REZI - Earnings call transcript Q3 2018 | Resideo Technologies, Inc.

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Operator

At this time we would like to welcome everyone to the Resideo Technologies Third Quarter 2018 Earnings Conference Call. Today's call is being recorded. [Operator Instructions]. I would now like to Dean Acosta, Chief Communications Officer of Resideo. Mr. begin. now may you Acosta

Dean Acosta

Nefkens Good morning call. Resideo. Resideo earnings Joe Resideo, to me and Vice Chief Financial and Dean Acosta, welcome Officer, Mike of I'm CEO for President the Resideo Chief Executive today President QX Ragan. and everyone and Communications With Officer

our You Investor Resideo.com. of Relations of earnings and third find can copy presentation release page quarter a materials the on

a to to other differ described remind forward those results materially obligation Before historical number you performance this guarantees risks The in looking would time we Actual involve forward get this in contains factors statements started from of and any and statements no morning's assumes forward statements. including and during Commission. filings to looking and from made Exchange like forward statements, constitute update looking than Securities those I such with facts result presentation company future the may time may are results the of uncertainties. Resideo's that of as a call looking or statements not

more it find President CEO, with filings. well Mike that which company we to our in SEC our yesterday can You as our the as like I'd With over other details to turn XXQ filed Nefkens. and

Mike Nefkens

thank you to be here it's and Dean Great great and with you today.

trading over Honeywell everyone the weeks began X to and bell So the ongoing from for morning whom celebrate and presentation few meet many appreciate Exchange. and rang investors just really completed of I and the as our page the as the optimism both with a Stock New listing. to our Resideo New joining by and York on We're were special on great like It's I'm spin with before by on support Stock on Resideo. been few start good I suppliers going able been here and many today's us other to It's we our after on we you past start of customers Exchange. saying inspired the off months so York We've call. stakeholders to

financial organic performance start hitting consistent on quarter on across running story. to we're position continuing have and the dive on the next market call X% recent opportunity us details of take new overview with deeper net X% our growth. numbers I'm of growth segment metrics to revenue to as While their disclosure a through to already you. those be attention third going delivered results Resideo's been allows level will October I today high to a to broader of solid part QX a you standalone liquidity phase forward as provide year off our call Joe and company. trading financial our Since the earnings certain We ground bit strategy. ground first Resideo in focused our may currency of of of to Joe earnings but we're the key our all a quarter just growth is this year I and more Honeywell's and started our results going We XXth through at a strong are who to over We provide business want also but the into and moving to an third the released

related and additional QX already related on impacted spin the from heard call of spin their that negatively and temporarily experienced increased that earnings our Honeywell many our you quarter. for some backlog chain have costs revenue issues As supply we EBITDA

normal product flows and issues back moving addressing actively volumes. are we're We chain seeing towards these supply already

us on track. back team and the operationally our With focused behind spin is

our develop some garnered phase on executed continue final product pipeline. of key our spin also we we wins While to the and

our and of As outlook segment XXXX excited segments showing and for full for you the XXXX. two know we our finally a year momentum guidance we're and product is are we about distribution the company, a many business in segment and have reaffirming

XXXX part at our and expect a growth range, is the well-run year end the XXXX deliver over to high demonstrates full Honeywell past performance our of business years track of on results We in three beyond. that the as continued

and growth excited continued value focused to and are We our about our for customers create innovation on and shareholders. future

about back X and new So up are I business you in jump and story those let minutes to the couple go a now bit me that. for the for through here and talk want page who to on a of Resideo

we a simplifying the solutions. from retrofit global residential we're million installs. comfort our about install in a We solutions customers We're So in products and serve do a of critical we through and through employees. of of XXX this leading smart When include a than security contractors XXX,XXX million more the as of both our the network provider home year workforce homes business. global contractors XXX,XXX we XX we and experience XX,XXX talk about new a sides and about

a call very are a them consumers safer When and with with Do like in marketplace. a the gives have that For efficient, I long you we standing easier the component channel business market. break in a is helping control. to It it position down and critical more We home a which relationship It's mature well-established to a to these upgrade contractors to solid us Me professional Channel

into mentioned distribution. broken I two our and is As segments, products business earlier

item products. hear me of global software. license. On we the our is ADI trademark we Every under and XX offering security bring refer is to so software ADI side segment, home low as part second Honeywell the product firmware you'll leading the voltage of market trusted as through or products and the connected a year distributor

security XXX over stocking home have locations connected supporting on focused the We ADI all contractor.

