Resideo (REZI) 1 Nov 232023 Q3 Earnings call transcript

Hello, ladies and gentlemen, thank you for standing by. At this time, I'd like to welcome everyone to the Resideo Technologies Third Quarter 2023 Earnings Conference Call. Today's call is being recorded. [Operator Instructions]

Good afternoon, everyone, and thank you for joining us for Resideo's Third Quarter 2023 Earnings Call. On today's call will be Jay Geldmacher, Resideo's Chief Executive Officer; and Tony Trunzo, our Chief Financial Officer. you earnings Investor related website Relations would to our available materials at of presentation like the afternoon's on page remind copy release statements. presentation and are investors.resideo.com. We contains A forward-looking this that of our facts of Statements guarantees risks call may are performance and number of or results uncertainties. during constitute other made this statements forward-looking than and a historical future not and involve those factors, Actual of in those differ results from the result to of materially as and Exchange time filings a statements from Commission. number Resideo's with including Securities forward-looking described a in may time the The company no to forward-looking update any assumes statements. obligation such We annual identify Form SEC XX-K that affect risks uncertainties other report our performance on and in and our principal filings.

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

and us Thank thanks, joining everyone, for today. you, Jason,

third flow repurchasing quarter, while cost through improve of our improving to structurally take guidance above midpoint continue shares. actions, both business, we the and actions range, the X.X cash During million to and delivering results adjusted the operating

I'm new which months operational during highlighted improvements and ADI, on experience initiatives the discuss and will momentum cost excited key by past several digital progress the the and Products & business strategic partnership at within Solutions by further reviews. I product over significant

optimization of we business sale part Cable of As our portfolio nonstrategic our work, Genesis completed the for million. $XX.X

safety our These to life across life technology capabilities. organization. for monitoring our European commitment safety offering the recurring Sfty, of Sfty creation We execute provider acquired market. will Norwegian opportunities demonstrate also bolster small a with the transactions multifamily value revenue services attractive

and further coming realignment operations and and products expect actions in to the against execute review portfolio asset actively to and continue our strategic long-term goals will ADI financial quarters. the We solutions

restructuring resulted annual an both a brings took we to gross third steps over savings of actions at quarters to million million costs structural QX, with the expected During least $XX $XXX across over quarter. X $XX charge Resideo. This These costs the past million. near-term and in in reduce long-term cost further

market backdrop have We taken these challenging. remains against that residential a actions

an new significantly home recent for driver and repair remain levels. and installations activity, historical and Existing below sales, important remodel security

efforts in new expected construction down new is to to number built from the units our channel gain momentum, XXXX of XXXX. be the While within continue

Despite of change that these home is cyclical outlook there housing and creation time our increased both no growth investment view of businesses. our headwinds, the remain the over in to are very stock supportive the and in favorable for new

we and near-term During uncertainty, we what driving to control through this on continue of execution efficiencies. laser period can macro focused be

the products. solid channels retail Turning & Products delivered Alert to businesses. Solutions performance life First construction by safety our and in led new

the construction Our of per new content the per community. within our turn are trends smoke when sales positioning content new and home and our builder the CO grow units past products expand believe increased as XX further for growth We positive. home outside new new home over has pace XX% us housing well outperforming we by months,

remains demand elevated. channel unsettled favorable XXXX inventory were less to the remained environment The relative distribution where and in HVAC drivers

in and continue by impacted U.S. created across energy volumes gas near-term products Our furnished Europe. to shifts unit regulatory be declining by uncertainty products around the

XXX improve excluding impact and In to & by grew profit Products the Solutions While expense are revenue, operating restructuring. million by $XX last points, Solutions we year, $X & actions driving Products of negatively gross basis continue expanded million we market conditions versus to QX, business. by reducing the performance operating margin

with Alert UL alarm product the release. momentum our driving the security products smoke fire and Xth within will upcoming camera fourth quarter, outdoor new also compliant We introductions. introducing our are First be we In new launching and edition

products. increased seeing introduced recently security our in series Pro around also EMEA customer engagement are We

