Resideo announces Q3 2022 financial results

SCOTTSDALE, Ariz.—Resideo Technologies, Inc., a global provider of home comfort and security solutions and distributor of commercial and residential security and audio-visual products, has announced Q3 financial results ending Oct. 1, 2022.

Among the Q3 2022 highlights were:

• Net revenue of $1.62 billion, up 8 percent from $1.5 billion in the third quarter 2021
• Gross profit margin of 26.6 percent, compared to 28.1 percent in the prior year comparable period
• Operating profit of $155 million, or 9.6 percent of revenue, compared to $167 million, or 11.2 percent of revenue, in the third quarter 2021
• Fully diluted earnings per share of $0.42, compared to $0.46 per share in the same quarter last year

"Financial results were mixed in the third quarter as continued growth at ADI was offset by headwinds to Products & Solutions' revenue and profitability," said Jay Geldmacher, Resideo President and CEO. "As the third quarter progressed, we saw softer-than-expected orders and sales across Products & Solutions, with customers looking to normalize inventory levels as macro uncertainty grows. Performance remained strong within Air products, particularly in connected thermostats, and we are well positioned across the portfolio as energy management and energy efficiency become even more critical to end users. We continue to navigate the changing macro environment and we are taking actions to ensure we protect profitability while staying focused on our strategic priorities."

Geldmacher continued. "ADI delivered another solid quarter with revenue growth in North America driven by demand in commercial product categories. We continue to make targeted investment at ADI, which is delivering results in key strategic areas of e-commerce and touchless revenue, private brands, and digital experience. Even as ADI makes these investments, operating profit and operating margin expanded year-over-year."

Products & Solutions

Products & Solutions delivered revenue of $707 million in Q3, up 12 percent compared to the third quarter 2021, including $112 million revenue contribution from acquisitions in the past twelve months and approximately $30 million of unfavorable impact from foreign exchange movements. End demand indicators for Air products remained solid in both the distribution and retail channels, driven by interest in connected thermostats. Energy, traditional Security and Water products all saw reduced orders and sales in the quarter. Integration of First Alert is progressing well with commercial opportunities emerging at key retail and home builder customers

Gross margin for the quarter was 36.2 percent, compared to 41.5 percent in the third quarter 2021. Gross margin was negatively impacted by the inclusion of lower margin First Alert revenue, continued input inflation, and lower volumes, partially offset by strong realization on pricing actions. Operating profit for the quarter was $124 million, or 17.5 percent of revenue, down 21 percent compared to the third quarter 2021. The $27 million year-over-year growth in operating expense in the third quarter 2022 was driven by $26 million of costs associated with First Alert.  

ADI Global Distribution

ADI Global Distribution Q3 2022 revenue of $911 million was up 5 percent compared to the third quarter 2021, driven by 9 percent year-over-year growth in North America.

During the third quarter 2022, acquisitions completed in the past 12 months added $23 million and foreign exchange was a headwind of approximately $22 million compared to prior year period. Demand and pricing were again strong in categories that typically serve commercial end markets including Fire, Video Surveillance and Access Control. Sales through ADI's e-commerce channel grew 22 percent, representing 18 percent of total ADI revenue, with overall touchless revenue reaching 37 percent of ADI total revenue. Private brands sales grew 23 percent compared to the third quarter 2021.

Gross margin of 19.3 percent in the third quarter 2022 was up 70 basis points compared to the third quarter 2021. Benefits from the current inflationary pricing environment, progress on ADI specific price optimization efforts, and expansion of private brands all contributed to margin expansion in the third quarter. Operating profit of $78 million for third quarter 2022 was up 7 percent from $73 million in the third quarter 2021.

Updated Outlook

Resideo expects Q4 2022 revenue to be in the range of $1.55 billion to $1.6 billion, gross profit margin in the range of 26.5 percent to 27.5 percent, and operating profit in the range of $130 million to $140 million.

Based on the current outlook for the fourth quarter, the company now expects full-year 2022 revenue to be in the range of $6.36 billion to $6.41 billion, gross profit margin in the range of 27.0 percent to 28 percent and operating profit in the range of $645 million to $655 million.