REZI - Earnings call 4 2023 | Resideo Technologies, Inc.

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Operator

Hello, ladies and gentlemen, at this time I would like to welcome everyone to the Resideo Technologies' Fourth Quarter 2023 Earnings Conference Call. Today's call is being recorded. [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

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

Jay Geldmacher

the million. momentum within revenue cash thanks, Products full activity was And a XXXX flow and And strong outlook. year order operating with were joining throughout finished above of cash on of our you, in today. note. everyone, us built Solutions. $XXX for midpoint and generation Jason. We the QX We year profitability strong Thank

Work the divestiture made manufacturing portfolio footprint and and made of we meaningful with also product reshaping and casting long-term of structural continues to substantial Diego. growth. our our progress, on our initiatives operations key operational business position for facility the in rebalancing outsourcing progress strategic ADI help costs.During operations significant the on our San and We reducing XXXX Genesis in profitable portfolio,

more through also builder fronts expanding on We advanced including the both the the on to XXXX.We relationships. with providers, relationships depth share announcement strengthening partnership and our we energy meaningfully move establishing market, have in ball as Ford with of to management expect major insurance home our recent new relationship the front,

home This spoken by We content have with builders. progress increased the led BRK brands.We work professional our builders content First is recovers. to, over market Alert with XX the number we previously building channel and expanded builder about new our existing We adding and in construction partners we are of in well-positioned are partners selling XXXX. as have to new this drive growth believe

new and market, We shutoff First of new for offering, branded long-term and potential water products to edition for and Alert This security detection camera professionally our EMEA security cadence. replacement outdoor also ProSeries defectors. included base.Our introduction our the our Xth expect connected improved product launching smoke and Products products monitored leak additional content this within the UL rollout we benefits significantly will Solutions, video have innovation doorbell positive

based results seeing are actions. We on these all

QX trends and to and time. we product long-term year-over-year and key margin-accretive stabilized We gross are effective is continuing grew initiatives.At despite new grow volume critical cost be digital Building margin expansion in Solutions, to engagement is we to invest actions, introductions ADI, which capabilities. to our QX. experience over are and a and leading continue order have headwinds on and expected achieving Through encouraged taking Products executing by control within in sequentially digital customer

e-commerce, data results electronic We and made XXXX includes were up our sales for e-mail of e-commerce better-performing total its assemblies. into AV now and new custom in organic management speed, of sales.With quarter in account acquired I automation the for basis was Pro XXXX, during XXXX, adjacent continues accounts expansion asset with helps discuss the of XXXX, enhance XX% For to categories XXXX in-sourcing search our Tony data AV year-over-year. availability particularly in in and an professional ADI categories, investment audiovisual will and XX% of to sales. that, intuitive make and now the work sales, experience outlook. This over interchange with to which fiber significant and adding systems. growing in X% delivery ADI focus one early information X% product and accuracy touchless of to a market management on turn our fourth ADI's BTX on Total call the market. web information.ADI ADI's usability progress capabilities

Anthony Trunzo

sequential quarter, afternoon, Fourth drove and of a Thank Solutions consecutive good operations.For the quarter cash since flow financial quarter million, our and year, improvements led everyone. in a spin. Products the momentum flow in continued P&S for from business. you, the by $XXX for cash Jay, margin operations the from gross in consecutive million record second generated third results outlook in range $XXX We exceeded and midpoint was

XXXX. to free revenue last converted year. fourth range for the were with quarter revenue. than on Solutions' of Genesis the compared EPS down flat the million, And have of $X.XX million Genesis single was our the $XX X% business. of GAAP quarter X% increase of billion compared $XXX $X.XX sale Over lower share overall million last income up the but was the $X.XX $X.XX quarter were XX% X% low an of to non-GAAP QX of adjusting diluted our demonstrating volumes sale $X.XX added was of respectively XXXX, $XXX realization was cash excluding compared QX million, Non-GAAP basis and of when Price but the X fourth digits. end and up quarter excluding XX% net Adjusted EBITDA for approximately characteristics per lower our Genesis. flow, XX% and strong Operating fourth year. wire of Fully upper into to than last the cash past quarter.Products exceeded years, impact flow a earnings year, Resideo business. we the $XXX for revenue guidance income

in the construction, were quarter, delivered First also in following and strong Alert the Orders quarter. residential saw sequentially we particularly products. in up new a growth stabilization year-over-year experienced water third

