Resideo at Oppenheimer Conference: Strategic Growth and Challenges

On Wednesday, 07 May 2025, Resideo Technologies (NYSE:REZI) participated in the Oppenheimer 20th Annual Industrial Growth Conference. The company discussed strategic growth, including innovation and expansion, while addressing challenges such as tariff impacts. Resideo’s commitment to product differentiation and operational excellence was emphasized alongside a cautious approach to potential margin pressure.

Key Takeaways

• Resideo is focusing on innovation in its Products and Solutions (P&S) segment, aiming for integrated home solutions.
• Tariffs pose challenges, particularly for ADI’s distribution of third-party products from China.
• The SnapOne acquisition is progressing well, with synergies exceeding expectations.
• Resideo aims to reduce leverage below 2x and is prioritizing capital investment in business growth.
• ADI’s e-commerce business saw a 15% growth in Q1 year-over-year.

Financial Results

• First Quarter Performance: Resideo reported strong satisfaction with its Q1 results.
• Free Cash Flow: The company projects generating $375 million in free cash flow from operations this year.
• Deleveraging Target: Aiming to reduce leverage below 2x.
• E-commerce Growth: ADI’s e-commerce business experienced a 15% growth in Q1 year-over-year.

Operational Updates

• P&S Manufacturing: Products are manufactured regionally (EU, Asia Pacific, North America) to minimize tariff exposure.
• USMCA Compliance: 98% of products from Mexican facilities destined for the US are tariff-exempt.
• ADI Sourcing: 20-25% of ADI’s sales are from products sourced in China.
• SnapOne Integration: Integration is progressing well, with synergies ahead of schedule.

Future Outlook

• P&S Innovation: Continued focus on developing differentiated products in air, security/safety, and water segments.
• Whole Home Integration: Aim to provide integrated solutions for comfort, protection, and savings.
• ADI Expansion: Geographic expansion and exclusive brand additions are potential M&A areas.
• Capital Allocation Priorities: Invest in the business, deleverage to below 2x, then consider M&A or shareholder returns.

Q&A Highlights

• Tariffs Impact: P&S has minimal tariff exposure due to USMCA compliance. ADI faces potential price increases from suppliers sourcing from China, with an estimated impact of 5-10%.
• Pricing Strategy: ADI plans to pass cost increases to customers, potentially affecting margins.
• SnapOne Synergies: The acquisition is exceeding expectations in synergy realization.
• M&A Strategy: Future acquisitions will focus on significant opportunities with high synergy potential.
• ESG Focus: Continued pursuit of ESG initiatives, particularly in energy efficiency.

In conclusion, Resideo remains focused on strategic growth and operational excellence. Readers can refer to the full transcript for more detailed insights.

Full transcript - Oppenheimer 20th Annual Industrial Growth Conference:

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. Thank you, everybody. Welcome to the Oppenheimer Industrial Conference. I am Ian Zaffino. I am the equity research analyst that covers Resideo.

I’ve been covering them since they spun out of Honeywell. With me today is Tom Saran, the company’s president of products and solutions, and also Mike Cartlett, is the company’s CFO. Guys, thank you very much for being here today. We really appreciate it.

Tom Saran, President of Products and Solutions, Resideo: Thanks, Ian. Thanks for having us.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. So now, first of all, very nice quarter last last night. Glad to see that stocks reacting very nicely today. But maybe we can back up and do a little bit of a high level discussion at first, call it. So maybe you could give us a quick overview of just Resideo and the main segments.

I know there’s ADI, there’s products and solutions. So maybe give us a broad overview of that. Thanks.

Mike Cartlett, CFO, Resideo: Sure. At a high level, you know, Resideo is operates in two distinct segments. We have our product and solutions group, which Tom is the president of, and P and S, you’ll hear us call it frequently. The P and S group is focused on developing products that are instrumental to home management, things that attach to the energy, to the securities, the safety aspects of the residential home and bringing products to LightNet. We have brands such as Honeywell Home, First Alert, VRK and others that bring those products.

And Tom will talk a lot more about those. On the other side, we have a distribution business called ADI. And ADI’s legacy was historically serving the commercial security integrators and professionals that install security solutions into commercial establishments. And over time, we’ve been growing that to serve in more and more markets. About 15% of what PMS sells gets sold through ADI and about 10% to 15% of ADI sales are PMS products.