who with with relationship partner the Nationwide, value of leak are working major life see customer insurance reduce product On front, We categories have help insurance claims. homeowner our our in key opportunity we providers, and and and to the that to significant insurance comfort USAA and safety X claim expanded presence, portfolio enhance leading breadth address safety areas. water providers particularly and in channel excited

we well-known Lastly, experience, recognized across underscores and the We honored Year and significant offerings recognition products companies the programs across number proposition team, value by of and within insurance to safety and we including channel, water against products the of additional the see for Lowe's Vendor and of grow is have as electrical our work chain supply as with connected and are brands. from Alert life significant of result and sales, product customer been their First management the partnerships a retail competing particularly utilities. category, opportunity This the Resideo large, build brands.

to place revenue. versus the manage of quarter for of X% information QX customers. the providing continuing ADI drive total overall, investment touchless of And customers projects ADI sales who on the ADI's aimed initiatives at Much focused their focus need this speed quarter. purchase takes is third friction on reducing of or is and E-commerce year, the the last customer and at ultimately to in is grew digital in sales our enhancing online experience the support experience. ADI in branch. were improving where XX% XX% online representing

market discussed for from helped ADI's ADI's large intrusion negative sales. exposure and around insulate historically of headwinds however, residential see accounted to the market trends many commercial ADI does, the which to earlier. has of XX% in have diverse continue

investment XXX,XXX of service September, X the provides house optimize units more In advanced long-term inventory is site of ADI, opening This will advanced to than automation and has equipped space feet Center enhance its capacity real-time technologies and inventory. new the announced million This management. distribution Dallas. growth. in for of warehouse ADI and and for distribution center over site chain Super The capacity supply operations with square provide customer

can late showcases I the report wanted and information highlight areas August. second resideo.com/sustainability. in to Before Resideo turning performance Resideo's ESG about annual outlook, in made product Tony report the and sustainability, has the leaders. generation strong was to increased call sustainability culture quarter transparency, company discuss The published found progress the at over be to More our of development journey third of next which of

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

everyone. and you, good Thank afternoon, Jay,

expenses, midpoint an basis results Third of expectations adjusting when business, above restructuring. were quarter which reduction improvement margin costs and year-over-year $XX Products operating in Solutions the our & XXX gross our for by posted restructuring a million operating excluding driven point

revenue $XX restructuring, to million million, declined year. compared year. Operating last versus income Resideo quarter million $X.XX last the consolidated third quarter $XXX including of X% of billion was QX for $XXX

QX million $XXX to million in of Adjusted XXXX. $XXX compared was EBITDA

earnings and basis on $X.XX, year. diluted $X.XX and per were a share respectively, last Fully non-GAAP $X.XX $X.XX compared with

the compared by unit X% added declines. Products & revenue Solutions than low of Price $XXX realization volume third but million was XXXX. $XX of quarter third quarter double-digit more million offset to approximately down with was revenue

product and declines Alert inventory products traditional reflecting flat were QX revenue distribution to HVAC product energy slower First mostly was channel. as attributable Our was the end last our revenue. Year-over-year air continued management year and demand to HVAC compared in categories, volume security business for

prior and quarter Orders compared October demand months. line prior with were in and The the in the third orders were the expectations period. to picked several were but sequentially, compared broadly to end the up our down entering experienced in volume approximately September and X% quarter trends market up

While encouraged in the we are of orders key below we remain by are channels. levels, signs XXXX stabilization peak seeing

freight points buy limited & all mix. component, favorable managing in Products of and partially margin a activity. material, gross last basis increase broker raw was $XX reflects reductions freight volumes costs, less QX and up realized on XX.X%, and year. labor of Solutions in XXX by compared The impacts offset quarter over million the year-over-year We to the cost saw progress reduced

fixed efficiency as labor in count of despite percent labor the allowed over with head us wage of This improve down to continues to Our expenses middle QX in inflation. sales America XXXX. North a XX% ongoing labor since direct reduce

development. operating million offset reduction Total restructuring labor year-over-year, for costs. were Products investments of in software were million inflation efforts down expenses Cost services $XX Solutions excluding and partially and by & $XX

$XXX or operating XX.X% sales QX Excluding X% profit was compared up costs, restructuring of to million XXXX. and