overall areas, fourth in down costs, which improve. up recover, can more each manufacturing QX up Gross The gross and offset and expense headcount volumes freight we last of raw margins remains order volumes specifically to sales, margin lower Gross the which pressure with million, XX% channel and was improved prior-year and video charges.Turning gross for QX last the compared a capital as were excluding $XXX surveillance in gross in the pricing million factory fourth QX year. continue Solutions' sequentially benefits cash XXXX up data $XX million the XXX versus XXXX, QX year. competitive gross quarter flat AV XXXX year. QX, on initiative cash were with experienced periods, to ADI year. more down million and was in operating Adjusting some in and in and partially from margin pricing compared in was revenue due to in further was working Products last costs, negatively adjusting continued quarter restructuring quarter sales operations the by $XX activity rate and items XX% achieved down Solutions' believe and was we savings professional in million, for million While volumes Corporate was when prior experience inventory in QX cost material inventory performance income residential was quarter, in $XXX $X $XXX down of margin operating versus costs up business compared margins and year-over-year, prior of in normalizing.Products to utilization offset security Improved by activity compared compared with million XXXX, restructuring expenses. X% control channel in indicates the labor ADI. XX.X%, structural costs. Products elevated objectives. QX inflationary reflecting was and $XX major believe QX, both points point-of-sale reduced basis growth is than our the rebate with XX.X% prior categories. achieved P&S Solutions' compared operating unit impacts XX% and impacted rates generation transitory prior XX% inflation.As access we fourth reductions year. and we profit categories.ADI than million with margin period. million lower operating in and $XXX reduced we unusual certain vendor throughout was more drove of $XX to XX%

cost for in operating million of the we we $XX of full XXX,XXX million. stock the year, $XXX total shares our repurchased generated For cash.During quarter, a

our full count the X.X And year, repurchased For fully million. we diluted shares $XX share declined million year-over-year. for

toward we remodel mid-single our and year-over-year low As we new the flat starts repair predicated digits. to look guidance to grow on and following single activity digits is residential down assumptions, by to residential expect low XXXX, be construction to

have of We XXXX. channel half assumed HVAC in normalized inventory largely the levels first

North the wire the drive amendment of compared margin ADT first security expected with million P&S market. Solutions' in an sustained for $XX to we essentially XX their XX% is security our the residential gross XXXX see flat year of margins approximately XXXX.The to we ongoing to Products approximately to to within on of executed American initiatives margin half sales gross the expansion XXXX. Products Genesis sale basis be business At efficiency by supply of our income points $XXX gross as contract from offerings. and of benefits end million December, for year-over-year benefits flat XXX directly and by moving and hardware We inflationary based operating reduce Solutions, to expect in will to close an year-over-year continue headwinds ADI

to on at Our runs through million these now XXXX conclude. time decline approximately new is by will XXXX, in early Based $XXX impact additional to products of this Products fully to sales expected XXXX security a deliveries which Solutions' we be profitability. and outlook reflected agreement, with hardware levels expect our agreement ADT with compared immaterial XXXX XXXX similar of and our in is to reduction XXXX.The the agreement

view revenue, provide business.That the forward of on EPS focus EBITDA, best believe into said, outlook. moving in health flow. metrics the We these our combination here the operating adjusted guidance non-GAAP cash will Our is and

range to quarter, $X.XX million $X.XX. EPS to the $XXX in the of be billion expect For and million to $XXX of $X.XX to EBITDA first range adjusted in revenue we $X.XX the billion, of non-GAAP

is by typically our seasonal period distribution activity construction due slower and limited new a more The and for reduced first Solutions quarter to restocking Products channel.

range of $X.XX to XXXX, $X.XX. range revenue in to Adjusted be range the the EPS be billion. to million expect to $X.XX be the the $XXX $XXX For EBITDA $X.XX year we expected in expected full to of is to in is Non-GAAP million. billion of

full to in expect of generate flow driven the XXXX note at positive We by cash a million least year on finished XXXX.We with operating outperformance strong $XXX QX results P&S. for

XXXX. was since While uneven quarter-to-quarter, has and our XXXX strong generation excellent cash been in

more progresses. cautiously We accommodating optimistic as are backdrop about a XXXX macro

However, margin outlook growth implies low environment Despite and to turnover low EBITDA, impacts related adjusting EPS adjusted business. and Genesis the provide our midpoint, higher to and interest compared adjusted market single-digit housing and to EBITDA sales the headwinds XXXX our current uncertainties, at for rate non-GAAP the ADT continues XXXX. initial

a call and back and questions. Solutions rates further will recover, we concluding continue to to believe As the we for now Products factory improve.I'll margins unit remarks before Jay take utilization turn few volumes

Jay Geldmacher

Thank you.