So obviously, there’s a lot of interaction between those two businesses, what ties them together. Both businesses very focused on serving the professionals and providing products and solutions to those professionals. So we think they go really well together. Rob Arnest who’s not here today runs our ADI segment. And Tom and Rob work closely together to make sure we’re serving the needs of those professionals on an aligned basis.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. And then just so maybe I know we have Tom here. So Tom, can you just walk us through some of P and S’s business, some of its key product offerings, end markets that you’re serving and kind of what you’re seeing that’s attractive or higher growth areas? Thanks.

Tom Saran, President of Products and Solutions, Resideo: Sure. So, you know, what we do in the P and S business is we’re focused on creating products for the controls and sensing in residential homes primarily. And our focus on that is to create differentiated products products in specific segments through professional distribution and pro installs. So the markets that are in that, we call it air, and air includes the thermostats, the controlling sensor HVAC systems, plus indoor air quality systems, humidification, dehumidification, ventilation, filtration, and then grid services, the control of those systems interfacing to utilities to basically optimize the load on the grid. So that’s one segment there.

The next segment would be security, and sometimes we bundle that with our safety. We say security and safety, but they’re they’re fairly distinct. And security is the classic for us, has been intrusion. But we’re pivoting from an intrusion play to a more broad definition of what total security for a resident or small business would be, which would include access control and video. And then safety, what that means, typically, it’s fire safety for us at this point.

And so that’s your smoke detectors that we market under the First Alert brand. And then we have the water business, and the water is for the control and the flow of water typically in two applications. One is hydronic heating. So in many markets, the most efficient means of transferring energy is through water. So that you see that very commonly in Europe, and you also see that in the Northeast United States.

You see that up in Canada. And so those are what we call the hydronic systems. And then we have potable, which is the classic, just the water flowing out of taps. We make various components to control that flow, regulate pressure, make sure it doesn’t backflow, filter it, what have you. And then lastly, we have our OEM or energy business because these are basically the sale to OEM appliance equipment manufacturers, and our role is to help them with combustion control.

Sometimes it’s the electronics related to that. Often, it’s the gas valves, chambers, interface designs. But in The United States, it’s typically water heater and furnace manufacturers. And in Europe, it’s the heat pump and boiler manufacturers. That’s overall business.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. And then can you just help me understand, you know, how you go to market in this business? You know, I know there’s a big kind of contractor component to that. You know, how large is that? How are you going to market?

And, you know, for me as a a residential homeowner, am I able to pick my product? Or is that really just what the contractor is giving me? To Just try to help me understand how you go to market. Yes.

Tom Saran, President of Products and Solutions, Resideo: Sure. So we are not a direct to consumer company. We sell through three major channels, I guess you could say. One is just the classic distribution channel to go to the pro contractor. Right?

The guy is gonna come up in the truck and install your system. Hopefully, you have a relationship with him that you’re able to kinda have a description of what he’s gonna be installing and how what things you’d like to see. And if you know, hey. Listen. You know, the the Resideo Honeywell Home product is what I really want.

He should be able to do that. My guess is he’s probably gonna tell you that that’s probably the best solution for you, and then explain why. So that’s very important to us. In fact, if you look at our strategy, you know, we wanna be the leader in those markets. We wanna do it through differentiated products.

We wanna do it through the pros. Well, the other place where pros play is in residential new construction. Right? So this is all of those homes that are being built by the professional building companies. Sometimes they have employees handling this rather than independent contractors, and so we’ll sell to them.

Again, that product is typically delivered to them through the distribution channels. And then lastly, we sell to retail because 50% of the retail sales, let’s say, Home Depot or Lowe’s, go to contractors. So contractors go there because it’s an inconvenient place for them to pick up products. And then of the other remaining 50% that’s not purchased by the pros, it’s the individual purchasing. And of those, they often purchase the product and then call a pro to install it.

So we have to participate because that’s where pros are purchasing product So that’s how we get the product into our customers’ hands.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. And then maybe can we just dig a little bit deeper into the fire business, fire safety? What are the growth drivers there? You know? And where do you see the market heading?

Tom Saran, President of Products and Solutions, Resideo: Well, first, you know, it is a regulated and a code driven business. Right? So just in terms of every residence needs to have one of these in every bedroom and then every hallway that between the bedroom and a point of egress. And so that drives a lot of it. So you see it both in the remodel, the people do any to cut a work to the house.

