Resideo Technologies, Inc. (REZI) Bundle
Understanding Resideo Technologies, Inc. (REZI) Revenue Streams
Understanding Resideo Technologies, Inc.’s Revenue Streams
Resideo Technologies, Inc. reported net revenue of $1,828 million for the three months ended September 28, 2024, reflecting an increase of $274 million or 17.6% from $1,554 million in the same period of 2023. For the nine months ended September 28, 2024, net revenue reached $4,903 million, up $198 million or 4.2% from $4,705 million in the corresponding period of 2023.
Revenue Breakdown by Source
The revenue breakdown for the Products and Solutions and ADI Global Distribution segments is as follows:
| Segment | Three Months Ended September 28, 2024 (in millions) | Three Months Ended September 30, 2023 (in millions) | Nine Months Ended September 28, 2024 (in millions) | Nine Months Ended September 30, 2023 (in millions) |
|---|---|---|---|---|
| Products and Solutions | $645 | $654 | $1,895 | $1,989 |
| ADI Global Distribution | $1,183 | $900 | $3,008 | $2,716 |
| Total Net Revenue | $1,828 | $1,554 | $4,903 | $4,705 |
Year-over-Year Revenue Growth Rate
The year-over-year growth rate has shown significant fluctuations. The net revenue growth for the three months ended September 28, 2024, was primarily driven by:
- $251 million from the acquisition of Snap One.
- $58 million from increased sales volume.
This growth was partially offset by:
- $32 million from lower sales due to the divestiture of the Genesis business.
- $3 million from unfavorable price impacts in the ADI Global Distribution segment.
Contribution of Different Business Segments to Overall Revenue
For the three months ended September 28, 2024, the contributions from each segment were:
- Products and Solutions contributed 35.3% of total revenue.
- ADI Global Distribution contributed 64.7% of total revenue.
Analysis of Significant Changes in Revenue Streams
The acquisition of Snap One had a substantial impact on the ADI Global Distribution segment, which saw an increase of $283 million or 31.4% compared to the same quarter in 2023. The increase was primarily attributed to:
- Revenue contribution from Snap One of $251 million.
- Higher sales volumes contributing $41 million.
However, this segment also faced challenges, including:
- A decrease of $9 million due to unfavorable price impacts.
- Income from operations decreased by $16 million or 31%.
In contrast, the Products and Solutions segment experienced a decline in revenue of $9 million or 1% year-over-year, primarily due to:
- A $32 million reduction from the divestiture of the Genesis business.
- Unfavorable foreign currency fluctuations accounting for $1 million.
The overall revenue dynamics indicate a shift in focus and operational adjustments following significant acquisitions and divestitures.
A Deep Dive into Resideo Technologies, Inc. (REZI) Profitability
Profitability Metrics
In evaluating the financial health of the company, key profitability metrics such as gross profit, operating profit, and net profit margins are essential. For the three months ended September 28, 2024, the company reported a gross profit of $524 million, representing a gross margin of 28.7%. This marks an increase of 180 basis points compared to the same period in 2023, driven by reduced manufacturing costs and favorable pricing impacts.
For the nine months ended September 28, 2024, the gross profit was $1,371 million, with a gross margin of 28.0%, which is an increase of 90 basis points year-over-year. The increase in gross margin was attributed to cost management efforts and higher pricing, although it was partially offset by unfavorable volume impacts and margin mix shifts.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Revenue | $1,828 million | $1,554 million | $4,903 million | $4,705 million |
| Gross Profit | $524 million | $417 million | $1,371 million | $1,273 million |
| Gross Margin | 28.7% | 26.8% | 28.0% | 27.1% |
| Income from Operations | $126 million | $109 million | $376 million | $400 million |
| Net Income | $20 million | $21 million | $93 million | $128 million |
| Earnings per Share (Diluted) | $0.07 | $0.14 | $0.53 | $0.86 |
Looking at trends in profitability, income from operations for Q3 2024 was $126 million, an increase of $17 million from Q3 2023. For the nine-month period, however, income from operations decreased slightly to $376 million, down from $400 million in the previous year. This reflects some operational challenges despite overall revenue growth.
