rezi-20240330

Tab le of C onten ts

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 March 30, 2024

☐ 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 19, 2024 was 146,016,926 shares.


Part I - Financial Information
Item 1.	U naudited Consolidated Financial Statements .	3
	Unaudited Consolidated Balance Sheets as of March 30, 202 4 and December 31, 202 3.	3
	Unaudited Consolidated Statements of Operations for the Three Months Ended March 30, 202 4 and April 1, 202 3.	4
	Unaudited Consolidated Statements of Comprehensive Income for the Three Months Ended March 30, 202 4 and April 1, 202 3.	5
	Unaudited Consolidated Statements of Cash Flows for t he T hree Months Ended March 30, 202 4 and April 1, 202 3 .	6
	Unaudited Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 30, 202 4 and April 1, 202 3.	7
	Notes to Unaudited Consolidated Financial Statement s.	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation s.	21
Item 3.	Quantitative and Qualitative Disclosures About Market Ris k.	30
Item 4.	Controls and Procedure s.	31
Part II - Other Information
Item 1.	Legal Proceeding s.	31
Item 1A.	Risk Factor s.	31
Item 2.	Unregistered Sales of Equity Securities and Us e of Proceed s.	31
Item 5.	Other Informatio n.	32
Item 6.	Exhibit s.	33
Signatures		34

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Part I. Financial Information

Item 1. Financial Statements.

Resideo Technologies, Inc.

Consolidated Balance Sheets

(Unaudited)


(in millions, except par value)	March 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	603	$	636
Accounts receivable, net	933		973
Inventories, net	929		941
Other current assets	212		193

Total current assets	2,677		2,743

Property, plant and equipment, net	369		390
Goodwill	2,689		2,705
Intangible assets, net	456		461
Other assets	329		346

Total assets	$	6,520	$	6,645

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	858	$	905
Current portion of long-term debt	12		12
Accrued liabilities	515		608

Total current liabilities	1,385		1,525

Long-term debt	1,394		1,396
Obligations payable under Indemnification Agreements	617		609
Other liabilities	355		366

Total liabilities	3,751		3,896

COMMITMENTS AND CONTINGENCIES

Stockholders’ equity

Common stock, $0.001 par value: 700 shares authorized, 152 and 146 shares issued and outstanding at March 30, 2024, respectively, and 151 and 145 shares issued and outstanding at December 31, 2023, respectively	—		—
Additional paid-in capital	2,243		2,226
Retained earnings	853		810
Accumulated other comprehensive loss, net	(226)		(194)
Treasury stock at cost	(101)		(93)
Total stockholders’ equity	2,769		2,749
Total liabilities and stockholders’ equity	$	6,520	$	6,645

Refer to accompanying Notes to the Unaudited Consolidated Financial Statements.

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Resideo Technologies, Inc.

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended
(in millions, except per share data)		March 30, 2024		April 1, 2023
Net revenue		$	1,486	$	1,549
Cost of goods sold		1,086		1,131
Gross profit		400		418
Operating expenses:
Research and development expenses		25		25
Selling, general and administrative expenses		231		244
Intangible asset amortization		9		9
Restructuring expenses		7		2
Total operating expenses		272		280
Income from operations		128		138
Other expenses, net		42		40
Interest expense, net		13		17
Income before taxes		73		81
Provision for income taxes		30		24


Net income		$	43	$	57





Earnings per share:
Basic		$	0.29	$	0.39




Diluted		$	0.29	$	0.38

Weighted average number of shares outstanding:
Basic		146		147
Diluted		148		149

Refer to accompanying Notes to the Unaudited Consolidated Financial Statements.

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Resideo Technologies, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended
(in millions)		March 30, 2024		April 1, 2023
Comprehensive income:
Net income		$	43	$	57
Other comprehensive (loss) income, net of tax:
Foreign exchange translation (loss) gain		(31)		16





Pension liability adjustments		—		3



Changes in fair value of effective cash flow hedges		(1)		(7)
Total other comprehensive (loss) income, net of tax		(32)		12
Comprehensive income		$	11	$	69

Refer to accompanying Notes to the Unaudited Consolidated Financial Statements.