There’s a replacement market because things. Of

different then because most smoke detectors just alarm in the home unless it’s part of a security system. And this basically would forward messages to your application on your phone so that you can be away from the home and be aware if something has gone wrong in your home, be able to address that. So that’s one place. But the other is it’s a key sensor. When you look at the overall whole whole home, having this integration of all of the various forms of sensing, whether it’s coming from what your energy level is or what’s happening with your water flow or or a leak of water that’s another part of our water business, leak detection, or the temperature thermostat, what’s going on or presence.

It’s a key sensor for an overall overall awareness of a whole home application because that’s our real goal is to provide comfort, protection, and savings through our control and sensing at the whole home subsystems.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. And then, you know, as you look at, like, what you’ve been doing, you know, just a segment in general, you know, maybe talk about where you’ve innovated and then also areas that you think you could continue to innovate in.

Tom Saran, President of Products and Solutions, Resideo: So, yeah, I I would say it’s fundamental to what we wanna do. So we do not want to be a generic provider of anything. We want to provide differentiated products to our customers that they perceive the value that enhances their lives. So in every one of those markets that I went through, we’re trying to create something new for them. And if you go to air and say the thermostat, the products we’re introducing, we introduced the first matter thermostat for a low end product.

Right? And all of a sudden so that was the low end. We’re gonna be bringing in a high end thermostat coming in the back second half of this year. There’ll be a whole product family that’s part of an overall platform, And then it’ll have features I don’t want to preannounce right now that will take us to a leadership role there. But we’re doing the same and say, if you looked at the safety business we just talked about.

The fact that we’re providing this connected product that’s allowing people to have an awareness away from their home to protect and just be aware of that. If you look at what we’re doing in the security with what we’re going to be offering, not only with the c x four video systems, the four k systems, but what we’ll be introducing for an overall single pane of glass integrated solution with advanced video analytics in the second half of the year, we’ll be announcing some products related to that, and then eventually the overall access control. So and then, you know, our lead detection, say, in water, what we’re doing there. So every one of these product categories we’re participating, we wanna be the leader in that, and we’re going to do that through differentiated solutions.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. Good. That is helpful. And then maybe we go to kind of the topic du jour on the tariff side. Right?

What is the impact now on P and S? And maybe take a step back, what’s kind of your manufacturing exposure and footprint? And then I have a follow-up to that.

Tom Saran, President of Products and Solutions, Resideo: Sure. So in P and S, we have a global footprint, and we typically produce products in the region that we expect it to be consumed. So we have facilities in The EU. We have facilities in Asia Pacific. We have facilities in North America.

And for the North America region, our factories are down in Mexico, although we do have a U. S. Factory. If you look at the consumption of product in The U. S.

Market, which is what’s being most heavily tariffed right now, those products are 90% coming out of our Mexican facilities. And of that product that’s coming out of the Mexican facilities, 98% is USMCA compliant, which USMCA compliant products are not currently tariffed. K? So they’re exempt from tariffs at this point. So of the remaining less than 10% that doesn’t come come from our Mexican or U.

S. Facilities, it’s a smattering of things, and we’re working through how to either bring that product into our facilities or source from a North American supplier, or there will be some cases where we’re not able to do that, and then we’ll have to adjust our pricing to our customers. But, again, you’re gonna be dealing with very small percentage of our overall revenue and to the point where it’s de minimis. And we’ve been very upfront communicating this process with our customers. They’re very aware exactly how we’re going through this.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. So if we look a couple more questions on this. Are you noticing anything as far as supply chain issues or anything along those lines as opposed to just the pure dollar amount of the tariffs? And then what type of pricing do you think you actually would need to offset the minimum exposure that you do have? Thanks.

Tom Saran, President of Products and Solutions, Resideo: So in terms of supply chain, we have not seen any disruption to it. And because we’re buying at fairly low level componentry and that we’re doing high level of conversions, our factories are high level conversion. That’s why we work with MCA compliant. We we have not seen disruption at this point at all. It’s I mean, you know, things could change, but as of now, we are not seeing any disruption.

In terms of the pricing that we would need to do, again, it is such a small portion of our sales. But those things that have been impacted, there’s two major parts to it. There is the rest of world, let’s say, which would be EU, Great Britain, Thailand, Taiwan, those miscellaneous products, some of that is coming from our factories that are offshore that they had a specialization and created something that we brought into The U. S, for instance, to the water. In that case, the price increases we’ve communicated have been approximately 6%.

