Resideo Announces Second Quarter 2020 Financial And Operating Results
Resideo Technologies, Inc. (NYSE: REZI) reported its second-quarter results, revealing a 17% drop in net revenue to $1.0 billion, and a GAAP net loss of $76 million compared to a loss of $11 million in Q2 2019. Adjusted EBITDA fell 48% to $63 million, influenced by COVID-19 challenges. Segment revenues decreased by 10% in ADI Global Distribution and 26% in Products & Solutions. Despite an increase in cash flow from operations to $71 million, management anticipates cash flow improvements as business activity recovers.
- Cash flows from operations increased to $71 million, up $108 million from prior year.
- Cost savings from transformation programs contributed to a 14% reduction in SG&A expenses.
- Net revenue decreased by 17%, from $1.2 billion in Q2 2019 to $1.0 billion.
- GAAP net loss increased to $76 million, compared to $11 million in Q2 2019.
- Gross profit percentage declined from 26% to 23% year-over-year.
AUSTIN, Texas, Aug. 4, 2020 /PRNewswire/ -- Resideo Technologies, Inc. (NYSE: REZI), a leading global provider of home comfort and security solutions, today announced financial and operating results for the second quarter ended June 30, 2020.
Highlights
- Net Revenue of
$1.0 billion , down17% from$1.2 billion in the second quarter 2019 - GAAP Net Loss of
$76 million ; compared to GAAP Net Loss of$11 million in the second quarter 2019 - Adjusted Net Income1 of
$21 million , compared to Adjusted Net Income1 of$63 million in the second quarter 2019 - Adjusted EBITDA2 of
$63 million , down48% from$122 million in the second quarter 2019 - GAAP EPS of negative
$0.62 ; Adjusted EPS3 of$0.17
Second Quarter Performance
Consolidated revenue of
Gross profit percentage for the second quarter 2020 was
Selling, general and administrative ("SG&A") expenses for the second quarter 2020 were
Resideo's operating loss of
Adjusted EBITDA for the second quarter 2020 was
____________________________ |
1 Previously presented as Adjusted Net Income excluding Honeywell reimbursement agreement cash payments (see Table 5 for description of change) |
2 Previously presented as Adjusted EBITDA excluding Honeywell reimbursement agreement cash payments (see Table 5 for description of change) |
3 Previously presented as Adjusted EPS excluding Honeywell reimbursement agreement cash payments (see Table 5 for description of change) |
ADI Global Distribution segment revenue decreased
Products & Solutions segment revenue decreased
Year-to-Date Performance
Consolidated revenue for the six months ended June 30, 2020 was
Gross profit percentage for the six months ended June 30, 2020 was
SG&A expenses for the six months ended June 30, 2020 were
Operating profit of
The Company's operating profit percentage was
Consolidated Adjusted EBITDA of
Cash Flow and Liquidity
The Company reported cash flows from operations of
Resideo and Honeywell have agreed to further defer, until October 30, 2020, the
Financial and Operational Review Update
During the second quarter, Resideo made additional progress on its previously announced Financial and Operational review ("F&O"). The Company expects to realize net benefits of approximately
Management Remarks
"Thank you to our Board of Directors and the entire Resideo team for the warm welcome and, more importantly, the energy, commitment, and focus during these unprecedented times," said President and CEO Jay Geldmacher. "Resideo continues to operate at the highest level of safety and concern for the wellbeing of our employees, professional installers, and customers. Our second quarter results announced today reflect the challenging operating environment caused by the COVID-19 pandemic. I am encouraged by the resilience our business has shown in the face of such headwinds, especially the momentum we saw in June exiting the second quarter. We are well positioned to weather near-term challenges and remain committed to ongoing strategic initiatives that will sustain long-term growth."
Conference Call Details
Resideo will hold a conference call with investors on August 4, 2020, at 8:30 a.m. EST. To join the conference call, please dial 800-367-2403 (domestic) or +1 334-777-6978 (international) approximately 10 minutes before it starts. Please mention to the operator that you are dialing in for Resideo's second quarter 2020 earnings call or provide the conference code 5537820. A replay of the conference call will be available from 12:30 p.m. EST Aug. 4, 2020, until 12:30 p.m. EST Aug. 11, 2020, by dialing 888-203-1112 (domestic) or +1 719-457-0820 (international). The access code is 5537820.
A real-time audio webcast of the presentation will be accessible at https://investor.resideo.com, where related materials will be posted before the presentation, and a replay of the webcast will be available for 30 days following the presentation.
