RESIDEO TECHNOLOGIES, INC. — Call Transcript 2026

Good afternoon, everyone. Thank you very much for joining us at the TMC Conference, Resideo Technologies today. My name is Tomohiko Sano, Mid-Cap Industrials Analyst at JPMorgan, and I will be your moderator for these sessions. We're honored to welcome Mike Carlet, CFO, and Chris Lee, Global Head of Strategic Finance from Resideo, for a fireside chat about the company's business strategies and future outlook. Mike, Chris, thank you for joining us. Thanks for having us. Thank you. Appreciate you. To start, I imagine there may be some in the audience who are not yet familiar with the Resideo. Mike, Chris, could you briefly share the history of the Resideo, your core business lines, and defining elements of your company culture, please? Sure, happy to. Resideo is a company that was originally spun out of Honeywell about eight or nine years ago in 2018, and today we operate as a two-segment business. We call one segment our P&S, Products and Solutions business, and that business is focused on developing and manufacturing products that are involved in the residential control and sensing. If the home is a system of systems, of, you know, your water system, your electrical system, your HVAC system. We are focused on developing products that control those systems, that sense those systems, and make them more enjoyable, more affordable, more comfortable, more safe for the homeowner. It's our primary focus on the product side. The other side of the business, our ADI distribution business, is a distribution business focused on the light commercial security, low voltage, and high-end residential AV distribution space, where we're selling to over 100,000 professional integrators that are installing those products into both people's homes and into all kinds of different commercial establishments. The business has operated in that way since it was spun off from Honeywell, but recently, last July, we announced that we're going to actually separate the business through a tax-free spin-off, separate it into two standalone companies. You know, when Honeywell spun this off, there were some reasons that it made sense to do so under common ownership. Really, for a number of years, we've said it makes more sense for these businesses to operate on a standalone basis. They have different go-to markets. They have different business models. One's distribution, one's product manufacturing. They have different capital allocation strategies, capital needs of the business. We've always said it makes sense to separate them. We had a bit of an overhang from a related party transaction from Honeywell that was a result of the spin that we couldn't separate them until that was settled. We settled that last summer. We've now been working for the last, you know, nine months or so on getting the businesses separated. We just gave some updated information that we're going to effectuate that separation sometime between the middle of Q3 and the middle of Q4. Given the time frame around it's either going to be the middle of Q3 or the middle of Q4. You know, it's hard to do those things, end of August, timing of financial statements. Those are the two windows that are out there. Everything's green. We feel pretty good about doing it sooner rather than later, but we need to make sure all the IT systems are set up, all the other things that allow both businesses to be successful are complete and done. We'll continue to move that forward. We have announced that our investor days will be in mid-July. Each company will have their own standalone investor day, where we'll talk about the businesses on a standalone basis at that point. Thank you, Mike. Then you're becoming CFO for ADI side, right? I am. You know, I originally joined Resideo when the ADI side of the business bought my previous company, Snap One. It made a lot of sense as we went through the separation, as we talked about how to set the teams up to make sure each business had the right folks on each side. Made a lot of sense for me to stay with ADI to help them be a separate standalone public company. Chris Lee, who runs Investor Relations for us, is actually gonna stay on the P&S side. We'll have good continuity on both sides. We'll be folks able to tell the story. In fact, we'll probably let Chris do most of the talking about the product side of the business today. He could do both sides. We can both do both sides, but we figure we'll start that process now. We are, as we announced, I think, last Monday, we filed our Form 10. We filed some other information about the separation, and we said that we are in the midst of recruiting for a CFO for the P&S business as well. Right. Thank you very much. Let's dive into the business, starting from Products and Solutions, P&S segments. In the recent earnings call, last week, you mentioned the demand in the retail and OEM channels was strong. How do you view the current state and outlook for the housing and the remodeling markets for the P&S business, please? Yeah. Thanks, Tomo. I think when we look at the macro environment, it's, with the Q1 print, the view is pretty much the same as we had at the beginning of the year when we set the annual guide, which is, the residential market is still relatively depressed. It's probably clicking along at a very low-single digit rate. I think it's for all the known and spoken reasons in the marketplace for the last several years. It's interest rate sensitive, it's availability sensitive, and I think there's a number of structural things that could provide tailwind in the future, as rates improve the market and confidence becomes more