Turning was fire, with in relatively period. X% X% EMEA. residential with key to X% intrusion in consistent growth $XXX was in A to the declines access control, ADI. and America were flat strength by decline down in quarters other recent offset QX and million, trends wire. commercial revenue North in as partially Category performance prior such video year double-digit surveillance categories

year. by last rebate the quarter XX.X% QX in pricing impacted transitory in to benefits negatively XX.X% more reduced certain vendor competitive margin experienced pricing Margins in gross and ADI volumes in lower activity were compared was due XXXX, with categories. third inflationary

costs. with compared and $XX of was year of restructuring million million XX% profit includes operating ADI QX $XX last down

footprint. restructuring accelerated physical ADI quarter, and head reductions, geographic third including the and its count During activities, consolidating

million restructuring, timing period. The Corporate third $X compared in with costs prior prior of costs the and in increase $XX were an nonrecurring $XX benefit certain year year the million, million reflects million up $X quarter.

was QX operations compared with million last cash million year. from $XX QX in $XX

$XX shares for X.X quarter, million we of repurchased stock cost total the our million. During a of

authorization the business. to expect of active significant the repurchase remain underlying against disconnect We we in value price executing as share the and our between see a

taken Including the the XXXX, restructuring restructuring QX undertaken over charges in million $XX we have quarters. past activity of X of over

benefit savings operating Approximately to XX% expense the in at in actions generate expected XXXX. least to $XXX with of COGS. these expect million remainder We gross these savings of are

outlook. sub-XX% and generated approximately of XXXX Moving by Genesis to margins. of of sale reduces margins the historically outlook EBITDA Note million that our of Genesis $XX $X and million in our previously the income. operating completion gross communicated sub-XX% mid-October revenue

to the $XX approximately We related fourth a sale. expect in to record income quarter other gain of in million the

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

to be $XXX profit of full consolidated now to is expected expect billion range be billion, we year, range in the the revenue $X.X $XXX gross million to of range to is XX.X% the in operating million. be of and $X.XX to expected XX.X% the margin to in For

by we met or was QX delivered Driving expectations, margins year-over-year. this restructuring. points at expanded conclusion, performance exceeded adjusting better-than-expected that basis XXX our & results where In Products gross Solutions for

the by October. order Products encouraged activity experienced & are We September in and in Solutions pickup

expect we be in to As markets, our improvements to moving profitability cost end our we to Solutions' helpful initiatives efficiency look Products forward. and & cyclical

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

Thanks, Tony.

headwinds, position across we the While can market remain businesses. in the navigate long-term structurally We profitability. for we sustainable control areas change focused and important higher cyclical positive steps to on we driving are short-term taking business growth the

and We Solutions conditions. gross costs within & have improvement margin are made Products input volume progress challenging driving despite reducing

financial goals critical to and rightsizing managing investment are and while profitability strategic operating near-term to operations continues. also and costs long-term fit ensuring We our portfolio value-driven long-term our protect

Later CONNECT with this across week the and innovation in networking annual our XXX and position for and dealers, opportunities Scottsdale, capabilities contractors have leadership HVAC, water industry installers we event, we home showcasing event landscape. our the over partners. smart highlights This professional and security, host thought integrators the will offering in and product

Our of positioning positioning and leverage the a better to business work on the relationships. these professional centered undertake much asset the with contractor continues remains unique us to and is has

continued I base our for thank and during a customers. for the employee on entire again delivering focus the their Resideo want to quarter work

for ready now are we Operator, questions.

