rezi-20230401

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 1, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _____

Commission File Number 001-38635

Resideo Technologies, Inc.

(Exact name of registrant as specified in its charter)


Delaware						82-5318796
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

16100 N. 71st Street, Suite 550 Scottsdale, Arizona						85254
(Address of principal executive offices)						(Zip Code)

(480) 573-5340
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading Symbol:

Name of each exchange on which registered:

Common Stock, par value $0.001 per share

REZI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of April 21, 2023 was 147,114,150 shares.

TABLE OF CONTENTS


Part I - Financial Information
Item 1.	U naudited Consolidate d F inancial Statements	3
	Unaudited Consolidated Balance Sheets as of April 1, 2023 and December 31, 2022	3
	Unaudited Consolidated Statements of Operations for the Three Months Ended April 1, 2023 and April 2, 2022	4
	Unaudited Consolidated Statements of Comprehensive Income for the Three Months Ended April 1, 2023 and April 2, 2022	5
	Unaudited Consolidated Statements of Cash Flows for the Three Months Ended April 1, 202 3 and April 2, 202 2	6
	Unaudited Consolidated Statements of Stockholders ’ Equity for the Three Months Ended April 1, 2023 and April 2, 2022	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
Part II - Othe r Information
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 6.	Exhibits	32
	Signatures	33

Part I. Financial Information

Item 1. Unaudited Consolidated Financial Statements.

Resideo Technologies, Inc.

Consolidated Balance Sheets

(Unaudited)


(in millions)	April 1, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	292	$	326
Accounts receivable, net	985		1,002
Inventories, net	1,008		975
Other current assets	210		199

Total current assets	2,495		2,502

Property, plant and equipment, net	379		366
Goodwill	2,736		2,724
Intangible assets, net	471		475
Other assets	318		320

Total assets	$	6,399	$	6,387

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	894	$	894
Current portion of long-term debt	12		12
Accrued liabilities	563		640

Total current liabilities	1,469		1,546

Long-term debt	1,402		1,404
Obligations payable under Indemnification Agreements	584		580
Other liabilities	340		328

Total liabilities	3,795		3,858

COMMITMENTS AND CONTINGENCIES

Stockholders’ equity

Common stock, $0.001 par value: 700 shares authorized, 150 and 147 shares issued and outstanding at April 1, 2023 and 148 and 146 shares issued and outstanding at December 31, 2022, respectively	—		—
Additional paid-in capital	2,191		2,176
Retained earnings	657		600
Accumulated other comprehensive loss, net	(200)		(212)
Treasury stock at cost	(44)		(35)
Total stockholders’ equity	2,604		2,529
Total liabilities and stockholders’ equity	$	6,399	$	6,387

Refer to accompanying Notes to the Unaudited Consolidated Financial Statements.

Resideo Technologies, Inc.

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended
(in millions, except per share data)	April 1, 2023		April 2, 2022
Net revenue	$	1,549	$	1,506
Cost of goods sold	1,129		1,068
Gross profit	420		438
Research and development expenses	27		24
Selling, general and administrative expenses	244		236
Intangible asset amortization	9		6
Restructuring and impairment expenses	2		—
Income from operations	138		172
Other expenses, net	39		40
Interest expense, net	18		11
Income before taxes	81		121
Provision for income taxes	24		34


Net income	$	57	$	87





Earnings per share:
Basic	$	0.39	$	0.60




Diluted	$	0.38	$	0.58

Weighted average number of shares outstanding:
Basic	147		145
Diluted	149		149

Refer to accompanying Notes to the Unaudited Consolidated Financial Statements.

Resideo Technologies, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended
(in millions)	April 1, 2023		April 2, 2022
Comprehensive income:
Net income	$	57	$	87
Other comprehensive income, net of tax:
Foreign exchange translation gain (loss)	16		(9)





Pension liability adjustments	3		—



Changes in fair value of effective cash flow hedges	(7)		23
Total other comprehensive income, net of tax	12		14
Comprehensive income	$	69	$	101

Refer to accompanying Notes to the Unaudited Consolidated Financial Statements.