constructive. There's more, you know, evidence of home building or the resale of existing homes. Today, you know, we would probably characterize that we're more so in a repair market versus a repair and remodel market. I think when we look at our preference and bias, you know, certainly, the products and solutions side or the RemainCo Resideo prefers a remodel market. It, it provides an opportunity for greater sale, greater opportunity for the professional to do work. I think in the current repair market, it still demonstrates Resideo's importance to the end user because, you know, we make best-of-breed products that are critical, as Mike said, to the operation of your home. You know, it goes back to the mission statement that Mike talked about, which is, again, to reiterate, you know, we make your lives more comfortable, more safe and secure, and more cost-effective. When you think about you're sitting in the Northeast this past winter, and it's awfully cold, and your thermostat breaks down, you go out and buy a new Honeywell Home product. Right. Because you know it works. I think, you know, as we look forward, you know, and, you know, given some of the things we've talked about over the last six to eight quarters about the self-help, the things we've been improving upon, we feel well-positioned to take advantage of an improving macro if and when. Thank you. I think it's last week you also talk about the market share gains in safety products and strong adaptations of the new offerings. What do you see as the Resideo's key competitive advantages in the P&S segment, versus major peers? I think, you know, just to dovetail on something I mentioned before, we believe in manufacturing and selling best-of-breed product that, you know, leverages our long, you know, over a century of heritage and domain expertise, and continuously selling to our moat, which are the professionals. You know, we think that is a virtuous flywheel that we can continue to perpetuate and build upon because, you know, we have an operating scale advantage. We have key brands that are very well known, like Honeywell Home and First Alert. We also have a brand that's very well known in the professional community called BRK, and all of those brands are synonymous with quality. I think we wanna continue to, you know, live up to that heritage that we have around quality, around product excellence, and frankly, around innovation, which is core to our go-forward strategy. I think relative to the competitive landscape, I, you know, we believe we have market share leading positions in a number of the categories we play in, and I think that's buttressed by the amount of volume that we manufacture, you know, on our very large operating footprint. Thank you. Then if you could touch on the mega trends or tailwinds, the portions that you mention about for the P&S segment for the medium long term, please? Yeah. I think when we look, you know, at the landscape, the residential landscape specifically, you know, we believe there is an under-housing that's been, you know, pinned by the lack of new construction. We also think that when rates come down, that will help to create more velocity in the sale of existing homes, both of which, you know, we would be exposed to. I think if you were to ask us, you know, where our greatest exposure is, it's more so to the R&R or the Repair and Remodel part of the marketplace versus residential new construction. I would tell you probably over 50% of our exposure, we believe, is to R&R. When we look at where we play, certainly we have a presence not only in R&R and in residential new construction, but also think about the replacement cycle. You know, many of our products have, you know, a stated lifetime. You know, a smoke and carbon monoxide alarm, I think, has an eight-year life on average. You know, that's probably something that you really don't wanna go too far beyond from a, a lifetime standpoint. I also think we're able to penetrate new markets with our products. For example, we called out the MRO market, the Maintenance and Repair market recently, which has a lot of appeal and efficacy to us because they serve multi-family units by and large, and there's a lot of use cases for us in those types of, you know, large, you know, dense dwellings. Thank you. Then, shifting gear to margins and pricing and costs. Your P&S segment has delivered 12 consecutive quarters of gross margin expansions. If you could talk about the how much of that is due to pricing power versus mix, and if you could talk about the sustainabilities for the next couple of quarters, please? Yeah, no, that's a great question. You know, I think we have a really exciting part of the story here. You know, I think with what I painted before, you know, we've been able to execute, you know, in a low- to mid-single digit, you know, revenue growth profile with an improving margin expansion, which has been borne, you know, fundamentally on structural operating efficiencies that we've been gaining. You know, when we, when Mike gave the overview of when we spun out of Resideo, I think it's underappreciated that the products and solutions segment were product lines in disparate parts of Honeywell's businesses when it was contributed. When it was contributed, we had a lot of manufacturing and supply chain sprawl that we had to work through, and that's some of the benefits you're seeing historically in the 12 consecutive quarters of expansion. I think going forward, you know, there's still more room to, you know, to be had. We're, you know, we think we're in the middle innings of that ballgame, where we can continue to extract operating efficiencies