break XX/XX the on segments down two approximately side a revenue Our into split.

on on products the to end slide experiences little So a X. our with deeper be I to this a spend going will moment want end now and

products at you it at categories. our a look we look couple in when So

We and the in wall home, those front products cloud. of have XXXX active the behind the exterior, the the in for cover wall

take let's a the exterior home. of first the So at look

home detectors products Our and motion the exterior of the motion viewers. cameras, include exterior outdoor for video,

etcetera traditional home the an mobile like controls, the inside behind panels, be business Moving we wall detection, we're things cloud applications. more about controls, furnace boiler supporting water viewer, the heating leak hot have motion have security which the and freeze and Then detection established water then our break and glass units, in would growing talk we with sound where and we thermostat detection water wall homeowners the on dehumidification, filtration, humidification, detection.

at sell the on global you have to right we also see through look very us high where for we that's product product our business global our These we distributor and our create to Channel we we're call winning able For can sales distribution. high are technical a real So sell Then customers. sharing set. our ADI point knowledge our the own OEM's together distributors them because direct how Do our It solutions to We customers. which products bottom Me ADI touch our gives that with is so touch with security

smart think broadest be that the their that's We they going apart. come and with companies single in product point of to sector portfolios a out have of anybody one is way. Other solutions us the think goes any I control sets of a technology what product which one don't a key aspect the and the the have in of they to products really core behind don't what us think the to it customers wall home. don't connectivity that get We makes that is home, different. sits They and way have or the that's

home So pipeline. some activity. with introduction to of had towards and all you recent our to highlight business residential development We're are demand with couple that want Honeywell In X.X expand to Crius dual We've customer offering and release which their response excited save our to announced helps I through program. I'm a couple here. move now. its highlight I and now will number a garage a platform. subsidiary major Energy Crius app. with connected Chamberlain energy. Chamberlin in agreements connect branded deliver about Iberdrola business homeowners I'd providing and connected ones continuing and we're comfort going security of on in of X like and consumers distributing and integration them efficiency and a also services customers. security Scottish We're to new we're Slovakian a Power of energy key wins Power, they're with They're for minutes Scotland with slide new generation products to with offer security particularly their utility the next to working Liftmaster the to our August made for talk thermostats going Innogy, about We're progress our products our their Scottish Chamberlain Innogy, that professional money broader to the with our several them leading carry dealers. doors to to thermostats total We're With and a partnerships right software partnering utility program

just from the is are proud one future. of XXXX excited ADI of the the products couple we business examples say we're which was about momentum Communications distribution that mean all notable Now the the side of These when named what we're a Axis on distributor showing security year manufacturers. and world's is of we largest the

through the to call So our you Joe like turn to with that I'd over to financials. walk

Joe Ragan

X% given our the call. sales a consolidated from first excluding date start on of then to also under to a slide, good third for X% broader we through quarter of the reported billion is basis quarter was indemnity with and environmental which or for EBITDA comments constant X% framing year decrease XXX Mike some we Thanks, public think and X% representing we on XXX our everyone. or to up I'll performance as currency performance slide million the especially I'll is our on helpful this year. next you payments like first which walk a basis organic and growth. quarter earnings some the trends net year the Adjusted make refer in our I'd Starting million prior up morning also the prior a X.X business X. numbers the from decrease about in

XX discuss this both the downward level pro-forma issues EBITDA a well adjusted I as spin As chain our would other was over At supply sequentially. our segment the to year high more slide address any arrangement environmental with and grown indemnity results. year, our address pressure net and year and as at cast will in detail and I the but drove million this up respect all $XXX it's year Mike EBITDA on have of reimbursement mentioned issues XXQ we've level is XX and call numbers. on all costs. into related at I'll Adjusted release when modeled our these without million XX%. have income of a the appendix the slides environmental we in a it's on the that beginning

our up in XX% due our on year-to-date U.S. the net the performance. Next at number are up prior year first million EBITDA environmental over adjusted at tax million over X%, was up also X.XX income XXX looking indemnity XX% up XX% billion XXX Slide and half was million year Adjusted changes excluding year to laws. strong X, XXX reflecting

