AUSTIN, Texas, May 8, 2019 – Resideo Technologies, Inc. (NYSE: REZI) reported first-quarter financial results for the quarter ended March 31, 2019. The company reported Net Revenue of $1,216 million, Adjusted EBITDA of $92 million and adjusted basic and diluted earnings per share of $0.29.
“We’re off to a great start in 2019 with strong Q1 revenue performance in both our Global Distribution and Products & Solutions businesses. In Q1, our in-house innovation shined with the launch and strong sales volumes of our next generation pro security platform,” said Mike Nefkens, president and CEO of Resideo. “In addition, we acquired Buoy Labs, expanding our pro offerings into water leak detection, a critical segment in whole home solutions. I’m proud of the progress we’ve made in executing both our investment plans and cost reduction programs, and I am confident we are driving significant value creation as we execute on our growth strategy.”
Net revenue for the first quarter was up 4% on a GAAP basis and up 7% on a constant currency basis. First quarter net income was $48 million on a GAAP basis, $36 million on an adjusted basis, and $71 million adjusted excluding the Honeywell reimbursement agreement payments. Adjusted EBITDA was $92 million, or $127 million excluding the Honeywell reimbursement agreement payments.
Products & Solutions revenue increased by 5% on a GAAP basis, and 8% on a constant currency basis. Security demonstrated strong growth, led by the launch of the next generation residential security platform. New leadership for the global integrated supply chain drove improvements that allowed the company to begin overcoming a number of spin headwinds in manufacturing.
In March, the company acquired Buoy Labs, reflecting its commitment to identify and execute on tuck-in acquisitions in key adjacencies. The Buoy product is an innovative Wi-Fi enabled solution that tracks and manages water usage in the home. Buoy integrates smart software and hardware that identifies and helps consumers prevent potential leaks through its subscription-based app services. Buoy can shut off the water in the event of a leak, saving the homeowner from the cost of water damage. At the Consumer Electronics Show in January, Resideo announced its Honeywell Home™ T-Series Smart Thermostats – the T9 and T10 Pro – which feature wireless smart room sensors. Resideo offerings won multiple awards at CES, including a Consumer Technology Association award, and earned mentions in multiple “top pick” and “best of CES” coverage. In the first quarter, Resideo also announced the Honeywell Home™ SiXCOMBO detector, its first ever, two-way professionally installed and monitored wireless combination smoke, heat and carbon monoxide detector.
Resideo’s new next-generation pro series security platform began rollout in Q1. This revolutionary platform delivers both entry-level security protection and scales to a fully integrated smart home security solution. It features new self-contained wireless panels, advanced encrypted sensing, and offers dealers one system for easy installation and support. The expanded lines of sensors and life safety devices are interchangeable across the entire platform to help reduce inventory and training cost, and user replaceable parts provide added convenience for consumers. Q1 was a strong quarter for Products & Solutions, demonstrating both core business innovation and global growth.
Global Distribution revenue for the quarter increased by 4% on a GAAP basis, and 6% on a constant currency basis. Segment performance was driven by solid organic growth in the Americas and EMEA regions, and was partially impacted by one fewer selling day year over year. Segment Adjusted EBITDA increased by 12%, primarily driven by higher sales volumes and productivity.
The company’s ADI Global Distribution business achieved growth in the quarter driven by the Security and Life Safety product categories, as well as through expansion of its Professional A/V growth initiative. ADI also added to its product offering, notably announcing a distribution agreement with Paxton, a leading access control provider. ADI is also winning high-value new business among security integrators throughout North America.
ADI has recently received numerous awards from vendor partners, including Digital Watchdog, Hanwha, and Luxul, among others, and also was recognized within the industry for training program excellence, winning CE Pro’s Quest for Quality award.
For the quarter, as expected, the company used $10 million in cash for operations. Uses of cash were primarily driven by investment in inventory to support new product offerings and expand offerings in Global Distribution.
Total debt decreased to $1,196 million, and liquidity is supported by a $350 million revolving credit facility, under which no amounts were outstanding as of the quarter end.
Looking ahead to the second quarter, the company’s investment programs, which have already begun and are on track, are expected to accelerate – particularly with its new comfort platform and supporting digital programs. The company continues to anticipate its EBITDA profile will be 40% weighted to the first half of 2019 and 60% weighted to the back half of the year as the company also executes on its cost reduction program.
“As we invest in the business for growth, we are pleased with our cash generation. We remain disciplined in our approach to cash management, exiting the first quarter with zero drawn on our $350 million revolver,” said Joe Ragan, executive vice president and chief financial officer. “We are on track with our previously announced cost reduction program and expect $50 million in annualized savings by 2020. With continued confidence in our ability to execute and positive first-quarter results, we are reiterating our full-year 2019 guidance to reflect revenue growth of 2-5% and Adjusted EBITDA at the upper end of the range of $410 to $430 million.”
Resideo will hold a conference call with investors on May 9, 2019, at 8:30 a.m. EDT. To participate in the conference call, please dial 888-599-8688 (domestic) or +1-856-344-9282 (international) approximately 10 minutes before it starts. Please mention to the operator that you are dialing in for Resideo’s first quarter 2019 earnings call or provide the conference code 355941. A replay of the conference call will be available from 12:30 p.m. EDT, May 9, until 12:30 p.m. EDT, May 16, by dialing 888-203-1112 (domestic) or +1-719-457-0820 (international). The access code is 355941.
A real-time audio webcast of the presentation can be accessed at https://investor.resideo.com, where related materials will be posted prior to 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 and security solutions primarily in residential environments and distributor of low-voltage electronic and security products. 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. Resideo is a $4.8 billion company with approximately 13,000 global employees. For more information about Resideo, please visit corporate.resideo.com.
The Honeywell Home trademark is used under a long-term license from Honeywell International Inc.
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, those 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 Dec. 31, 2018 filed with the Securities and Exchange Commission (“SEC”). You are cautioned not to place undue reliance on these forward-looking statements, such as guidance regarding 2019 and 2023 and our planned $50 million cost program, which speak only as of the date of this release. 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.
This release includes EBITDA, Adjusted EBITDA, Adjusted EBITDA excluding Honeywell reimbursement agreement payments, Segment Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income excluding Honeywell reimbursement agreement payments, adjusted basic and diluted net income per share, constant currency growth, and other financial measures not compliant with generally accepted accounting principles in the United States (GAAP). The non-GAAP financial measures are adjusted for certain items 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, these measures are 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. These metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Refer to the tables above in this release for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures. We believe EBITDA, Adjusted EBITDA excluding Honeywell reimbursement agreement payments, Segment Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income excluding Honeywell reimbursement agreement payments, adjusted basic and diluted net income per share, and constant currency growth are important indicators of operating performance. For reconciliations of these measures to the most directly comparable GAAP financial measures to the extent that they are available without unreasonable effort, please refer to the tables above in this release. They should be read in connection with our financial statements presented in accordance with GAAP.
A reconciliation of Adjusted EBITDA, Adjusted EBITDA excluding Honeywell reimbursement agreement payments, Segment Adjusted EBITDA to the corresponding GAAP measures 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 gain, non-operating (income) expense and stock compensation expense.