REZI - Earnings call transcript Q2 2022 | Resideo Technologies, Inc.

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Operator

Ladies and gentlemen, at this time, I would like to welcome everyone to the Resideo Technologies Second Quarter 2022 Earnings Conference Call. Today's call is being recorded. All participants will be in a listen-only mode until the formal question-and-answer portion of the call. [Operator Instructions] It is now my pleasure to turn today's call over to Mr. Jason Willey, Vice President of Investor Relations. Mr. begin. now may you Willey,

Jason Willey

Tony to results a materially statements with Exchange statements. described Good presentation afternoon, Resideo's Resideo's call and joining for earnings Officer; you company be in A forward-looking Financial assumes the Form copy of XX-K of statements. are and historical those quarter affect that website would like With result from our may XXXX in thank and call on report We made update over and turning our differ and factors, We annual results Executive on second Investor Chief number today's and this presentation time now Geldmacher, for our call earnings forward-looking available our Chief afternoon's other performance investors.resideo.com. to may uncertainties. no a involve Jay the including than as SEC that will from risks Officer. principal future Relations filings not related any us statements release that, Resideo's everyone, at and Trunzo, page materials or Statements call. contains Securities the will On during number and filings. uncertainties forward-looking obligation remind of a of facts guarantees risks of you other time those the the in The identify to forward-looking Actual I Jay. performance Commission. our constitute such to and of are

Jay Geldmacher

end our Products profit record everyone. QX & outlook. revenue and We ADI Jason, delivered of afternoon, the strong with Thank operating you, Solutions above and in and at good results

focused new business. challenges strong key improve well enabled delivering and positioning actively add chain on retail us has distribution and performance to remain to for OEM value-creating to continue to while through M&A. and customers and execution supply We accounts We our drive execute deploying capital our organic inflationary on

the sheets demand, past around our uncertainty we macroeconomic resilient housing short-term the for attractive past over macro While efficiency market cycles. years business are position remains equity markets, the structural be of People's across and have current to two the balance evolution progress trajectory The views consumer significant economic cycle. constrained relative and technology. comfort made it the the throughout and backdrop to the creates home of healthy the and have trends focus evolved growing work, hybrid and energy on homes supply smart home within a with

security, strong further and saw within Additionally, year-over-year products. second of portfolio. in across the including to there growth X%. & business, adjustments Demand innovation labor a price May activity the There by in We meaningful remained work a is price physical driven of both an across macro contractors continue and renovation air these along with delivered Solutions as repair of the selected Products April quarter, the trends, backlog remains and parts commercial for on and markets. through constraints. healthy supply realization home We position increased In focus believe growth cycles. ongoing awareness and Resideo success organic XX% with for

demand remained position As repair supply in customers have strong, renovation. and a demand sales reminder, generally no and over & in specifically Products better in the indicate XX% a distribution driven we channel than zoning competitors. that Solutions Conversations we are signs tied a Activity also key connected and of HVAC thermostats with products. pullback believe of by to air remained products, for

Retail categories. our and thermostat in indicates ambassador and smoke the the in detection rollout brand supporting partners We outperforming and Talent program. to POS active our through professional invest like our the Building CO distribution installers involvement we organizations and of data continue in are Foundation

solid points interest of we and of quarter saw price We are also in management Within offering OEM rates and signs energy which season, exit with business quarters customers connected after benefiting expected the combined support from and backlog, our growing XXXX several but the of are OEM to historically in normalization functionality. channel, into a are Early our our indications demand. consumer growth heating order XXXX. across as breadth our high from of we head for

fronts we see radio headwinds general traditional market Our underlying to product business face conversions. trends good of is XG in the North Overall, business transition and in challenges, continues market security runoff continue several across to including and Europe demand our in America. supply healthy,

agreement we principle work our current to we amend products ADT on provide at in products to reached Additionally, XXXX, with together. other an ADT our through continuing have agreement as relationship

