RESIDEO TECHNOLOGIES, INC. Q3 FY2024 earnings call

• Strong third quarter results with both Products and Solutions and ADI achieving mid-single-digit year-over-year organic revenue growth. • Total company gross margin expanded by nearly 200 basis points year-over-year. • Adjusted EBITDA reached $190 million, a 29% year-over-year increase. • Integration of Snap One into ADI is progressing well, with a target of $75 million in annual run rate synergies by 2026 and on track to achieve $12 million in 2024. • Products and Solutions saw 4% organic revenue growth with new product launches, including the Focus Pro series thermostats. • ADI had 31% year-over-year sales growth, e-commerce sales grew 18%, exclusive brand sales rose 32%, and the first combined store of the future opened in Omaha.

Products and Solutions: In the third quarter, revenue was $645 million, with 4% organic growth. Gross margin was 42.2%, up 350 basis points year-over-year. Adjusted EBITDA was $157 million, an increase of $17 million year-over-year. ADI: Q3 revenue was $1.18 billion. Excluding the $251 million contribution from Snap One, organic revenue rose 4%. Adjusted EBITDA was $92 million, up 33% from Q3 last year, with $25 million from Snap One. The organic ADI business had lower gross margin due to reduced inflationary benefits and competitive pricing in some categories.

• For the fourth quarter, total company net revenue is expected to be in the range of $1.815 billion to $1.855 billion, adjusted EBITDA in the range of $170 million to $185 million, and adjusted EPS in the range of $0.51 to $0.61. • For the full year 2024, total company net revenue is expected to be between $6.72 billion and $6.76 billion, adjusted EBITDA between $672 million and $687 million, and adjusted EPS between $2.18 and $2.28. • The company expects to generate at least $375 million of total company operating cash flow for 2024.

Q: Jay, congrats on the retirement announcement but wanted to know what kind of leader Resideo needs for the next phase and what qualities are sought in the next operator.

A: Jay stated that he wants the company to be in a strong position when transitioning, and the next leader should be able to build on the momentum achieved and focus on growing both top and bottom lines.

Q: Chan Park inquired about SG&A being higher than expected and margin trends going forward.

A: Mike Carlet responded that there were some one-time unusual items in P&S SG&A that caused the increase, which shouldn't be a recurring trend. Regarding margins in 2025, they are positive about the business momentum and new product introductions will drive margin growth, with guidance on timing to be provided appropriately.