Resideo Technologies, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended
(in millions)	April 1, 2023		April 2, 2022
Cash Flows From Operating Activities:
Net income	$	57	$	87
Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization	24		20

Stock-based compensation expense	12		11

Other, net	2		2

Changes in assets and liabilities, net of acquired companies:
Accounts receivable, net	23		(61)
Inventories, net	(27)		(66)
Other current assets	(8)		(12)

Accounts payable	(12)		17
Accrued liabilities	(86)		(66)

Other, net	11		9


Net cash used in operating activities	(4)		(59)
Cash Flows From Investing Activities:
Capital expenditures	(20)		(19)
Acquisitions, net of cash acquired	(6)		(633)
Other investing activities, net	—		(13)


Net cash used in investing activities	(26)		(665)
Cash Flows From Financing Activities:
Proceeds from issuance of A&R Term B Facility	—		200
Repayments of long-term debt	(3)		(3)
Payment of debt facility issuance and modification costs	—		(4)
Other financing activities, net	(6)		(4)



Net cash (used in) provided by financing activities	(9)		189
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	6		—
Net decrease in cash, cash equivalents and restricted cash	(33)		(535)
Cash, cash equivalents and restricted cash at beginning of period	329		779
Cash, cash equivalents and restricted cash at end of period	$	296	$	244

Supplemental Cash Flow Information:
Interest paid	$	27	$	14
Taxes paid, net of refunds	$	19	$	12
Capital expenditures in accounts payable	$	15	$	13

Refer to accompanying Notes to the Unaudited Consolidated Financial Statements.

Resideo Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Common Stock							Accumulated Other Comprehensive Loss		Treasury Stock
(in millions, except shares in thousands)	Shares	Amount		Additional Paid-In Capital		Retained Earnings				Shares	Amount		Total Stockholders’ Equity
Balance at January 1, 2023	146,222	$	—	$	2,176	$	600	$	(212)	2,050	$	(35)	$	2,529
Net income	—	—		—		57		—		—	—		57
Other comprehensive loss, net of tax	—	—		—		—		12		—	—		12
Common stock issuance, net of shares withheld for taxes	862	—		3		—		—		497	(9)		(6)
Stock-based compensation expense	—	—		12		—		—		—	—		12
Balance at April 1, 2023	147,084	$	—	$	2,191	$	657	$	(200)	2,547	$	(44)	$	2,604

	Common Stock							Accumulated Other Comprehensive Loss		Treasury Stock
(in millions, except shares in thousands)	Shares	Amount		Additional Paid-In Capital		Retained Earnings				Shares	Amount		Total Stockholders’ Equity
Balance at January 1, 2022	144,808	$	—	$	2,121	$	317	$	(165)	1,440	$	(21)	$	2,252
Net income	—	—		—		87		—		—	—		87
Other comprehensive income, net of tax	—	—		—		—		14		—	—		14
Common stock issuance, net of shares withheld for taxes	564	—		3		—		—		256	(6)		(3)
Stock-based compensation expense	—	—		11		—		—		—	—		11
Balance at April 2, 2022	145,372	$	—	$	2,135	$	404	$	(151)	1,696	$	(27)	$	2,361

Refer to accompanying Notes to the Unaudited Consolidated Financial Statements.

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Resideo Technologies, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Nature of Operations and Basis of Presentation

Nature of Operations

Resideo Technologies, Inc. (“Resideo”, the “Company”, “we”, “us”, or “our”) is a leading manufacturer and developer of technology-driven products that provide critical comfort, energy, smoke and carbon monoxide detection home safety products, and security solutions to homes globally. We are also a leading wholesale distributor of low-voltage security products including access control, fire detection, fire suppression, security, and video products, and participate significantly in the broader related markets of audio, communications, data communications, networking, power, ProAV, smart home, and wire and cable. Our global footprint serves both commercial and residential end markets.

Basis of Consolidation and Reporting

The accompanying Unaudited Consolidated Financial Statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the Unaudited Consolidated Financial Statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the Unaudited Consolidated Financial Statements included herein contain all adjustments, which consist of normal recurring adjustments, necessary to fairly present our financial position, results of operations and cash flows for the periods indicated. Operating results for the period from January 1, 2023 through April 1, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023.

For additional information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report on Form 10-K”), filed with the United States Securities and Exchange Commission (the “SEC”) on February 21, 2023.

Reporting Period

We report financial information on a fiscal quarter basis using a modified four-four-five week calendar. Our fiscal calendar begins on January 1 and ends on December 31. We have elected the first, second and third quarters to end on a Saturday in order to not disrupt business processes. The effects of this election are generally not significant to reported results for any quarter and only exist within a reporting year.

Note 2. Summary of Significant Accounting Policies

Our significant accounting policies are detailed in Note 2. Summary of Significant Accounting Policies of the Annual Report on Form 10-K for the year ended December 31, 2022. There have been no significant changes to these policies that have had a material impact on the Unaudited Consolidated Financial Statements and accompanying notes for three months ended April 1, 2023.

We consider the applicability and impact of all recent accounting standards updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”) and disclose only those that may have a material impact.

