Earnings call transcript Q2 2023

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Operator

Ladies and gentlemen, at this time I would like to welcome everyone to the Resideo Technologies Second Quarter 2023 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]. Thank you.

pleasure today’s my Mr. over now is to call turn to It Willey, Relations. Investor President Jason of Vice Mr. Willey, now you may begin.

Jason Willey

investors.resideo.com. On our be Good materials related afternoon, Officer; A second Investor call. copy Resideo’s the joining and are us call website everyone, and Chief page earnings Relations thank available quarter you Tony Trunzo, of XXXX on Financial Chief our Geldmacher, presentation Resideo’s Jay for at our for today’s of Executive will Officer. earnings and release

would you than contains facts may We remind performance forward-looking and a statements. are made call or presentation to this afternoon’s future involve and number like that this guarantees statements Statements historical constitute of of results uncertainties. not risks other forward-looking during and

materially a those assumes statements Exchange Securities factors, identify filings. differ annual forward-looking company time time of Form The number the in from no result a our those Resideo’s the as and described such report update including risks from and any affect performance in that SEC to in Actual other principal results Commission. uncertainties with of XX-K the filings statements. our to We on obligation forward-looking may and

turn I the to that, over will With Jay. call

Jay Geldmacher

operating our everyone. afternoon, reported Thank and market. you, challenging Jason, good original the residential QX profit revenue ongoing We despite and within range

new pace continue is We value long-term accelerating. to make progress product introductions of important and our on drivers, an

enhancing portfolio European in our In the and capabilities products the presence first water half our in market. heat video new year, of expanding introduced growing our this security, pump we connected leak

expect XXXX are flow annualized improvements million half the as progresses. least at with further reduce expected actions we are combined to XXXX continued improves QX and of for program structure generate QX that XXXX to have and in Cash continuing We our of substantially savings. second our cost $XXX identified

the second inventory headwinds on Soft are cut actions results. half slower to quarter we a to additional of improve. in a a designed cost In expect to And markets these we structural end XXXX. when create market excess demand number with and response and that to impacted continue market leverage demand, levels taking improvements channel our second are of conditions focus

on Products the Solutions. factory are and And on progressing I time, & we actions to sharing details within portfolio look optimization additional several yearend. actions these At forward same more before of

to opportunity dynamics not Directors price consistent our generation, We opportunity million do transformation a deliver of Resideo share operational this today, and our the relationship authorization, long-term creation continued ability leverage at and share management strong Board has and both substantial reflects current unique also XXX believe announced with we we markets for that [technical serve. to the cash through these or the across our difficulty] repurchase the Board approved value the and see

a capital We the see share in part important repurchase of plan allocation as business. that and balanced includes organic an investment inorganic

position Our is liquidity current is our strong. leverage current And target. consistent level long-term with our

channel the higher volumes impacted and slower and businesses. Products home These quarter, continued excess distribution in our retail dynamics to and general impact & interest mix. conditions inventory traffic, Turning reduced second during sales to challenging remained the both rates. with negatively by HVAC market Solutions’ new existing

the market cool weather impacted was HVAC spring across of the in further Demand by much US.

have Our categories. be a across to demand price limited. success strong, price realization more remained price opportunity holding slowing incremental while most means of likely and good we To-date,

example This bringing of into opportunities the dollar our activity portfolio under average First Resideo new market. is compared product In we is While content this QX, construction home with adding US residential great grew increased and by XXXX, driven new smoke our XX% the of the a Alert value of umbrella. by channel. penetration on detector execution co homebuilder for in content over double-digits are year-over-year important down creation

First total a solid with Alert up had year-over-year. sequentially sales QX

continue We last buy to with fronts, activity on lower broker sourcing progress supply compared and year. much chain to see

realized also $XX freight at savings have of costs year-over-year factories. We our and million our aggressively variable labor managed

going introductions are Our new well. product

the with camera, Detection Leak our second more our The our Shutoff First a market have plans pump video in in include First of security number continuing Alert to Alert garnered the Leak Detection outdoor positive of market half, established Wi-Fi and branded Water work have Water and doorbell Valve the the We and new introduction offering heat adding the First OEMs. pipeline. and In feedback. themselves initial Alert