First Alert operational execution. by actions retail driven had and a demand, pricing strong quarter

to category. are daily chain initiatives been identified. growth ADI The in Private the very margin investment the gross semiconductor favorable position line with are revenue and product efficiency, by market in margin enthusiastic to First and business more and the driving direct grew America to drive as are this operating in second sharing distributor growth At the to quarter, profit At with in strengthen and and dialogue to custom the a we a collaborating e-commerce practices teams revenue pretty distributors, capabilities that, collaborative audiovisual fifth acquisition to the are environment has challenge ADI continue We with ADI growing suppliers. second already announced acquisition and to positive relatively opportunities dynamic automation our remains and sales. aggregate, Alert completed expected of of remains strong. Gross Resideo best over about the With suppliers our acquisition is $XXX margin, private products. and business. and I continued turn practices expansion in over numerous growth XXXX brands. enabled creation these constrain We video, expected will of X% us leading supply environment. second in key Supply to to pricing categories to around XXXX. invest and key active in This sales North XXXX. of how team QX performance and pricing performance in Top are markets. ADI, driven remains remind The quarter half. ADI's and adds pleased has that an call the the This acquisitions value even believe outlook contribute and since constraints are restrained key tools Tony have engagement in position, remain beginning discuss is In continues our in in detail. the audio, allowing July, we us supply Brands significant and more growth telecommunication by driven electronic million residential The being regional

Tony Trunzo

Thank you, afternoon, good and Jay, everyone.

Our market as invest of operational organic the QX position We business. execution market continued continue a results as positive across as reflect and growth we well significant solid and even in to delivered trends. strong margin expansion profitability another quarter and our

quarter Second of $X.XX compared up on to and revenue organic year XX% basis. billion QX last X% was an up

as aggregate XXX addition Foreign Consolidated $XX investment an reported points in reflecting quarter planned & growth for million Gross by XX% $XXX QX. all $XX XX% volumes rose partially and margin and second quarter. Products points the QX increased grew unit of compared by approximately or the XXX diluted to million year-over-year, to organic basis. expenses $XX to approximately while offset exchange reduced earnings during X%, per last last from realization by on quarter well was basis movements continued Price grew compared basis both operating XX.X%, increase grew Alert up revenue lower X%. the as million of income share. First revenue corporate $X.XX XX% X% million businesses, $XXX of million was Solutions costs. Operating approximately added of an

compared QX. was exchange Foreign to four point a percentage last headwind

$X annual $XX began revenue Alert of XXXX. in $X run $XXX manage ahead remain annual and ongoing to an was Solutions as chain end our Products run gone reduce track rate to income by environment. income in synergies operating million at the cost First operating the of to inventory difficult million acquisition-related at supply Integration $XX during and synergy to reduced million QX at backlog step-up continues QX well successfully was XXXX plan of & million business million and of achieve due delinquent First rate of cost an the exit Alert valuation. and to we on has acquisition. QX of by contributed

saw levels, half Second we of decline quarter Even in Europe with QX, security, in of orders outlook were XXXX. XG to delinquent relatively in transitions relative remains organic product for an helped flat overall in historic which to year-over-year our support where for expected backlog product radio categories, growth across winding the second except down swaps. reduction due the the continued strong our backlog and

margin the exiting second down backlog overall of levels. further the Solutions above still Products in QX quarter rest in a anticipate XXXX. well year XX.X% we reduction and expect the was we in with XX.X%, While & gross of through historic year, the backlog delinquent from

While pricing offset First Alert inflationary margin. results actions gross have reduced impacts,

