Resideo Announces Second Quarter 2024 Financial Results

⁽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.

($ in millions, except per share data)

Q3 2024

2024

Non-GAAP Adjusted EBITDA

$170 - $180

$655 - $695

Non-GAAP Adjusted Earnings per share

$2.15 - $2.35

Full Year Cash Provided by Operating Activities

 At least $375

Contacts:

Investors:

Media:

Jason Willey

Garrett Terry

Vice President, Investor Relations

Corporate Communications Manager

[email protected] 

[email protected] 

Q2 2024 ⁽¹⁾

YTD 2024 ⁽¹⁾

(in millions)

Products
and
Solutions

ADI Global
Distribution

Corporate

Total
Company

Products
and
Solutions

ADI Global
Distribution

Corporate

Total
Company

Net revenue

$      630

$       959

$        —

$   1,589

$   1,250

$    1,825

$       —

$   3,075

Cost of goods sold

370

773

(1)

1,142

745

1,483

—

2,228

Gross profit

260

186

1

447

505

342

—

847

Research and development expenses

21

—

—

21

46

—

—

46

Selling, general and administrative
     expenses

103

118

59

280

200

220

91

511

Intangible asset amortization

6

6

1

13

12

9

1

22

Restructuring, impairment and
     extinguishment costs, net

—

—

11

11

5

2

11

18

Income (loss) from operations

$      130

$         62

$      (70)

$      122

$      242

$        111

$   (103)

$      250

Q2 2023 ⁽¹⁾

YTD 2023 ⁽¹⁾

(in millions)

Products
and
Solutions

ADI Global
Distribution

Corporate

Total 
Company

Products
and
Solutions

ADI Global
Distribution

Corporate

Total
Company

Net revenue

$      677

$       925

$        —

$   1,602

$   1,335

$    1,816

$        —

$   3,151

Cost of goods sold

418

747

1

1,166

826

1,467

2

2,295

Gross profit (loss)

259

178

(1)

436

509

349

(2)

856

Research and development expenses

28

—

1

29

55

—

1

56

Selling, general and administrative
     expenses

111

102

30

242

221

207

58

486

Intangible asset amortization

5

3

1

10

11

6

2

19

Restructuring and impairment
expenses

—

2

—

2

2

2

—

4

Income (loss) from operations

$      115

$         71

$      (33)

$      153

$      220

$       135

$      (64)

$      291

Q2 2024 % change compared with
prior period

YTD 2024 % change compared with
prior period

Products
and
Solutions

ADI Global
Distribution

Corporate

Total
Company

Products
and
Solutions

ADI Global
Distribution

Corporate

Total
Company

Net revenue

(7) %

4 %

N/A

(1) %

(6) %

— %

N/A

(2) %

Cost of goods sold

(11) %

3 %

N/A

(2) %

(10) %

1 %

N/A

(3) %

Gross profit

— %

4 %

N/A

3 %

(1) %

(2) %

N/A

(1) %

Research and development expenses

(25) %

N/A

N/A

(28) %

(16) %

N/A

N/A

(18) %

Selling, general and administrative
     expenses

(7) %

16 %

97 %

16 %

(10) %

6 %

57 %

5 %

Intangible asset amortization

20 %

100 %

— %

30 %

9 %

50 %

(50) %

16 %

Restructuring, impairment and
     extinguishment costs, net

N/A

N/A

N/A

450 %

150 %

— %

N/A

350 %

Income (loss) from operations

13 %

(13) %

112 %

(20) %

10 %

(18) %

61 %

(14) %

⁽¹⁾

On January 1, 2024, certain corporate functions were decentralized into the operating segments aligning with the business strategy. Functional expenses related to information technology, finance, tax, business development, and research and development are now recorded within the Products and Solutions and ADI Global Distribution segments. For the three and six months ended July 1, 2023, $13 million and $25 million of corporate expenses have been reclassified into the Products and Solutions while $8 million and $16 million of corporate expenses have been reclassified into the ADI Global Distribution segments, respectively, decreasing reported Income from Operations to conform to the current year presentation.

Three Months Ended

Six Months Ended

(in millions, except per share data)

June 29, 2024

July 1, 2023

June 29, 2024

July 1, 2023

Net revenue

$             1,589

$             1,602

$             3,075

$             3,151

Cost of goods sold

1,142

1,166

2,228

2,295

Gross profit

447

436

847

856

Operating expenses:

Research and development expenses

21

29

46

56

Selling, general and administrative expenses

280

242

511

486

Intangible asset amortization

13

10

22

19

Restructuring, impairment and extinguishment costs, net

11

2

18

4

  Total operating expenses

325

283

597

565

  Income from operations

122

153

250

291

Reimbursement Agreement expense ⁽¹⁾

47

44

90

85

Other expense (income), net

1

(2)

—

(3)

Interest expense, net

15

17

28

34

  Income before taxes

59

94

132

175

Provision for income taxes

29

44

59

68

  Net income

$                   30

$                   50

$                   73

$                107

Earnings per common share:

