Resideo Technologies, Inc.

Ladies and gentlemen, at this time, I would like to welcome everyone to the Residio Technologies second quarter 2023 earnings conference call. Today's call is being recorded. All participants will be in a listen-only mode until the formal question and answer portion of the call. At that time, if you would like to ask a question, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. It is now my pleasure to turn today's call over to Mr. Jason Willey, Vice President of Investor Relations. Mr. Willey, you may now begin.

Good afternoon, everyone, and thank you for joining us for Resideo's second quarter 2023 earnings call. On today's call will be Jay Geldmacher, Resideo's chief executive officer, and Tony Trunzo, our chief financial officer. A copy of our earnings release and related presentation materials are available on the investor relations page of our website at investors.resideo.com. We would like to remind you that this afternoon's presentation contains forward-looking statements. Statements other than historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Residio's filings with the Securities and Exchange Commission. The company assumes no obligation to update any such forward-looking statements. We identify the principal risks and uncertainties that affect our performance in our annual report on Form 10-K and other SEC filings. With that, I will turn the call over to Jay.

Thank you, Jason, and good afternoon, everyone. We reported Q2 revenue and operating profit within our original range despite the ongoing challenging residential market. We continue to make progress on important long-term value drivers, and our pace of new product introductions is accelerating. In the first half of this year, we introduced new products enhancing our video capabilities and security, expanding our connected water leak portfolio and growing our presence in the European heat pump market. We are continuing to reduce our cost structure and have further actions identified for the second half of 2023 that combined with our Q4 2022 program are expected to generate at least 115 million of annualized savings. Cash flow improves substantially in Q2 and we expect continued improvements as 2023 progresses. Soft end market demand and excess channel inventory levels in a number of our markets impacted second quarter results, and we expect these headwinds to continue in the second half of 2023. In response to slower demand, we are taking additional actions to cut costs with a focus on structural improvements that are designed to create leverage when market conditions improve. At the same time, we are progressing on additional portfolio and factory optimization actions within products and solutions. I look forward to sharing more details on several of these actions before year end. We also announced today that our board of directors has approved a 150 million share repurchase authorization. Both management and the board see substantial opportunity for value creation at Resideo through continued operational transformation and the ability to deliver strong and consistent cash generation. We do not believe our current share price reflects these dynamics or our unique relationship with the pro and the long-term opportunity to leverage this across the markets we serve. We see share repurchase as an important part of a balanced capital allocation plan that includes organic and inorganic investment in the business. Our current liquidity position is strong and our current leverage level is consistent with our long-term target. Turning to the businesses, products and solutions general market conditions remain challenging during the second quarter with slower retail traffic continued excess inventory in our HVAC distribution channel, and reduced new and existing home sales impacted by higher interest rates. These dynamics negatively impact both volumes and mix. Demand in the HVAC market was further impacted by cool spring weather across much of the U.S. Our price realization remains strong, And while slowing demand likely means incremental price opportunity will be more limited, to date we have a good success at holding price across most categories. While U.S. residential new construction activity is down double digits compared with 2022, we are adding content in this important market. In Q2, our average product dollar content for new home grew by over 15% year over year, driven by increased penetration of our smoke and CO detector portfolio into the home builder channel. This is a great example of execution on the value creation opportunities of bringing First Alert under the residual umbrella. First Alert had a solid Q2 with total sales up sequentially year over year. We continue to see progress on supply chain and sourcing fronts with much lower broker buy activity compared to last year. We also realized 13 million of year over year freight savings and have aggressively managed our variable labor costs at our factories. Our new product introductions are going well. We have more in the pipeline. The first alert video doorbell and first alert branded Wi-Fi water leak detection and shut off valve have established themselves in the market and garnered positive initial market feedback. In the second half, our plans include the introduction of a new outdoor security camera, adding to our first alert water leak detection offering, and continuing our work with a number of heat pump OEMs. Additionally, we'll be launching new first alert smoke and fire alarm products compliant with the upcoming UL 8th edition release. ADI's second quarter revenue was essentially flat compared with Q2 2022. ADI continues to execute on expanded e-commerce and touchless sales. ADI saw continued softness in residential AV and security categories, while commercial categories showed more stability, led by continued strong growth in access control. With that, I will turn the call over to Tony to discuss second quarter performance and 2023 outlook in more detail.