from, you know, for example, you know, looking at underutilized factories or looking at ways we can optimize the supply chain further. With the new product introduction that I mentioned earlier, we think there is some pricing power because, you know, as I mentioned, we believe our products are best of breed. We think they're differentiated relative to the competition, you know, we should be able to earn some price for that. Also think about, you know, the volume that we're manufacturing, which is, you know, large. When you're manufacturing that amount of throughput across a healthier manufacturing and supply chain footprint, that's actually margin beneficial. We're really excited about all that because, you know, I think we have a lot of things planned from a new product introduction standpoint. Thank you. You just talk about the supply chains and manufacturing. If you could talk about the strengths and risks of your Mexico-centric manufacturing footprints, and how are you investing in automations or diversification? I think one thing to call out, Tomo, as you rightfully did, is our philosophy from a manufacturing standpoint is nearshoring. For all the products that we sell in North America, we manufacture in Mexico. When we look at other parts of the world, we have a similar setup. I think because of the, you know, the vast majority of our revenues are generated from North America, puts a lot of focus on our Mexican operations. You know, currently we're a beneficiary of the exemptions under USMCA. Looks like, you know, right now we continue to be a beneficiary. Who knows what tomorrow will bring, right? You know, I think when we look at our flexibility, and this is where our scale, our global scale from a manufacturing standpoint is to our advantage. We have a lot of things in our playbook that could, you know, you know, move some of the manufacturing or, you know, look at other alternative ways we can manufacture the product that may be if Mexico should, you know, that environment change. You know, we're not banking on that. We're continuing to make investments down in Mexico in terms of labor, in terms of automation of the manufacturing facility, you know, to increase that output. You know, I, we're very excited about what we're doing there. We'll talk more about it at our Investor Day. Thank you. Shifting gear to innovations and new products, and with over 14 million connected customers via Honeywell Home. How do you plan to further monetize this base, and what role do software subscriptions and revenues play out? Yeah, I think, it will have a role in the future, which, you know, we'll likely lean into more so in the future. I think today what should be appreciated is we already have an existing base of recurring monthly revenue as part of our security business, and what I'm referring to is the backend monitoring system that, or the backend monitoring service we offer on a monthly basis to our customers. That's called AlarmNet. That's basically, you know, if the signal gets tripped on the intrusion security, the signal goes to a clearing house which we control, and then we route that to the first responder. We think in our future, aligned with our new product introduction strategy, we intend to produce more and more connected product. I think what's interesting and what we'll lean into more at our investor day is enabling an ecosystem that has more connected product that can interop not only with each other in our ecosystem, but also with third-party product that is in the ecosystem enabled by our communication protocol and supported by a software layer. Again, we'll talk more about that at the investor day, but we're pretty excited about what those opportunities can bring. Thank you, Chris. I would pause here if anyone have questions on P&S. We're good? All right. Thank you, Chris. Moving to ADI. Thank you for starting, Mike. I enjoyed listening to Chris for once. That was good. All right. Thank you. That's one, yeah. I'm glad you can, you know, save your vocal cords. Yeah. You want a sip of water before you go? No, I'm good. Thank you. Okay. Then Mike, if you could talk about the ADI's market environment, and I think it's, you talk about the sequential growth in security product categories, and then some have rebound in video surveillance. How do you view the current state and outlook of the commercial securities and AV markets? Yeah. ADI really serves in two primary markets with growth in some adjacent markets. Again, that commercial security market is the legacy ADI business where we've grown tremendously, over the last, you know, decade. With the Snap acquisition, that was much more the residential AV. I think those are two different markets, right? Commercial security continues to be a very strong market. There's lots of innovation there. If you think about both product innovation, the impact of AI on surveillance and security and video, putting those detection technologies, those identification technologies. You know, when somebody walks into a bank, how do you identify them? How do you make sure you're keeping track of security situations? Like, that is an emerging, continuing evolution of technology. We will continue to be playing in that, and our integrators that install those products will continue to play in it. That is a strong market, continues to be a strong market that we think will continue to grow at very healthy levels. Video's certainly a big part of that. You know, the whole surveillance, this whole security business has changed to surveillance. And detection around that rather than break entry into lots of other things. Incredibly important part of the business. The