Investor Update December 2019
DISCLAIMER Forward-Looking Statements This presentation contains “forward - looking statements.” All statements, other than statements of fact, that address activities, events or developments that we or our management intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results or performance of the company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, those described under the headings “Risk Factors” and “Cautionary Statement Concerning Forward - Looking Statements” in our Annual Report on Form 10-K for the year ended Dec. 31, 2018 filed with the Securities and Exchange Commission (“SEC”). You are cautioned not to place undue reliance on these fo rward-looking statements, such as guidance regarding full-year 2019, our ability to realize cost reductions over the lifecycle of our products and realize related gross margin opportunity, the commencement, progress and results of the comprehensive operational and financial review and its oversight by the Strategic and Operational Committee, including our ability to improve operating margins, core business processes, direct product costs, and G&A, our cost optimization program, our ability to achieve greater operational flexibility under the credit agreement amendments, and our ability to work with our professional partners to better position our thermostat portfolio and the related expected significant sales improvement in 2020, status and estimates of inventory write-downs, each of which speak only as of the date of this release. Forward looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements. Non-GAAP Financial Measures This release includes EBITDA, adjusted EBITDA, constant currency growth, adjusted basic earnings per share and other financial measures not compliant with generally accepted accounting principles in the United States (GAAP). The non-GAAP financial measures are adjusted for certain items and may not be directly comparable to similar measures used by other companies in our industry, as other companies may define such measures differently. Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends and provide useful additional information relating to our operations and financial condition. These metrics should be considered in addition to, and not as replacements for, the most comparable GAAP measure. We believe EBITDA, adjusted EBITDA and constant currency growth, adjusted basic earnings per share are important indicators of operating performance. They should be read in connection with our financial statements presented in accordance with GAAP. A reconciliation of adjusted EBITDA to the corresponding GAAP measure is not available on a forward-looking basis without unreasonable efforts due to the impact and timing on future operating results arising from items excluded from these measures, particularly environmental expense, Honeywell reimbursement agreement expense or gain, stock compensation expense, repositioning charges, and other non-operating expense (income). 1
BOB RYDER – CFO RESIDEO TECHNOLOGIES CFO CONSTELLATION BRANDS (2007-2015) • Market Cap grew from $4B to $27B, reduced leverage, implemented first dividend and stock buy-back program • Restructured wine business: consolidated facilities, centralized functions and focused on net pricing, core brand strength, profit margins • Exited most of the international wine business, acquired Modelo Beer Brands for US Market CFO AMERICAN GREETINGS (2002-2005) • Market Cap grew from $1.1B to $1.6B, reduced leverage, reinstated dividend • Retooled go-to-market strategy for greeting cards, divested non-core business, reduced SG&A PEPSICO (1989-2002) • Controller Frito-Lay North America • CFO Frito-Lay Europe • Strategic Planning, M&A, Controller roles at divisional and PepsiCo level 2
RESIDEO INVESTOR THESIS Post-Spin • Resideo opened trading on the first day as an independent company on October 29, 2018 at $28 per share • The spin thesis was strong brand recognition, Pro Install channel and Home Install base, consistent ADI performance and leadership share in large and growing segments • SpinCos often have teething pains due to legacy tie-ins, allocated pre-spin financials, management and customer turnover, TSA transitions and shareholder churn • Resideo has additional complexity due to Honeywell determined spin obligations, lack of pre-existing stand-alone business and dramatic profitability shortfalls to estimates • Performance has been disappointing in 2019, with commensurate stock market reaction Path Forward • The foundational assets of the business remain sound, and profitable growth is the goal • Operational and Financial review intended to put Resideo back on the path to leverage its strengths and create shareholder value 3
RESIDEO BUSINESS SEGMENTS 2019 Estimates Resideo ADI Products & Solutions $5.0B $2.8B $2.2B Products & Solutions EMEA 16% Security RTS 25% 26% 2% APAC ADI 43% 57% 82% 49% US / Canada Comfort • Sales growth +2% to +4% • Segment growing at 6% • Segment growing sales at 1% • Adjusted EBITDA of • Adjusted EBITDA of $189M and • Adjusted EBITDA of $291M and $340M*, or 7% margin 7% margin 13% margin Note: Sales and EBITDA represent 2019 Estimate; Segment mix % is based on September Year-to-Date results as presented in latest 10Q; Sales represents External Sales 4 * Represents mid-point of the EBITDA guidance range of $330M to $350M
STRONG BASE BUSINESS, GOOD POSITION IN ATTRACTIVE INDUSTRIES Addressable Market ($B) 3 & Select Resideo Positions Product Categories $10.4B Comfort & Select Product Categories RTS • Connected Thermostats Leader or Main Deep 150 Million • $1.7B 1 Traditional Temp. Control Player in Most Relationship with Households with • IAQ & Potable Water Categories Pro Resideo Product Products & Solutions ($2.5B) 2 $5.2B Security Select Product Categories: • $0.8B 1 Pro Security 4 ~6 Million Trusted Brand Data Collected • DIY Awareness Connected with Broad from 30 Million Portfolio Sensor Points Customers $20.6B Select Product Categories: ADI Distribution • Intrusion ($2.8B) 1,300 Suppliers 200+ Distributor #1 Global • Access Control Distributor for and 350K Stocking • And other 10 categories Security Products Products Locations 1. Revenue as reported in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission; 2. Includes intersegment revenue of $305M as reported in 10K; 3. Addressable market for 2019 in the markets and geographies that we compete in; 4. Pro Security is professionally monitored security including those systems that are self-installed by consumers, e.g. Simplisafe 5
THROUGH THE PRO INSTALL CHANNEL WE DELIVER COMFORT , SECURITY AND SIMPLICITY TO PLACES WE CALL HOME 6 7 5 1 2 3 8 4 2 9 *Most Active SKUs 6
BROAD PORTFOLIO PROVIDING COMPREHENSIVE SOLUTIONS, SERVING CONSUMER NEEDS VIA PROFESSIONAL CHANNEL Select Offerings Connected T10 T6 Vision Pro Wifi 9000 Thermostats Zone Traditional Valve T4 Damper Actuator Temperature Control Control Comfort & Consumer RTS Pressure & IAQ & Backflow Reducing Humidification Dehumidification Pro SWs Potable Water Preventer Valve Products & Solutions Residential Thermal Water Heater Gas Wireless Pilot Burner Control Valve AquaReset Solutions (RTS) Security Total Connect Motion Pro Security Security Panel Sensors Software Camera Sensor Security Indoor Smart Home Flood DIY Awareness Access Key Fob Security Sensors Sensor Access Control Pro AV Enterprise Connectivity 12 Categories Covering Wide Range ADI Distribution Selection of Products Intrusion Video Surveillance Fire 7
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