slide Next see distribution product closer we at you'll side. segment a X even performance split on almost between an if look the overall, take and

distribution date, chain our at experienced to although factoring the product sales margin from has supply has were from year quarter modest at the a when was steady a quarter. sales X% lower we the growth It and a a been the external Short side product for related and performer profit and strong steadily the perspective. same impacted the the segment for perspective. total segment for challenges rate to the time sales continued up been segment has term XX% than Profit product modestly intercompany to grow revenue performance. then down contributor negatively in On

in from XX% On On X%, side sales QX the a we're X, date. sheet strong distribution from X% and year Slide perspective in segment and of quarter the to liquidity show up position. distribution growth a strong to continued the profit balance was

to which technically not in October financing but we XXX XXQ our went million disclosed secured the have of While the our spin-off. facilitate cash includes million million spin in of third notes. and publicly was revolving date facility secured markets the XXX in secured in to to Since post we of part part drawn which senior XXX additional as credit distribution and on a of an debt used spin X.X repositioning of our unsecured Honeywell debt the early quarter billion

BB+ S&P. We have been a rating given from credit

capital QX see our talk to about we of ahead how think are and little and there. and how it's what about give on priorities more an move I think Before bit a to we you allocation XXXX important overview I

cash to to end to full high drive Board year digits we adjusted opportunities expectations, we start to access subject open From future. IP proven of to that which our consider slide times have in We term geographies. will or a with range. an our we continue generate in to be new EBITDA our organic on up are We're flows term full we our capital reaffirming could a steady mid-single would From growth at the invest ratio a new results the the to growth targeting approval as we a will tool are be expecting historically ability and to a organic markets XX existing Longer in debt are we business planning of perspective two XXXX. return standpoint our to near provide the for dividend focus On modest delever. select introduced development XXXX are on technologies, M&A guidance. or looking year at to

sales between devices demand and strong XXX and and continue million to and need of them connected XXX expect million EBITDA technologies the the expect and XXX expertise more demand the see these and help sense combined net of adjusted of access to EBITDA for XXX people between smart we really make growing from easily. with between growing which adjusted for adaptation million XX.XX X.XX minus million. indemnity We billion, and We drivers for billion

position significant is well performing and expect scale, and give and business margin the combination expansion forward. uplift market of steady powerful we will valuation growth us Our equity going

expense year, for revenue EBITDA ahead growth, So organic looking R&D indemnity of XX% and environmental or expectations next our Honeywell, million XXX after adjusted also at approximately XXXX to payment the we reiterated back XXXX XX% to close a dividend to X% we turn planning of open as going before out for modest I are mentioned to to I'm earlier Q&A. to consider approval. it that we board in subject With call the margin Mike

Mike Nefkens

from and Joe. here key few Great, there are out Slide to that Thank this I just takeaways here today's to summarize I you on points XX call. want close and just want

with So first a is Resideo and base. scale has record a winning loyal track size, customer

the for and you that time creating shareholder this expect have dividend able and leading liquidity critical shareholders well profitability positions line our most we We're and strong strong more will growth. to return focused and for deleveraging approval. top be focused We the overtime. our a in integrating We're to growth Board call I systems value pending over modest profile from away always and hope capitalized with running potentially the through flow on on home. with cash Overall come sense a value

guidance our the shared of XXXX for at I the in our we're As earlier reaffirming full range reaffirming for high XXXX. year end outlook

that first for our you and please. the an line here with over questions Operator again like to the all I'd earnings It's us joining Resideo call for at for turn time up to open exciting thank So today. to

Operator

[Operator Instructions].

our first question Oppenheimer. Please Zaffino ahead. We from take from will Ian go

Unidentified Analyst

on for taking for Mark questions. is Ian. This our Thanks

additional view just saw provide supply much then get as quarter breakout you growth you So really a if and chain you can X% guys you growth forward do maybe growth insight going quickly on impacted can in products you rate what spin off was how during start how this and Thanks. could the the the related of quarter give of a by normalize there? a any

