Resideo Announces First Quarter 2020 Financial and Operating Results
First Quarter Highlights
- Net Revenue of $1.2 billion, down 3% year-over-year on a GAAP basis and 2% year-over-year on a constant currency basis
- GAAP Net Loss of $21 million; Adjusted Net Income1 of $29 million
- Adjusted EBITDA of $99 million2, down 22% year-over-year
- GAAP EPS of ($0.17); Adjusted EPS3 of $0.24
AUSTIN, Texas, May 6, 2020 – Resideo Technologies, Inc. (NYSE: REZI), a leading global provider of home comfort and security solutions, today announced financial and operating results for the first quarter ended March 31, 2020.
“We have been operating through a period of unprecedented challenges for the global economy and our industry,” said Andy Teich, the lead independent director of Resideo. “Our primary focus has been the health, safety and well-being of our employees, professional installers, and customers. We began to experience COVID-19 pandemic related headwinds during March and responded by taking decisive actions to reduce costs and maximize our financial flexibility. Looking ahead, we will continue to work diligently to safeguard our employees, professional installers and customers during these uncertain times. In addition, we remain committed to best positioning Resideo for long-term sustainable growth. While near term challenges remain, we are confident that Resideo is well-positioned across our markets with leading brands and strong pro-channel loyalty supported by established global scale.”
Consolidated revenue decreased 3% year-over-year on a GAAP basis and 2% year-over-year on a constant currency basis. On a GAAP basis, ADI Global Distribution revenue increased 6% while Products & Solutions revenue decreased 14%. Revenue in both segments was negatively impacted by the COVID-19 pandemic toward the end of the quarter. GAAP Net Loss decreased $69 million, or 144% year-over-year. Adjusted EBITDA2 decreased $28 million, or 22% year-over-year.
__________________________1 Previously presented as Adjusted Net Income excluding Honeywell reimbursement agreement cash payments (see Table 5 for description of change)
2 Previously presented as Adjusted EBITDA excluding Honeywell reimbursement agreement cash payments (see Table 5 for description of change)
3 Previously presented as Adjusted EPS excluding Honeywell reimbursement agreement cash payments (see Table 5 for description of change)
ADI Global Distribution revenue increased 6% on a GAAP basis and 7% on a constant currency basis. Despite a COVID-19 pandemic-driven revenue slowdown toward the end of the quarter, segment constant currency revenue increased in the Americas, EMEA and APAC regions. Segment Adjusted EBITDA remained flat despite higher revenue, COVID-19 pandemic related employee benefit reductions, and other cost productivity improvements. Unfavorable product line and customer mix as well as commercial investments negatively impacted Segment Adjusted EBITDA for the quarter.
Products & Solutions segment revenue decreased 14% on a GAAP basis and 13% on a constant currency basis, with lower revenue across all lines of business driven by the overlap of a strong prior year quarter, coupled with the impact of the COVID-19 pandemic. Segment Adjusted EBITDA decreased from $81 million in the first quarter of 2019 to $53 million, or 35%, driven primarily by lower revenue and unfavorable product mix relating mainly to new product launches in the Security and Comfort businesses. Cost reduction from on-going transformation programs coupled with COVID-19 pandemic related cost actions partially offset the impact of lower revenue on Segment Adjusted EBITDA.
Cash Flow and Liquidity
Resideo has maintained a strong liquidity position throughout the early stages of the COVID-19 pandemic through several measures, including the draw-down of our $350 million revolving credit facility as a conservative measure. The future trajectory of the COVID-19 pandemic remains unclear and the company plans to continue its focus on cost reduction and cash flow management measures, including reducing net working capital investment and planned capital spending. In addition, we intend to continue our dialogue with Honeywell regarding the overall relationship, including the deferment of $42 million of second quarter payments related to the Honeywell reimbursement agreement and trademark license agreement that was announced on April 23, 2020.
As of March 31, 2020, the company had cash and cash equivalents on balance sheet of
$338 million and was in compliance with its debt covenants.
Financial and Operational Review Update
The work undertaken by Resideo as part of the comprehensive Financial and Operational (F&O) review provided the company with a head start in reacting to the COVID-19 pandemic, supporting acceleration of cost reduction actions within selling, general and administrative expenses and indirect spend.
Teich continued, “I have been pleased with the progress the management team has made, and while there is still significant uncertainty regarding the depth and duration of the crisis, I believe our F&O action plan has enabled us to more swiftly and decisively address some of the challenges presented by the COVID-19 pandemic. Based on the progress made to date on our F&O initiatives, we remain confident that the actions we announced in our fourth quarter 2019 earnings release will allow us to achieve $30 - $40 million of cost savings in 2020. Consistent with our expectations, there were not material F&O savings in our Q1 financial results.”
Within the key focus areas, the company has realized the following early successes toward its F&O initiatives:
- Renegotiated approximately 50% of our targeted direct material contracts through a focus on value engineering and logistics;
- Announced approximately 35% of our organization reduction initiatives;
- Implemented approximately 25% of our 2020 indirect cost reduction initiatives;
- Implemented process improvements to reduce our investments in customer receivables and inventory; and
- Advanced the analysis of our manufacturing footprint and potential alternatives.
Full Year Guidance Update
As previously announced on April 23, 2020, given the rapidly evolving operating conditions in the industry due to the COVID-19 pandemic, the company has withdrawn its full-year 2020 guidance. Given the continuation of these uncertainties, we are not issuing updated financial guidance at this time.
Conference Call Details
Resideo will hold a conference call with investors on May 7, 2020, at 8:30 a.m. EDT. To join the conference call, please dial 800-949-2175 (domestic) or +1 720-543-0197 (international) approximately 10 minutes before it starts. Please mention to the operator that you are dialing in for Resideo’s first quarter 2020 earnings call or provide the conference code 9660873. A replay of the conference call will be available from 12:30 p.m. EDT May 7, 2020, until 12:30 p.m. EDT May 14, 2020, by dialing 888-203-1112 (domestic) or +1 719-457-0820 (international). The access code is 9660873.
A real-time audio webcast of the presentation will be accessible at https://investor.resideo.com, where related materials will be posted before the
presentation, and a replay of the webcast will be available for 30 days following the presentation.
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.
SOURCE Resideo Technologies, Inc.
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