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Contacts:

Media:
Annalise Helms
(763) 777-4334
annalise.helms@resideo.com

Investors:
Page Portas
(516) 726-3799
investorrelations@resideo.com


Resideo Announces Second Quarter 2020 Financial And Operating Results

AUSTIN, Texas, Nov. 5, 2020 – Resideo Technologies, Inc. (NYSE: REZI), a leading global provider of home comfort and security solutions, today announced financial and operating results for the third quarter ended Sept. 26, 2020.

Highlights

  • Net revenue of $1.4 billion, up 11% from $1.2 billion in the third quarter 2019
  • Operating profit of $131 million, compared to operating profit of $59 million in the third quarter 2019
  • Net income of $75 million, compared to net income of $8 million in the third quarter 2019
  • Adjusted EBITDA1 of $188 million, up 65% from $114 million in the third quarter 2019
  • Cash provided by operating activities of $21 million in the third quarter 2020

Third Quarter 2020 Performance

Consolidated revenue of $1.4 billion in the third quarter 2020 increased 11% compared with the prior year of $1.2 billion. ADI Global Distribution segment revenue was $790 million, an increase of 11% compared with revenue of $714 million in the prior year primarily due to increased volume from project business. Products & Solutions segment revenue was $572 million, an increase of 12% compared with revenue of $512 million in the prior year due to positive demand trends across each of Products & Solutions' primary end markets. 

Gross profit margin for the third quarter 2020 was 27.2%, compared to 25.2% in the prior year. The increase was attributed to higher revenue and sourcing and productivity cost savings initiatives, partially offset by increased factory costs related to COVID-19 safety measures and unfavorable sales mix in both segments.

Resideo's operating profit of $131 million in the third quarter 2020 compared to a prior year operating profit of $59 million. The operating profit reflects the improved gross profit and reduced SG&A expenses due to ongoing transformation and cost reduction programs. Net income for the third quarter 2020 was $75 million, or $0.60 per diluted common share, compared with $8 million, or $0.06 per diluted common share, in the prior year.

Adjusted EBITDA for the third quarter 2020 was $188 million, representing an increase of 65% compared with $114 million in the prior year. ADI Global Distribution segment Adjusted EBITDA increased from $48 million in the prior year to $52 million in the third

1 Previously presented as Adjusted EBITDA excluding Honeywell reimbursement agreement cash payments (see
Table 5 for description of change)

quarter 2020, primarily due to higher revenue and cost savings actions, partially offset by lower gross margin and increased investment activity. Products & Solutions segment Adjusted EBITDA increased from $66 million in the prior year to $136 million in the third quarter 2020. The increase was the result of higher revenue, improved gross margin, transformation savings and COVID-19 related cost management actions.

Year-to-Date Performance

Consolidated revenue for the nine months ended Sept. 26, 2020 was $3.6 billion, down 3% compared with consolidated revenue for the prior year of $3.7 billion. ADI Global Distribution segment revenue for the nine months ended Sept. 26, 2020 was $2.1 billion, an increase of 2% compared to the prior year. Products & Solutions segment revenue for the nine months ended Sept. 26, 2020 was $1.4 billion, a decrease of 10% compared with $1.6 billion for the prior year.

Gross profit margin for the nine months ended Sept. 26, 2020 was 24.9%, compared to 26.2% for the prior year. The decline in gross profit margin was the result of impacts from lower revenue in the Products & Solutions segment, unfavorable product mix across both segments and increased factory costs related to COVID-19 safety measures. These factors were partially offset by positive impacts from our ongoing transformation and cost savings programs and sourcing and productivity improvements. 

Operating profit of $159 million for the nine months ended Sept. 26, 2020 decreased 15% compared to operating profit of $186 million for the prior year. For the nine months ended Sept. 26, 2020, the Company reported a net loss of $22 million, or negative $0.18 per diluted common share.

Consolidated Adjusted EBITDA of $350 million for the nine months ended Sept. 26, 2020 declined $13 million, or 4%, as compared to $363 million for the prior year. ADI Global Distribution segment Adjusted EBITDA for the nine months ended Sept. 26, 2020 of $126 million, represented an 11% decline from $141 million for the prior year. ADI Global Distribution segment Adjusted EBITDA was negatively impacted by lower volumes related to COVID-19 and unfavorable sales mix, partially offset by cost reduction actions and transformation programs. Products & Solutions segment Adjusted EBITDA for the nine months ended Sept. 26, 2020 of $224 million represented a 1% increase from $222 million for the prior year. Within the Products & Solutions segment, cost savings from transformation programs and various cost reduction initiatives offset lower revenue, unfavorable sales mix and increased factory operating costs attributable to COVID-19 employee safety measures.

Cash Flow and Liquidity

The Company reported net cash provided by operating activities of $21 million for the third quarter 2020, an increase of $54 million from the prior year. This improvement was primarily due to improved net income and an increase in accrued liabilities. At Sept. 26, 2020, Resideo had cash and cash equivalents of $260 million, total outstanding debt of $1.3 billion, and $200 million undrawn on a $350 million revolving credit facility.

On Oct. 30, 2020, the Company paid the previously deferred April 30, 2020, $35 million Honeywell Reimbursement Agreement payment and made the regularly scheduled Reimbursement Agreement payment of $35 million.

