Resideo(REZI) - 2025 Q1 - Quarterly Results

Resideo First Quarter 2025 Financial Results First Quarter 2025 Financial Highlights Resideo reported strong Q1 2025 results, exceeding its outlook with a 19% year-over-year increase in net revenue to $1.77 billion, driven by organic growth in both segments and the Snap One acquisition. Gross margin expanded by 200 basis points to 28.9%, and Adjusted EBITDA grew 23% to $168 million. Adjusted EPS of $0.63 significantly surpassed the high-end of the company's guidance Key Financial Highlights | Financial Metric | Q1 2025 | Q1 2024 | % Change | Note | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $1.77 billion | $1.49 billion | 19% | High-end of outlook range | | Gross Margin | 28.9% | 26.9% | +200 bps | Eighth consecutive quarter of YoY improvement for Products and Solutions | | Net Income | $6 million | $43 million | -86% | Primarily due to a $47 million increase in Honeywell Reimbursement Agreement expense | | Adjusted EBITDA | $168 million | $137 million | 23% | High-end of outlook range | | Diluted EPS | $(0.02) | $0.29 | - | - | | Adjusted EPS | $0.63 | $0.47 | 34% | Exceeded high-end of outlook range | - The integration of Snap One into the ADI segment is progressing well, with synergy achievement reported to be ahead of plan[6] - The company stated that over 98% of product costs incurred by the Products and Solutions segment in Mexico are currently exempt from tariffs[6] Management Remarks CEO Jay Geldmacher highlighted the strong Q1 performance, with results at or above the high end of guidance. He noted excellent operational execution, organic growth in both segments, and continued margin expansion. The company reaffirmed its 2025 outlook, expressing confidence in profitable growth opportunities despite a volatile macro environment and its ability to mitigate potential tariff impacts - Management reported a strong first quarter with results at or above the high-end of the range for all key financial metrics[3] - Both the ADI and Products and Solutions segments generated organic net revenue growth, continued gross margin expansion, and healthy Adjusted EBITDA growth[3] - The company reaffirmed its 2025 outlook, citing profitable growth opportunities and the belief that it can essentially mitigate the cost impact of any tariffs[3][4][5] Segment Performance Both of Resideo's segments demonstrated growth. Products and Solutions saw net revenue increase by 5% to $649 million, with a notable gross margin expansion to 41.4%. ADI Global Distribution's revenue grew 29% to $1,121 million, primarily driven by the Snap One acquisition, and achieved 4% organic growth Products and Solutions The Products and Solutions segment achieved a 5% increase in net revenue to $649 million, with gross margin expanding to 41.4% and Adjusted EBITDA growing 13% to $158 million, driven by volume, mix, and price realization Products and Solutions Segment Performance | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | $649 million | $620 million | 5% | | Gross Margin | 41.4% | 39.5% | +190 bps | | Income from Operations | $136 million | $112 million | 21% | | Adjusted EBITDA | $158 million | $140 million | 13% | | Adjusted EBITDA Margin | 24.3% | 22.6% | +170 bps | - Revenue growth was driven by volume demand, mix, and price realization, particularly in the HVAC and Electrical Distribution channels for the new Honeywell Home FocusPRO thermostat and BRK products[7] - Gross margin expansion was attributed to structural improvements that increased operational efficiency[9] - The company launched the connected First Alert Smart Smoke and Carbon Monoxide Alarm, designed to be compatible with the Google Home app and replace Google's expiring Nest Protect alarms[8] ADI Global Distribution The ADI Global Distribution segment reported a 29% increase in net revenue to $1,121 million, primarily due to the Snap One acquisition, with organic growth of 4% and a 360 basis point gross margin expansion ADI Global Distribution Segment Performance | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | $1,121 million | $866 million | 29% | | Gross Margin | 21.6% | 18.0% | +360 bps | | Income from Operations | $34 million | $49 million | -31% | | Adjusted EBITDA | $72 million | $58 million | 24% | - Revenue growth was primarily driven by the $227 million contribution from the Snap One acquisition. Organic revenue growth was 4%[11] - Organic growth was strong in the e-commerce channel, which grew 15% year-over-year. Organic average daily sales grew 7%[11] - The 360 basis point increase in gross margin was driven by the inclusion of higher-margin Snap One and increased e-commerce sales[12] Cash Flow and Liquidity The company used $65 million in cash from operating activities in Q1 2025, a notable shift from the $2 million provided in Q1 2024. This change was primarily driven by an increase in accounts receivable due to higher sales and cash outflows for accounts payable. As of March 29, 2025, Resideo held $577 million in cash and cash equivalents and had total outstanding gross