Xth revenue with be XXXX. we’ll release. compliant Additionally, essentially new continues quarter upcoming ADI ADI’s compared Fire UL Edition products Alarm QX flat the was First launching second to its and Alert’s Smoke AV access saw and expand categories security continued more in continued control. and strong execute in residential sales. stability commercial while ADI led softness e-commerce growth categories, by and with showed touchless

Tony, With to discuss XXXX over I that, turn call will outlook performance detail. to the second in more quarter and

Tony Trunzo

decline We a up billion, X% rate to consolidated second the quarter year. revenue record annual quarter last everyone. QX was with experienced reported QX Jay revenue of you, XXXX, and since at has good grown the compounded Thank second X% afternoon, of in levels of Compared X% compared XXXX. and $X.X a

earnings million was the share compared $XXX with And compared income year. earlier. $XXX for year last million Operating a EBITDA million million adjusted to $XXX compared last $XXX were was year. diluted $X.XX to per quarter Fully $X.XX

strong at from QX. cash $XXX was million operations compared with $XX last QX million

of should at $XXX for inventory accelerate in improvements cash as tighter supply to during will progress signed the the the operations largest XXXX be agreements us related through we environment. generate to driver of from The least working of committed improved working in manage year we expect inventories capital. pace expect full inventory million on We turns Over capital time, the to XXXX. enable

their if around Ultimately, generate we Solutions’ to which, expect in Products XXs days, the a target $XXX the would million in low of current from reduce to & XX inventory successful, approximately days cash. level

$XX by million be of cash We charges. expect affected in approximately XXXX from restructuring operations cash to

the compared XXXX performance. second rate quarter with down QX past revenue a Compared years. Products over second of XXXX, at & million and four has with XX% was quarter up Solutions’ X% record revenue $XXX was XX%, compound grown

$XX approximately realization inventory Price unit accelerating and to contributed reduce that unit drop. traffic, XX% retail year-over-year decline furnace offset than was volume more efforts the distribution by a components our by volumes. customers OEM volumes million revenue all to Along weak in levels boiler added HVAC to and for the

continued Also impacting revenue driven products. & traditional QX Sequentially, and by performance was in markets smoke major growth Solutions’ carbon our detector up markets. in X%, US was and Products of less weather across monoxide favorable the security challenges primarily

QX. favorable products freight, raw points reflects was and on more products. in gross by The increase cost & component within margin XXX unfavorable Products Solutions’ last that QX basis and partially mix impact absorption, material offset air sales energy XX.X%, volume costs, lower fixed reduced up from the

Total and offset profit for & Solutions’ services compared development. software were year-over-year, XX.X% XX.X% operating last expenses was and million million operating Products or sales, labor year. continued in investment Products of cost sales reduction $XXX Solutions with flat $XXX inflation efforts as & of or

of control sale AV We in declines as residential saw by in and the has access in intrusion ADI continued well QX strength compound prior the category million, over the is offset revenue at as categories. years. India revenue was in four X% $XXX late past rate our the in essentially EMEA America operations grown of North softness Growth XXXX. to year. X% and a flat ADI

sustainable, compared benefits. sales. was are seen the year peak past last second quarters touchless transitory the pricing the three levels and pricing exclusive margin and gross we quarter impact in have ADI XX% believe the saw in optimization, XX.X% over driven brands margin with growth of when inflationary We we by

of profit $XX X% compared the record prior performance with year. operating was ADI in down million

investment at million charge restructuring a the to quarter, targeted including headcount spending. resulted During This our second QX $X ADI activities, and reductions initiated slowing results.

costs indicators, conditions Solutions Consistent business. flat external year $XX remainder corporate and the in with Products were remain quarter declines year-on-year & margin the both market for second prior of we volume Second XXXX, soft our and continued expect with headwinds revenue forecast to with million, creating quarter. residential

a taking reduce action As we aggressive are costs. result, additional to

across $XX on in annualized a are company additional year and QX, restructuring with at million anticipate actions million generate We least at an to $XX and charge basis. of savings that of least million $XX the taking expected

first quarter. prior-year the For

Excluding $XX QX XXXX, in transaction First one-time flat corporate year-over-year. were costs costs Alert million of

in at the X% of the charges. year range full of and expected revenue including of $XXX now the we down expected of $XXX range million, billion, is be to the restructuring is profit million in Consolidated margin expect be range $X.XX the gross billion million to For midpoint. revenue to to XX.X% XX.X%, $XX implying operating in to be to $X.XX

to be XXXX. range million We $X.XX is to to the per share to of be range $X.XX. of expected EBITDA million in be the expect for GAAP and to EPS non-GAAP $X.XX Adjusted $XXX the to of $X.XX earnings in $XXX in range

