Resideo Announces Fourth Quarter and Full Year 2022 Financial Results

SCOTTSDALE, Ariz., Feb. 15, 2023 /PRNewswire/ -- Resideo Technologies, Inc. (NYSE: REZI), a leading global manufacturer and developer of technology-driven products and components that provide critical home comfort, energy management, and safety and security solutions and a leading wholesale distributor of low-voltage security, life safety, audio visual, data com, and other product categories, today announced financial results for the fourth quarter and full year ended December 31, 2022.

Full Year 2022 Financial Highlights

• Record net revenue of $6.37 billion, up 9% from $5.85 billion in 2021
• Gross profit margin of 27.7%, compared to 27.1% in the prior year
• Record income from operations of $611 million, or 9.6% of revenue, compared to $559 million, or 9.6% of revenue in 2021, including restructuring and impairment expenses of $35 million in the fourth quarter 2022
• Fully diluted earnings per share of $1.90, compared to $1.63 per share in the prior year

Fourth Quarter 2022 Financial Highlights

• Net revenue of $1.56 billion, up 7% from $1.45 billion in the fourth quarter 2021
• Gross profit margin of 27.6%, unchanged versus the prior year quarter
• Income from operations of $98 million, or 6.3% of revenue, compared to $141 million, or 9.7% of revenue, in the fourth quarter 2021, including restructuring and impairment expenses of $35 million in the fourth quarter 2022
• Fully diluted earnings per share of $0.26, compared to $0.45 per share in the same quarter last year

Management Remarks

"Across the organization the team continued to deliver for customers in the face of the dynamic supply chain environment and challenging macro economic backdrop," commented Jay Geldmacher, Resideo's President and CEO. "Feedback from customers and our data indicate our competitive positioning remains strong across the majority of our key markets. This is evident in the results both ADI and Products and Solutions delivered in 2022, with record revenue and expanding profitability even as residential market growth began to slow in the second half of the year. We remain focused on executing on the substantial long-term opportunity to improve margins and drive higher profitability through product innovation, cost optimization, and manufacturing efficiency initiatives."

"Given elevated near-term uncertainty around the macro-economic environment and the residential market outlook, we have taken action to reduce costs. This includes headcount reductions, scaling back certain investment initiatives, and further rationalizing corporate spending. We have also begun the manufacturing optimization work delayed due to supply chain challenges. These actions will position us to better respond to market fluctuations while continuing to support our customers and invest in key innovation and profit enhancement initiatives." 

Cost Reduction Actions

Resideo has initiated cost reduction actions that are expected to result in an approximate 5% decrease in Resideo's global workforce and approximately $70 million of annualized savings once fully implemented, which is expected to be within the next 12-24 months. Key initiatives include right-sizing the business, simplifying the organizational structure, optimizing manufacturing, and rationalizing corporate spending. These cost reduction measures are expected to improve the focus of operational resources on advancing strategic initiatives and better position Resideo to scale with future growth.

The Company incurred $35 million in restructuring and impairment expenses related to these costs reduction actions, which were recorded in the fourth quarter of 2022. Cash costs associated with these actions are expected to be approximately $25 million and paid throughout 2023.

Products and Solutions 2022 Highlights

• Net revenue of $2.78 billion, up 13% compared to 2021
• Operating profit of $527 million, down 3% compared to 2021
• Completed the acquisition of First Alert and made significant integration progress
• Revenue growth in Air products of 11% year-over-year, driven by connected thermostats

Products and Solutions delivered record revenue of $2.78 billion in 2022, up 13% compared to 2021, including $341 million revenue contribution from the First Alert acquisition in 2022 and approximately $95 million of unfavorable impact from foreign exchange movements. Growth in Air products, driven by strength in connected thermostats and zoning solutions, was partially offset by slower Security product sales. Results in the second half of 2022 were negatively impacted by inventory destocking across OEM and distribution channels. 

Gross margin for the year was 38.7%, compared to 39.6% in 2021. Gross margin was negatively impacted by the inclusion of lower margin First Alert revenue, continued input inflation, and lower volumes, partially offset by strong realization on pricing actions. Operating profit for 2022 was $527 million, or 18.9% of revenue, down from 21.9% in 2021. Products and Solutions made significant progress during 2022 on a number of key long-term initiatives focused on driving product and services innovation across the portfolio. At the center of this is software platforming work and expansion of home energy management solutions. Additionally, the acquisition of First Alert in late March 2022 added significant new capabilities to the product portfolio around smoke and carbon monoxide detection. This includes the opportunity to expand First Alert products into our traditional distribution channel and with new residential construction customers.