residential AV business, you know, that we bought from Snap One is about 20% of our business. Much more challenged. I think the big difference between the P&S business that Chris was talking about that is very residential-focused and this residential AV piece at the high end is the residential P&S part of the business is mostly non-discretionary purchases. You're going to have a smoke detector. You're going to have carbon monoxide. You're going to have a thermostat. You're going to have a hot water heater where our ignition system's gonna be on it, and most people, you know, choose to have a security system. They don't view it as a discretionary purchase. I think at the high-end residential AV, there's a lot more discretion in there, while we could all talk about the wealthy folks in this world and their resilience, and their ability to continue to make discretionary purchases, I think when it comes down to the piece we're at, when you tie it back to housing starts and the resale activity, people aren't waking up one day and saying, hey, I wanna go put speakers in my ceiling in the kitchen. That's usually tied to an event. Those events are happening less and less. That market's been a bit more challenged, but I think overall we feel really good about the overall markets that we participate in. We believe that the housing piece that the side we serve will come back, and that will also benefit us. I think in the, you know, the more recency, we probably underperformed the market a little bit given some of the challenges we've talked about with our ERP implementation. We feel really good about the activities we have in place to offset that. From a growth market standpoint, those are the core markets. In the Pro AV side of the business and the Datacom side of the business, those are continuing to grow at healthy rates as well. Those are markets that we participate in. We've got good beachheads in. We have, you know, businesses that are, you know, in the nine figures, but they're still a relatively small part of the business, and we think we have lots of opportunity to continue to grow in those businesses, and we think that both those areas are ones that we'll look to continue to see drive incremental growth. Thank you, Mike. If you could talk about competitive environment for ADI. You emphasized ADI's operational stabilities and top-tier customer service recognitions. What is the structural advantage of the ADI's 200+ locations, omnichannel model, and how does the Snap One integration strengthens your moat? Yeah, definitely. First, we have too many locations, so I'll start there and say that from the Snap One acquisition, we have about 30, 35 markets right now in the U.S. where we have both an ADI store and a Snap store, and you really don't need both. You got to make sure you're in the right spot, but our markets are not big enough where we're not McDonald's. You don't need one on every corner. We're not Starbucks. We do think we have the opportunity to rationalize that footprint over the coming months and over the next 12 months-18 months, I think you'll see us get the store count down a bit, more closely resembling from a store count standpoint where ADI was before the Snap acquisition. There'll be a few more incremental locations, but pretty close to that footprint. That will drive a significant amount of cost savings without impacting the customer experience. With that, you know, ADI is very much an omnichannel business. Both our it's not just our store footprint. It's the omnichannel aspect. We talk every quarter about how much our e-commerce business grew. Even when we talk about e-commerce, it's not e-commerce on a standalone basis. It really is the ability for these 100,000 integrators to come and shop with us how they want to, get the product where they want to. Shop online, pick up in store. In a given week, I don't remember the exact number, so Rob will yell at me because I'll probably get this wrong, but it's north of 80%, and might be north of 90% of our customers are interacting with us online. They're coming there, and they're researching. They're learning. They might be shopping. They might be buying, or they might just learn there, then come into the store then. Buy online, pick up in store, all those things are going on. We really view that ecosystem of omnichannel experience as really the differentiated moat that ADI has from a go-to-market standpoint, we execute better than anybody else in the industry. When I joined the ADI, you know, when they bought my company Snap a couple years ago, when I watched what they did, we always knew this from afar. Being inside the house and just seeing how well they execute, how customer-focused they are, how much they're ensuring that the customer experience is just absolutely great is just impressive to watch. You put those things together, and we think we've got a great protective moat. We've got competitors out there that are trying to do the same things, and some are great competitors as well, but we think we outperform them every single time it comes down to execution. Thank you. You just talk about the e-commerce. The revenue was up low teens year-over-year. Exclusive brands growing over the next three to five years. Which product categories do you see as the biggest share of wallet gainers within your integrator customer base? As we continue to grow, you know, we love the e-commerce business. We think it's easier for our customers, you know, when they buy online, and we've seen a shift. I think this industry has shifted. We all talk about as consumers e-commerce is, like, old, like, you know, Amazon's been around a little