debt of $2.02 billion - Net cash used by operating activities was $65 million in Q1 2025, compared to $2 million of cash provided by operating activities in Q1 2024[13] - The use of cash was primarily driven by an increase in accounts receivable from higher sales and early payments on accounts payable to receive supplier discounts[13] Liquidity Position | Liquidity Position | As of March 29, 2025 | | :--- | :--- | | Cash and cash equivalents | $577 million | | Total outstanding gross debt | $2.02 billion | 2025 Outlook Resideo reaffirmed its full-year 2025 outlook and provided guidance for the second quarter of 2025. For Q2, the company expects net revenue between $1,805 million and $1,855 million and Adjusted EPS of $0.51 to $0.61. For the full year, net revenue is projected to be between $7,285 million and $7,485 million, with Adjusted EPS of $2.23 to $2.47 2025 Financial Outlook | ($ in millions, except per share data) | Q2 2025 Outlook | Full Year 2025 Outlook | | :--- | :--- | :--- | | Net revenue | $1,805 - $1,855 | $7,285 - $7,485 | | Non-GAAP Adjusted EBITDA | $175 - $195 | $725 - $805 | | Non-GAAP Adjusted Earnings Per Share | $0.51 - $0.61 | $2.23 - $2.47 | | Cash Provided by Operations | - | $345 - $405 | Financial Tables and Reconciliations Summary of Financial Results (Table 1) Table 1 presents a detailed breakdown of financial results by segment (Products and Solutions, ADI Global Distribution) and for the total company for Q1 2025 compared to Q1 2024. It details net revenue, cost of goods sold, gross profit, and income from operations for each segment, highlighting ADI's 29% revenue growth and Products and Solutions' 21% growth in operating income - Provides a side-by-side comparison of Q1 2025 and Q1 2024 performance for each business segment and corporate expenses, showing revenue, costs, and operating income[23] Consolidated Statements of Operations (Table 2) The Consolidated Statement of Operations shows a 19% increase in net revenue to $1.77 billion. However, net income decreased significantly from $43 million in Q1 2024 to $6 million in Q1 2025. This was primarily due to a $47 million year-over-year increase in the non-cash expense related to the Honeywell Reimbursement Agreement, which rose from $43 million to $90 million - Net income fell to $6 million from $43 million year-over-year, largely due to a significant increase in the Reimbursement Agreement expense to $90 million[24] - Diluted earnings per share (EPS) was $(0.02), a sharp decline from $0.29 in the prior-year quarter[24] Consolidated Balance Sheets (Table 3) The balance sheet as of March 29, 2025, shows total assets of $8.07 billion and total liabilities of $4.73 billion, resulting in total stockholders' equity of $3.35 billion. Key assets include $3.08 billion in goodwill and $1.23 billion in inventories. Long-term debt stood at $1.98 billion Consolidated Balance Sheet Summary | Balance Sheet Item | March 29, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $8,074 million | $8,199 million | | Total Liabilities | $4,727 million | $4,890 million | | Total Stockholders' Equity | $3,347 million | $3,309 million | Consolidated Statements of Cash Flows (Table 4) The cash flow statement for Q1 2025 reveals a net cash usage of $65 million from operating activities, a significant decrease from the $2 million provided in Q1 2024. Net cash used in investing activities was $31 million, primarily for capital expenditures, and financing activities used $22 million. This resulted in a net decrease in cash of $115 million for the quarter Consolidated Cash Flow Summary | Cash Flow Item (Three Months Ended) | March 29, 2025 | March 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(65) million | $2 million | | Net cash used in investing activities | $(31) million | $(22) million | | Net cash used in financing activities | $(22) million | $(8) million | | Net decrease in cash | $(115) million | $(33) million | Non-GAAP Reconciliations This section provides detailed reconciliations of GAAP measures to non-GAAP measures, including Adjusted Net Income, Adjusted EPS, and Adjusted EBITDA. For Q1 2025, GAAP Net Income of $6 million was adjusted to a non-GAAP Adjusted Net Income of $94 million. Key adjustments included adding back the $55 million non-cash portion of the Reimbursement Agreement accrual, $30 million in intangible asset amortization, and $15 million in stock-based compensation. Consequently, GAAP EPS of $(0.02) was adjusted to $0.63 - Reconciles GAAP Net Income of $6 million to Non-GAAP Adjusted Net Income of $94 million for Q1 2025. Major adjustments include the non-cash Reimbursement Agreement accrual ($55 million), intangible asset amortization ($30 million), and stock-based compensation ($15 million)[28] - Reconciles GAAP Net Income of $6 million to Non-GAAP Adjusted EBITDA of $168 million for Q1 2025[30] - Provides segment-level reconciliations from GAAP Income from Operations to Non-GAAP Adjusted EBITDA for both Products and Solutions ($158 million) and ADI Global Distribution ($72 million)[32][34]