Basic

$               0.19

$               0.34

$               0.49

$               0.73

Diluted

$               0.19

$               0.34

$               0.48

$               0.72

Weighted average common shares outstanding:

Basic

146

147

146

147

Diluted

149

149

148

149

⁽¹⁾

Represents the expense incurred pursuant to the Reimbursement Agreement, which has an annual cash payment cap of $140 million. The following table summarizes information concerning the Reimbursement Agreement:

Three Months Ended

Six Months Ended

(in millions)

June 29, 2024

July 1, 2023

June 29, 2024

July 1, 2023

Accrual for Reimbursement Agreement liabilities deemed
probable and reasonably estimable

$                   47

$                   44

$                   90

$                   85

Cash payments made to Honeywell

(35)

(35)

(70)

(70)

Accrual increase, non-cash component in period

$                   12

$                     9

$                   20

$                   15

(in millions, except par value)

June 29, 2024

December 31, 2023

ASSETS

Current assets:

Cash and cash equivalents

$                  413

$                          636

Accounts receivable, net

1,071

973

Inventories, net

1,188

941

Other current assets

212

193

Total current assets

2,884

2,743

Property, plant and equipment, net

424

390

Goodwill

3,079

2,705

Intangible assets, net

1,218

461

Other assets

379

346

Total assets

$              7,984

$                       6,645

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$                  980

$                          905

Current portion of long-term debt

12

12

Accrued liabilities

602

608

Total current liabilities

1,594

1,525

Long-term debt

1,979

1,396

Obligations payable under Indemnification Agreements

625

609

Other liabilities

492

366

Total liabilities

4,690

3,896

Stockholders' equity

Preferred stock, $0.001 par value: 100 shares authorized, 0.5 shares issued and
outstanding at June 29, 2024 and no shares issued and outstanding at
December 31, 2023, respectively

482

—

Common stock, $0.001 par value: 700 shares authorized, 152 and 146 shares
issued and outstanding at June 29, 2024, respectively, and 151 and 145 shares
issued and outstanding at December 31, 2023, respectively

—

—

    Additional paid-in capital

2,276

2,226

    Retained earnings

881

810

    Accumulated other comprehensive loss, net

(242)

(194)

Treasury stock at cost

(103)

(93)

Total stockholders' equity

3,294

2,749

Total liabilities and stockholders' equity

$              7,984

$                       6,645

Three Months Ended

Six Months Ended

(in millions)

June 29, 2024

July 1, 2023

June 29, 2024

July 1, 2023

Cash Flows From Operating Activities:

Net income

$                   30

$                   50

$                   73

$                107

Adjustments to reconcile net income to net cash in
operating activities:

Depreciation and amortization

28

25

52

49

Stock-based compensation expense

15

13

29

25

Other, net

7

4

17

6

Changes in assets and liabilities, net of acquired
companies:

Accounts receivable, net

(91)

(58)

(57)

(35)

Inventories, net

(11)

12

(4)

(15)

Other current assets

6

11

9

3

Accounts payable

75

56

31

44

Accrued liabilities

11

(8)

(78)

(94)

Other liabilities

22

16

22

27

Net cash provided by operating activities

92

121

94

117

Cash Flows From Investing Activities:

Acquisitions, net of cash acquired

(1,334)

—

(1,334)

(6)

Capital expenditures

(15)

(29)

(36)

(49)

Other investing activities, net

7

—

6

—

Net cash used in investing activities

(1,342)

(29)

(1,364)

(55)

Cash Flows From Financing Activities:

Proceeds from issuance of incremental term loans
under the A&R Term B Facility, net

582

—

582

—

Proceeds from issuance of preferred stock, net of
issuance costs

482

—

482

—

Repayments of long-term debt

(3)

(3)

(6)

(6)

Other financing activities, net

(1)

(6)

(6)

(12)

Net cash provided by (used in) financing activities

1,060

(9)

1,052

(18)

Effect of foreign exchange rate changes on cash, cash
equivalents and restricted cash

—

4

(5)

10

Net (decrease) increase in cash, cash equivalents and
restricted cash

(190)

87

(223)

54

Cash, cash equivalents and restricted cash at beginning
of period

604

296

637

329

Cash, cash equivalents and restricted cash at end of
period

$                414

$                383

$                414

$                383

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

ADJUSTED NET INCOME PER DILUTED COMMON SHARE AND

NET INCOME COMPARISON

(Unaudited)
 

RESIDEO TECHNOLOGIES, INC.