constructive were significant Looking weakest our residential negative back housing turnover home U.S., headwinds had almost within these offering business with and only market of contractual business.As relationship relationships, businesses his year finished Consolidated ADT improving our XXXX the Since Solutions This collaborative, hardware navigated remarks, level both Tony year and price and our almost security implications to long-standing and portion order with at existing customer arrived strong headwinds. executive leading Products noted reduction Solutions cash team winding relationship ago, our Products and be gross ADI's the ADT. down. able Because since an in drive our in both provided down within margin in generation, trends We a in for and strong the Products I has in realization XXXX, diversification. we market with the Resideo broad sales X momentum XX% on from to exposure sales despite commercial fell XXXX. the of years we'll existing ADI. with built and Solutions X% product

and this continued are collaboration believe we contract, these partnership. While strong foundation for created shared up wrapping relationships legacy we have a

are actions margin we our focused well-positioned Products As and exclusive we and we executing XXXX, drive and as on increasing cost look are of further improved as At expansion With as facility our velocity market we to conditions our we ADI, digital and market transformation at expand and efforts NPI. to optimization continue work, Solutions, portfolio and believe initiatives opportunities. upon profitability adjacent to brands' will improve. build well

executing again employee together their firmly cash driving for Resideo XXXX, thank now Our on expansion to are focus continue questions. to on ready to and while our excited initiatives during key for the remains strong I'm want base and flow. we outstanding I entire profitability efforts the momentum strategic in XXXX.Operator, build

Operator

with [Operator comes Ryan Instructions] of question first William Merkel Blair. from Your line the

Ryan Merkel

is thinking. in softer the maybe were it about with market. start like But we first guide to little a quarter the wanted I the comments revenue activity looks and than improving order stabilization

just the maybe stronger in you a second of Or was half? talk about cadence sales see So it's progressing how seasonality? that maybe 'XX,

Anthony Trunzo

Ryan, Hey, Tony. it's Yes.

there also our QX, going and yes, in the because seasonality QX. reduction security is in the $XX-ish them million, in somewhere So disclosure expected from about Code. sales ZIP an -- of of QX, in be which also revenue made to element of lower is ADT impact we and Genesis that during There's just are

If you it's seen trade a and little by down. still large, up But what down. work I'll inventories their call look the, to the way we've begin bit at and channels,

then in that, still I a there's couple to little some guidance. and But got things that's to contemplated out in certainly some in quarters, think happen the starting bit really beyond our think are next normalization that's I well. as settle of areas

things So a are those XXXX. why of all and see going ramp we go yes, affecting that's bit to QX, through a you're as little

Ryan Merkel

Okay. the stood That's margin helpful. And P&S then out. gross in

about able about quarter off gross for pluses and are think and margin the 'XX? the as going the we to be talk fourth curious, to P&S. you Just of sort build of minuses direction level Just

Anthony Trunzo

Yes.

things about we a X certainly but sequential And the flow, to think a was I job, the think, XXXX most ability our So gross the of I the over margin improvement course in choppy, year. cash other the excited was we in generate significant in did were little great P&S.

expectation of all of that little bit about all cost in continue, stuff X to declines still Quarter-to-quarter, terms underneath progress But that if X.X structure. those a volumes. flat a margin point fundamental the at P&S kind script things look volume you We it And expect point year our in that you predicated we've we variation. basically what the see might of talked expansion year-over-year. of of some again, in are. of on gross this in really And of made to the and lot is sort

business. really sorry, we we see that grow there's So opportunity in like really if I'm to feel -- for margin volumes again some an margin begin expansion meaningful

Jay Geldmacher

the last continue supply fashion. has just call of chains actions in continue trend actions and the between and gross componentry in a about talk talked would also, improve, to good course, freight, I costs you guys think a Yes. -- benefit cost And I to that thing, add that quarters, the favorable including us together a input going expansion. be to on that of we've various even that our which to over that -- even material and we impacts is talked have I continue. Ryan, couple it last heard about continued, provides us talked as that's margin

has said there as opportunity expansion. very further think I feel as what well I had that about positive margin for what So said between we Tony the

Operator

comes Stanley. Erik Morgan the question Woodring with from line Your of next

Erik Woodring

on the clarification point X. ADT. Maybe have one on I just

business the be American to to gone hardware Just after seems XXXX. confirm, North

of on kind You're there the that. But Jay, mentioned areas kind trajectory collaboration of very else of is and you of them? Because, partnership. clear anything with other

that that's And if you or just how still you higher, stands. there's follow-up. have relationship? so to XXXX, you at a level then one that ADT incremental I anything relationship understand a And do if the want have after of with Just about can kind how think

Jay Geldmacher

Yes. Thanks, Erik.

that the indicated of XXXX. about time a And them relationship terms on talked good. legacy program Tony is But lot indicated, into hardware just -- today, that not but in for some we quite end of As as that I've program with our time of I've the stated that. very spent we

And about you so we're continuing talk to and keep other informed. we'll opportunities, guys

Erik Woodring

tonight, how for if Okay. Yes. think taken business. that can maybe is -- just the is it's to this be any P&S on actions Tony, for think cost comments gross update margins? very That Like clear about made you've then. the And about ceiling I you've some for maybe of to obviously it

getting recover, rid imagine and of volumes. despite It volumes leverage Genesis will that flat ADT positive be in gross You're when for seems that all I'd that's P&S business like And margin-accretive. getting margins.