But again, you’re dealing with a very small portion of our sales, very, very small. And we’ve communicated that to our customers, and they’ve been completely accepting it because it’s just such a small percentage of the overall. And then the second piece would be the products coming out of China. This is the one we’ve worked much more to try to bring products into our own production, so we can create greater conversion value. For those products that we’re not able to do that, we’re going to have to be adjusting pricing much more.

But again, you’re dealing with immaterial amounts of dollars or even percentages.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. Thank you. And Mike, maybe you could touch upon kind of similar conversations at ADI for tariffs and kind of what’s going on there to mitigate it? Yes, thanks.

Mike Cartlett, CFO, Resideo: Sure. ADI is mostly a distribution company. Over three quarters of what we sell is third party product, where we’re bringing it in and reselling it, mostly in the North America market with also a pretty big footprint over in EMEA. So as we think about the tariff impacts here, we’re looking about where do our third party suppliers provide those products, where do they source those products and then how do we think about the impacts we’re going to have. About 20% to 25% of what ADI sells, we believe is sourced out of China.

We look to where those third party products are sourced. It’s coming out of there. And we’re sort of dependent on what those third parties are going to do vis a vis price before we pass it along. So as of today, as we talk to our suppliers, less than a quarter of them have passed along significant price increases, and we continue to monitor that. As we absorb those price increases, we pass them along as does every other distributor.

So we’re not disadvantaged vis a vis other distributors, we all get the same impact from those suppliers. We all pass it along on a timely basis. We try to phase that in appropriately. So today, as we’re sitting here, we think there are price impacts of 5% to 10% based upon the amount of product that’s coming, primarily again out of China. There’s other areas as but primarily out of China and where we’ve been told that those prices will increase.

As we continue to monitor that, we continue to talk to our suppliers, we continue to talk to our customers about what’s coming. And I think everybody understands that not all of that will be passed through, but a significant part of it pass through as suppliers react as time goes by. Obviously, it’s a fluid and dynamic environment. We don’t want get too far ahead of ourselves as we think about other potential changes that might be out there. Can’t forecast what’s going happen, so we continue to monitor it and look closely at how we think about passing those pricing actions through.

But I think the really important call out is that as a distribution primarily a distribution company, everything we’re doing, it’s the same as everybody else is doing. So there’s no disadvantage or advantage really to any supplier. You’re really back to just core. Why are you going to succeed is back to your core operating principles, your core competitive advantages as you think about competitive environment.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. So in a classic distribution model, typically, what would happen is prices go up a dollar, the distribution company might do a dollar plus a margin, right? So the margin is 10%, you would then take to a dollar 10 price increase. Do you think that’s going to happen here similarly? Or do you think you might have to if there’s a dollar cost increase, you might not be able to protect your margin as aggressively as kind of in a normal environment where we see costs go up.

Mike Cartlett, CFO, Resideo: Yeah. I think what’s fair, what we believe is fair for our customers is to pass through the dollar impact, not the percentage impact. So if the price goes up a dollar or if our cost goes up a dollar, our intention is to raise our price a dollar, not raise it one point one dollars So we might see some margin rate degradation because of tariffs. Underneath that, we do believe that we’re going to see margin accretion growth, margin rate accretion from our organic activities, but that will probably be somewhat offset by this price activity because again, we think the fair thing to do is let’s protect our EBITDA, let’s protect our bottom line, but we’ll see some margin rate degradation around that as we pass that through. Like every distributor, in the very short term, there might be some bumps.

You’re never going to time this perfectly well. And so we’ve got inventory that we purchased at pre tariff pricing. We’re going to try to phase the pricing as appropriately to not overly take advantage of that. But obviously, we’re going to do our best to not be on the wrong side of that equation as we think about phasing of the price increases that are out there.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Understood. Okay. And then let’s talk about the fun stuff on ADI. Maybe help us understand like where this business grows, what are the end markets look like and then how much is commercial versus residential?

Mike Cartlett, CFO, Resideo: Yes. So ADI’s legacy historically was in the commercial security business, and that is still its sweet spot of where it operates. We are the significant provider there to the professionals that go into commercial establishments and are installing all the security cameras, access control of that vehicles in those establishments. That’s the sweet spot of Slayer. It’s probably where we live where we have the best competitive advantage.

