Revenue and earnings are up at APi Group, one of Minnesota's newer public companies, but the New Brighton company said supply-chain issues are eating into margins and affecting the efficiency of its project work.
"As we have discussed throughout the quarter, COVID-19 continues to impact our business, despite our team's agility, as we manage the rise in the number of COVID-19 cases, coupled with supply-chain disruptions and inflation," said Russ Becker, APi's chief executive, in a news release. "These supply-chain issues impact our work and the work of others on certain projects and ultimately have an effect on our efficiency, causing downward pressure on margins."
APi is a provider of safety, specialty and industrial services in over 200 locations in North America and Europe.
The company earned $21 million, or 9 cents per share, in the second quarter, down from the $36 million, or 17 cents per share, in the same period a year ago. Net revenue was $978 million, up 10%.
Adjusted gross margin was 24.2%, down 27 basis points from the second quarter of 2020, with supply-chain disruptions and inflation contributing to the margin squeeze.
The company's safety services segment saw an organic revenue increase of 26.4%, while its specialty services unit saw an organic sales increase of 18.9%. Those results were offset by a 49.6% decrease in net revenue of its industrial segment.
The company maintained its guidance on full year 2021 revenue, saying adjusted net revenue will be in the range of $3.65 billion to $3.75 billion. The results will not include its upcoming $3.1 billion acquisition of Chubb fire and security businesses from Carrier Global Corp.
"We expect these negative variables will be with us through the balance of the year, however we do not believe they limit us in achieving our long-term goals," Becker added.
Those long-term goals include the integration of the Chubb units, announced on July 27 and expected to close toward the end of this year. It is expected to transform the company, nearly doubling annual revenue and the number of employees.
"We believe Chubb is a sleeping giant and will be a core asset for us that we plan to invest behind in the years to come," said James Lillie, co-chairman of APi Group's board. "We believe the transaction will be highly accretive with compelling synergies, complement revenue growth through cross-selling certain products and services and provide meaningful opportunity for margin expansion."
Revenue and earnings per share both came in slightly above analyst expectations but APi's shares closed Wednesday at $21.72, down nearly 5%.