[Operator Stanley. the comes of line Woodring Erik with Morgan Instructions] first question from Your

to in home at your all a common top, and we home both construction. from you by just whether They're home headwinds if it's turnover, less start Maybe alluded new both the prepared residential related here. remarks Tony sales, thread Jay,

into of we we the that to the residential how about And customers should on how that based we the next integrators, of year? then have your think evolve conversations headwind? are just really months early inning kind the think better but can of a in? do trying How Just downturn So follow-up. with and these trends I understand X next longevity over about

Erik, it's Tony. Thanks for the question.

are track bigger for we off know more significantly. a I track driver are starts, we significantly home Existing pretty a And our you than home business. big well, new that's obviously existing starts, sales of sales. and both and as home off all chunk As do

call we that. to said like But It's in at difficult have we they seem our gotten a position the us that rates to given the Does market value better we're in comments, seems marketplaces. those not mean that in certainly, where clear really have As call to bottom? stabilized. We're the for just -- have somewhat to seem a in things bottom are chain. order

orders that as also, And or terms some we last seen of so. in month there's encouraging said in Erik, signs the we've

mix. a it's think I so And

And is difficult right, bottom. to think so Tony call I the it's pretty

that underscore, I with First was solid thing pointed I is really Alert just to in that construction strides are going new brands. out making some the market, one we the particularly Erik, I'd we of say, guess,

content growing market our is down. So even in is still that the trending though itself market

Yes, I That's job would we've in our that. the have done that sell the really that as new a overall and about footprint contribution important builders. to teams talked past a into new agree piece with new into with every and of able well nice wins something we're as gaining expanding of home

driving Okay. That the value of prepared you kind the between that's dance disconnect because helpful. I remarks made stock here to about understand and of the market And comment are a price you you a business, under the of kind really that in of market the Resideo? the change business is Tony, Resideo maybe kind and has understanding some taking floor that, give want your appreciating doesn't today? to But -- buyback And value that underlying or the is of what today what think you the efforts of about in do the activity. current

for mean, soft the as should had I where been Look, be. obviously, it think indicate thanks the shares, the market lower which have of is a than and active we buying back number been does A we've the said, in quarters that been valuation results of we've down. Look, things. the things have So number question. we

see extent that And as at to that gap is perspective. I valuation we're from least to think, to my execute, close, our going on always, continue focus we the execution.

of on about lot talked of and results are significant generation. The restructuring P&S operationally this really focused today revenue A cash business. underlying volume. the margin progress charges, QX operating on lower show and within last lower the profitability quarter, things expansion, that than higher year taking demonstrating realigning We're we expenses lower after out the portfolio. significantly some they functionally and, the We're

really for be think bodes -- to to positioned I So that I in I we to that operating that better whenever business the better perform think kind we than rather happen, think it a were now sooner ago this going later, growth And see we're does, opportunity much leverage well a an in upswing. than as of for that's see year environment.

getting We've position and talked and meantime, from on cycle behind out, I in a crystal in for the of of like we've that And add, things the just the our things prepared go it remarks, a Yes. everybody a execution. moving standpoint. important continued the to cost you help and and think of ball out the of you But you and the is of And indicated or things highlight for you're when cycle, -- our think NPI than this, in of we us. together best sure I'd those so actions have we as that Tony come lot on important control good new at the details is are come better cycle, try NPI doing about importance I us. does things really the rest figure taken all because cost structure you through it's to new the important really the that velocity I super cycle right, folks NPI the then watch the bottom to than when And the I'm position out look back. And of let's there, line, as that anybody, up. and a know the

have through go valuation. significantly I on opportunities think cycle, the we As we'll

question year $XX income And I operating reduced think, we If about account was midpoint The I maybe comes prior to your into earnings, then but raised of and earnings, you, XQ by, clarification, full about for results, means just take No, you guide guide your Tony. EPS that think one $X.XX. million, up that's perfect. by XQ $X.XX.

is, another really about that me. Genesis. from? $X.XX from But wrong. the sale maybe from math it considering? kind item Where EPS point think the correct comes of that's that Just a of clarification. if my not for that of roughly of that $X.XX Just -- we're remaining is we think should Is me And question comes coming below-the-line of upside $X.XX just I

outlook try dollars I'll million what And obviously, an prior of have the better but to the EPS, that our We outlook mean, things. I with few QX on QX, from EPS. a the address business sale up right, would ended few the at moving well. -- that. our do now, the better to the Erik, of some guidance lot our Genesis Yes. have of points midpoint million indicated. a those think probably increment for there's net-net, on the pieces, for midpoint the and is increment a than above dollars standpoint, But the that's and that's have operational I'd to we I I suspect math as in

Okay. That Good luck. That's works. perfect.

