group is not capital-intensive — it does not own the buildings it services, and service vehicles/equipment are modest. Low CapEx intensity is a structural advantage of the services model vs. manufacturing peers. Maintenance CapEx is estimated <$70M; growth CapEx is minimal given organic growth is technician-driven, not asset-driven. [S1]

#### 3. Balance Sheet Quality

##### Asset Quality

| Asset | Dec 2025 | Quality Assessment |
|-------|---------|-------------------|
| Cash | $912M | High quality; strong liquidity |
| Accounts receivable, net | $1,563M | Normal for services; DSO ~72 days |
| Goodwill | $3,167M | Large; reflects M&A history. Subject to impairment testing. |
| Intangible assets, net | $1,584M | Customer relationships, trade names; amortizing |
| PP&E, net | $397M | Low (service vehicles, equipment); consistent with asset-light model |
| Total assets | $8,936M | — |

**Goodwill analysis:** $3.167B of goodwill represents 35.4% of total assets and 93% of tangible book value. This is expected for an acquisition-driven company but creates earnings risk if acquired businesses underperform and impairment charges are required. No impairment charges have been recorded in recent years, suggesting acquired assets are performing. [S1, S2]

**Net Debt:** $1,847M at YE 2025 ($2,759M LTD - $912M cash). Net leverage = 1.1x FY2025 adj. EBITDA per covenant definition; approximately 1.8x on a trailing EBITDA basis (Q1 2026). [S2]

##### Debt Structure

| Instrument | Outstanding | Rate | Maturity |
|-----------|-------------|------|---------|
| 2021 Term Loan | $2,157M | SOFR + 1.75% (~7%+) | Jan 2029 |
| 4.125% Senior Notes | $350M | 4.125% (fixed) | Jun 2029 |
| 5.75% Senior Notes (new) | $500M | 5.75% (fixed) | Jun 2031 |
| Revolving Credit Facility | $0 drawn | Floating | 2029 |
| Total Gross Debt | ~$3,007M | — | 2029–2031 |

**Note:** $500M 5.75% senior notes were issued May 2026 (after FY2025 year-end) to fund CertaSite, Onyx-Fire, and Wtech acquisitions. This increases gross debt to ~$3.0B and net leverage toward 2.0x+.

**Refinancing risk:** Both the term loan and 2029 senior notes mature in 2029 — the same year. This creates a refinancing concentration risk in FY2028/2029. Management will need to address this through refinancing or paydown. Given FCF trajectory ($663M in FY2025 → $800M+ in FY2026E), management has capacity. [S2, S3]

#### 4. Adversarial Research Sweep

*Note: No earnings transcripts used (coverage-next-full path). Short reports, litigation, and regulatory actions sourced from web research and SEC filings.*

##### Short Interest
- Short interest: ~2.3% of float (~10M shares), approximately 2.8 days to cover (June 2026)
- Short interest has declined ~29% from November 2025 peak — bears have been covering
- No active short reports identified by major short-focused funds (Muddy Waters, Hindenburg, etc.)
**Assessment: Short interest is low and declining; no organized bear thesis** [S4]

##### Litigation / Legal Risk
- **International operations:** APi's FY2025 10-K flags FCPA compliance risk for European/Middle Eastern operations. No active FCPA proceedings disclosed.
- **ERP implementation risk:** Multi-year enterprise ERP rollout began in 2024; execution failures could affect financial reporting controls. Clean KPMG audit opinion in FY2025.
- **Contract disputes:** Normal for a company with thousands of project contracts. No material litigation disclosed in FY2025 10-K.
- **Series A Preferred Stock:** The large non-cash preferred accrual (~$590M in FY2025 vs. $95M in FY2024) creates a significant difference between reported and perceived financial results. No shareholder litigation identified. [S2]

##### Regulatory/SEC Issues
- **KPMG audit:** Clean (unqualified) opinion on both financial statements and ICFR as of December 31, 2025. Effective ICFR maintained.
- **SEC comment letters:** No material open SEC comment letters identified.
- No DOJ/FTC antitrust proceedings related to M&A program identified.

##### Related Party Risks
- **Sir Martin Franklin advisory fee:** Franklin receives $4M/year advisory fee from APi via Mariposa Capital, disqualifying him from independent director status. This is a governance risk that should be monitored but is disclosed and approved by the compensation committee.
- **Franklin selling:** Franklin and other founders have sold ~$310M in shares over the trailing 12 months via 10b5-1 programs. While selling, this was partly triggered by January 2026 Series A preferred dividend distribution. [S5]

##### Financial Statement Red Flags — None Material
- Revenue recognition is straightforward services model under ASC 606
- No off-balance-sheet vehicles or synthetic structures identified
- Goodwill write-downs: None in recent history; clean acquisitions
- Working capital: Normal for services; no suspicious AR or inventory build
- Related-party transactions: Franklin advisory fee is the main item; disclosed and approved

**Overall Adversarial Assessment: LOW RISK.** APi Group is a large-cap, well-audited company with straightforward (if complex) financials. The accounting adjustments (preferred stock, amortization) require investor sophistication but are not deceptive. The primary financial risk is integration execution on $1B+ of concurrent M&A, not accounting quality.

#### 5. Earnings Quality Score

| Dimension | Score (1–5) | Notes |
|-----------|------------|-------|
| Revenue recognition | 5 | ASC 606 standard; services model |
| Cash conversion | 5 | FCF consistently exceeds NI; amortization explains gap |
| Working capital management | 4 | Negative WC in inspection contracts (prepaid); A/R normal |
| Debt structure | 3 | 2029 refinancing concentration; leverage elevated |
| Accounting transparency | 4 | GAAP distortions are disclosed and well-understood |
| Litigation / legal risk | 4 | Clean; international compliance risk monitored |
| Insider selling | 3 | High-volume founder sales; but via 10b5-1 programs |
| **Overall** | **4.0/5** | Strong earnings quality with known risk areas |

#### Source Index
| Code | Source |
|------|--------|
| S1 | XBRL / APG_financials/xbrl/xbrl_summary.md |
| S2 | 10-K FY2025 / APG_financials/sec_filings/10K_FY2025_summary.md |
| S3 | StockAnalysis / APG_financials/other/stockanalysis_summary.md |
| S4 | Short/risk research / APG_financials/other/short_and_risk.md |
| S5 | Proxy / insider transactions / APG_financials/proxy/ |

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/APG/fundamental

## Navigation

- Overview: /stocks/APG
- Financials (this page): /stocks/APG/financials
- Thesis: /stocks/APG/thesis
- Investment Memo: /stocks/APG/memo
- Coverage universe: /stocks