Resideo Announces First Quarter 2024 Financial Results

Products and Solutions first quarter gross margin of 39.5%, fourth consecutive quarter of year-over-year improvement

First quarter net income of $43 million; Adjusted EBITDA of $137 million at the higher end of outlook range

Continued progress on business transformation with new product introductions and agreement to acquire Snap One, a leading provider of smart-living products and distribution

SCOTTSDALE, Ariz., May 2, 2024 /PRNewswire/ -- Resideo Technologies, Inc. (NYSE: REZI), a leading global manufacturer and distributor of technology-driven products and solutions for homes and businesses, today announced financial results for the first quarter ended March 30, 2024.

First Quarter 2024 Financial Highlights

• Net revenue of $1.49 billion, down 4% compared to $1.55 billion in the first quarter 2023
• Net income of $43 million compared to $57 million in the first quarter 2023
• Fully diluted EPS of $0.29 and $0.38 and Adjusted EPS⁽¹⁾ of $0.47 and $0.51 for the first quarter 2024 and first quarter 2023, respectively.
• Adjusted EBITDA⁽¹⁾ of $137 million compared to $138 million in the first quarter 2023

Management Remarks

"Performance within Products and Solutions drove first quarter Adjusted EBITDA to the higher end of our outlook range," commented Jay Geldmacher, Resideo's President and CEO. "We continue to deliver gross margin and profitability improvements within Products and Solutions despite market demand that remains constrained by higher interest rates and slower housing turnover. ADI's business trends improved as the quarter progressed and momentum continues on key strategic initiatives around growing exclusive brands sales and enhancing digital capabilities."

"We continued to execute on our transformation work through organic and inorganic actions. We took further steps in optimizing our manufacturing footprint and we have improved structural costs through restructuring and focused expense controls. We expect our planned acquisition of Snap One will bring immediate value to Resideo by adding highly complementary business capabilities that expand opportunities in attractive growth categories and accelerate ADI's expansion of higher margin proprietary products."

¹ This press release includes certain "non-GAAP financial measures" as defined under the Securities Exchange Act of 1934. Resideo management believes the use of such non-GAAP financial measure, specifically Adjusted EBITDA and Adjusted EPS, assists investors in understanding the ongoing operating performance of Resideo by presenting the financial results between periods on a more comparable basis.  See reconciliations of U.S. GAAP results to adjusted results in the accompanying tables.

Products and Solutions First Quarter 2024 Highlights

• Net revenue of $620 million, decreased 6% compared to the first quarter 2023
• Gross margin of 39.5%, up 180 basis points compared to the first quarter 2023
• Income from operations of $112 million compared to $105 million in the first quarter 2023
• Adjusted EBITDA of $140 million, 22.6% of revenue, compared to $128 million, 19.5% of revenue, in the first quarter 2023

Products and Solutions delivered net revenue of $620 million in the first quarter 2024, down 6% compared to first quarter 2023 and down less than 1% excluding the impact of the Genesis divestiture. Volumes declined in Air and Security product categories, impacted by lower activity in EMEA and continued low levels of housing turnover in the U.S. These headwinds were largely offset by strong performance at First Alert, particularly with home builder customers, and continued price realization.

Gross margin for the quarter was 39.5%, compared to 37.7% in the first quarter 2023, reflecting improving material costs, reduced freight, and lower direct labor spending. Selling, general and administrative expenses were down $13 million and research and development expenses remained consistent compared to 2023. Included in the first quarter 2024 were $5 million of restructuring costs, compared to restructuring costs of $2 million in first quarter of 2023. Operating profit for the quarter of $112 million or 18.1% of revenue, increased from $105 million or 16.0% of revenue in first quarter 2023. Adjusted EBITDA grew 9.4% year-over-year in the first quarter 2024 to $140 million, with Adjusted EBITDA margin up 310 basis points to 22.6%. Continued progress on structural gross margin improvements through labor reductions and material cost controls and lower selling, general and administrative expenses drove the higher profitability despite volumes remaining a headwind.

ADI Global Distribution First Quarter 2024

• Net revenue of $866 million, decreased 3% compared to the first quarter 2023
• Gross margin of 18.0%, down 120 basis points compared to the first quarter 2023
• Income from operations of $49 million compared to $64 million in the first quarter 2023
• Adjusted EBITDA of $58 million, 6.7% of revenue, compared to $70 million, 7.9% of revenue, in the first quarter 2023
• Exclusive brand sales up 7% compared to prior year first quarter

ADI first quarter 2024 net revenue of $866 million decreased $25 million compared to first quarter 2023. ADI had volume declines in several categories including residential security, access control and video, partially offset by expansion in fire and data communications. ADI's e-commerce channel grew 1% in first quarter 2024 compared to the prior year period, representing 21% of total ADI revenue. ADI digital engagement accelerated during the quarter with revenue, orders and customer count all up year-over-year. Planned improvements to website speed, on-site search, estimated delivery dates and ADI mobile app are expected to support continued customer digital growth looking forward. Exclusive brand sales grew by 7% compared to the first quarter 2023, with record daily sales levels achieved for the quarter.

