Resideo Technologies, Inc. (NYSE: REZI) announced its fourth-quarter and full year earnings along with its long-term strategy for growth and margin expansion that includes a digital portal to connect its user base of 150 million customers with its 110,000 authorized contractors.
The company’s first full quarter outside its parent company Honeywell was solid, but because the company readjusted its forecast lower (down to just 4 percent growth) for 2019 based on potential softening of the economy, the stock market reacted negatively.
The stock price fell 25 percent on the day to hover around $18/share.
Resideo reported net revenue of $1.27 billion for the fourth quarter of 2018 (up 5 percent), bringing full-year net revenue to $4.8 billion (up 6 percent). The bottom line was strong, with net income of $405 million, up 15 percent.
“We delivered strong performance for the fourth quarter and full year, despite the spin-related cost base coming in higher than expected,” said Mike Nefkens, president and CEO of Resideo.
“I am proud of our team's accomplishments as we successfully executed the spin and met or exceeded financial expectations.”
Resideo spun off from Honeywell on Oct. 29, 2018 as a leading global provider of residential security and comfort solutions, and low-voltage and security distribution.
“The disruption from the spin is mostly behind us and we have a solid team in place that delivered great results in 2018, and we are ready to do even more. As a newly independent company, we are establishing our roadmap for growth and long-term value creation,” says Nefkens.
“This year is foundational for Resideo as we take critical steps near-term to further improve our cost base, invest to accelerate growth, increase margins and drive recurring revenues. We've brought on new talent to drive innovation and win market share in the growing residential IoT market by reimagining the smart home for contractors and consumers alike,” Nefkens said.
Vision 2023 Strategy Includes Acquisitions
The company’s Vision 2023 strategy is broad-ranging, including a focus on increased recurring revenue, water leak detection, indoor air quality and wellness, potential acquisitions, and development of a referral portal that will connect its 150 million end-user customers with its database of 110,000 contractors.
Overall, Vision 2023 represents a $90 million investment by the Austin, Texas-based firm.
“I want to provide clarity on how we’re thinking about acquisitions,” said Nefkens speaking to investors. “Our vision is to broaden our products and solutions segment into new and complementary verticals to a new product, technology and business additions.
“We’re most interested in companies with products that can leverage our distribution channels all round out our connected portfolio. These are innovative and high-growth businesses that need our channels for global reach. We have those channels.
“While I can’t get into these specifics right now, I can say that we are actively in discussions with several exciting opportunities for either strategic partnerships or outright acquisition,” he noted.
ADI Performance Strong
Nefkens specifically lauded the performance of ADI during the quarter.
“Regarding our ADI business which is the Global Distribution side, segment revenues were up 6 percent for the quarter. For the full year Global Distribution segment revenues were up 7 percent on the year. Global Distribution operating profit grew by 21 percent for the quarter while operating profit for the year was 13 percent higher than in 2017.
“We launched key partnerships with smart home suppliers including Arlo, Amazon, Samsung, Netgear, DSC and Google and we were also recognized by TRENDnet for exceptional sales performance. Again, a really solid year and a great start as a standalone company,” added Nefkens.