REZI - Earnings call transcript Q3 2020 | Resideo Technologies, Inc.

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Operator

Ladies and gentlemen, at this time, I'd like to welcome everyone to the Resideo Technologies Third Quarter 2020 Earnings Conference Call. Today's call is being recorded. [Operator Instructions]. It's now my pleasure to introduce Mr. Jason Willey, Senior Director of Investor Relations. Mr. begin, now may you sir. Willey,

Jason Willey

Resideo's and including Good Financial for facts our constitute call made Officer. for and forward-looking earnings during number this statements Geldmacher, statements as us may presentation vary not Copy remind call or results of involve you Actual to historical may guarantees performance of Third a results are materially uncertainties. and morning, will other Trunzo, forward-looking Quarter Chief Jay future today's from everyone, Resideo's the are On you on this and XXXX risks morning's of joining Call. and Officer; presentation update those related and The forward-looking Exchange thank statements. Earnings available such our Executive Chief Resideo's from be Tony of Relations of statements. Investor to than time number like to in the Commission. release Securities a We result obligation filings our any of would and a the no those described contains with forward-looking Statements page website materials assumes factors, on at company time investors.resideo.com. that Conference

GAAP We the I our risks the principal filings. identify website. over turn our included release A and refer affect our other financial of on report will Jay. annual Additionally, in reconciliation presentation, today, both results accompanying in call section and be non-GAAP to Form non-GAAP on our now that Relations of can certain call during the found we company's performance Investor press our to XX-K is the will to SEC information. earnings which uncertainties of and

Jay Geldmacher

Jason, you, morning, and Thank good everyone.

each the us demand of outperformance in portfolio, reach long grew improvement a of a and ADI a initiatives quarter We quarter, has compared we from saw professional driving platform demand markets. expansion. translated XX% we relative ADI well-defined top grew Products QX. The financial a end quarter Solutions, and second with our our it in markets of extensive dynamics to revenue executing product the reflecting value-enhancing COVID-XX year-over-year growth tailwind saw growth a At team markets, unmatched shifted quarter, third underlying third on third continued quarter in XX% line headwind record our in significant leverage This outperformance. strategy & gross the the meaningful XXXX. with deliver channel a strength which across meaningful sequential and and year-over-year serves. track the business, in broad to our relationships Across distribution margin ADI, to the another the Within in to the During for of improvement results. revenue to enabled

demand we as This into underlying quarter. which move the indicated accelerated on home behavior third progressed in homes, customer through we As momentum call, creating and their QX is July. spend markets, desire X attention or With durability reach for our home comfort quarters. on the have business beyond projects market solutions current leading to driving which renovation repair security invest, well and we believe and capitalize distribution the our and on and continue as security. and and a People increased to X to believe positive across is trended trends, time QX we positioned demand positive home more

added connected the time, the to growth. an efforts joined efforts, is significant enabling our leadership a value Phil the and Looking the around innovation on took across platforms and of accelerated this road track customer We home Jeff and on progress are reorganizing of Jeff August, delivering records segment. Products the development. business adding in to strengthening growth. of Senior sustained new of is the our operational President Solutions unlocking better solidified organization Frank is leader organization address individuals to needs, improvements, efficiency user new & in that X at the on innovation long-term we a positioning critical as role the quicker President business, transformation cohesion track technology The for product new critical experience focused Products leading perspective and create bring formation to to market their Solutions who as across position successfully proven operationally and ensuring senior on for of of October, reorganized on focus market his Product within to product team there's our teams while bringing back Innovation discipline Phil my Resideo. the fresh ecosystem. strategic organization team first join The Resideo We and been of Resideo, year earlier and bring products leader unifying and needed to of our and software, on market. development, new the focus cost efficiency & in map multi-decade on hands-on innovation team, essential the Theodore, The executing Resideo, operational move innovation. development. is to months our Vice with driving structuring transformation to innovation In and record same focus, this the improvement In at lead engagement our business of

as development product historically product and business. one look siloed accelerate together lines to we As bring

are engineering to We bringing customers. critical ensuring innovative portfolio linkages product and with have the of & line product establish products the These across reorganized Solutions new our entire Products effectively, foster changes quickly to collaboration to while and designed management. we are needs aligned to market and cost integrate