Excluding or Operating as impact of million was Alert due operating $XXX up & with to R&D was profit investment. $XXX $XX gross of last & First compared year-over-year sales for in flat year. XX.X% essentially or Alert, $XX million million & Solutions million expenses of well planned Solutions First the compared costs margin Products sales QX. as last Products in increases Products to were XX.X% Solutions

support access to second revenue completed drive up revenue grew ADI ensuring key of operating activity of serving surveillance around efforts The in was category. basis sales including of XX% development despite XX% we ADI to our revenue the our and in Private ecosystems. continue quarter. with over year-over-year, up in the particularly at constraints, good quarter quarter. in approximately XX% and XXXX while We fire year-over-year categories ADI revenue added to acquisitions in innovation services revenue. control. XX% the closely revenue XXX costs brands ADI for sales X% manage and saw growth touchless E-commerce million portfolio $XXX since beginning two markets, in of are QX the commercial again supply of points by we've core the video investing products reaching accounting were total initiatives

basis enablement direct to sales $XX support operating million IT the and the grew continue expense of XX% we of million quarter year-over-year, investment sales for were Included the X.X% compared in settlement. revenue XXX second with increased ADI points legal even compared gross quarter infrastructure $XX points net digital $XX was million brands improved basis with reduced XX%, the as to costs margin number of again at XXXX. XXX in XX.X% year. last Foreign exchange line margin last as pricing approximately strong second to QX contribution from came prior the increased the up margin, growth year ADI This X.X%. product ADI the strong private was and to environment. year, quarter or increase operating second costs in and tools. by reflecting Corporate M&A, from XXXX quarter associated

from Excluding these corporate last still by spending year, costs decreased approximately X%.

from During million the generation cash we cash $XX and to XXXX. of cash environment. higher reflects growth the operations generated in chain dynamic working QX to million from capital manage supply to XXXX $XX operations support quarter, compared operating of

in half. rates We quarter our second flow expected Also $X.X is of interest XX% expect the net the been to remain of approximately debt as of has fixed. result, significantly minimal. at a billion short-term stronger on And Resideo and cash end, impact higher is

expected and billion GAAP be our XX.X%, gross be the growth outlook to of XX.X% be at operating expected and XXXX in expect XX% to of to range $X.XX is in full the $XXX billion million to year-over-year Consolidated for of year the revenue million. $X.XX to margin in continue range midpoint. is Turning range the the to profit to to $XXX of implying

of to revenue range billion. and in quarter, Consolidated profit is margin operating third be be $XXX the in expect million. is to of $X.XX of $X.XX the million expected to the the to in range XX% For range expected to billion to gross XX% be GAAP we $XXX

full revenue million. outlook of approximately approximately $XXX for of First operating includes year Our million $XX profit and Alert

For quarter, $X million contribute million. the approximately revenue operating we third and $XXX profit expect of of approximately to First Alert

during approximately XXXX. First we As costs indicated, related of expect to million Alert incur previously $XX integration

approximately We in incurred million $X full the $XX intangible costs amortization million year including expect for also of the QX.

costs these provided outlook of All included in here. the are Alert First

sales and net ADI minimal Our of Solutions operating income. single-digit incorporates year-over-year to a remainder with reported a dollar, XXXX. from stronger The outlook headwind the the at & to contemplates supply U.S. continuation constraints low outlook impact through of Products both also

slides. Additional found XX Page outlook earnings be details can our on of

to the back XXXX. call to in make the XXXX on wanted a at our handing targets Before Jay, comments financial laid we Investor I out March few Day of

macro environment chain normalize. update full it targets, costs provide the given a While of lack supply we do on and feel practical not when to to was will fluid XXXX clarity

model Investor assumptions reviewing we Day. We underlying we've outlined have significant made the the across the Overall, and all progress at time metrics. progress considerable spent

of in Our revenue further enhanced ahead outlined tracking the the be we XX is past but by will what months. acquisitions completed

revenue to plan underlying of despite are tracking continue operating the The appropriate growth chain same ADI. to is of outlined cycle. gross a believe cost through been true corporate We short-term have and ahead margin targets impact rates segment we outlined targets. also We're progress, inflationary and for supply at significant challenges we At our cost P&S, margin. gross the headwinds to pressures the

a trending of to the previously outlined. targets likely we the corporate as whole, we end Taken are margin lower