while. I think in this industry that purchasing behavior of shifting from either walking into the store or sending a PO in, it really has shifted more in the last three to five years than historically before that, and we do think that's a really important continued piece of the business that will continue to drive that growth. Now again, we don't think about just as e-commerce. It really is the digital experience and the overall omnichannel growth, but that will continue to be a significant part of growth as we look at it. The overall exclusive brands look, exclusive brands are great. ADI had exclusive brands before the Snap acquisition. They were more in the basic camp I would put in, things that weren't overly complex. I think once we brought ADI and Snap together and we saw the opportunity of some of the things Snap was doing on the residential side, on the more value-enhancing side of the business where you can add a software layer to some products or add some services and support around the products, we think we can do that. What we're focused on right now is continuing to have that product innovation deliver those products within the residential AV market, but how do we leverage that expertise that we have and bring it over to that commercial security side of the business? We wanna do that in a way where we're filling industry gaps, right? We are and will continue to be a business that is primarily focused on distributing other folks' product, our third-party products. Today, you know, sub 20% of our business is our exclusive brands business. In the future, we see that growing to low 20%. You know, we're not talking about shifting this to being 50% exclusive brands or something, but we do think there's opportunities where the market is not being served by the existing product companies, that we could incrementally grow our exclusive brands into the commercial space, continuing to identify the areas in the residential space to do it. There's a bunch of opportunities there. We'll start with one, the WattBox product that we have, that we built for the residential market, has a lot of relevance into the commercial market. It's, you know, IP-enabled power that allows you to remotely access, allows the integrator to remotely access their job, manage the power situation, reset things remotely. There's a lot of things you can do there. The, the lift to get that product commercial ready is not huge. Now, you have to do things like have MFA. Like, you don't need Multi-Factor Authentication in a residential home, but you probably do once you put that in a commercial environment. There are tweaks to the products we need to make, but we think that's a really good one, an easy one to continue that, make that move, and there's other ones as well that we'll continue to look at. Again, it's being done in a way that we don't wanna start competing with our great suppliers. We wanna find ways that we can fill in the gaps where they're maybe not meeting the needs that are out there. Thank you. Then let's move on the margin side. Mike, if you could talk about the margins for ADI. What are the main delivers for margin expansion at ADI? You mentioned the business transformation actions and margin expansion targets last week, and how do you like Snap One integration, digitalizations, exclusive brands mix contributed to the future probabilities? Yep. Profitability, sorry. If you go back and look at Snap and ADI prior to the acquisition, I think pro forma, you know, if you added Snap and ADI together, we were running somewhere around a 7% EBITDA margin. We've actually stepped back from that a little bit over the last couple years. We've seen a little bit of underperformance on the residential AV side of the business from where we expected, and at the same time, at the acquisition, we expected to be making some investments. We've grown our SG&A piece of the business at a rate that's faster than what the top line revenue growth has been. As we're sitting here today, you know, the team said, okay, we haven't had quite the revenue growth we expected, therefore we have to fix the cost side of the business a little bit. I think the very first thing that we need to do, and are doing, and will do this year, is just go rightsize the cost base a little bit. Rob and his team are out there today. They've identified tens of millions of dollars of cost saving opportunities that will impact tens of millions of dollars in year. Again, on a full year basis, that will be even more than that. That is going back and identifying those areas that either we've invested a little bit at a rate that's not supported by the growth of the business, or continued synergy and integration. You know, again, we talked about the geographic footprint, rationalizing that. That's all in there. We feel really good that the first thing we're going to do to drive EBITDA expansion is get back to where we were and a little bit above that by just getting the cost back to right size in light of where the revenue has performed over the last couple years. That's one. Two, you know, we think we're in really good position to continue to grow that revenue. Last half of last year was tough for ADI. You know, we put this once in a generation ERP system in place. It went well, right? I think from a technology standpoint, you know, it was a B+. Like, the technology all worked. Like, changing things that people have worked on for, you know, decades, it's tough. I, you know, I started in public accounting in 1989. I remember, you know, Ernst & Whinney, where I started, was a Lotus shop, Arthur Young was a Mac Excel shop, E&Y merged right when I started, all the E