Over years, we’ve been expanding that business to grow into the datacom area, the pro AV area, the residential AV area. And all those are continued growth opportunities for us as we look forward. We’re still three quarters plus on the commercial side, about 25% on the residential side. The residential side, primarily through the SnapAV acquisition, there was other activity as well, but primarily through SnapAV. And that part of the business really does operate at the high end of residential.

So if you think on the P and S side, on Tom’s business, we’re really broadly across all of residential. A thermostat goes in every house, right? A smoke detector goes in every house. Security can go very much broadly across a number of areas. The residential entertainment AV control areas that ADI, through the Snap acquisition operate in are very much at the higher end of the residential market.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. And then maybe also help us understand in ADI, what’s kind of the competitive of of ADI, you know, commercial, you know, professional installations, smart homes, you know, what sort of the the advantages here? And and then also talk about the the environment competitively speaking. Yeah.

Mike Cartlett, CFO, Resideo: Sure. I I think ADI’s single biggest advantage is operational excellence focused on a customer first ethos. So if Rob was here, was talking about business. You know, Rob and his team are extremely focused on flawless execution, delivering a great experience to the customer, providing the products they need on a timely basis with great information and putting the customer first all the time allows them to do that. It does provide that competitive advantage.

You think about the e commerce activities, how we think about the omnichannel solution, everything is there. It all starts with the customer. And putting the customer first all the time, I think is the single biggest reason that we’re competitively advantaged. Now, we’ve got 110 locations in The U. S.

And dozens of locations throughout the rest of the world. So we do have a great footprint that allows us to meet the needs of the customers. We have great activities on our exclusive brands. Over 20% of what we sell these days is our own branded product. And so we’ve got great products, not just great distribution, but also great products where we can innovate around those exclusive brands to bring solutions, to provide the complete suite of solutions to integrators where they need those products.

And so obviously, we’re primarily distributor, primarily third party product distribution, but we do look at our exclusive brands as another source of competitive advantage, where we understand the needs of the customer as well as anybody else because we’re talking to them every single day and we can then sort of deliver the best solutions to them.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. And then who are you competing within that space and how do you do versus them?

Mike Cartlett, CFO, Resideo: Yes, think, look on the distribution side, there’s a number of large distribution companies that are out there, all the normal players that we feel we are well positioned. There’s also regional distributors. It’s both national distributors, regional distributors, local distributors that are all servicing these same professionals and trying to meet their needs. I think again, systems, our operational execution, our focus on flawless execution allows us to meet and beat all those competitors as they’re we buy better than everybody or as well as everybody. But again, putting the customer first allows us to compete better than everybody else.

And then on the exclusive brand side, like everyone every category that we have an exclusive brand, there’s a different competitive set that we’re thinking about, whether it’s our Arachnos networking, whether it’s our Episode and Triad speakers, whether it’s our Control4 home automation system, each one of those is going have a different suite of product competitors that we’re thinking about how do we operate against them. But there’s nobody on the product side on the exclusive brands that we look at, say there’s a single competitor that we specifically worry about.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. Good. If anyone has any questions, please put it in the chat or you could email me at ian.zaffino@0pc0.com, and I’ll get your question answered. But, you know, as far as you know, if we could get a little bit deeper into ADI, you did the SnapOne acquisition. Maybe help us understand what you’ve learned recently.

Why did you do the deal? What are you seeing as far as growth opportunities and anything else you want to highlight on that business?

Mike Cartlett, CFO, Resideo: Sure. Listen, we’re thrilled with that acquisition. I think, you know, Ian, I actually came from the SnapOne side of the business. You know, as we were going through diligence, I was fortunate enough to meet the Resideo team, the ABI team, Resideo team, Tom, Rob, Jay, and was fortunate enough that Tony Trunzo, their CFO, said, hey, I’m thinking about the next thing and let’s talk about whether you want to stick around. So it’s been a really great experience for me, it’s been great to see how well the two companies at ADI and Snap have come together.

We originally met Rob back in 2017. It was even before the spin off from Honeywell. Rob was running ADI at the time. We were going through a recapitalization at Snap, and we met Rob and we walked out of the meeting with Rob, said we really should put these two companies together at some point in our lives. It took seven or eight years to get it done, but it was always something that we thought made a lot of sense.