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

We between to is million. $X.XX earnings expect $XXX GAAP earnings EBITDA and share $X.XX. $X.XX million and be of to non-GAAP per expected of $XXX share $X.XX per to Adjusted

product provided dynamics continuing And on to factors market margin, overall our made while annual by noted we market transformation. that costs In when we and respond managing initiatives we focus challenging. February, unusual to XXXX outlook, presented new forecast that preserve that our

late last year combined at in our cost actions programs response expect dynamic. generate million in planned to took The are annual these In with cost we to $XXX we aggregate, actions QX this savings. least

later as part greater also beginning process. on functional further We anticipate achieving year are of this efficiency focused savings that and

As pursuing projects Jay manufacturing larger noted, and portfolio efficiency. we optimization are around also

any QX. further difficult of news have is both predict, to on to fronts we timing the during While project hope individual

Additionally, we as able businesses. anticipate margin our this being work our both fall, provide and a frameworks budgeting long-term updated of strategic to to component of planning

to a turn back before now Jay the will questions. few we remarks call concluding take I for

Jay Geldmacher

flow to as and partners. customers have believe conditions margins improve. Tony. conditions by will cash new responded Thanks, cutting with challenging market relationships strong on cost, and these products improving the continuing focus market impact meaningful building activities and on We a and We performance

simplify breadth focused this product unique for and planet to our team Resideo with platform. for for residential Thank create and are our good drive accomplish continued we works buildings and our of To customers. with value you contractors, the to on world long-term We remain the and our life. delivering everyday leverage stakeholders, to homes continue vision helping unsurpassed where our and entire focus technology a to distribution will their our ADI leading professional commitment position for

Operator, we are prepared for our now ready conclude This remarks. questions.

Operator

question Morgan Instructions] [Operator Woodring from Erik Stanley. is Your first from

Your open. line is

Unidentified Participant

for Woodring. This Erik you. Maya Hi, thank is on

like mentioned of we inventory persistent back kind you Just yearend? work to the timing my but, that those and be that there As till show normalized – think something as cadence kind challenges channel levels the first is yearend, will How of of about by I done? question. should you inventory know think

Tony Trunzo

for question. business target Hi, levels Products our Maya Tony. – & we’re days. XX – No Thanks I in don’t it’s Solutions for the the inventory is

that and to running some to in reasons. to currently from couple target the We’re for we’re is where a of going get low XXs time take

The challenges, we’ll first supply this firm next to or through entered of secure that supply and year yearend the agreements into chain the with during into is, commitments. pand we – during continue on components some certain

to So that to. inventory an committed of we’re some that had of have going inflow we

the be are seeing at But same we’re products we’re flowing good and going to to decline. have inventory all use we’ll it. volumes because that time these going eventually in longlived It’s inventory,

it’ll improvement recovery in going it’s our on get exactly the is those before hard target how to the of levels. we quickly is to volumes to and XXXX long, us, that be how going be carry that say it’s days to XX but dependent because So kind well rebound, to to

Jay Geldmacher

I and said there, And that laid XX I is already target Yeah know we very it the think doable. that of add. would Tony you out

that at target know to know some we’ve this out. this, down that a lot manage good and the terms this can it’s in we You you on feel this project that for specific people of forward to But manage we and time, ball hard move teams we of have to the exactly of recovery. market laid

to And heard years. do think I know we job, electronic to the we variety in chain very were guys terms through supply. did able any just probably chain a more Tony have in very, a in one worst our past as to enter call, of severe supply during agreements said. know you of supply have buying into what the XX moving had base In been give very earnings to most that good experience that problems, periods you you we’re And guarantee little components a as clarity companies

So, we know what it is.

is well that know recover. our to the it, managing think beginning as how I to as market we manage tied to

Tony Trunzo

pretty I since ADI P&S. And It in come expected I between one other low should they up ultimately we address down on commitments range. QX year. should back answer a it globally. days guess I carry, thing focused close to I this distributor and say the XXs in did inventory inventory want XXs the inventory spike of you on to – sort time spend the delivery where runs low we’re be of be close where fair pretty in bit how is much we’re we’re kind the their of has It to set. a time they we going for where close vis know we we’re of a much to balance about which that’s level that want to that to today and customers of levels pretty you we thing customers in and think our a and make with to objectives going is terms today vis where service getting talking getting want to where to to our and know levels we’ve

Jay Geldmacher

not also still better there some of but chain few a lingering primary from their They one but issues most all, suppliers much was. saw with supply it’s other it than it

Tony Trunzo

you $XXX we released can from that level. potential XX we there’s million cash know like of be P&S there’s as get that inventory to down day But feel

Jay Geldmacher

Exactly.