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Resideo Technologies, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended
(in millions)	March 30, 2024		April 1, 2023
Cash Flows From Operating Activities:
Net income	$	43	$	57
Adjustments to reconcile net income to net cash in operating activities:

Depreciation and amortization	24		24
Restructuring expenses	7		2
Stock-based compensation expense	14		12

Other, net	3		—

Changes in assets and liabilities, net of acquired companies:
Accounts receivable, net	34		23
Inventories, net	7		(27)
Other current assets	3		(8)

Accounts payable	(44)		(12)
Accrued liabilities	(89)		(86)
Other, net	—		11


Net cash provided by (used in) operating activities	2		(4)
Cash Flows From Investing Activities:
Capital expenditures	(21)		(20)
Acquisitions, net of cash acquired	—		(6)
Other investing activities, net	(1)		—


Net cash used in investing activities	(22)		(26)
Cash Flows From Financing Activities:
Common stock repurchases	(1)		—

Repayments of long-term debt	(3)		(3)

Other financing activities, net	(4)		(6)



Net cash used in financing activities	(8)		(9)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(5)		6
Net decrease in cash, cash equivalents and restricted cash	(33)		(33)
Cash, cash equivalents and restricted cash at beginning of period	637		329
Cash, cash equivalents and restricted cash at end of period	$	604	$	296

Supplemental Cash Flow Information:
Interest paid, net of swaps	$	22	$	27
Taxes paid, net of refunds	$	28	$	19
Capital expenditures in accounts payable	$	11	$	15

Refer to accompanying Notes to the Unaudited Consolidated Financial Statements.

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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, 2024	145,389	$	—	$	2,226	$	810	$	(194)	5,536	$	(93)	$	2,749
Net income	—	—		—		43		—		—	—		43
Other comprehensive loss, net of tax	—	—		—		—		(32)		—	—		(32)
Common stock issuance, net of shares withheld for taxes	699	—		3		—		—		335	(7)		(4)
Stock-based compensation expense	—	—		14		—		—		—	—		14
Common stock repurchases	(75)	—		—		—		—		75	(1)		(1)
Balance at March 30, 2024	146,013	$	—	$	2,243	$	853	$	(226)	5,946	$	(101)	$	2,769


	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 income, 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

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, 2024 through March 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024.

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, 2023 (the “2023 Annual Report on Form 10-K”), filed with the United States Securities and Exchange Commission (the “SEC”) on February 14, 2024.

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.

Reclassification

For the purpose of comparability, certain prior period amounts have been reclassified to conform to current period classification. Refer to Note 4. Segment Financial Data for additional information on reclassified corporate expenses to the segments.

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, 2023. 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 the three months ended March 30, 2024.

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

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU requires entities to disclose, on an annual and interim basis, significant segment expenses that are regularly reviewed by the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. The ASU also requires disclosure of the name and title of the CODM. The guidance is effective for

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Resideo Technologies, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. We are currently assessing the impact of adoption on our Consolidated Financial Statements and related disclosures.

Note 3. Assets Held for Sale

Assets and Liabilities Held for Sale

The Company records assets held for sale at the lower of the carrying value or fair value less costs to sell. The following criteria are used to determine if property is held for sale: (i) management has the authority and commits to a plan to sell the property; (ii) the property is available for immediate sale in its present condition; (iii) there is an active program to locate a buyer and the plan to sell the property has been initiated; (iv) the sale of the property is probable within one year; (v) the property is being actively marketed at a reasonable sale price relative to its current fair value; and (vi) it is unlikely that the plan to sell will be withdrawn or that significant changes to the plan will be made. The carrying value of assets and liabilities held for sale at March 30, 2024, are $38 million in other current assets and $18 million in accrued liabilities, respectively, and zero in the comparable period. Assets held for sale at March 30, 2024 are actively marketed for sale and are under contract. These assets were sold during the second quarter.

Note 4. Segment Financial Data

The Company’s segment information is evaluated by our Chief Executive Officer, who is also the CODM, and is consistent with how management reviews and assesses the performance of the business as well as makes investing and resource allocation decisions. We monitor our operations through our two reportable segments: Products and Solutions and ADI Global Distribution, and report Corporate separately.