If you took ADI’s focus on the commercial professional integrator from a more brick and mortar standpoint, Snap had been a pure e commerce business focused on the residential side. But Snap was growing into omnichannel. ADI was growing and focusing more on e commerce omnichannel. We were looking to get in professional. ADI was looking to get in residential.

It really was a really great match. And so as we put the companies together over the last six to nine months now, it’s come together really well. Rob’s team is a combination of legacy ADI and Snap folks. It’s one organization. It’s one sales team.

We still have separate go to market endpoints. There’s still Snap locations and ADI locations. It’ll take a year or two more from now to really bring the systems together and really fully integrate all the operations. But organizationally, go to market, exclusive brands development, all those things are going really, really well. We’re ahead of our plan on timing of synergy.

We feel great about the amount of synergy that we’re generating. But more importantly, we think that we’re delivering to the customers the experience that we really felt we could by bringing these great organizations together.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. And then if I could just squeeze in one more in ADI, and and then we’ll move on. On ADI, what are you seeing as far as how go to market has changed, and how you’re interacting with your customers? Right? I I think that things are becoming more digital.

There’s more ecommerce. There’s, you know, more analytics. Maybe help us understand, like, what that does to ADS business, what it does to your contractor relationships, and any other type of color you could add.

Mike Cartlett, CFO, Resideo: Well, you’re spot on. I mean, ecommerce and and the omnichannel experience is more and more important. People are more and more buying through an online portal, but that doesn’t mitigate the need for the local stores for that local experience. Much of the sales activity still happens at local. Much much of the education, the training, learning about products all happens at those local stores that are out there.

And so we think it’s really the omnichannel solution. Solution. We’ve invested heavily into the e commerce solutions that are out there, which is going really well. Think in Q1, I’m going to quote a number here that I think is right. I think Rob said yesterday, 15% growth at our e commerce business in Q1 year over year.

That’s on an organic basis. That’s not talking about Snap on acquisition. So it’s more and more important. But I would not think about it as a shift purely to e commerce. It really is about that omnichannel experience, which changes the relationship.

And think we’re really well positioned and competitively advantaged on that given the significant investments we’ve made. And even adding Snap into that Snap’s legacy was as an e commerce company. And so bringing those two things together really brings some great expertise to bear on how to really develop those solutions.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. And then, as we look at the M and A environment, what does it look like? Any areas that you feel like you need to bulk up or to bolt on? Yeah. Just, broadly speaking.

Mike Cartlett, CFO, Resideo: Yeah. I’ll let Tom talk about some of the PNS activity. I think broadly, listen, our our capital allocation plan is first invest in the business that we have. Two, let’s get delevered. We obviously have a bunch of we added some leverage as we did the Snap acquisition.

But we think there’s a number of M and A opportunities that are out there that allow geographic expansion for ADI, that allow for us to find more exclusive brand products that might make sense to add to the portfolio, that allow us to expand our customer reach beyond those core residential AV and professional security commercial integrators that are there. So we’re continually looking for those. But quite frankly, at ADI, we’re about halfway through the bulk of the big digest the Snap and ADI acquisition. There’ll be years of tail on that on the local side and bringing distribution centers together. But we’re well through it.

But until we’re very comfortable, we’ve done that. I doubt there’d be a big ADI acquisitions. We’re very, very comfortable there. If the right opportunity is there, we’ll certainly look at it. Tom, obviously, there’s a number of opportunities on the product side to think about bolstering the product portfolio.

Tom Saran, President of Products and Solutions, Resideo: That’s differentiated that provides comfort protections and savings to our customers related to the control sensing in the home, we would be interested in if it’s complementary. You know? But one of the key things that we want to stay focused on is the investment in our products to create those differentiated solutions. A key piece of what we’re doing is driving scale. When you look at the thermostat business, our scale relative to our competition is significant.

Same thing when you look at smoke and safety detection. And in the markets we serve, we have driven to make sure we have scale and making sure now more so that we’re leveraging that type of competitive position. So we’ll look at those companies, but right now, the first priority is investing in the products and our product lines to create a competitive advantage.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. And then more to that point, how are you thinking about now capital allocation priorities?