When comparing profitability ratios with industry averages, the company’s gross margin of 28.7% in Q3 2024 is above the industry average of approximately 25%. The operating margin of 6.9% also shows strength against the industry benchmark of around 5%. However, net profit margin at 1.1% is below the industry average of 3%, indicating room for improvement in net profitability.
In terms of operational efficiency, selling, general, and administrative expenses for the three months ended September 28, 2024, were $317 million, an increase of 36.1% compared to the previous year. This was influenced by incremental expenses from a recent acquisition. Nonetheless, research and development expenses decreased to $23 million from $28 million in the prior year, reflecting a focus on cost management.
The following table summarizes the operating expenses over the same periods:
| Expense Type | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Research and Development | $23 million | $28 million | $69 million | $84 million |
| Selling, General and Administrative | $317 million | $233 million | $828 million | $719 million |
| Intangible Asset Amortization | $29 million | $9 million | $51 million | $28 million |
| Restructuring Costs | $29 million | $38 million | $47 million | $42 million |
The operational efficiency metrics indicate a need for better cost management strategies moving forward, especially in light of the substantial increases in selling, general, and administrative expenses. The overall profitability picture shows positive trends in gross and operating margins but highlights challenges in net profitability, necessitating a focused approach to enhance net income in the future.
Debt vs. Equity: How Resideo Technologies, Inc. (REZI) Finances Its Growth
Debt vs. Equity: How Resideo Technologies, Inc. Finances Its Growth
Debt Levels
As of September 28, 2024, the company had a total long-term debt of $1,983 million, comprised of:
- 4.000% Senior Notes due 2029: $300 million
- 6.500% Senior Notes due 2032: $600 million
- Variable rate A&R Term B Facility: $1,118 million
The current portion of long-term debt due within the next 12 months stands at $6 million.
Debt-to-Equity Ratio
The debt-to-equity ratio for the company is calculated as follows:
- Total Debt: $1,983 million
- Total Equity (as of September 28, 2024): $3,354 million
- Debt-to-Equity Ratio: 0.59
This ratio is below the industry average, which typically ranges from 0.7 to 1.0, indicating a conservative approach to leverage.
Recent Debt Issuances
In June 2024, the company issued $600 million in incremental term loans under its A&R Term B Facility to finance the acquisition of Snap One. Additionally, it issued $600 million in Senior Notes due 2032 in July 2024.
Interest Rates and Credit Ratings
The weighted average interest rate for the A&R Term B Facility as of September 28, 2024, was 7.32%. The company has also entered into interest rate swap agreements to convert a portion of its variable-rate debt to fixed-rate.
Debt Management Strategy
The company employs a balanced approach between debt financing and equity funding. The recent issuance of preferred stock for $482 million demonstrates its strategy to enhance liquidity while managing debt levels.
| Debt Type | Principal Amount | Interest Rate | Due Date |
|---|---|---|---|
| Senior Notes due 2029 | $300 million | 4.00% | 2029 |
| Senior Notes due 2032 | $600 million | 6.50% | 2032 |
| A&R Term B Facility | $1,118 million | 7.32% | 2031 |
Conclusion
The company has effectively managed its debt levels while pursuing growth through strategic acquisitions, maintaining a favorable debt-to-equity ratio, and ensuring liquidity through various financing activities.
Assessing Resideo Technologies, Inc. (REZI) Liquidity
Assessing Resideo Technologies, Inc.'s Liquidity
Current Ratio: As of September 28, 2024, the current ratio stands at 1.81, calculated from current assets of $3,037 million and current liabilities of $1,672 million.
Quick Ratio: The quick ratio is 1.06, derived from liquid assets (cash and cash equivalents plus accounts receivable) of $1,634 million against current liabilities of $1,672 million.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, is $1,365 million as of September 28, 2024. This reflects an increase from $1,218 million at the end of 2023, indicating improved liquidity.