Mike Nefkens

Investor related a most good the in that. are give name, comes typically expected. I believe issues name, items We of spin to about little related be really bit I'll where about QX example administrative out Honeywell like supply come put are, because they do Resideo needs I So to had them items. there customs affect chain product talked Day that under a an are or as it are not these paperwork days what we under of would talk us took you example to the out just a couple at the did actually yes issues

result in that ships as planned making some we're the have also spin. Europe We a of

these right can were are tell back that and to front few still it in got us. knew volumes sure of planned We clean. now coming we've make to and you we items I out So through we're we're told I we already looking normal in for the get just seeing QX there a still team things before come

of here guidance here few those that on the you back QX in and again QX very a tell these would the now. at we're I our headwinds as top So and is seeing comfortable working the expected it really of affirm we're of to we running reason range the we're we through still be by will we're end side items in able that were because other fully

Unidentified Analyst

XXXX? power terrific that's full so Okay, great of by beginning

Mike Nefkens

That's correct.

Unidentified Analyst

great. taking up behind at particularly sort can picture, business - Resideo's the the and state can follow now correlation you to and versus going drivers quick to XXXX. larger XXXX Okay, market the with of your outlook and of repairs renovation And then to impact just macro the back the a looking speak to a for the housing Thanks. how balance current mark potentially and of step

Mike Nefkens

a take a new first on actually our XX% so that less if take of a a our I that's revenue if lot look great focuses question revenue you So you get look financials home. at our than and at and

So have we hedge a natural there.

where home that for have where it estimate that a is to estimate about close homes up on math new starts every shift $X effects our done EBITDA we some our XXX,XXX done have an down million. We or

to big not new correlated we home see a can are for us. you highly item starts, not So that it's

remodeling. look we more and renovation us much For at

was consumers we saw I've feel in seen know one other confident is unemployment to you have that. of at one rate the the best that rate Home the one their out that and I One items items spend consumers unemployment the I you homes look Depot their we're to Depot's correlators continuing announcements when homes came best Home came that seeing of out they said are - yet the in and yesterday there out macro and other were the think they really continue seeing of of invest and low on

which how into space So we of well as kind consumer starts spending us. strong both that's home home good new as the for see continued is

Operator

Instructions]. [Operator

We ahead. Wolfe [ph] from our go question from Research. take Nigel next Please Cove will

Unidentified Analyst

[ph] Christian is This Nigel. for

your the call. seen a had a little relative congrats light little on [ph]? So to for you can on few situation bit detail, spin in and on was incrementals the earnings quarter maybe first about here just a questions talk distribution, just just

Mike Nefkens

And you said on distribution?

Unidentified Analyst

Correct.

Mike Nefkens

think mean lead in growth here. take were distribution look on they Yes, definitely you a no I I numbers if the at the

I Resideo some the what with X% X%. was revenue distribution chain we where think were expected we that the of issues goes also X% distribution so products number the which X% and was by and very supply affected growth we not distribution through really part was or comfortable had of but

to the the the at did the One we is half there things that look devastating we to in out of of some volumes got QX. of did QX have storms and higher first have due we year in

X% versus X% comfortable with. bit for distribution compares the are quarter growth in growth we the actually - very So were X% that but a

Unidentified Analyst

quantify simulated are in number guide. you included CapEx, not that and kind just [ph] on there those just highlighted you then some the that of what that entails? And guys CapEx Can

Joe Ragan

We would we software about approximately year conversion branding to factories, one the year that the IT lot capitalized million estimated some some XX in and a XXXX about onetime that's the building costs of be and approximate costs our and for have have course cash one-time changes overall million, the we support to is development. recent facilities XX is XX is manufacturing are to in XX CapEx to of and be etcetera in to that of so the that related in of and Sure. CapEx spin most distribution we primarily make but XX the have million related two estimate do is million talked Christian

Operator

from Alliance Please go We will Lou from next Fritz Investors take [ph]. ahead. our question Global

Unidentified Analyst

I is got XXX, have it's mean of month adjusted Honeywell at after XX really EBITDA? number XXX your the where I non-pro EBITDA XXX. I've pro-forma, a kind and very you of guidance? that guidance implies basically fourth for of your look high a presentation question adjusted is forma nine of quarter on you Is or XXX you're payment the what basically pro-forma So adjusted mid-range EBITDA to the XX a basically EBITDA XXX and if about it page predicting adjusted but