Three Months Ended

Six Months Ended

(in millions, except per share data)

June 29, 2024

July 1, 2023

June 29, 2024

July 1, 2023

GAAP Net income

$                   30

$                   50

$                   73

$                107

Less: preferred stock dividends

2

—

2

—

GAAP Net income available to common stockholders

28

50

71

107

Acquisition and integration costs

34

—

34

—

Stock-based compensation expense

15

13

29

25

Intangible asset amortization

13

10

22

19

Reimbursement Agreement accrual increase, non-cash
component ⁽¹⁾

12

9

20

15

Other ⁽²⁾

12

(3)

17

(5)

Tax effect of applicable non-GAAP adjustments ⁽³⁾

(22)

(7)

(31)

(14)

Non-GAAP Adjusted net income available to common
stockholders

$                   92

$                   72

$                162

$                147

Three Months Ended

Six Months Ended

June 29, 2024

July 1, 2023

June 29, 2024

July 1, 2023

GAAP Net income per diluted common share

$               0.19

$               0.34

$               0.48

$               0.72

Acquisition and integration costs

0.23

—

0.23

—

Stock-based compensation expense

0.10

0.09

0.20

0.17

Intangible asset amortization

0.09

0.06

0.15

0.13

Reimbursement Agreement accrual increase, non-cash
component ⁽¹⁾

0.08

0.06

0.14

0.10

Other ⁽²⁾

0.08

(0.02)

0.11

(0.03)

Tax effect of applicable non-GAAP adjustments ⁽³⁾

(0.15)

(0.05)

(0.22)

(0.10)

Non-GAAP Adjusted net income per diluted common
share

$               0.62

$               0.48

$               1.09

$               0.99

⁽¹⁾

Refer to the Unaudited Consolidated Statements of Operations herein.

⁽²⁾

Other includes restructuring expenses, impairment charges, extinguishment costs, loss on sale of assets, Tax Matters Agreement gain, foreign exchange transaction loss (income), and litigation settlements.

⁽³⁾

We calculated the tax effect of non-GAAP adjustments by applying a flat statutory tax rate of 25% for the three months ended June 29, 2024 and July 1, 2023.

 NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(Unaudited)
 

RESIDEO TECHNOLOGIES, INC.

Three Months Ended

Six Months Ended

(in millions)

June 29, 2024

July 1, 2023

June 29, 2024

July 1, 2023

Net revenue

$         1,589

$         1,602

$         3,075

$         3,151

GAAP Net income

$               30

$               50

$               73

$             107

GAAP Net income as a % of net revenue

1.9 %

3.1 %

2.4 %

3.4 %

Provision for income taxes

29

44

59

68

GAAP Income before taxes

59

94

132

175

Acquisition and integration costs

34

—

34

—

Depreciation and amortization

28

25

52

49

Stock-based compensation expense

15

13

29

25

Interest expense, net

15

17

28

34

Reimbursement Agreement accrual increase, non-cash
component ⁽¹⁾

12

9

20

15

Other ⁽²⁾

12

(3)

17

(5)

Non-GAAP Adjusted EBITDA

$             175

$             155

$             312

$             293

Non-GAAP Adjusted EBITDA as a % of net revenue

11.0 %

9.7 %

10.1 %

9.3 %

⁽¹⁾ 

Refer to the Unaudited Consolidated Statements of Operations herein.

⁽²⁾ 

Other includes restructuring expenses, impairment charges, extinguishment costs, loss on sale of assets, Tax Matters Agreement gain, foreign exchange transaction loss (income), and litigation settlements.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(Unaudited)
 

PRODUCTS AND SOLUTIONS SEGMENT

Three Months Ended

Six Months Ended

(in millions)

June 29, 2024

July 1, 2023

June 29, 2024

July 1, 2023

Net revenue

$             630

$             677

$         1,250

$         1,335

GAAP Income from operations

$             130

$             115

$             242

$             220

GAAP Income from operations as a % of net revenue

20.6 %

17.0 %

19.4 %

16.5 %

Stock-based compensation expense

4

5

10

9

Other ⁽¹⁾

4

—

9

2

Non-GAAP Adjusted Income from Operations

$             138

$             120

$             261

$             231

Depreciation and amortization

18

17

35

34

Non-GAAP Adjusted EBITDA

$             156

$             137

$             296

$             265

Non-GAAP Adjusted EBITDA as a % of net revenue

24.8 %

20.2 %

23.7 %

19.9 %

⁽¹⁾  Other includes restructuring expenses and litigation settlements.

ADI GLOBAL DISTRIBUTION SEGMENT

Three Months Ended

Six Months Ended

(in millions)

June 29, 2024

July 1, 2023

June 29, 2024

July 1, 2023

Net revenue

$             959

$             925

$         1,825

$         1,816

GAAP Income from operations

$               62

$               71

$             111

$             135

GAAP Income from operations as a % of net revenue

6.5 %

7.7 %

6.1 %

7.4 %

Stock-based compensation expense

3

1

5

3

Acquisition and integration costs

4

—

4

—

Other ⁽¹⁾

—

2

2

2

Non-GAAP Adjusted Income from Operations

$               69

$               74

$             122

$             140

Depreciation and amortization

8

5

13

9

Non-GAAP Adjusted EBITDA

$               77

$               79

$             135

$             149

Non-GAAP Adjusted EBITDA as a % of net revenue

8.0 %

8.5 %

7.4 %

8.2 %

⁽¹⁾  Other includes restructuring expenses.