Resideo Announces Second Quarter 2022 Financial Results
SCOTTSDALE, Ariz., August 4, 2022 – Resideo Technologies, Inc. (NYSE: REZI), a leading global provider of home comfort and security solutions and distributor of commercial and residential security and audio-visual products, today announced financial results for the second quarter ended July 2, 2022.
Second Quarter 2022 Highlights
- - Net revenue of $1.69 billion, up 14% from $1.48 billion in the second quarter 2021
- - Gross profit margin of 27.7%, up 160 basis points compared to gross profit margin of 26.1% in the prior year comparable period
- - Operating profit of $186 million, or 11.0% of revenue, compared to $121 million, or 8.2% of revenue, in the second quarter 2021
- - Fully diluted earnings per share of $0.63 compared to fully diluted earnings per share of $0.39 in the second quarter 2021
"ADI and Products & Solutions delivered record quarterly revenue and combined operating profit exceeded the high-end of our outlook," commented Jay Geldmacher, Resideo's President and CEO. "We have remained focused on delivering for customers and we believe our execution has enabled us to improve our positioning at key distribution and retail accounts, add new OEM business, and solidify our position as the distributor of choice for security contractors."
"Products & Solutions grew volumes in the quarter and we continue to see good realization on our price actions. First Alert delivered a strong quarter, and we are in the very early stages of tapping the meaningful commercial and operational opportunities from bringing the organizations together. Investments to expand digital initiatives and private brands continue to deliver strong growth for ADI. Returns on these investments and ADI's relentless focus on execution drove another quarter of meaningful gross margin expansion and record operating income."
Products & Solutions Second Quarter 2022 Highlights
- - Record revenue of $764 million, up 28% compared to the second quarter 2021
- - Operating profit of $154 million, up 19% compared to the second quarter 2021
- - Strong realization on pricing actions drove over $60 million of year-over-year revenue improvement
- - Unit volumes grew compared to the second quarter of 2021, aided by strength in Air products sold through the distribution and retail channels
Products & Solutions delivered revenue of $764 million in the second quarter 2022, up 28% compared to the second quarter 2021 and up 9% excluding the $113 million revenue contribution from the acquisition of First Alert, which was completed on March 31, 2022. Demand was strongest in the distribution and retail channels, which offset expected declines in security. The supply chain environment remained challenging during the second quarter, constraining the business' ability to fully meet demand.
Gross margin for the quarter was 37.3%, compared to 39.3% in the second quarter 2021. Pricing actions benefited second quarter gross margin and partially offset year-over-year cost inflation and impacts from the First Alert acquisition. Included in the second quarter 2022 gross profit was First Alert inventory step-up expenses of $6 million, which impacted gross margin by approximately 80 basis points. Operating profit for the quarter was $154 million, or 20.2% of revenue, up 19% compared to the second quarter 2021.
First Alert had a strong second quarter, driven by solid demand for smoke and combo alarms and strong operational execution. Results also benefited from recent pricing actions. Initial collaboration work has begun between the First Alert and Resideo teams with a number of value creating opportunities already identified.
ADI Global Distribution Second Quarter 2022 Highlights
- - Record revenue of $922 million, up 5% compared to the second quarter 2021
- - Gross margin of 20.0%, up 260 basis points compared to the second quarter 2021
- - Operating profit of $86 million, up 30% compared to the second quarter 2021
- - E-commerce sales growth of 29%, accounting for 18% of ADI total revenue
ADI second quarter 2022 revenue of $922 million was up 5% compared to the second quarter 2021, driven by a strong pricing environment and recent acquisitions. Demand was again strong in categories that typically serve commercial end markets including fire and access control. Vendor supply issues remained a headwind to additional growth in the quarter. Sales through ADI's e-commerce channel grew 29%, representing 18% of total ADI revenue, with overall touchless revenue reaching 36% of ADI total revenue. Private brands sales grew over 35% compared to the second quarter 2021.
Gross margin of 20.0% in the second quarter 2022 was up 260 basis points compared to the second quarter 2021. Benefits from the current inflationary pricing environment, progress on ADI specific price optimization efforts and expansion of private brands all contributed to margin expansion in the second quarter. ADI continues to invest in digital tools and systems to improve selling efficiency. This includes implementing a global artificial intelligence pricing system in 14 countries, which brings a consistent set of tools with business intelligence dashboards to drive accountability. Operating profit of $86 million for second quarter 2022 was up 30% from $66 million in the second quarter 2021, exceeding 9% of revenue.
At the beginning of the third quarter, ADI acquired Electronic Custom Distributors (ECD), a regional distributor of residential audio, video, automation, security, wire, and telecommunication products. With four branch locations and a 30,000 sq. ft. distribution center, the acquisition adds to ADI's growing capabilities in the audio visual market. ECD is the fifth acquisition for ADI since 2020.
Second Quarter 2022 Financial Performance
Consolidated revenue of $1.69 billion in the second quarter 2022 grew 14% compared with the prior year of $1.48 billion. Gross profit margin for the second quarter 2022 was 27.7%, up 160 basis points compared to 26.1% in the prior year. Resideo's operating profit of $186 million in the second quarter 2022 compared to a prior year operating profit of $121 million. Total Corporate costs were $54 million, down from $74 million in the prior year primarily due to the net costs associated with the class action legal settlement in the second quarter 2021. Net income for the second quarter 2022 was $94 million, or $0.63 per diluted common share, compared with $58 million, or $0.39 per diluted common share, in the prior year.
Cash Flow and Liquidity
Second quarter 2022 net cash provided by operating activities of $35 million compared to cash provided by operating activities of $94 million in the prior year comparable period. The reduction in cash generation was primarily due to investments made in working capital to support growth and a strategic decision to increase inventory levels to help mitigate supply chain constraints. At July 2, 2022, Resideo had cash and cash equivalents and restricted cash of $255 million and total outstanding debt of $1.4 billion.
Based on first half results and the outlook for the remainder of 2022, the company expects full year 2022 revenue to be in the range of $6.45 billion to $6.65 billion, gross profit margin in the range of 27.5% to 28.5% and operating profit in the range of $690 million to $720 million.
The company expects third quarter 2022 revenue to be in the range of $1.67 billion to $1.72 billion, gross profit margin in the range of 27.0% to 28.0% and operating profit in the range of $165 million to $175 million.
Conference Call and Webcast Details
Resideo will hold a conference call with investors on August 4, 2022, 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 second Quarter 2022 Earnings" or the conference ID: 7301399.
Resideo is a leading global manufacturer and distributor of technology-driven products and solutions that provide comfort, security, energy efficiency and control to customers worldwide. Building on a 130-year heritage, Resideo has a presence in more than 150 million homes globally, with 15 million systems installed in homes each year. We continue to serve more than 110,000 professionals through leading distributors, including our ADI Global Distribution business, which exports to more than 100 countries from nearly 200 stocking locations around the world. For more information about Resideo, please visit www.resideo.com.
- Printable PDF: Full Q2 2022 Press Release and Financial Tables