Outlook

The Company expects fourth quarter 2020 revenue to be in the range of $1.36 billion to $1.41 billion, operating profit in the range of $130 million to $140 million and Adjusted EBITDA in the range of $180 million to $190 million.

Management Remarks

"In the third quarter we delivered meaningful sequential and year-over-year revenue and profitability expansion across the business," commented Jay Geldmacher, Resideo's President and CEO. "Demand strengthened as the quarter progressed at ADI and across our Products & Solutions offerings. These results highlight Resideo's strong position in the residential solutions market supported by the breadth of our product portfolio and distribution reach, unmatched relationships within the professional channel and leading positions in many of the product categories we serve.

"Our revenue performance and the progress with our ongoing transformation and cost reduction initiatives enabled us to strengthen our liquidity position, and in late October we made all outstanding Reimbursement Agreement payments to Honeywell. While we are closely monitoring our operations and supply chain for impacts related to the COVID-19 pandemic, we are encouraged by the strong demand trends we are seeing across our end markets as we close out 2020."

Conference Call Details
The Company will hold a conference call with investors on Nov. 5, 2020, at 8:30 a.m. EST. To join the conference call, please dial 1-800-367-2403 (U.S., toll-free) or +1-334-777-6978 (international), with the conference title "Resideo Third Quarter 2020 Earnings" or the conference code 8408606. A replay of the conference call will be available from 12:30 p.m. EST Nov. 5, 2020, by dialing 1-888-203-1112 (U.S., toll-free) or +1-719-457-0820 (international). The access code for the replay is 8408606.

A real-time audio webcast of the earnings 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 for 30 days following the presentation.

About Resideo
Resideo is a leading global provider of critical comfort, residential thermal solutions and security solutions primarily in residential environments. Building on a 130-year heritage, Resideo has a presence in more than 150 million homes, with 15 million systems installed in homes each year. We continue to serve more than 110,000 contractors through leading distributors, including our ADI Global Distribution business, which exports to more than 100 countries from more than 200 stocking locations around the world. 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, uncertainties, and other factors, which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, (1) the duration and severity of the COVID-19 pandemic and the disruption to our business and the global economy caused by it, including (A) its effect on the demand for our products and services, (B) its effect on our and our business partners’ supply chains, workforce, liquidity, spending and timing for payments and disbursements, (C) the impact of potential facility closures and the modified working conditions at our corporate offices, Product & Solutions segment and ADI Global Distribution segment, including the timing for our ability to reopen any facilities that have been or may be closed and/or to ramp up operations at such facilities and meet related customer demand, and (D) the impact of employee salary reductions, furloughs and other actions we have taken or may take in response to the COVID-19 pandemic, (2) our ability to continue discussions and reach agreement with Honeywell with respect to modifications to some of the agreements that govern our relationship, and any potential disputes that have arisen or may hereafter arise with Honeywell if we are unable to reach such agreement, and (3) 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, 2019, our Quarterly Report on Form 10-Q for the quarter ended September 26, 2020 and other periodic filings we make from time to time with the Securities and Exchange Commission (SEC). You are cautioned not to place undue reliance on these forward-looking statements, such as (i) the outlook regarding fourth quarter 2020, (ii) the impact of the COVID-19 pandemic on our business and operations, (iii) the progress and results of, and our ability to implement the opportunities identified in our previously announced comprehensive financial and operational review, including whether the implementation of the financial and operational review will provide meaningful financial benefits in 2020, 2021, 2022 and beyond, (iv) our ability to address issues that impacted our performance in 2019, including our ability to redesign our product introduction process, enhance our value engineering and cost reduction initiative for existing product platforms, and enhance our product management capabilities, (v) our ability to timely and adequately execute on anticipated new product launches, including the Pro Series launch, and (vi) the impact of the class action litigation and derivative shareholder litigation commenced against Resideo and certain of its current and former directors and executive officers. 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.

Non-GAAP Financial Measures

This release includes Adjusted EBITDA which is not compliant with generally accepted accounting principles in the United States (GAAP). The non-GAAP financial measures are adjusted for certain items as reflected in Table 5 above and may not be directly comparable to similar measures used by other companies in our industry, as other companies may define such measures differently. Management believes that, when considered together with reported amounts, this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends and provide useful additional information relating to our operations and financial condition. This metric should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Refer to Table 5 above in this release for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures. We believe Adjusted EBITDA is a relevant indicator of operating performance. It should be read in connection with our financial statements presented in accordance with GAAP.

A reconciliation of Adjusted EBITDA to the corresponding GAAP measure is not available on a forward-looking basis without unreasonable efforts due to the impact and timing on future operating results arising from items excluded from these measures, particularly environmental expense, Honeywell reimbursement agreement expense, stock compensation expense, restructuring expense and other non-operating expense (income).

Adjusted EBITDA (Non-GAAP) was previously presented as Adjusted EBITDA excluding Honeywell reimbursement agreement payments (Non-GAAP). The change in presentation was made beginning with our first quarter 2020 results to more accurately reflect the underlying performance indicators of the business in Adjusted EBITDA. The Honeywell reimbursement agreement cash payments are a liquidity measure and will be included within the cash flow and liquidity discussions. Management believes that this presentation more clearly presents underlying operations as the amounts related to the Honeywell reimbursement agreement are recorded in net income are based on when such amounts become probable and reasonably estimable.

 

SOURCE Resideo Technologies, Inc.

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