Resideo(US:REZI)2023-05-03 23:27Financial Data and Key Metrics Changes - Fully diluted earnings per share were $0.38 compared to $0.58 in the year-earlier period, reflecting a decline [11] - Total operating expenses for Products & Solutions increased by $18 million year-over-year due to the inclusion of First Alert costs [13] - Operating cash flow for the first quarter was a use of $4 million compared to a use of $59 million in the first quarter of 2022 [15] - Products & Solutions gross margin in Q1 was 38% compared to 43.3% in the first quarter of 2022, indicating a decline due to inflation and reduced volumes [68] Business Line Data and Key Metrics Changes - Products & Solutions delivered revenue of $658 million, up 6% year-over-year, aided by First Alert and price realization despite lower volumes [57] - ADI's first quarter reported revenue was essentially flat compared to Q1 2022, with daily average sales up 2% [65] - Products & Solutions operating profit was $117 million, or 17.8% of sales, compared with $154 million or 24.8% of sales last year [96] - ADI operating profit of $72 million was down 10% compared to the prior year, reflecting increased investment in strategic areas [97] Market Data and Key Metrics Changes - The company noted continued softness in residential AV and security categories, with slower growth in several commercial categories [9] - The HVAC distribution channel is expected to continue managing inventory down as 2023 progresses [57] - The OEM channel's inventory levels have largely normalized, tracking end demand [88] Company Strategy and Development Direction - The company is focused on improving cash generation, expanding margins, and accelerating key product initiatives [102] - Significant progress has been made on the El Paso distribution center consolidation, expected to yield annualized savings of over $2 million [8] - The integration of First Alert is progressing well, with a target of achieving at least $30 million in annualized synergies [91] Management's Comments on Operating Environment and Future Outlook - Management expects underlying residential demand to remain soft throughout 2023, but anticipates improving supply chain dynamics [17] - The outlook for ADI incorporates low single-digit revenue growth, with modest growth in commercial categories offset by slower residential activity [18] - The company remains focused on delivering financial targets and improving cash generation despite constrained end market demand [102] Other Important Information - The company expects revenue for the full year to be in the range of $6.2 billion to $6.55 billion, implying flat revenue at the midpoint [71] - Adjusted EBITDA is expected to be in the range of $610 million to $660 million for the full year of 2023 [99] Q&A Session Summary Question: What happened with the First Alert business? - Management noted that Q1 is typically the lowest quarter for First Alert, with some softness in retail early in the quarter, but overall performance improved as the quarter progressed [104] Question: Why does the company owe more to Honeywell this year? - The increase in the accrual to $41 million represents a true-up from Honeywell regarding the estimated costs of environmental maintenance and remediation [106] Question: What are the expectations for inventory levels as the channel continues to get leaner? - The company aims for a 10-day improvement in cash cycle days by the end of 2023, focusing on reducing inventory levels [100]