Thanks, Erik.

question of comes with line William Merkel Ryan Blair. the next from Your

back turnover, just turnover and mortgage high remodel more just from. residents? My that's is prices for the housing theme if high, that your wondering move people repair there to outlook could benefit so or this current I'm that first home this their out are of there tied to and question, investing rates in people and because can't are something products are you

their their activity million at been So us. homes. clearly units that's down the or to maybe a existing of right plus repair minus. Ryan, compared headwind sell little right homes moving to And potentially a think us not to deciding trough. I it's house, and they their it's dynamic decline, probably more it one home people think just We before if of in a that of just I unit happens has, not when of significant purchase X people of sales. by to projects think significantly the existing than X X/X remodel the has terms by from peak existing from you've lot in But out it's helped that or they Whether There's I highlighted other. or annually, drop the look types X million they're bit sales, dynamics, for tease countervailing home in to volumes trend think by for and hard outweighed do you but the

Got it.

Okay.

a about -- low if digits, down are just And -- very as broadbrush of digits. if seeing new we're we're I of I a XX-plus existing you own percent. follow it, seeing housing look driver home for unit double think view. also answer, my And as double up this well, us. at But they're our volumes And -- down if starts are you down I low kind guess is a sales which reduction said, and is in on and to

So clearly, those outperforming think that, I we're of some metrics.

seeing homes. we're people's their there probably, investment in from some that is So lift existing

Yes.

Question for Okay. more expect? more sounds And talk is there. what about that? should number we like in to Can two It optimization. there's inning maybe what portfolio you're do you

of look, of and it that early us and is to are sure. if do The Resideo. outsourced the at sale factories our done our pretty activities for be Genesis we're and the once for we evaluating a we've we awesome year this quarters. was look, could incrementally San to kinds we in removed to Diego new that castings do. assets That would do things And be But inside important thing big those The going kind things thing the It's pretty coming say, over -- of for and us offshore. business important here's is innings, two well. still a all facility we it just closed the as there

standpoint it integration of vertical the what from looks and Here's manufacturing. like

businesses move from businesses some it looks standpoint that the it's the But and we're is out just the investing of. to maybe Here's we're It that take what innings. early of like in to going time. going

and you mean that in And reasons, it was able some QX in and the Diego. that But we opportunities coming. at we've these focal time a in again number time, and of we about said some really Yes. on said have my good I point of so earnings have what team our remarks, in couldn't optimization, tell that. point think really larger do call, last at more if both that matter San remember there, Genesis others. we of time, of for we a today, about I obvious but than it's a could And I you as I of talk these opportunities are of we're in in think you follow-up we it's now about, to -- and terms how did I a because talked

all rate, the margins growth the growth And just of objectives, underlying to objectives, the improve to underlying improve is this our to of the be of incrementally rate, clear, and the business.

could just EBIT I if in wrong. correct million, and the think early one you I Well, $XXX guidance was gave XXXX more level, say 'XX I'm high Yes. for if me

cost been you're Now yourself what perform optimization to but things, probably did other the goals has out? the you you had than and miss going that know macro that. on portfolio if you and graded you I to set relative obviously different how cutting thought,

period. ever we've the situation experienced, my we mean, Yes. of well you because And COVID anybody's and chain had if could years -- at still that also X of that limitations think career, the you so associated do there time I we all in had we worst with during I what as challenges of least about that a as on this before, supply -- talked had you period about know. for

Hopefully, we -- in why what with back we with about because there, more about we of talked seeing momentum some I we've knew last the highlighted what call, -- and earnings talked before, hold Diego, them and you're that's especially of of there kind opportunities some that the on. were today you'll that to begin lot Genesis. of had think we a So San