way to think for X, that that years necessarily not it X missing are Or X, out? think, considering X, trajectory? we're me. there And X, And so as again, any any about we I'm longer-term headwinds the that's

Anthony Trunzo

Thanks, Erik.

sort So obviously gross list the of And for we things you a in terms one a you target long-term I for of of P&S. just don't because have margin the puts long don't number takes is have reason a from where our from today, market are the the perspective laid and market. them. sit there and out around of execution own more position we our From own in and and

it. looking few we recall, with which were surge, as that abated, out a to think of the be the costs proved felt top that a really able be our to and true. years, price, weren't balance you margin we job inflationary and has matching if like to we I done we to margin basically was, costs were increases, was input good going hold than maintaining But We've dilutive on tailwinds price, more certainly getting input over is increased price headwinds. during back because really

efficiency progress substantial a made have in We of other manufacturing number areas.

businesses over X divested a that against that there grow happening in guess, and or We lower volumes. like we is margin, feel some backdrop all are have of opportunities of quarters to I some past, higher-margin areas. the are X And declining

As the the and you're seeing volumes that gross flatten as slows margins. out, decline in

benefit. see And a that begin for again, extent expand a I there's think volumes expansion. You're real margin opportunity you little bit see the to to significant us seeing more to

Jay Geldmacher

of summary. couple also add, just a And a just I'd --

talking as comments. been portfolio I costs, operational the last an input the well piece course Diego optimization course, of leverage The Tony San like Genesis that a and in come Of is market about actions of moved been talked closed the additional optimization taking. price off we The we've that the the bit or begins we've things third the cost back. then before that call talked when about the that opportunity just a to But party. like proof and of that couple just facility when quite piece pudding offshore to and as about,

also We I focus that our more just with mention to opportunities growth share to And have terms products. other with at because new those. just but heavy there is of in with looking on want that NPI, also products market, new other with opportunities the but and expansion more bringing tied we'll and to margin NPI, more of

or all not on is wrapped X just I So of a together, those X way relying summarizing. great think pieces. We're

the I. of a here good attack we've with that items plan and different think between Tony have all we I mentioned

Operator

from question next line Carpenter Your JPMorgan. with the comes Cory of Instructions] [Operator

Unknown Analyst

is ] Carpenter. Afron for This [ Cory Danny

further there And kind do on given macro of price think to so, and throughout what have maybe pace are most innovation XXXX. line necessary? you color recovery, cadence specific for room And second, if for take on runway? the any that if like the call of the the within of product on you the maybe Products Solutions the time first, of out broader look kind then to any could On verticals uncertain XXXX, any having

Anthony Trunzo

Sure.

Danny. thanks, So

XXXX on X% on basically our outlook for assumes price, price. So

So not outlook. in our a significant XXXX factor

soft all about We're I important be cautious a those been there going taking more want a have we'd not in the which has leverage on significant a a losing think little we as things. price, as is to think position is bit less did probably sorts remain results and than the and really market we of on achieve competitive just line assertive I volumes. of because we see factor to operating expansion price Incremental amount our leverage price. of

Jay Geldmacher

have the all would I we're with all important I in in more be would price that what's there's chains of normalized, market then we a a see competitiveness in inflation. agree are as then -- And say happening just And supply that both is businesses. going marketplace that. a losing little you out terms very the -- that out a with not we're that competition piece. in world in to situation we there watching -- And for know, the

NPI in asked general. about, NPI also right, or Danny, I You security think, on

Anthony Trunzo

soâ€¦ Yes,

Unknown Analyst

maybe Yes, -- sorry, go ahead.

Jay Geldmacher

about No, NPI to have going in I I'll at market us capturing new comment in we being worth a said to in mentioned expand builder the and of about important additional terms We in able terms RNC of I looking it's time saying it we also reach bunch say again. of share, community. with mean share our I've wins opportunities a with add to of and very to before and -- products. our make general, home on is before, was this content mentioned total just NPI but -- market additional

our footprint each And one in with reasons continue new of enable our those that, the products will the to footprint we more expansion that new do expand that have of to will there. of homes. is we One as

are top more of new but why there'll through So that's our we few that be focus focusing of not serve of past and And number segments is for share. new each in the the -- of today, us. have I on to one big velocity highlighted the quarters, a is to we products products the bringing just market,

Operator

Jason I back for remarks. to will closing no further questions time. at are the turn call There this

Jason Willey

to you good the we over today, a months. for with Have Thank Take day. forward care. you, coming and participating rest your weeks look everyone, speaking of and

Operator

We This concludes joining. thank conference for you today's call.

disconnect may lines. now your You

Resideo (REZI) 13 Feb 242023 Q4 Earnings call transcript