discipline I to and make to project we organizational driving need accountability to not business, our the growth. journey changes, or a discrete while transformation focus operational maintain and recognize program. long-term a we the on sustainable revenue these as bringing continuous As view

the culture reporting months few much time engaging Resideo on of into the continue values key this with leadership Resideo. leading focused of will customers my team over with a work I these transformation now directly ingraining have Our on past to critical senior crucial our our focus Tony partners. collaboration support of to will have these I related around at areas. other needs, and better strategic opportunities challenged our building and and critical marketing to customers' decisions identify understand the inform us relationships. development, product also and partnerships our accelerate team engagement believe for I relationships to allow

are With discuss I financial While opportunity will Tony of third our broad of the where substantial. differentiated products market, And in suite turn itself areas we to value. create innovations quarter we the more call there's performance the others in have a can is that, residential solutions leverage we in detail. to the or greater meaningful to market clearly partner over to

Anthony Trunzo

to Jay, prior for morning, increase year. quarter was the you, $X.X everyone. good Thank and an XX% Consolidated compared billion, of revenue the third

and savings. as $XX $X.XX from from COVID-XX-related point for quarter to Jay totaled market included last compared benefit income As to approximate well million, from of million during fully XXX QX the basis in general $XX business an America improved due or expenses points primarily our for was year. net we to XX%, year, of ADI transformation GAAP approximately initiatives increased savings revenue operating strong from quarter and $XXX net quarter. and diluted third was across QX acquisitions. revenue business. saw the third gross QX third profit quarter in particularly Demand the cost serving cost demand million up Consolidated lower from the X% stronger third was share. programs. as North business, residential XX% million $XXX spending gross prior absorption in which common Higher to savings the X.X margin for down revenue, the indicated, generated cost-reduction $XXX an year compared Selling, last the for administrative margin for resulted cost adjusted prior on improved year. XX.X% the project per of and due million EBITDA of percentage large across million the returned $XXX up products largely

the management in Solutions as than cash separately. QX a will COVID-XX-related security than up revenue segment than demand and was in Products of performance focus backlog by mix and higher long-term report on and and up Consolidated the to positives reflects supply adjusted its clearer well we $XX was the typical $XXX strategic Products to accountability much $XX e-commerce spending. from initiatives. and ADI $XX management. margin increase experienced change Solutions segment accountability give on were initiatives last network of second product and these markets. our improvement well operational ADI which improved Products and particularly X% view partially the million increase was the performance and and quarter COVID-related investment exited year-over-year corporate up initiatives net EBITDA compared million, cost cost a million chain. corporate revenue, $XXX to This double growth unfavorable in authority, strong offset revenue. These last was QX, above liabilities. strong disruptions improved on million moving ADI & operations e-commerce, branch QX aid XXXX, our improved in adjusted the with Beginning revenue more segments costs to we due third was year several to comfort While end for align due impact continuing an some revenue to better QX will levels, reductions. income less & reflects stepped demand, the productivity and investment the operations Solutions into The & EBITDA continued of sourcing and quarter has market with higher year. impacts quarter manufacturing to during and by XX% offset due of X more million, up the accrued increased forward. expect its as

previously expected, made sales $XXX million in At we of grew visible was Resideo total our and regularly undrawn accelerating time, specific April on costs growth. financial originally XX, improved equivalents and receivables sequentially. improvement higher As that and had payment and our million and $XXX outstanding and results as end away debt to innovation culture credit billion been that that was will making its instead October continuous scheduled and of On facility. operations performance. and cost on We will Over had QX $XXX margins million a cost-reduction deferred. QX, of be overall remain of we programs move Honeywell, payment ingraining lower, cash revolving $XX impacted the on made million, focus agreement driving due million cash from of focused reimbursement cash in by also $XX in with we $X.X from savings a part DNA, efficiency

expect year full XXXX. savings the it and $XX million program, our for to between net $XX million now transformation current As we relates of

on results. provide QX will We detail our more with initiatives future transformation

fourth EBITDA the range for improved of We billion million the guidance revenue GAAP quarter Given $XXX in are our to in business, we to to QX of range in $XXX the $XXX of in and expect this adjusted operating visibility profit range $X.XX million $XXX the of million billion, year. reinstating currently the million. $X.XX

the Our support to providing October results see across we outlook demand business healthy we the are the continue and today.