I Jay of the are will to we before questions. income However, aggregate we cash at for remarks concluding back implied targets. the turn a we now take in generation level and above operating the deliver operating believe few call tracking to or

Jay Geldmacher

Thanks, Tony.

business out strong have with markets with past This will developed dividends many the reestablish only key installer across attractive we we the remain Our professional to improvements face-to-face two the partners we and and relationships relationships focused decades serve. past existing these customers, to supported opportunity unmatched road The ample results globe. over with continued performance. over engagement. being business progress engaging across increased enhanced to sustainable build margin be improvements see opportunity customers excited has We suppliers by done achieve paid back ADI, have on two the structural already as work we of reflects in by across operational and be financial delivering sustained At The driven team and longer-term build years. the trends over the is on performance is long-term the ambitions. upon recent years with to our the and across see stakeholders directly the

will normalize. supply made become progress as the visible inflationary Products expect more already Solutions at and We & chain the begin to environments

markets we to year-over-year Demand expect businesses. remainder the commercial our the remained XXXX, serve. residential growth we of look key we underlying As to solid in in and deliver

invest and work supporting to prepared remarks. are As deploy focus potentially our continue in I quarters entire the opportunities even concludes down over acquisitions. Resideo We for for more challenging and to base for attractive macro to additional organically plan thank a continued we backlog, support through dedication want the a in environment. business this look business coming provides the ready customers execution. employee the on to we capital now their This our for to questions. Operator,

Operator

Evercore first question with the Amit from [Operator Instructions] comes Your line of Daryanani ISI.

line now Your is open.

Michael Fisher

for Michael this Fisher for Thanks taking Hi, is on Amit. the questions.

So with, private in seeing you're into where label? with the little and what business? label a to categories of bit the specific a get business some there, on you just lot start also details want dig be just you're maybe private I And comparable in to would the success there profile any to having P&S margin that then the are

Tony Trunzo

of The business. at Trunzo. in entered. been The that are services been of and now Tony in but consistent overall in answer with ADI – we of have our them selective categories sort the We've business gross some in margins or we've is big have profile more them opposed that you you private as it's lines, been the there margin, what smaller, about we video in have pretty Most growth most third-party relatively continue really the for yes. short question minus business Michael, can label products hi is see those significant Yes, of product plus to the products It's excuse as I the of ancillary got we it overall. and But said, in brand to hinted that, to of even And still a there. see really And percentage margin as attractive. we've grow meat small lot being fast. with limited the the in room area. your

Jay Geldmacher

disciplined they've I also the and part been to ADI's correct, that And for but he label, them strategically the our that about expanding, mentioned, also particular critical very their of areas datacom. go further they into is would they of most private as where say, with Tony And terms they're is think areas add in let's expand. where review on

the things picking they area. might label So private too, in that product are some there, be applicable

think really done this. job I So they've a in nice

Michael Fisher

in results the I with kind kind of line speak gone was whether you for deal Alert’s another sizable I'm of with it's – we to in can deal, maybe you got at early the and Great. integration you'll hoping themselves. be ready the curious, or Yes. bit deal somewhat. mean, expectations. days the future? way I any changed First your has how of a whether the this near seem for What talked guys the still M&A be here on I getting on your has little outlook aggressive deal in not is, was integration

Jay Geldmacher

couple but have Tony the like been knock Yes. in do ago. wood, able I very how on Tony pleased The First a underneath we've let very with and again, with we're Resideo then of operationally And way the about in how just one teams a that they've – Alert quarter you're between now mentioned basically said couldn't right. follow together. what before, team to terms I'll and we get collaboration teams mean not has we being gone. in but make he has year out superior. pleased the of belt our And integration with comments with been a Alert, worked customers, we the both and up. First But

it as and plan, to part commercially. that acquisitions, my the least and also opportunities other we chair, the on the understand own any our opportunities, sizable identified business but operationally both that's all to opportunities, of from every super really – into you're because any get able to helpful For at – plants get from

we think in I progress always around, earnings team success pleased in So and Tony, with and last we have acquisitions big of in call, from a integration about place companies that for a the comments your very this, last difference. talked that integration have the experience very makes that that team. I is added and a even Everybody the really in think time lot the is chair? teams brought a of had versed key are and anything asked, the M&A made and is people the we