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

Products and Solutions—The Products and Solutions business is a leading global manufacturer and developer of technology-driven products and components that provide critical comfort, energy management, and safety and security solutions to over 150 million homes globally. Our offerings include temperature and humidity control, thermal water and air solutions, as well as security panels, sensors, peripherals, communications devices, video cameras, other home-related lifestyle convenience solutions, cloud infrastructure, installation and maintenance tools, and related software.

ADI Global Distribution—The ADI Global Distribution business is a leading wholesale distributor of low-voltage security products including security and life safety, access control and video products and participates significantly in the broader related markets of smart home, power, audio, ProAV, networking, communications, wire and cable, and data communications.

Corporate—On January 1, 2024, certain corporate functions were decentralized into the operating segments aligning with the business strategy. As a result, $11 million and $7 million of information technology, finance, tax, business development, and research and development functional expenses incurred during the first quarter are now recorded within the Products and Solutions and ADI Global Distribution segments, respectively. For the period ending April 1, 2023, $12 million and $8 million of corporate expenses have been reclassified into the Products and Solutions and ADI Global Distribution segments, respectively, decreasing reported Income from Operations to conform to the current year presentation. Additionally, certain other immaterial prior period amounts have been reclassified to conform to the current period classification.

Corporate expenses include costs related to the corporate office such as the executive function, legal, accounting, tax, treasury, corporate development, human resources, and information technology. Additionally, unallocated amounts for non-operating items such as Reimbursement Agreement expense, interest income (expense), other income (expense) and provision for income taxes are reported within Corporate.

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Resideo Technologies, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

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


	Three Months Ended
(in millions)		March 30, 2024		April 1, 2023
Net revenue
Products and Solutions		$	620	$	658
ADI Global Distribution		866		891
Total net revenue		$	1,486	$	1,549


	Three Months Ended
(in millions)		March 30, 2024		April 1, 2023
Income from operations
Products and Solutions		$	112	$	105
ADI Global Distribution		49		64
Corporate		(33)		(31)
Total income from operations		$	128	$	138

The Company’s CODM does not use segment assets information to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed.

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.

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)		March 30, 2024		April 1, 2023
Products and Solutions
Air		$	191	$	211
Safety and Security		213		228
Energy		134		136
Water		82		83
Total Products and Solutions		620		658

ADI Global Distribution
U.S. and Canada		746		768
EMEA (1)		120		123

Total ADI Global Distribution		866		891

Total net revenue		$	1,486	$	1,549

(1)EMEA represents Europe, the Middle East and Africa.

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Resideo Technologies, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 6. Restructuring

The following table represents restructuring expense attributable to the segments:


	Three Months Ended
(in millions)	March 30, 2024		April 1, 2023
Products and Solutions	$	5	$	2
ADI Global Distribution	2		—

Restructuring expenses	$	7	$	2

We took actions during the quarter to align our cost structure with the Company’s strategic objectives and our outlook of market conditions. The intent of these actions is to lower costs, increase margins, and position us for long-term growth. We expect to fully execute on our restructuring programs over the next 12 to 24 months, and we may incur future additional restructuring expenses associated with these plans. We are unable at this time to make a good faith determination of cost estimates, or ranges of cost estimates, associated with future phases of the programs or the total costs we may incur in connection with these programs. Refer to Note 6. Restructuring Expenses in our 2023 Annual Report on Form 10-K for further discussion of our restructuring programs.

The following table summarizes the status of our restructuring expenses included within accrued liabilities on the Unaudited Consolidated Balance Sheets.


	Three Months Ended		Twelve Months Ended
(in millions)	March 30, 2024		December 31, 2023
Beginning of period	$	30	$	27
Charges	7		34
Usage (1)	(11)		(31)

End of period	$	26	$	30

(1) Usage primarily relates to cash payments associated with employee termination costs.

Note 7. Stockholders’ Equity

On August 3, 2023, we announced that our Board of Directors authorized a share repurchase program for the repurchase of up to $150 million of our common stock over an unlimited time period (the “Share Repurchase Program”).

During the three months ended March 30, 2024, we repurchased 0.1 million shares of common stock in the open market at a total cost of $1 million. As of March 30, 2024, we had approximately $108 million of authorized repurchases remaining under the Share Repurchase Program. Common stock repurchases are recorded at cost and presented as a deduction from stockholders’ equity.