world uncertainties. COVID cases rising and However, the create operational additional market around

does or materially facilities manufacturing Our activity, branches. QX impact new customer our outlook could industry not that restrictions in our ADI factor supply chains,

As always, all our employees considerations. will we safety the prioritize of other over

development. e-commerce recent of be Resideo. and will investment targeted our systems Products driving are we organizational growth Solutions, Within in will the M&A. product by these enhancements, for include innovation and budget investments additions focused that and new reinforced XXXX, ADI, investments will discussed. be new on part these At evaluating areas leadership As changes process & incremental Investment across Jay initiatives

our host will to report that we dive into areas results these Day we in QX when at deeper Investor plan our early and March. We

intend a beginning presents questions. a view, results take As profit, measures back on we clearer of known our other to in focus before to operations XXXX, and flow now concluding the measures. cash GAAP actual picture from remarks turn a non-GAAP and few against reminder, a In for we operating call deemphasize I'll benchmark. GAAP Jay

Jay Geldmacher

Thanks, Tony.

by encouraged While supply closely operations in we and risks monitor COVID-XX-related demand chain, to strong we are customer we currently seeing. the are continue our

year The results when further our and ensure continue more in capitalize are efforts. on and details markets and enhancement our deliver to process transformation opens new full as we our introduction strength cost investments changes March. focused current As on demand to to -- planning execute look margin are opportunities our the intend in early across process in we strategy, our Investor at current report we for growth. our structure, positioned we efficiencies gross the long-term our to XXXX making refine product through providing to and to the accelerating We business. drive business long-term Day February driving in are We accelerate on an forward we tailwinds and move rightsizing we innovation and to efficiencies

first by I more the X Resideo, I for As see opportunities even encouraged look back at of creation. that my long-term months I'm value

This done, is create concludes Across be at the bringing people the excitement there strong ensure are remarks. the for foundation. time, incredibly closing, me same their to combined up platform give organization, transformation needs success questions. and meaningful necessary our the to thank prepared to efforts ready I the we stepped we believe over like with customers, have work are now While for the a new tremendous board, while talent we have would about I sustainable for And past our This In we operator, our dedication meet long-term and ongoing changes embracing effort Resideo's Resideo. foundation, to an future. quarter. employees for of on

Operator

our And with Lovallo come Instructions]. will from Bank question [Operator of the first John America.

John Lovallo

in one you gaining the is? took first cost and traction the Can understand opportunity us up you targets. help it in the most quarter just like the transformation started traction really And looks where your looks quarter. it where you The saw programs is, incremental savings like the

Jay Geldmacher

that? Tony, on you to want comment

Anthony Trunzo

with cost transformation the structure. in you Yes. any see the John, benefit as first so place program, is

to COGS forward, and in You eventually in benefit a longer. the more the your in translate to takes your you up start line little SG&A as sales COGS. -- fixed The see do activation into see implement should the start revenue programs, little those you into start as you a moving to take it -- of and It then line -- overhead benefit in bit bit just hold. and the

so to the -- by of the a million, costs, when you, million number on you GAAP So we way, why number. the it it see significant just basis. in And expenses, majority is that you that a net significant that is majority gave $XX the number $XX of gave operating at look that's the we a

some we're over other and line. well. other respect planning terms integrated margin significantly then initiatives, office sales we Moving initiatives forward, things our activation, to in will the show help that said, like I next as of profitability, some And few should programs business with and the think on as implementing gross management quarters, momentum

John Lovallo

Okay. is from Products we're where XX% the would Solutions well. imply quarter big the It quarter out trying at to like least And fourth of that that. sit the That's surprise then north helpful. was as we in something here the sustainability & XX.X% sort of of what margin. And looks figure

thoughts a this to kind run into of just more the bit what helpful. were number? XX% sort of we drivers wanted So a be dig there? Is biggest that good would little sustainable Any rate on

Anthony Trunzo

would long-term things We're that a expectations like margins early opportunity the and metrics referenced that as me Day still is not would trending upward plan revenue quarter time, what that is to sustainable. achievable. think we what The it's but sustainable, indicate saw this there's margins we we the that that not number quarter, view long-term gives a respect we tell we with Investor in that through John, only at to think nothing will March. clearer grinding in you given suggest that to the ultimately give over long-term So to

got nothing margin continue good good To fixed product slightly level extent mix suggest that, fact, really quarter. revenue a like and was that's a off the unfavorable in of performance, business benefit to to that the sustainable. in isn't We leverage costs see our significant we there's In operating this.