Tony Trunzo

of deals We've Yes. I question bit this And taken a forward. completion other kind a for got moving what of of depth significant roll experience intentionally is team. integration. what our a this to of a is potentially of out to your mean guess, first Michael, does the the XX the to significant months But lot we've frankly. on of it's Jay's slow M&A right, And – longer than used to, I'm as number reasonably on we've we purposely six toward team. deal laid this ramp synergy

bring a number about we knew a how So we of automation, And relatively result capabilities exciting. that. They've small We an the into of their that being been of really But we've positions their that are senior First they some really leadership the over owners of Resideo business. to to senior lot, obviously, spirit here. with their with the around significant at manufacturing their drive to an making bring different team learned that's the a way I really got entrepreneurial a years. careful frankly, around finding an business at they we that think about But kind can execution as entrepreneurial pretty approach will some really variety brings that pretty we've along significant bring capabilities strategy experience value. business Alert. table retail And just and standpoint, also sure from that about. business, And lever say across

Jay Geldmacher

And acquisitions to that, my career. Yes. experience add in doing of my I'd

that the get maximization strengths you the of terms end own experiences And a – not or I out day products leveraging and you're two head both the various that right standpoint think from equaling organizations. individual and fully that sure to the two it's that making look super And of on really that deals, plus of the important of it you hit buying, you you the do the listed of people that their he – you're the fullest, it's the type the Tony at of in there. things at but the plants out six, any it if acquisitions. of understand just

Michael Fisher

for Great, my questions, thank you guys. taking

Jay Geldmacher

You bet.

Operator

next from Your Instructions] question Dircks William Blair. with [Operator the comes Paul of line

now is open. line Your

Paul Dircks

Hi, good afternoon, guys. Nice quarter.

Jay Geldmacher

Hey, Paul, thank you.

Paul Dircks

here the to and there an very up, just tools ADI, profits have question now we benefit at hitting it's seen is, positive and half last margin margin back the about that processes been low me see the trying are is, We've are the from to gross so have get gross if over step private My a few quarters. impressive cost? to for sense price right. last erosion margins into the been XX%. and you question and so, will trajectory, good the up implemented, will see have that And XXs label new here gross start quarters, getting four because First we while inventory in seen I'm things outsized we year appreciating off from fact XXXX? step e-commerce a roll the of been of

Tony Trunzo

Thanks, Paul. Yes. Sure.

objective, And expansion quantify to has our inflation. in has things to And the anticipate of the of increase of been about that but hard some prices exactly growth some pretty And result, been margin close its the that a double sort terms in margin double private It's expand abate. bit. you, ADI laid to call proactive that slight about – that we the margins a the trajectory, that the mean and And I at of secular of what to brands at range. gross really expansion our is third-party But has we for well XXXX other think, targets gross quite, they're but answer talked something is going we talked I'll about growth we the as, half us our in as in the progress expand of efforts. to code of opportunity. business, we little half for short – objective yes, think, to going environment. we've was the time. in for over the the half inflationary has margin ZIP not result XX% margin from of gross accelerated we been the combination XXXX a out around the that do tailwinds help So talked all efforts continue point, margin, our

next Our few is benefit. progress to achieve control roll-off anything quarters objective can offset over in we of enough that we the inflationary in of to see these other terms that areas basically to a expect