Note 8. Stock-Based Compensation Plans

The Stock Incentive Plan, which consists of the Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates and the 2018 Stock Incentive Plan for Non-Employee Directors of Resideo Technologies, Inc., provides for the grant of stock options, stock appreciation rights, restricted stock units, restricted stock and other stock-based awards. The maximum aggregate shares of common stock that may be granted under these plans are 19.5 million with 3.2 million available to be granted at March 30, 2024.

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Resideo Technologies, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

A summary of awards granted as part of our annual long-term compensation follows:


	Three Months Ended March 30, 2024			Three Months Ended April 1, 2023
	Number of Stock Units Granted	Weighted average grant date fair value per share		Number of Stock Units Granted	Weighted average grant date fair value per share
Performance Stock Units (“PSUs”) (1)	575,249	$	27.96	553,071	$	29.89
Restricted Stock Units (“RSUs”)	1,783,299	$	17.82	1,466,307	$	19.03

(1) Included herein are PSUs at target payout. Final shares issued may be different based upon the actual achievement versus the performance measure target.

Stock-based compensation expense, net of tax was $14 million and $12 million for the three months ended March 30, 2024 and April 1, 2023, respectively.

Note 9. Inventories, net

The following table summarizes the details of our inventories, net:


(in millions)	March 30, 2024		December 31, 2023
Raw materials	$	212	$	221
Work in process	13		18
Finished products	704		702


Total inventories, net	$	929	$	941

Note 10. Goodwill and Intangible Assets, net

Our goodwill balance and changes in carrying value by segment are as follows:


(in millions)	Products and Solutions		ADI Global Distribution		Total
Balance at January 1, 2024	$	2,045	$	660	$	2,705




Impact of foreign currency translation	(12)		(4)		(16)
Balance at March 30, 2024	$	2,033	$	656	$	2,689

The following table summarizes the net carrying amount of intangible assets:


(in millions)	March 30, 2024		December 31, 2023
Intangible assets subject to amortization	$	276	$	281
Indefinite-lived intangible assets	180		180
Total intangible assets	$	456	$	461

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Resideo Technologies, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Intangible assets subject to amortization consisted of the following:


	March 30, 2024						December 31, 2023
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Patents and technology	$	63	$	(28)	$	35	$	64	$	(26)	$	38
Customer relationships	316		(140)		176		319		(138)		181
Trademarks	9		(8)		1		9		(8)		1
Software	198		(134)		64		193		(132)		61
Intangible assets subject to amortization	$	586	$	(310)	$	276	$	585	$	(304)	$	281

Intangible assets amortization expense was $9 million for the three months ended March 30, 2024 and April 1, 2023.

Note 11. Leases

Total operating lease costs are as follows:


	Three Months Ended
(in millions)		March 30, 2024		April 1, 2023
Operating lease costs:
Cost of goods sold		$	5	$	5
Selling, general and administrative expenses		14		14
Total operating lease costs		$	19	$	19

Total operating lease costs include variable lease costs of $3 million and $6 million for the three months ended March 30, 2024 and the three months ended April 1, 2023.

The following table summarizes the carrying amounts of our operating lease assets and liabilities:


(in millions)	Financial Statement Line Item	March 30, 2024		December 31, 2023
Operating lease assets	Other assets	$	183	$	192
Operating lease liabilities - current	Accrued liabilities	$	38	$	39
Operating lease liabilities - non-current	Other liabilities	$	159	$	166

Supplemental cash flow information related to operating leases was as follows:


	Three Months Ended
(in millions)	March 30, 2024		April 1, 2023
Cash paid for operating lease liabilities	$	9	$	9
Non-cash activities: operating lease assets obtained in exchange for new operating lease liabilities	$	6	$	7

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Resideo Technologies, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 12. Long-Term Debt

Long-term debt is comprised of the following:



(in millions)	March 30, 2024		December 31, 2023

4.000% Senior Notes due 2029	$	300	$	300


Variable rate A&R Term B Facility	1,117		1,119

Gross debt	1,417		1,419
Less: current portion of long-term debt	(12)		(12)
Less: unamortized deferred financing costs

SEC Form 10-Q filed by Resideo Technologies Inc.