Jay Geldmacher

the we've top margin John, within becoming created the a thing. really that is is here mind. is part and is company enhancements This DNA. something I'll this office transformation I not that said type of as said, that And our as add, also Tony short-term of

group and of do enhancement their a -- will margin what there's life within of So all the point kind blood a and for move be forward, we as organization. always the company people that's they that's focal

John Lovallo

That's in can I squeeze good just to hear. here. more one If

nicely, side, us those made Margin are you that maybe were flat. going percent. of revenue up XX-ish the in think ADI were was growth. like you investments for just was understand what and maybe was It On the seemed help that and investments those some quarter there Can to persist? magnitude if the

Anthony Trunzo

Yes.

over an And So as Rob on ADI business said absolutely with changing deserves that there's business couple the we the operating is -- that. last on team a have QX job shoestring. call, done that of investment. a years, we're really his and more incredible

in way. outbound We the e-commerce like are meaningful in investing telesales. investing in more initiatives underlying a in some in way. We're systems meaningful sales investing be aggressively We'll a

yes, are level really So on expect said Having it that, the to the historically. the the -- it's perform forward strong continue we drive those designed continue. margin sits things to at with ADI foundation today. what that from consistent to still will done business business investments to These

Operator

with comes Oppenheimer. Ian question next Our Zaffino from

Ian Zaffino

you you little get mentioned Can versus bit how security comfort guys a just does into the mix little you and do? just a about deeper side. Or that? Can maybe talk bit -- care product on just

Anthony Trunzo

we part there's about, at those cohesive a to OEM in we that Yes. our because the the chain which, point this of -- tight, at dive old into in that not way, security, and is means by -- old even have Ian, the what we're have -- into the in run supply tends some backlog is and But really that that is margins which to business, by segments, we than that, OEM rate knocking kind have, customer-level demand sort which margins of somewhat business prioritized the lower the talked consolidated margin business. going because down of deep and turning somewhat silos RTS more environment. said part Having deep, would P&S necessarily have. that process we're or of, of normal meaningful lines as business is level, those in them product indicated of we

Jay Geldmacher

Yes. And I'll to that. add

a move we the as lot both talk -- that of the us made, comments importantly, think because of -- with be look way in to hear Just it very from different and the within in -- able I'll to I But and Tony groups that a total we'll efficiencies, lens and innovation within we a the and created across And -- at more that products you'll future. different product P&S. lot get Products segments. productivity, through of productivity, a both as this and all innovation this those just or I is innovation we're -- really silos but mentioned. about I'm a product excited segments the going the Solutions, But to efficiencies, & with lines, again, provide lot were about as I eliminating individual across excited forward that going get

Ian Zaffino

Got you.

So more you basically, product to OE line? talking about when versus were you mix, versus referred more aftermarket

Anthony Trunzo

Yes. That's right.

Ian Zaffino

Okay.

And Good. to effort -- breaking there there us down on know thoughts there? a ADI Is maybe we any your a them unlike the is concerted well? then opportunity as How divisions Okay. together? expect? anything on and have is also give what that Like to referred silos, greater you and Or working together? they're side. about about But You should talked I business product products. can just you work there

Jay Geldmacher

Yes.

tighter looking And further a Products at opportunity what a discussing what real product Products and the we ADI be & have same at road then with time, have group. as between in the done future -- Solutions & think looks can ADI. Solutions to collaboration their at maps I and

know together, working about in silos. comes as the groups now mentioned, I I so are And down a two And back, closer you and that we're big that that's even and just And that encouraging breaking of mentioned happening. way.

opportunities expect So more there. I

Anthony Trunzo

Ian, to fine it. on point super put a

Our P&S business' largest customer is ADI.

Ian Zaffino

a That great point.