Gross margin for the quarter was 18.0%, down 120 basis points compared to first quarter of 2023. The reduction was driven by reduced inflationary pricing benefits that drove higher margin in 2023 and lower product line margin. ADI has experienced a reduction of average cost inventory benefits year-over-year, as supplier price increases have reduced in pace and scale in 2024. Selling, general and administrative expenses were $102 million in 2024, down $2 million compared to prior period. Operating profit of $49 million for first quarter 2024 decreased 23% from $64 million in first quarter 2023. Adjusted EBITDA declined to $58 million in first quarter 2024 from $70 million in first quarter 2023. Lower revenue and reduced gross margin drove the year-over-year decline in profitability.

Cash Flow and Liquidity

Net cash provided by operating activities was $2 million in first quarter 2024 compared to a usage of  $4 million in the first quarter 2023. The increase was primarily driven by working capital improvements compared to the prior year period. At March 30, 2024, Resideo had cash and cash equivalents of $603 million and total outstanding debt of $1.41 billion.

Outlook

The following table summarizes the Company's current second quarter 2024 and full year 2024 outlook.

Conference Call and Webcast Details 

Resideo will hold a conference call with investors on May 2, 2024, at 5:00 p.m. ET. An audio webcast of the call will be accessible at https://investor.resideo.com, where related materials will be posted before the call. A replay of the webcast will be available following the presentation. To join the conference call, please dial 888-660-6357 (U.S. toll-free) or 1-929-201-6127 (international), with the conference title "Resideo First Quarter 2024 Earnings" or the conference ID: 7301399.

About Resideo 

Resideo is a leading global manufacturer and developer of technology-driven products and components that provide critical comfort, energy management, and safety and security solutions to over 150 million homes globally. Through our ADI Global Distribution business, we are also a leading wholesale distributor of professionally installed electronic security and life safety products for commercial and residential markets and serve a variety of adjacent product categories including audio visual, data communications, and smart home solutions. For more information about Resideo, please visit www.resideo.com.

Forward-Looking Statements
This release contains "forward-looking statements." All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risks and uncertainties, which may cause the actual results or performance of the Company to differ materially from such forward-looking statements. Such risks and uncertainties include, but are not limited to, (1) our ability to achieve our outlook regarding the second quarter 2024 and full year 2024, (2) our ability to recognize the expected savings from, and the timing and impact of, our existing and anticipated cost reduction actions, and our ability to optimize our portfolio and operational footprint (3),  the amount of our obligations and nature of our contractual restrictions pursuant to, and disputes that have or may hereafter arise under the agreements we entered into with Honeywell in connection with our spin-off,  (4) risks related to our recently completed acquisitions including our ability to achieve the targeted amount of annual cost synergies and successfully integrate the acquired operations (including successfully driving category growth in connected offerings), (5) the ability of the conditions to the closing of the Snap One transaction being timely satisfied and the consummation of the transaction, (6) the ability of Snap One and/or Resideo to drive increased customer value and financial returns and enhance strategic and operational capabilities, (7) the ability of Snap One and/or Resideo to achieve the targeted amount of synergies and the related valuation implications described in this press release, (8) the accretive nature of the transaction to Resideo's non-GAAP EPS in the first full year of ownership and the growth and margin profile of the combined businesses, (9) the ability to accelerate brand strategy as a result of the transaction, (10) the ability to integrate the Snap One business into Resideo and realize the anticipated strategic benefits of the transaction, including the anticipated operational and strategic benefits of the transaction, and (11) the other risks described under the headings "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements" in our Annual Report on Form 10-K for the year ended December 31, 2023 and other periodic filings we make from time to time with the Securities and Exchange Commission. Forward-looking statements are not guarantees of future performance, and actual results, developments, and business decisions may differ from those envisaged by our forward-looking statements. Except as required by law, we undertake no obligation to update such statements to reflect events or circumstances arising after the date of this press release and we caution investors not to place undue reliance on any such forward looking statements.

Use of Non-GAAP Measures
This press release includes certain "non-GAAP financial measures" as defined under the Securities Exchange Act of 1934 and in accordance with Regulation G. Management believes the use of such non-GAAP financial measures assists investors in understanding the ongoing operating performance of the Company by presenting the financial results between periods on a more comparable basis. Such non-GAAP financial measures should not be construed as an alternative to reported results determined in accordance with U.S. GAAP.

We have included reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and provided in accordance with U.S. GAAP at the end of this release. A reconciliation of the forecasted range for Adjusted EBITDA  and Adjusted Net Income per diluted share for the second quarter of 2024 and for the fiscal period ending December 31, 2024 are not included in this release due to the number of variables in the projected range and because we are currently unable to quantify accurately certain amounts that would be required to be included in the U.S. GAAP measure or the individual adjustments for such reconciliation. In addition, we believe such reconciliation would imply a degree of precision that would be confusing or misleading to investors.

Table 1: SUMMARY OF FINANCIAL RESULTS (UNAUDITED)

Table 2: CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

   Table 3: CONSOLIDATED BALANCE SHEETS (UNAUDITED)

Table 4: CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

SOURCE Resideo Technologies, Inc.