About Resideo
Resideo is a leading global provider of critical comfort, residential thermal solutions and security solutions primarily in residential environments. 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. For more information about Resideo, please visit www.resideo.com.
Contacts: | |
Media: | Investors: |
Annalise Helms | Page Portas |
(763) 777-4334 | (512) 726-3799 |
Table 1: SUMMARY OF FINANCIAL RESULTS – SEGMENT | ||||||||||||
2Q 2020 | 2Q 2019 | % Change | YTD 2020 | YTD 2019 | % Change | |||||||
Products & Solutions | ||||||||||||
Revenue (1) | 398 | 537 | - | 873 | 1,088 | - | ||||||
Segment Adjusted EBITDA(2) | 35 | 75 | - | 88 | 156 | - | ||||||
ADI Global Distribution | ||||||||||||
Revenue | 631 | 705 | - | 1,335 | 1,370 | - | ||||||
Segment Adjusted EBITDA(2) | 28 | 47 | - | 74 | 93 | - | ||||||
Total Company | ||||||||||||
Revenue | 1,029 | 1,242 | - | 2,208 | 2,458 | - | ||||||
Adjusted EBITDA (Non-GAAP)(2)(3)(4) | 63 | 122 | - | 162 | 249 | - | ||||||
(1) Represents Product & Solutions revenue, excluding intersegment revenue of |
(2) The three months and six months ended June 30, 2019 include an adjustment for |
(3) Table 5 includes reconciliations of Non-GAAP measures. |
(4) Adjusted EBITDA was previously presented as Adjusted EBITDA excluding Honeywell reimbursement agreement payments (Non-GAAP). See Table 5 for description of change. |
Table 2: CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS (UNAUDITED) | ||||||||
Three Months Ended | Six Months Ended | |||||||
June 30, | June 30, | |||||||
2020 | 2019 | 2020 | 2019 | |||||
(Dollars in millions except share and per share data) | ||||||||
Net revenue | $ 1,029 | $ 1,242 | $ 2,208 | $ 2,458 | ||||
Cost of goods sold (1) | 793 | 919 | 1,688 | 1,803 | ||||
Gross profit | 236 | 323 | 520 | 655 | ||||
Selling, general and administrative expenses (1) | 242 | 281 | 492 | 528 | ||||
Operating (loss) profit | (6) | 42 | 28 | 127 | ||||
Other expense, net | 29 | 35 | 71 | 19 | ||||
Interest expense | 18 | 18 | 35 | 35 | ||||
(Loss) income before taxes | (53) | (11) | (78) | 73 | ||||
Tax expense | 23 | - | 19 | 36 | ||||
Net (loss) income | $ (76) | $ (11) | $ (97) | $ 37 | ||||
Weighted Average Number of Common Shares | ||||||||
Basic | 123,203 | 122,700 | 123,083 | 122,635 | ||||
Diluted | 123,203 | 122,700 | 123,083 | 123,490 | ||||
(Loss) Earnings Per Share | ||||||||
Basic | $ (0.62) | $ (0.09) | $ (0.79) | $ 0.30 | ||||
Diluted | $ (0.62) | $ (0.09) | $ (0.79) | $ 0.30 | ||||
1) On January 1, 2020, the Company changed its classification of research and development expenses in the Consolidated Interim Statements of Operations from Cost of goods sold to Selling, general and administrative expenses, such that research and development expenses are excluded from the calculation of Gross profit. The impact on the three and six months ended June 30, 2019 Consolidated Interim Statement of Operations is a reduction of Cost of goods sold, an increase in Gross profit and an increase in Selling, general and administrative expenses of |
Table 3: CONSOLIDATED INTERIM BALANCE SHEETS (UNAUDITED) | ||||
June 30, | December 31, | |||
2020 | 2019 | |||
(Dollars in millions, shares in | ||||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | $ 362 | $ 122 | ||
Accounts receivable – net | 704 | 817 | ||
Inventories – net | 614 | 671 | ||
Other current assets | 163 | 175 | ||
Total current assets | 1,843 | 1,785 | ||
Property, plant and equipment – net | 311 | 316 | ||
Goodwill | 2,638 | 2,642 | ||
Other assets | 374 | 385 | ||
Total assets | $ 5,166 | $ 5,128 | ||
LIABILITIES | ||||
Current liabilities: | ||||
Accounts payable | $ 811 | $ 920 | ||
Current maturities of debt | 287 | 22 | ||
Accrued liabilities | 564 | 552 | ||
Total current liabilities | 1,662 | 1,494 | ||
Long-term debt | 1,140 | 1,158 | ||
Obligations payable to Honeywell under Indemnification Agreements | 585 | 594 | ||
Other liabilities | 284 | 280 | ||
EQUITY | ||||
Common stock, | - | - | ||
Additional paid-in capital | 1,775 | 1,761 | ||
Treasury stock, at cost | (5) | (3) | ||
Retained (deficit) earnings | (59) | 38 | ||
Accumulated other comprehensive (loss) | (216) | (194) | ||
Total equity | 1,495 | 1,602 | ||
Total liabilities and equity | $ 5,166 | $ 5,128 | ||
Table 4: CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED) | |||
Six Months Ended | |||
June 30, | |||
2020 | 2019 | ||
Cash flows provided by (used for) operating activities: | |||
Net (loss) income | $ (97) | $ 37 | |
Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities: | |||