Anthony Trunzo

way major of levels at -- our and is our customers. is managing in as well in and relationships terms that we're as regard. other That And major our on about and have connectivity building customers. building we it not with ADI senior And any Jay of talked executive important in that at relationships

Operator

[Operator Instructions].

question Craig Capital from with Our Irwin comes Partners. next ROTH

Craig Irwin

the been quarter. factory First, strong there the little saw a in direct wanted much you this on not and And traditional or strength customers? past starting COVID I can congratulations you to results. ask Was distribution this were that for whether March? on some environment delayed spending OEM projects contribution your about catch-up we comment to this maybe variance of that bit the have between experienced channel might

Anthony Trunzo

then start Sure. you in well. Jay, can as pop I'll and

Jay Geldmacher

Yes.

Anthony Trunzo

breaking position that we're of channel terms that. Craig, it to In in do not way, down a in by

profitable going within earlier, do. think less they're to I we're in somewhat their as innovation. product really that's continue that, those look our deep across aftermarket somewhat less we well. profitable other business, a parts is position as channel the to as isn't you And of mainly, when a OEM of silos, -- to do drive It's business. something we I because the try P&S the their business. said view the going And than to unified some into business of But blur development, than

ecosystem X to But right the science thing, we're what now, restocking driven beyond demand of that all this an sort it and it's figure demand by pretty it's we to across that there's we're fundamental sort -- X, throughout As how try channel obviously restocking -- serving. to board, after the sustained out. entire seeing months that relates increase X much clear, -- home well it's of strong imprecise of and a -- the connected that throughout of in basically channel months was

there's we our been And strongest the is fact So we one real think continue we here just two the demand the There's if indications made the that's see maintain the that's of or terms was fundamental beyond change. backlog. that level a that comment to -- durability significant really strong in because is next of of a quarter why the case.

Jay Geldmacher

services think guys performing types like the when everyone going space. reinforces do at and results in -- how And Tony said. just with I that And try to on just just agree would and that this you think Tony and board, that of everything you that triangulate at is I market what's data look those that. I Yes. look we across

Craig Irwin

Excellent. Okay.

So the and EBITDA revenue the a just results then teens. March approach basis if on leverage from? Clearly, leverage together, Can last combined the monitor next year-over-year, of what's months that where we June tad up been we maybe maybe your And expand summing coming this year. something was for X in should quarters? in or take down but your of last is to the the quarters' how an done you a the understand actions does impact. was specifically, low there's on the there couple this to discrete get of Are amplified watch proportionate over

Anthony Trunzo

Craig, didn't QX made. I track QX to So you commentary the just

Craig Irwin

them together, down your tad, for but over EBITDA XQ just and XXXX up XXXX. is XQ Add It's XX%. compare a

Anthony Trunzo

Yes. see. I

Craig Irwin

more what some of are So you color look through. and obviously the if about as side. see you're execution on over months talked specific -- definitely Margins that driving And leverage? projects you're of progress -- the really it just getting actions for the I'd getting the or similar should EBITDA coming specific we us on next can milestones leverage number that quarters? I to And on are SG&A give appreciate some you side.

Anthony Trunzo

Sure.

the net we're that's of back of goes from comment our done haven't made. of where the kinds the And of and going. -- all. -- were first but to taken at now, you doesn't of it the toward see I kind programs transformation sort the a it this transformations, benefits do into these math is half overhead. year. the summer. I first at concentric of But level opportunity. second benefit the circles and and exact those you're Resideo it lot of surprise spring When you're about, SG&A fixed this actions talking And So why seeing past really a comes savings them on of I skewed And me of exact the was basis,

The first is that G&A.

a then it's the a expansion. that every getting the year that margin P&S as said, where and planning, X.X though. that. Resideo, opportunity there's going made drive step. long factories just means, about. on as was then have conversation piece on the any but margin margin gross terms That can accountability of that -- benefiting in proactively accountable thing, by of look right That's -- is a by of profitability quarter the the demand. And is a for by end concept only step and I this getting margins parts the we're over we're of second piece any it's not -- from and spending an factory programs. your reality I not as satisfied side, DNA strong are, that and think the of talking X, activation We're decision business story continue spoke about Getting progress the we inside forward, referring heavy to that the of moving to the spin the focus we're is benefits the an And the we the of up. it comments, tremendous going no well, initiative about that. the we've said, the the individual certain in has a The said the of I The on the dollar. of new business now that right in Look, you of imagination, to organization we'll integrated we're business who's and the spend making for that's name for I and and on what time, And cost sure cost within third out and relatively into Because, we're powerful really stretch building SG&A I'm discrete to making in focus pretty gets every a it. that not, that's had owner to -- as And has load coming is efficiency. last and dollar to years. on continue The that And to to sure. talking of longer is structure Absorption sales my costs. seeing of