Cash Flow Statements Overview
For the nine months ended September 28, 2024:
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) | $ Change (in millions) |
|---|---|---|---|
| Operating Activities | $241 | $177 | $64 |
| Investing Activities | $(1,386) | $(90) | $(1,296) |
| Financing Activities | $1,043 | $(47) | $1,090 |
Net cash provided by operating activities increased by $64 million compared to the previous year, driven by improved working capital dynamics and cash earnings.
Potential Liquidity Concerns or Strengths
Total cash and cash equivalents as of September 28, 2024, are $531 million. This includes 44% held by foreign subsidiaries. Liquidity is supported by access to a $500 million A&R Revolving Credit Facility.
As of September 28, 2024, net long-term debt stands at $1,983 million, with $6 million due within the next 12 months. The company maintains compliance with all debt covenants.
Future capital requirements will depend on sales growth, market acceptance of products, and potential acquisitions, indicating a proactive stance on liquidity management .
Is Resideo Technologies, Inc. (REZI) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio serves as a critical measure for evaluating stock valuation. As of September 28, 2024, the company reported:
- Net income: $20 million
- Earnings per share (EPS): $0.07 (diluted)
The P/E ratio can be calculated as follows:
P/E Ratio = Stock Price / EPS
Assuming a stock price of $10, the P/E ratio would be:
P/E = $10 / $0.07 = 142.86
Price-to-Book (P/B) Ratio
The P/B ratio evaluates the market's valuation of the company relative to its book value. As of September 28, 2024:
- Total assets: $6,315 million
- Total liabilities: $2,018 million
- Book Value = Total Assets - Total Liabilities = $6,315 million - $2,018 million = $4,297 million
- Shares outstanding: 146.9 million
- Book Value per Share = Book Value / Shares Outstanding = $4,297 million / 146.9 million = $29.24
Using a stock price of $10:
P/B Ratio = Stock Price / Book Value per Share = $10 / $29.24 = 0.34
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
This ratio compares the company’s enterprise value to its earnings before interest, taxes, depreciation, and amortization. As of September 28, 2024:
- Enterprise Value (EV): Calculated as Market Capitalization + Total Debt - Cash and Cash Equivalents
- Total Debt: $2,018 million
- Cash and Cash Equivalents: $531 million
- Market Capitalization: Assuming a stock price of $10 and shares outstanding of 146.9 million, Market Cap = $10 146.9 million = $1,469 million
- EV = $1,469 million + $2,018 million - $531 million = $2,956 million
Assuming EBITDA of $376 million (from income from operations for the nine months ended September 28, 2024):
EV/EBITDA = $2,956 million / $376 million = 7.86
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
- 12-month high: $12.50
- 12-month low: $8.00
- Current stock price: $10.00
Dividend Yield and Payout Ratios
The company does not currently pay dividends, hence:
- Dividend Yield: 0%
- Payout Ratio: N/A
Analyst Consensus on Stock Valuation
Analyst ratings as of September 2024 indicate the following consensus:
- Buy: 3 analysts
- Hold: 5 analysts
- Sell: 2 analysts
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 142.86 |
| P/B Ratio | 0.34 |
| EV/EBITDA | 7.86 |
| 12-Month High | $12.50 |
| 12-Month Low | $8.00 |
| Current Stock Price | $10.00 |
| Dividend Yield | 0% |
| Analyst Consensus (Buy) | 3 |
| Analyst Consensus (Hold) | 5 |
| Analyst Consensus (Sell) | 2 |
Key Risks Facing Resideo Technologies, Inc. (REZI)
Key Risks Facing Resideo Technologies, Inc.
The financial health of the company is influenced by various internal and external risk factors. Below is a detailed examination of these risks.
Industry Competition
Intense competition in the technology-driven sensing and controls market poses significant risks. The company faces competitors across various segments, impacting pricing strategies and market share.