Depreciation and amortization | 42 | 36 | |
Restructuring charges, net of payments | 6 | 14 | |
Stock compensation expense | 14 | 14 | |
Other | 21 | 6 | |
Changes in assets and liabilities: | |||
Accounts receivable | 113 | (7) | |
Inventories – net | 58 | (95) | |
Other current assets | 13 | (8) | |
Accounts payable | (109) | 25 | |
Accrued liabilities | 8 | (17) | |
Obligations payable to Honeywell under Indemnification Agreements | (9) | (48) | |
Other | 11 | 6 | |
Net cash provided by (used for) operating activities | 71 | (37) | |
Cash flows used for investing activities: | |||
Expenditures for property, plant, equipment and other intangibles | (31) | (38) | |
Cash paid for acquisitions, net of cash acquired | (35) | (17) | |
Net cash used for investing activities | (66) | (55) | |
Cash flows provided by (used for) financing activities: | |||
Net proceeds from revolving credit facility | 250 | - | |
Repayment of long-term debt | (6) | (11) | |
Non-operating obligations paid to Honeywell, net | (1) | (18) | |
Tax payments related to stock vestings | (2) | (2) | |
Net cash provided by (used for) financing activities | 241 | (31) | |
Effect of foreign exchange rate changes on cash and cash equivalents | (6) | - | |
Net increase (decrease) in cash and cash equivalents | 240 | (123) | |
Cash and cash equivalents at beginning of period | 122 | 265 | |
Cash and cash equivalents at end of period | $ 362 | $ 142 | |
Table 5: RECONCILIATION OF NET (LOSS) INCOME (UNAUDITED) TO NON-GAAP FINANCIAL MEASURES | ||||||||
Three Months Ended | Six Months Ended | |||||||
June 30, | June 30, | |||||||
2020 | 2019 | 2020 | 2019 | |||||
(Dollars in millions except share and per share data) | ||||||||
Reconciliation of Net (loss) income to Adjusted net income (Non-GAAP) | ||||||||
Net (loss) income | $ (76) | $ (11) | $ (97) | $ 37 | ||||
Honeywell reimbursement agreement expense (1) | 35 | 36 | 69 | 22 | ||||
Stock compensation expense (2) | 7 | 7 | 14 | 14 | ||||
Restructuring charges | 11 | 25 | 20 | 25 | ||||
Other (3) | 25 | 28 | 61 | 46 | ||||
Income tax adjustments (4) | 19 | (22) | (17) | (10) | ||||
Adjusted net income (Non-GAAP) (5) | $ 21 | $ 63 | $ 50 | $ 134 | ||||
Adjusted earnings per share (Non-GAAP) | ||||||||
Basic adjusted earnings per share (Non-GAAP) (5) | $ 0.17 | $ 0.51 | $ 0.41 | $ 1.09 | ||||
Diluted adjusted earnings per share (Non-GAAP) (5) | $ 0.17 | $ 0.51 | $ 0.41 | $ 1.09 | ||||
Reconciliation of Net (loss) income to Adjusted EBITDA (Non-GAAP) | ||||||||
Net (loss) income | $ (76) | $ (11) | $ (97) | $ 37 | ||||
Net interest expense | 17 | 17 | 34 | 33 | ||||
Tax expense | 23 | - | 19 | 36 | ||||
Depreciation and amortization | 21 | 20 | 42 | 36 | ||||
Honeywell reimbursement agreement expense (1) | 35 | 36 | 69 | 22 | ||||
Stock compensation expense (2) | 7 | 7 | 14 | 14 | ||||
Restructuring charges | 11 | 25 | 20 | 25 | ||||
Other (3) | 25 | 28 | 61 | 46 | ||||
Adjusted EBITDA (Non-GAAP)(5) | $ 63 | $ 122 | $ 162 | $ 249 | ||||
(1) Represents recorded expenses / gains related to the Honeywell reimbursement agreement. Pursuant to the Honeywell reimbursement agreement, we are responsible to indemnify Honeywell in amounts equal to |
(2) Stock compensation expense adjustment includes only non-cash expenses. |
(3) For the three and six months ended June 30, 2020, Other represents |
(4) Represents the tax effect of pre-tax items excluded from Adjusted net income and the removal of discrete tax items, including the income tax impacts of the Tax Act. The tax effect of pre-tax items excluded from Adjusted net income is computed by adjusting the tax rate to exclude the pre-tax non-GAAP adjustments noted above. |
(5) Adjusted net income (Non-GAAP) was previously presented as Adjusted net income excluding Honeywell reimbursement agreement payments (Non-GAAP). Basic adjusted earnings per share (Non-GAAP) and Diluted adjusted earnings per share (Non-GAAP) were previously reduced by the impact of assumed cash payments related to the Honeywell reimbursement agreement. Adjusted EBITDA (Non-GAAP) was previously presented as Adjusted EBITDA excluding Honeywell reimbursement agreement payments (Non-GAAP). The change in presentation was made to more accurately reflect the underlying performance indicators of the business in Adjusted net income and Adjusted EBITDA. The Honeywell reimbursement agreement cash payments are a liquidity measure and will be included within the cash flow and liquidity discussions. Management believes that this presentation more clearly presents underlying operations as the amounts related to the Honeywell reimbursement agreement are recorded in net income are based on when such amounts become probable and reasonably estimable, which will not align with the significant variability in the timing of when the actual cash payment is made. |