ADI Global Distribution 2022 Highlights

• Revenue of $3.59 billion, up 6% compared to 2021
• Gross margin of 19.4%, up 130 basis points compared to 2021
• Operating profit of $313 million, up 17% compared to 2021
• E-commerce sales growth of 24% year-over-year, accounting for 18% of ADI total revenue in 2022

ADI revenue of $3.59 billion in 2022 was up 6% compared to 2021, driven by 10% year-over-year growth in North America. During 2022, acquisitions completed in the past twelve months added $86 million and foreign exchange was a headwind of approximately $66 million compared to the prior year. Demand and pricing were strong in categories that typically serve commercial end markets including fire, video surveillance and access control. This was partially offset by slower demand trends within the residential focused intrusion and audio visual categories.

ADI continued to enhance the customer's omnichannel experience, drive growth in private brands, and expand its presence into attractive adjacent categories. ADI's e-commerce channel grew 24%, representing 18% of total ADI revenue, with overall touchless revenue reaching 37% of ADI's total revenue. Exclusive brands sales grew 25% compared to 2021, and revenue from categories servicing audio visual and data com exceeded $500 million for 2022.

Gross margin of 19.4% in 2022 was up 130 basis points compared to 2021. Benefits from the current inflationary pricing environment, progress on ADI specific price optimization efforts, and expansion of exclusive brands all contributed to margin expansion. Selling, general and administrative expenses were $373 million in 2022, up 10% compared to 2021 supporting growth in adjacent categories and investment in digital initiatives. Operating profit of $313 million for 2022 was up 17% from $268 million in 2021.

Full Year 2022 Financial Performance

Consolidated revenue of $6.37 billion in 2022 grew 9% compared with the prior year of $5.85 billion. Gross profit margin for 2022 was 27.7%, up 60 basis points compared to 27.1% in the prior year. Resideo's operating profit of $611 million in 2022 compared to the prior year operating profit of $559 million. Total Corporate costs were $229 million, down from $250 million in the prior year due to an $8 million benefit associated with an indemnification accrual release in third quarter 2022 and a $9 million impairment charge related to the Austin, Texas office relocation in the third quarter 2021. Net income for 2022 was $283 million, or $1.90 per diluted common share, compared with $242 million, or $1.63 per diluted common share, in the prior year. 

Fourth Quarter 2022 Financial Performance

Consolidated revenue of $1.56 billion in the fourth quarter 2022 grew 7% compared with the prior year of $1.45 billion. Gross profit margin for the fourth quarter 2022 was 27.6%, flat to the prior year quarter. Resideo's operating profit was $98 million in the fourth quarter 2022, including restructuring and impairment expenses of $35 million, compared to the prior year quarter's operating profit of $141 million. Total Corporate costs were $67 million, up from $54 million in the prior year quarter due to $4 million of restructuring expenses associated with programs initiated in the fourth quarter of 2022 and costs associated with information technology and finance organizational transformation. Net income for the fourth quarter 2022 was $39 million, or $0.26 per diluted common share, compared with $67 million, or $0.45 per diluted common share, in the prior year quarter.

Cash Flow and Liquidity

Resideo reported net cash provided by operating activities of $152 million in 2022 compared to cash provided by operating activities of $315 million in the prior year. The lower cash generation was primarily due to higher working capital. At December 31, 2022, Resideo had cash, cash equivalents and restricted cash of $329 million and total outstanding debt of $1.4 billion.

Outlook

The following table summarizes the Company's current first quarter 2023 and full year 2023 outlook.

Conference Call and Webcast Details

Resideo will hold a conference call with investors on February 15, 2023, 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 Fourth Quarter 2022 Earnings" or the conference ID: 7301399.

About Resideo 

Resideo is a leading global manufacturer and developer of technology-driven products and components that provide critical comfort, energy management, and safety and security solutions to over 150 million homes globally. Through our ADI Global Distribution business, we are also a leading wholesale distributor of low-voltage security and life safety products for commercial and residential markets and serve a variety of adjacent product categories including audio visual, data com, wire and cable, and smart home solutions. 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 and uncertainties, which may cause the actual results or performance of the Company to differ materially from such forward-looking statements. Such risks and uncertainties include, but are not limited to, (1) our ability to achieve our outlook regarding the first quarter 2023 and full year 2023, (2) our ability to recognize the expected savings from, and the timing and impact of, our cost reduction actions, (3) the duration and severity of the COVID-19 pandemic and the disruption to our business and the global economy caused by it, including its effect on our and our business partners' supply chains, (4) the amount of our obligations and nature of our contractual restrictions pursuant to, and disputes that have or may hereafter arise under the agreements we entered into with Honeywell in connection with our spin-off, (5) the likelihood of continued success of our transformation programs and initiatives, (6) risks related to our recently completed acquisitions, including First Alert, including our ability to achieve the targeted amount of annual cost synergies, successfully integrate the acquired operations (including successfully driving category growth in connected offerings), and the expected net present value of tax benefits resulting from the First Alert transaction and (7) 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, 2021 and other periodic filings we make from time to time with the Securities and Exchange Commission. 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. 

SOURCE Resideo Technologies, Inc.

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