And we're of and a lot to the forward now about course, move to And them speed. opportunities. level a and that I why of on to along. as share at able of more ball think of reviewed and the to those team the each these a velocity higher so is we those one in -- able going you maybe if anything, being kind had things take begin And we're that's excited with shelf then, comes we've of

comes Amit line Evercore of ISI. the Daryanani from question with next Your

Amit. Fisher for Michael on

So I quick just there by was any couple is curious, the gross guys upside stuff talked Or last on the questions? on in driven portfolio about play the is primarily this there? margin the of you optimization business, P&S other dynamics to

labor kinds and terms so this were driven guess on we've Freight when at able have -- we of progress much you buys. things we some of These terms normalized. broker rates felt but all It's were in through that the meaningful for progress things, these inflationary we've work it We quarters, quarters. we to I was all of more things. very progress And -- by in talked of significant made those high, And also like really the been first components. our the made significant in significant made impacts we all, those unfolded. last masked all had efficiency. look We've of of price, being also of of if progress about facing them costs number trajectory several kinds

we revealed that in the of seeing made you're I better think a bit terms what is little being margin. progress is have

this lower that says to see. that mean said, lot given with performance the I a volume, the volumes perspective, think impressive margin made, that have that you're I margin say from clear overemphasize, they're progress gross facing. now I starting line gross a in about been percentage I hadn't like the to it the really have X.X investors on we of points to business quarter delta can't my I

Yes, I would agree.

versus Makes some sense. homebuilder higher overall up the a of in you dig big wondering content new I'm things guys are And just, just for channel the kind business. how think, you going channel, brought a guys. home and about homebuilder I market. if little the for that maybe bit rest you think of then And is little bit talk the I better into can success with the

has business homebuilder more and to and really repair from X/X RNC driver. into a X/X then to significant work been and ability is more been two and BRK, that the referenced remodel smoke out seen brand homes it, add to One builder getting in indexed for their relationships got building more existing our the which builders really BD Well, comes much us team and done The But We're hard out in the to overall. that things. channel of dynamics. home is it sales progress is is it's the we've our and heavily in more access we've that we other, First And the has channel, worked really we area, CO the with Alert from and a build more to relationships. it.

have And is a RNC. then increased expansion increased continuing in earlier, that come more to we're the on further markets mentioned we first a drive, of there. lot what I Tony as to to to And the from said back and back and we will of opportunity content, by content and really to which that number the be piece, comes that and back, expand for that the new Right, the on with as the we benefit going into my able customers that. we're -- RNC, builders chair, content

Zaffino of from Ian question Oppenheimer. [Operator with Instructions] line Your the next comes

Sellhausen you is for question. taking guys the on This Isaac Ian. Appreciate

of quarter? sounds you a price maybe dynamics the saw the on saw as for pricing be pricing could still or volume context our some year, Products through despite and expectations volumes declines. Just nice the what in benefit you Solutions, It that, in maybe for follow-up And XXXX you talk like business the into this the the one to & year? going on from previous the increases then the part should second lap next some

Isaac. Thanks, Yes.

things. of couple a think I

I the price the but all, been increases. think some million, of I not changes anticipate But largely price to I it's to was just flow-through we've there's position seen the to going would $XX think dramatic we've say, maintain flow-through. able forward. been give abate, specific moving price. prior XXXX. make large anything of and input that our majority costs I of that We're moves realization in there, wouldn't about First quarter, logically, in as here really this price be We did

normal increases still we'll of think sort I that price get and our thing.

our our driving we go -- -- started for the that back and needed to if X-plus price then marketplace. saw the showed Jay to And of saw that to years first inflation we I was up, as we was But we started. inflation price we to were you objective we were the as trying we when And part price to helped as isn't the value costs. bringing where we basically before and forward ability basically an with think that up going moving the that's our to tail, have input neither those has pricing our to inflation costs environment. be that hold now input either going to the driving the or margin. caught with continue And abated, environment inflation, -- stay in chasing where perspective inputs

agree with I Yes. would that.

Is helpful? that

business the you on in just headwinds was. And then quick a Yes, the in commercial discussed? what maybe positive side most of categories on residential the you've are that the ADI, follow-up it space given

say you one? most did the Sorry, positive

Yes.

Yes.

has reason, in intrusion residential of and dollars security, whatever -- are for or lot volumes A control, still unit still video -- sort held and the well. has and off. the Fire fire the done access we're and So really there. of

with agree would I Yes, that.

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

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

call. Thank This joining. you concludes conference today's for

disconnect now your You lines. may