Mike Cartlett, CFO, Resideo: Again, as I said, I think our primary capital allocation is we think about cash and we’ll generate $375,000,000 of free cash flow this year or cash flow from operations this year, is first to invest in the business. As Tom said, first thing that both the ADI and at P and S, let’s make sure we’ve got great product innovation, great product development, great customer first solutions that we’re bringing out there. We think deleveraging down, we’ve been very clear that we’re going to get back below 2x leverage. If we can see a path getting below 2x leverage in the near term, we’ll then think about other types of use of capital, whether that is on the M and A side, whether it’s return to shareholders. I think we’ve proven with both the FirstLord acquisition a number of years ago, the Snap acquisition that we did, we’re focused we’re looking at things that are needle moving.

We’re focused on things that we have a very high level of confidence with a lot of synergy that really add a lot of value and create shareholder value as we think about those going forward. So we’ve got a high bar for what we do from an M and A standpoint, but we do look at opportunities that are out there.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. And then, I know it’s been deemphasized recently or less talked about, but maybe can you talk about your ESG efforts and your focus and maybe energy efficiency kind of comments?

Mike Cartlett, CFO, Resideo: Tom, wanna talk about the energy efficiency piece of our product portfolio first, and we can talk about just sort of overall.

Tom Saran, President of Products and Solutions, Resideo: Yeah. It’s a drive. So in most of the market, especially in OEM, improving the combustion and the conversion, electrification, all of those are major thrusts of the industry, you know, whether it’s including what we had recently in most of the industry, a shift in the more greenhouse benign gases. So there’s a shift in the gas. It was r four ten a to r 32 greenhouse, more beneficial or less offensive.

There was shift there. As we look at combustion systems, we’re working on more efficient combustion systems through dampering systems, the Venturi valves, how we’re able to kinda get the most. And we are seeing, you know, still the electrification and the heat pump and how that’s being utilized in various markets, and it’s continually evolving. And we participate in all those markets.

Mike Cartlett, CFO, Resideo: I think just overall from a corporate standpoint at ADI, I think our CEO, Jay, is his mantra has always been do the right thing. And I don’t think that changes. I think despite all the noise around some of ESG activities, I think as a company, do the right thing continues to be our mantra. I think on the environmental side, I think while there’s and sustainability, while there’s lots of changes that are going on out there, where there’s economic benefit, I think there will still be opportunities for us to continue to explore and participate in those. And I think the focus is changing from compliance to where there really is benefit, as Tom talked about.

There are areas around ESG that really are continually beneficial to our customers, and we’re continuing to focus to invest in those areas.

Tom Saran, President of Products and Solutions, Resideo: Yes. I mean, when you think about what makes a great thermostat, one of those things is not only the comfort, but trying to provide that comfort as efficiently as you can. That’s a key part of what the thermostat and what we’re trying to do to to drive, not only balancing, driving, improving, and maximizing comfort, but maximizing savings. And that’s what you’ve seen. That’s a potential resource.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Okay. Perfect. We have, like, one minute left. So anything you wanna give us as far as how we should be thinking about 2025 or just any other kind of comments that you’d like to make for investors to get a little bit more understanding of the business?

Mike Cartlett, CFO, Resideo: No, listen, Lee, I think we announced our earnings last night. We were thrilled with our first quarter performance despite all the uncertainty that’s out there. If the tariffs weren’t making so much noise, I think we’d feel well, we still feel great about what we can control. And the execution that Tom is delivering delivering from a new product development initiative standpoint, continuing to bring those products to market, continue to bring differentiated products out there. We feel great.

ADIs continue to execute, continuing to enjoy the benefits of bringing Snap and ADI together. So outside of the tariff noise, we feel great about the business. And listen, we’ll control what we can control in tariffs. It might change tomorrow. We know what’s out there today.

Today, we’re very, very well positioned. As things continue to evolve, we’ll continue to talk to our customers, continue to talk to our suppliers and make sure that we are doing all we can to mitigate any impacts. But as we sit here today, we feel really good about our position vis a vis the uncertainty of the tariff market that’s out there.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Perfect. Alright, guys. We’re, out of time, and I know you guys have a big schedule of meetings today, so I’ll let you guys get to that. Thank you very much for for attending and doing this presentation.

Tom Saran, President of Products and Solutions, Resideo: Thanks for having us.

Ian Zaffino, Equity Research Analyst, Oppenheimer: Take care,

Mike Cartlett, CFO, Resideo: Appreciate it.

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