people got forced into the Y side and became an Excel shop, and they took the backslash away. Again, that was painful. That's what's been going on in our stores, right, is that sort of transition from a system that people know how to use. It slowed down things at the stores. When it slowed down things at the stores, we had a customer that we had, you know, 90% of their wallet share. They went down the road a couple times, now we still have that customer. We've lost no customers. I'm sure we lost a couple, in total, we've lost no customers. We have lost a little bit of wallet share with some customers who have now spread their spend a little bit. We've got a lot of actions in place to go back and reclaim that lost share. We're doing those right now. Again, Rob and his team very focused on executing against that in the back half of this year. We feel really good about those things. On top of that, you know, this, the impact of that depression on revenue last year, we're lapping some pretty easy comps in the second half of this year. All that, as you get revenue back to where it should be, helps the margin profile as well. Those are all the short-term things. Just go get them done right now. If you think about our guide for the year, that's all baked. Not totally baked, at least parts of it are baked into the guide. Over the longer term model, once we get that fixed, it really is about those couple things that really drive the scale and the leverage. One, you know, exclusive brands have margins that are 2x-2.5x greater than our exclusive, our third party products. Like, to the extent we are able to tweak the percentage of sales up on that area, identify areas that we can bring those products to market, drive incremental growth, in those areas, that is very much, accretive to the bottom line from a margin perspective, a margin percentage. E-commerce, as we talked about, just is a higher margin business. It's easier for our customers. It makes us a little bit more money, not because we're charging more, just because at the end of the day, it's a more efficient and effective way of doing business, so that drives a little bit of margin down to the bottom line as well. We're gonna continue to look for other opportunities from the cost standpoint to identify things to do. Thank you. One other thing to add, which might be relevant and interesting to the audience is, you know, in the current environment, there's a lot of questions for everybody around inflationary cost pressures. Yes. You know, I think, you know, let's just address this now 'cause it really covers both ADI and P&S, which is we've told, you know, the public and our customers that we're raising prices in this quarter. When we look at the impact in the second half of the year, we believe those price increases will, you know, cover or more than cover the inflationary cost pressure. I think however, in the second quarter because we are implementing those increases now, there's gonna be a gap in when they attach, and as a result there'll be a little bit of leakage that will impact our bottom line. However, that leakage, as we talked about on the earnings call last week, is immaterial to the total business. Okay? I think it's important for people to make sure they understand that, because there's, you know, a lot of questions in general about fuel, about commodity costs, and we've been very thoughtful and proactive around not only how we cover it this year, but we're also thinking about next year already. Right. Thank you, Chris. The last question's from Mike, ADI. Do you plan to pursue like a further M&A like Snap One? What does the ideal target profile like look like, if any? Yeah. look, the Snap One acquisition is a once in a lifetime, maybe not once in a lifetime, but you know, those sort of transformational things you've got to have such a high level of confidence and underwritability, where you see that much synergy in a transaction. You know, we talked about putting ADI and Snap One together for years. We met Rob, I was on the Snap One side, we met Rob, I think it was 2017, might've been before that. Said, we should put these two businesses together. It took, you know, seven to eight years to get that done, but made a ton of sense. I think those kind of things, you know, they come along very infrequently. That is, we're not planning for those. We're not out there looking, saying, we have to do it. I think the M&A that we look at on the ADI side is very much driven by as we think about those growth markets of Pro AV, of datacom, where we don't have all the customers. In the commercial security space, we have all the customers. In the high-end residential AV space, we have all the customers, or at least all the customers that we're gonna get. We can get incremental, but there's no big customer base that we haven't attacked. On those other growth areas, there's a lot of customers out there we don't have. If we can find bolt-on acquisitions, things that make sense, that bring a customer base that we don't have that we could expose to that great execution at ADI, bring them into our ecosystem where we serve the customer really, really well, those are the kind of things we would do. I think similarly at P&S. While we're not looking for customers, because again, we're selling through distribution, we have most of the customers we'd have, if you think about the direct customer being the distributor, the big box, whoever it is we're selling through. What we're thinking about there is where are the adjacent products? Where we're in a category, we're in HVAC, we're the leader in thermostats, but we're not the leader in a lot of other things