Unidentified Participant

should you there kind as we half room about levels And we further you. cost Okay, back the of the quick about expect guys how actions into talked But to look or I as question. know quarters. one year? entire just of seeing the pricing And we’re think pricing of there the year. to we some additional power you hold? actions the look benefit thank phase of taken then rest the any do Is follow-up

Jay Geldmacher

pricing have Well I by we the seen which guess large the been we case. hold good but definitely news expected is, and that’s

that going it’s of have limited additional have that terms pressure obviously dynamics pricing market a of In lot drove soft of know increase abated. pretty volumes you actions, to price inflationary be the the

price outlook at additional doesn’t our point. So meaningful this action contemplate

Unidentified Participant

Okay, thank you.

Jay Geldmacher

Thanks, Maya.

Tony Trunzo

Maya. Thanks,

Operator

from Funds. next with Kearney the Your Brett line Gabelli of question comes

open. Your line is

Brett Kearney

for Thanks the Hi, taking guys. question.

Tony Trunzo

Of course.

Brett Kearney

strong First point Alert a The was you quarter. in the know

can builder executing that parts of potential curious more of portfolio through Just channel? And provide been some also maybe for on of the into broader initiatives time? channel penetration for you Resideo the there color other pull you’ve over deeper the

Tony Trunzo

with and question really We great some with that’s in exclusive you’re Alert. homebuilders added the and That’s First wins nice We’ve right. added – had meaningful to the agreements content. R&C channel with pretty several our

up the XX% there’s and quarter R&C Our went momentum real in about there.

some a entrée be respect retail underway related important, community way. question we much more of because we a would pull deeper would to way but we’re retail, engage your broader First work retail, just know First definitely same that. we’re those where pretty say and get sort but go and as products thought super different really in And in about with Alert, the at homebuilding President There’s an it momentum very entrée with the to through gave us us is right benefit. I we in Alert of has that that with they to to the level good the were and It’s given you in

Jay Geldmacher

and new to products market the that’s able there that R&C we R&C as have that lot with talk if but wins things our that. so brand with a our of in well and the increased had add generated First – fact edition places we Alert of expansion about program the as particular the our of would other I with been agree, ambassador just I’d deals And couple content brand with I

a got great total we our products add part with really our we to it’s as things all content, gives pull tie can and what ecosystem standpoint from technology it as and well of we the So as continue CO we and what in through forward. opportunities other some as we to smoke of move then offer expand can can

Tony Trunzo

we And to levels about inventory, by when said outlook – to I would inventory outlook in our channel would inventory I we inventory Apparently our And go talking that – their our question not an does similar outlook think inventory normalize. expectation I own our with QX. the channel was operator, the really to you answered what tell begin we respect and levels. when meaningfully for if our I channel Maya, on were question that asked may. See see is down

before in to we meaningful a through sell that through going may point a they to work It’s to sell in are of you be go sell volumes see had going bit. sell up, even The negative. then to down is dollar It’s which actually inventory days the a – you want going and start see little in little down going tell take But they hard to feel, to still are sell to levels know coming what’s through we’re that the for – have declines happen to our see through to turn inventories before improve. we’ll positive QX. target sort the through and because

Jay Geldmacher

Brett]. And think did First your back Frank question Alert? dropped. with fully Frank, I there Frank - answer about we on [sic

Tony Trunzo

[inaudible].

Operator

back further at no I are time. There Jason call questions to would Willey. this turn now Mr. the

Jason Willey

you rest very I coming forward of thank the look to and good for day. Have in much. your participation days Thank everyone months. we you speaking their today. with a And

Operator

call. participating. and thank you conference for This Ladies gentlemen, concludes today’s

You may now disconnect.

Resideo (REZI) 3 Aug 232023 Q2 Earnings call transcript