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Resideo Technologies, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Adopted Accounting Pronouncements

In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs (Topic 405): Disclosure of Supplier Finance Program Obligations. This guidance enhances transparency of an entity’s use of supplier finance programs by requiring quarterly and annual disclosures about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts annually, and a description of where in the financial statements outstanding amounts are presented. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Effective January 1, 2023, we completed our assessment and adopted ASU 2022-04 concluding that it is not applicable to Resideo at this time as we currently have no supplier finance programs in place.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and subsequent amendment to the initial guidance: ASU 2021-01, Reference Rate Reform (Topic 848): Scope (collectively, “Topic 848”). Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. This guidance may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2024. The A&R Senior Credit Facilities include a transition clause to a new reference rate in the event LIBOR is discontinued and the Swap Agreements will be amended to match the new reference rate. We have evaluated the potential impact of adopting this standard and do not expect it to have a material impact on our consolidated financial statements and related disclosures. Refer to Note 12. Long-Term Debt and Note 13. Derivative Financial Instruments to the Unaudited Consolidated Financial Statements.

Note 3. Acquisitions

Pro forma results of operations for the following acquisitions have not been presented, as the impact on our consolidated financial results was not material.

2023 Acquisitions

BTX Technologies, Inc.—On January 23, 2023, we acquired 100% of the outstanding equity of BTX Technologies, Inc., (“BTX”) a leading distributor of professional audio, video, data communications, and broadcast equipment. We report BTX Technologies, Inc.’s results within the ADI Global Distribution segment. We have made a preliminary purchase price allocation that is subject to change as additional information is obtained.

2022 Acquisitions

Teknique Limited—On December 23, 2022, we acquired 100% of the outstanding equity of Teknique Limited, a developer and producer of edge-based, artificial intelligence-enabled video camera solutions. We report Teknique Limited’s results within the Products and Solutions segment. Purchase consideration includes cash and a note payable with the former owner. We have made a preliminary purchase price allocation that is subject to change as additional information is obtained.

Electronic Custom Distributors, Inc.—On July 5, 2022, we acquired 100% of the outstanding equity of Electronic Custom Distributors, Inc., a regional distributor of residential audio, video, automation, security, wire and telecommunication products. We report Electronic Customer Distributors, Inc.’s results within the ADI Global Distribution segment. We completed the accounting for the acquisition during the first quarter of 2023, which did not result in any adjustments.

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Resideo Technologies, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

First Alert—On March 31, 2022, we acquired 100% of the outstanding equity of First Alert, Inc., a leading provider of home safety products. We report First Alert’s results within the Products and Solutions segment. We completed the accounting for the acquisition during the first quarter of 2023, which did not result in any adjustments.

Note 4. Segment Financial Data

We monitor our business operations through our two operating segments: Products and Solutions and ADI Global Distribution.

These operating segments follow the same accounting policies used for the financial statements. We evaluate a segment’s performance on a GAAP basis, primarily operating income before corporate expenses.

Corporate expenses include expenses related to the corporate office as well as supporting the operating segments, but do not relate directly to revenue-generating activities primarily including unallocated stock-based compensation expenses, unallocated pension expense, restructuring expenses, acquisition-related costs, and other expenses related to executive, legal, finance, tax, treasury, human resources, IT, strategy, communications, and corporate travel expenses. Additional unallocated amounts primarily include non-operating items such as Reimbursement Agreement expense, interest income, interest expense, and other income (expense). The Reimbursement Agreement is further described in Note 16. Commitments and Contingencies to the Unaudited Consolidated Financial Statements.

Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions, and assesses operating performance.

The following table represents summary financial data attributable to the segments:


	Three Months Ended
(in millions)	April 1, 2023		April 2, 2022
Net revenue
Products and Solutions	$	658	$	619
ADI Global Distribution	891		887
Total net revenue	$	1,549	$	1,506


	Three Months Ended
(in millions)	April 1, 2023		April 2, 2022
Income from operations
Products and Solutions	$	117	$	153
ADI Global Distribution	72		80
Corporate	(51)		(61)
Total income from operations	$	138	$	172

The Company’s Chief Executive Officer, its Chief Operating Decision Maker, does not use segment assets information to allocate resources or to assess performance of the segments and therefore, total segment assets have not been reported.

Note 5. Revenue Recognition

We have two operating segments, Products and Solutions and ADI Global Distribution. Disaggregated revenue information for Products and Solutions is presented by product grouping, while ADI Global Distribution is presented by region.

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Resideo Technologies, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

The following table presents revenue by business line and geographic location, as we believe this presentation best depicts how the nature, amount, timing, and uncertainty of net revenue and cash flows are affected by economic factors:

Three Months Ended

(in millions)

April 1, 2023

April 2, 2022

SEC Form 10-Q filed by Resideo Technologies Inc.