Jay Geldmacher

on digital help the I think a their time success start here inflationary manage as to Tony question, big well comes way, label see a can brands trajectory – as that front. when in and change that very and on we talking on really good we things particular the their that because – they're this private private execution expansion, captured on ADI's we're expansion,

a know Tony job ADI So abilities really is do I there. to in very of I their nice team that did the And think explaining that. confident

Paul Dircks

maybe discussions perhaps through the with market ask that. question wanted the your trending third the just within absolutely. and by we encouraging No, conversations can light to shed maybe over any your you tone some I how of and have with also pros on July retail then so, next most I channel hear. these on light vertical. the tones shed and or it's conversation or of of early get how appreciate by so, and quarter? It's to you here pro the in risk destock the Other could is as changed? But are retail, retailers recent year your If

Tony Trunzo

some have start Jay I'll and will then comments.

level, at is tone So to channel. vary going the you're mean the I right. by some

we're retail that at execution Our indicates gaining share.

is be So very retail But what to and – from from our the is job. of destocking there occur. not that our an feedback retail, I is done strong. a partners to execution to or whether able execution I'm for implications on think that close be destocking can't – might comment hearing standpoint we've going I we're enough great

we market. the we think and the focused doing from when and OEM that share. be own point share market positioning our and from think of can. you we're We're We're market. trade our in at she water But strategy see tone. we're we're demand. market professionals on pro. really look of the can talked true the steady softness the think We Building making providing ambassador of program brand else, we've as progress execution still – that is ourselves – still think support the seen all world say heater to is created I really And and HVAC Everywhere I and that a The building of We're that market and is our that I People I OEMs. a own terms same the adding underlying adding parts execution in goes. lot of is definitively all our Foundation. the only to strong. is the about Talent the tone We've support to a significant growing place that part

Jay Geldmacher

talks would execution, to big, big been about we're Tony mean we've our able that's when Tony, to I I when – add, just retail product provide And clear deal. so a And customers.

natural to been of As group crazy who supply this this part very – proud of It who that. differentiator I've I'm of on because supply and many or before I'm going there. out you chain including guys you procurement these to that's folks time by rest be is do I for this our group. ADI; the materials, next asking mentioned ball. P&S, all with companies crystal you're to same Rob, team chain, myself everybody future weeks, also out indicated And the chain, is And super I'm – manage being lead And as we of is leadership, that I'm that chain our our other in a product to the able questions supply market. call, for or see through as benefit on still script I'm the supplies able as for that in your get last personal you And our spent road, this one year a partners. different on the all knows the better and to one thought to today. going grind. through got been do talked we I two lot going senior runs not are on of XX you how line find that. be calories to the is there, a I've everybody mean this think earnings on going are earlier, months, about said build the it's we other how of supply this supply just and of It's Phil, there I personally, – hasn't the runs I of just And with to

better of And happen. bit the on, some because it spending to of supply spring base, others with into particular again, who's who's our brought terms it's in little the that are back capacity But to help in them make markets. relationships, in some comes being time will semiconductor get XXXX – really the a got of of the

and that tied retail pleased and time extensive it's build stickier also our it the we're pros. and with it helps interaction our side that all front pro comments and And that there to relationships have – we on pro the the So execution different face-to-face the things have we nature reach in you make with additional is the business. the them the the know Tony out base you, on what mentioned are that's effort that with have helps doing and training

Paul Dircks

color, thanks Appreciate Understood. the guys.

Tony Trunzo

Thanks Paul.

Jay Geldmacher

Paul. Thanks

Operator

the Willey, further over no turn are Mr. back I call to at you. time. questions this There

Jason Willey

to follow-up questions, today. as if out. for you always, like again good don’t And a any Take to Thank thank your reach have everyone you. everyone. I'd participation day. please hesitate Have care,

Tony Trunzo

Everybody. Thanks

Jay Geldmacher

Thanks Everybody.

Operator

This concludes today's conference call.

disconnect. now may You

Resideo (REZI) 7 Aug 222022 Q2 Earnings call transcript