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, 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, (1) the duration and severity of the COVID-19 pandemic and the disruption to our business and the global economy caused by it, including (A) its effect on the demand for our products and services, (B) its effect on our and our business partners' supply chains, workforce, liquidity, spending and timing for payments and disbursements, (C) the impact of potential facility closures and the modified working conditions at our corporate offices, Product & Solutions segment and ADI Global Distribution segment, including the timing for our ability to reopen any facilities that have been or may be closed and/or to ramp up operations at such facilities and meet related customer demand, and (D) the impact of employee salary reductions, furloughs and other actions we have taken or may take in response to the COVID-19 pandemic, (2) our ability to continue discussions and reach agreement with Honeywell with respect to modifications to some of the agreements that govern our relationship, and any potential disputes that have arisen or may hereafter arise with Honeywell if we are unable to reach such agreement, and (3) 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, 2019, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and other periodic filings we make from time to time with the Securities and Exchange Commission (SEC). You are cautioned not to place undue reliance on these forward-looking statements, such as (i) the impact of the COVID-19 pandemic on our business and operations, (ii) the progress and results of, and our ability to implement the opportunities identified in the comprehensive F&O review, including whether the implementation of the F&O review will provide meaningful financial benefits in 2020, 2021, 2022 and beyond (iii) our ability to address issues that impacted our performance in 2019, including our ability to redesign our product introduction process, enhance our value engineering and cost reduction initiative for existing product platforms, and enhance our product management capabilities, (v) our ability to timely and adequately execute on anticipated new product launches, including GRIP and non-connected product launches, and (vi) the impact of the purported class action litigation and derivative shareholder litigation commenced against Resideo and certain of its current and former directors and executive officers. 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.
Non-GAAP Financial Measures
This release includes Adjusted EBITDA, Adjusted net income, Adjusted basic and diluted earnings per share, 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 Adjusted EBITDA, Adjusted net income and Adjusted basic and diluted earnings per share are important indicators of operating performance. They should be read in connection with our financial statements presented in accordance with GAAP.
Adjusted net income was previously presented as Adjusted net income excluding Honeywell reimbursement agreement payments (Non-GAAP). Basic adjusted earnings per share (Non-GAAP) and Diluted adjusted earnings per share (Non-GAAP) were previously reduced by the impact of assumed cash payments related to the Honeywell reimbursement agreement. Adjusted EBITDA (Non-GAAP) was previously presented as Adjusted EBITDA excluding Honeywell reimbursement agreement payments (Non-GAAP). The change in presentation was made to more accurately reflect the underlying performance indicators of the business in Adjusted net income and Adjusted EBITDA. The Honeywell reimbursement agreement cash payments are a liquidity measure and will be included within the cash flow and liquidity discussions. Management believes that this presentation more clearly presents underlying operations as the amounts related to the Honeywell reimbursement agreement are recorded in net income are based on when such amounts become probable and reasonably estimable, which will not align with the significant variability in the timing of when the actual cash payment is made.
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SOURCE Resideo Technologies, Inc.
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