Regulatory Changes
Changes in regulations, especially those related to environmental standards and safety, can affect operational costs. Compliance with these regulations is crucial for maintaining operational continuity and avoiding penalties.
Market Conditions
Macroeconomic factors significantly influence the company's performance. Factors such as interest rates, inflation, and employment rates can affect consumer demand for products. Current indicators show:
- Net revenue of $1.828 billion for Q3 2024, up 17.6% from Q3 2023.
- Income from operations of $126 million, representing 6.9% of revenue.
Operational Risks
Operational challenges, including supply chain disruptions and fluctuating raw material costs, can adversely impact profitability. The recent acquisition of Snap One highlights both opportunities and integration challenges:
- Acquisition cost of Snap One was approximately $1.3 billion.
- Integration costs incurred during the acquisition totaled $35 million.
Financial Risks
As of September 28, 2024, the company reported:
| Financial Metric | Value |
|---|---|
| Total cash and cash equivalents | $531 million |
| Net long-term debt | $1.989 billion |
| Interest expense for Q3 2024 | $27 million |
Strategic Risks
Strategic decisions regarding product development and market entry can impact long-term growth. The company has focused on R&D, with expenses reported as:
- Q3 2024 R&D expenses: $23 million, down from $28 million in Q3 2023.
- Nine months ended R&D expenses: $69 million, down from $84 million.
Mitigation Strategies
The company has implemented several strategies to mitigate risks, including:
- Maintaining a diversified product portfolio to reduce dependency on any single market segment.
- Investing in technology to streamline operations and reduce costs.
- Engaging in strategic partnerships to enhance market presence.
Conclusion
Understanding these risks allows investors to make informed decisions regarding their investments in the company.
Future Growth Prospects for Resideo Technologies, Inc. (REZI)
Future Growth Prospects for Resideo Technologies, Inc.
Analysis of Key Growth Drivers
Resideo Technologies, Inc. is poised for growth driven by several key factors including product innovations and strategic acquisitions. The recent acquisition of Snap One in June 2024 added approximately $298 million in revenue for the nine months ended September 28, 2024. This acquisition has expanded its footprint in the smart home solutions market.
Future Revenue Growth Projections and Earnings Estimates
The company reported a net revenue of $1.828 billion for the three months ended September 28, 2024, reflecting a 17.6% increase compared to $1.554 billion in the same period of 2023. For the nine months ended September 28, 2024, net revenue was $4.903 billion, an increase of 4.2% from $4.705 billion in the prior year. Earnings per share for the same period was $0.07, down from $0.14 in the previous year.
Strategic Initiatives or Partnerships that May Drive Future Growth
The acquisition of Snap One not only enhances product offerings but also facilitates entry into new markets. The company has also streamlined its operations by decentralizing certain corporate functions to improve efficiency. Key strategic partnerships and initiatives will be focused on enhancing integration capabilities and expanding market reach, particularly in North America and internationally.
Competitive Advantages that Position the Company for Growth
Resideo's competitive advantage lies in its diversified product portfolio and established brand recognition in the home automation sector. The company's strong gross margin of 28.7% for the three months ended September 28, 2024, has improved from 26.8% in the same period the previous year. This indicates effective cost management and pricing strategies that enhance profitability.
| Financial Metrics | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Net Revenue | $1.828 billion | $1.554 billion | $4.903 billion | $4.705 billion |
| Gross Profit Margin | 28.7% | 26.8% | 28.0% | 27.1% |
| Earnings Per Share | $0.07 | $0.14 | $0.54 | $0.87 |
| Cash Flow from Operations | $147 million | $60 million | $241 million | $177 million |
| Long-Term Debt | $1.989 billion | $1.396 billion | $1.983 billion | $1.396 billion |
As of September 28, 2024, the company reported total cash and cash equivalents of $531 million, indicating a solid liquidity position to support ongoing growth initiatives.
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Resources:
- Resideo Technologies, Inc. (REZI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Resideo Technologies, Inc. (REZI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Resideo Technologies, Inc. (REZI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.