Jay Geldmacher

Yes. a driving champion part we're reemphasize as anymore. onboard, But done, worry X going projects as DNA It's we about, And way of it's a what efforts we're then and be then created in transformation for implemented not those. margin be before -- important help we really -- it's functional -- just been we really say, all pushing the part and what's all forward what entire I basis, that definitely discrete really I'd to for And as going excited of change new of it's thinking, look of don't we for discrete to the me to Tony it. it and of everyone's be to of be that you part before we're that about just business to and go I'd helped day-to-day the things way to we on, add just came it's And the continually the the but for, that. about of just we're we'll for transformation office will to came -- on and are able areas because becomes the because share with that that being program that, and a I overall is But to business. transformational long-term I I but the that those said, said, and to business discrete in-flight And had we'll just transformation it's not exciting were, and company projects. operate, of organization. enhancements, -- the way onboard, cultural I many the more think operating that way think organization then accelerate as doing in this organization

Anthony Trunzo

incredibly frankly, think, has accountability for this powerful want is lot responded to very that I that heard it something for the and That's pass get cultural opportunity Craig, this results very why our there's the to -- incredibly hall me on add the thing, The the it a spending. But call, and that earnings. doing and spending to somehow other positively And is drives soapbox, add We're being of first it's to element it. organization, going do When it get of of I one a reported an anymore. powerful I'll change, again. focus clearly my for understands we're back, not you GAAP take you to and results. you

Craig Irwin

then I last if product And Priorities for development. may. new Great. question,

more approach priorities guys priorities with about are obviously Are maybe share product carefully dollars. as you top broadly you spend and opportunistic? across the you to Or development? the where for completely portfolio see a new see you portfolio sort You think more things need areas us refreshed your to does be reinventing picking what better bit spread just there the of little Can your and where traction? are really

Jay Geldmacher

as that -- just in at the to you going technology add. is please and Day going silos, innovation, Investor So accelerating that also jump technologies, the to but I help that the ecosystems going mentioned, our of about then, really questions new base Tony, but and take product are my great -- asked. of accelerating and And product be innovation that have, of talked a office we as products we've we're able talk innovation products entire group future the say mentioned offer I already we'll that -- we're look an drive created share of to at just strategy, and have answer Tony also the knocked in we leveraging we technology. -- as section in entire product road move what March, -- strategy -- I it a down that will -- too, the We And I'll mentioned we the can strategic product will that behind product our about did, I'd as do well within company, and our what as but -- that's looking to to as fulfill and more forward. to I lot to partnerships together not partnerships we strategies total see we -- map what we're also internal all but we're

Anthony Trunzo

we'll to forward. have more say Craig, we that Yes. as about move

have and are a as I of less a about have guys it. changes we what to view about a changing terms -- where decisions to Jay in like. and associated I I'd be those think around organized, way said market to That's think encourage be the as we'll by that with you to priorities RTS meaningful going And give needs a bit that what's the with have opportunity competitive, as to investment are it clearer over time. position in holistic P&S talked front opportunities good the product look that more done Resideo. and be But before never I to opportunity think to you areas we margin is of a putting line and moving growth good the process that forward, respond comfort can in of security how in we'll our about is and little because

Craig Irwin

progress. the Congratulations Great. solid on

Jay Geldmacher

you. Thank

Anthony Trunzo

Thanks, Craig. that. Appreciate

Operator

you. XXXX our the to we'd time That Earnings for you And Conference Q&A. thank Call. Resideo Third for Thank like Quarter with concludes attending that, Technologies

for your disconnect joining today. and thank lines, may You you phone us

Resideo (REZI) 8 Nov 202020 Q3 Earnings call transcript