Joe Ragan

the the this for I'm there thank I question period read Thanks prepared and tables and everyone is where who for we continue say, lot like of that have we all reconcile. time to just to to to that in of you sorry but

and of We than the adjusted the we're about that quarter performance we're very so and pro range range, was the we second are in forma saying XXX to reaffirming and good the guiding talking actually that EBITDA fourth XXX guidance. end are to high more XXX slide,

Unidentified Analyst

next in third was to from drop drastic you then CapEx - actually think around year expect the of a I X% And in running in quarter? X% sales 'XX

Jeffrey Edwards:

that not number is it, some in actually That cash is accruals CapEx. - has that

The CapEx which and XX correct million really going cash our Honeywell is reporting. maintain X%. about of that forward that's about remember number legacy is part So you're we'll what

Operator

Instructions]. [Operator

follow-up from a Wolfe Research. ahead. go [indiscernible] have Please We from

Unidentified Analyst

Christian guys. Hey, again. here

what quarters. I talk is the customer been pricing higher of to that that? about response accelerating it's mix and wanted Thanks. guess pricing, a last on I back through Just that the Can talk three the function of with selling what's

Mike Nefkens

to able had inflation. Yes, any our know through pricing [indiscernible] you offset experience we've customers our so look in especially to we've positive business very to so pricing pass with on far been pricing

no been business no in our whatsoever. issues and distribution to business in so So both able [indiscernible] we there. issues had there pricing our We've get

Unidentified Analyst

given? you anticipate is then this next - year do will And that continue just into

Mike Nefkens

you into getting really good well where pricing team with is we I've same had Christian, We've - team as questions know dug it. and pricing look at so. my think the need I the asked

know trend been had years deep don't three you So I it issues pricing. we've go We've expect do really least see a had change in whatsoever no to numbers, whatsoever. at able I that in that with I've

Operator

Edler Investments Please we Aarno have go Engine another with [ph]. And question from ahead.

Unidentified Analyst

points all these have, about you talk about in and talk guess been maybe envision that but guys can future connected you role central application you some I the in you not customers You vision the in all the future? playing can focus has bigger a the can that past

Mike Nefkens

Yes about. highlight I'll so two of them that excited we're really

one we motion So on the an that things focus mean we of sensing, I on company are really IoT also in we push our analytics heavily detection, on advanced cameras.

a what to without out really us. We don't solve, there examples so use is of exactly problem focus we is put going don't like that that single on knowing detection. heavily basic now So those most product focus just two cases do the new what leak one is a area we it's of are

now there and water pilot with what B little not leak lot homes. that are in a we of know company trying you the BXC company We for and also XX,XXX the sell of detectors industry. know other claims insurance where leak to high insurance just to have to is detection into really about a businesses on going great example a damage solve a talk I B is we're companies you large we're So one out a we

a to you water so having having is in the example. this the walls the from pay destruction also insurance typically is that here behind leakage their case save don't but house to claims company homeowner That's save on due out great see. a leakage the to money So use

products a we I things other read to be able own, every pool lot you about that whether pool be swimming there right, all dying security, have what. in your to of swimming neighbour's the toddlers like be a The is or whether pools it about it solve problem, talk that out year

tell difference we a home can connect and pool. If the and sensors you alert combination and that our the and child and ripples measure at that water issue an that cameras the look not there between near of alert can on can even way up an take animal, fire armed and that can splashes, an sound, system in measure security home etcetera police, our to adult that the a the the it's turn neighbours to the is department, a lights if light

we kind and the out are have partners those solving need products you need you scale, have you and you are So to as we some to that behind need cases the very also that. the of to good use have have

kind and teams are So now really XX to right of and R&D working our use have we those about are the that cases those we're on market. things to excited get out

Operator

And with the turn like call remarks. closing further Nefkens to Mike I no would for questions to back

Mike Nefkens

our first the appreciate. call want just thank into This Yes, weeks great this. earnings listen I great over had one, guy. I so for is Hey everybody to number you the know we've going questions that

we're questions I is is the this team one. showing had call think the a great and great we telling on XXX the to on next is appreciate and the forward looking people me we what which over here call

time. a we'll next you have day everyone and see So great

Operator

your for Quarter Third you Resideo participation. XXXX Earnings Conference thank concludes Call. Technology And This

disconnect. You may now

Resideo (REZI) 14 Nov 182018 Q3 Earnings call transcript