RESIDEO TECHNOLOGIES, INC. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Resideo exceeded the high end of its annual financial outlook metrics. Total net revenue was ~$6.8B, up 8% YOY; total adjusted EBITDA ~$700M, up 17% YOY; cash from operations $444M, a new record.
• Products & Solutions: 2024 organic revenue and gross margins improved. Launched Focus Pro thermostat and VISTA security products in 2024 with positive customer reception. Fourth quarter gross margin expanded, with HVAC, OEM, retail, and electrical distribution channels strong, but security channel soft.
• ADI: 2024 organic net revenue grew 2%, fourth quarter organic net revenue growth 9% YOY. Digital channels and product categories like video surveillance, residential security, etc., showed strength in second half. Snap One integration progressing well, achieving ~$17M run rate synergies in 2024.

Segment Performance

• Products & Solutions: In 2024, organic net revenue growth improved ~300 basis points vs 2023. Reported total net revenue was approximately $6.8 billion, growing 8% year-over-year. Reported gross margins expanded 240 basis points in 2024 due to structural improvements. Fourth quarter organic net revenue declined ~1% YOY after excluding currency and Genesis divestiture. HVAC, OEM, retail, and electrical distribution channels were strong; security channel was soft. Gross margin in Q4 was 40.8%, up 130 basis points YOY.
• ADI Global Distribution: 2024 organic net revenue grew 2% YOY. Fourth quarter reported net revenue grew 39% YOY, with organic net revenue growth 9% YOY. Driven by Snap One acquisition, broad-based organic growth, and accelerating digital revenue. Achieved ~$17M run rate synergies from Snap One acquisition in 2024, ~40% higher than expected.

Guidance

• 2025 financial outlook: Total company net revenue range $7.285B - $7.485B; adjusted EBITDA range $725M - $805M; EPS range $2.23 - $2.47; cash from operations range $345M - $405M. First quarter 2025 net revenue range $1.72B - $1.77B; adjusted EBITDA range $150M - $170M; EPS range $0.27 - $0.33. Anticipate both segments to grow net revenue in 2025, ADI growth higher than Products & Solutions. Update synergy target for Snap One to at least $75M annual run rate synergies exiting year 3. Expect better than previously communicated impact from ADT in 2025. Forecast 100-150 basis points gross margin expansion in 2025.

Risks

• Global macro environment remains mixed with U.S. dollar strength and potential tariff changes adding uncertainty to 2025. Resideo has comprehensive planning to address potential tariff changes, including price increases, commercial actions, and operational/supply chain moves.

Question and Answer

Q: Talk about new product innovation and road map for 2025 A: Thomas Surran mentioned revitalizing existing product lines, with products like Focus Pro thermostat and VISTA security products received well. 2025 will see new offerings in thermostats, security, safety, and expansion into new product categories and markets.

Q: Tariffs and supply chain contingency plans A: Jay Geldmacher said they reached out to customers proactively, considered price increases, commercial actions, and supply chain moves. Invested in customer relationships to deepen ties.

Q: ADI gross margin and Snap One synergies A: Robert Aarnes said ADI's exclusive brands growth (legacy + Snap) is margin accretive. Snap One synergies at $17M in 2024, ahead of expectations, driven by integration approach with 50-50 leadership teams.

Q: Tariffs and competition, ADI e-commerce and pricing A: Jay Geldmacher said competitors have mixed supply chain locations. Robert Aarnes noted ADI's e-commerce and exclusive brands are margin accretive, market competitive in Q4, but investments in omnichannel and ERP will help.

Q: ADI organic growth and Snap One margin accretion A: Robert Aarnes said ADI organic growth strong, Snap One launches new products, Control4 enhancements, and expanding into ADI customer base will drive margin accretion