down there. Now, again, we're not trying to manufacture the whole big unit and system, but where are the things that we can identify that might be bolt-on acquisitions that could augment our existing product platform, that we could go to our existing, you know, distribution network, bring those products in, layer our manufacturing expertise and the other things we're doing on top of it, and bring those. I think on both sides, you know, we think bolt-on M&A is part of the story, when we have the right leverage levels. Let's start with. You know, we're going out there, we've got a leverage level today that might be a little bit high. Again, from a management standpoint, very comfortable running the company with the leverage it has. The markets don't like, you know, as much leverage as management likes sometimes. Right. We think what we need to get leverage down to, you know, the right market levels. We have to be very focused on both companies post-spin. We'll think about other capital allocation opportunities, whether it's bolt-on M&A, returning capital to shareholders out there. I don't think, you know, transformational M&A is not in anybody's business plan. Not that it's never gonna happen, that's not the plan for either business. There's bolt-on M&A, certainly is. Thank you. Please, last question. You know, there's always been this interesting aspect about home automation which is it seems very isolated in pockets. The camera system around the house. You know, the alarm systems. aspects of the kitchen seem like they're now. You know, there was, you know, the automated, vacuuming systems. None, nothing's ever really been like- Yeah. Integrated or connected? Is there something, I mean, is there some magic moment that people are waiting for? Or things that you guys are partnering up with other people about? Yeah. Listen, I just moved into a new house two weeks ago. Okay? We'd spent six months remodeling it before I moved in, and I have nothing but, literally almost nothing, well, there might be one, I'm not gonna mention the name. Except Resideo and Snap One product or, you know, ADI product in the house. I was very conscious about that, and it all, I mean, product is great. You know, I have my Resideo First Alert app, which has my HVAC system control. It has my security system, all my smoke and fire is all in that system. I have my Control4 system through ADI, my speakers, my whole, my media over IP that controls all the Like, it's all there, it all works. Now, I could have probably done 75% of that with just disparate systems, disparate apps. It doesn't have to all be controlled. How many apps do you want on your phone? How do you want? Because I did it all this way, I will tell you there's probably not a house in the U.S. that works as well as my house does on an integrated basis. It's that little bit of incremental. That's what people Because people are like, I want Sonos, or, I want. We sell Sonos. We love Sonos, right It's not native to some of these things. As Matter comes out, we'll continue to participate. As a distributor in exclusive brands, we'll continue to sell products on both the commercial and residential side that customers want. P&S will continue to develop products that operate there and will either be integrated or standalone. It's all gonna work. It works well together. It just works better if you do it together. It doesn't have to though. I think that's the differentiation. Right. To Mike's point, I've been to his house, so I've seen firsthand how well it works. I think. We did have 20 people over a week after we moved in. My wife is not yet over it. You don't have the Resideo page of the house? Nope. Nope. Like a home environment? No. Nope. Nope. No, let's not go there. I think, look, Mike's house and example's emblematic of the ecosystem.

Speaker 3: Good afternoon, everyone. Thank you very much for joining us at the TMC Conference, Resideo Technologies today. My name is Tomohiko Sano, Mid-Cap Industrials Analyst at JPMorgan, and I will be your moderator for these sessions. We're honored to welcome Mike Carlet, CFO, and Chris Lee, Global Head of Strategic Finance from Resideo, for a fireside chat about the company's business strategies and future outlook. Mike, Chris, thank you for joining us. Good afternoon, everyone. good afternoon everyone Thank you very much for joining us at the TMC Conference, Resideo Technologies today. thank you very much for joining us at the tmc conference resideo technologies today My name is Tomohiko Sano, Mid-Cap Industrials Analyst at JP Morgan, and I will be your moderator for these sessions. my name is tomohiko sano mid-cap industrials analyst at jp morgan and i will be your moderator for these sessions We're honored to welcome Mike Carlet, CFO, and Chris Lee, Global Head of Strategic Finance from Resideo, for a fireside chat about the company's business strategies and future outlook. we're honored to welcome mike carlet cfo and chris lee global head of strategic finance from resideo for a fireside chat about the company's business strategies and future outlook Mike, Chris, thank you for joining us. mike chris thank you for joining us

Speaker 1: Thanks for having us. Thanks for having us. thanks for having us

Speaker 2: Thank you. Appreciate you. Thank you. thank you Appreciate you. appreciate you

Speaker 3: To start, I imagine there may be some in the audience who are not yet familiar with the Resideo. Mike, Chris, could you briefly share the history of the Resideo, your core business lines, and defining elements of your company culture, please? To start, I imagine there may be some in the audience who are not yet familiar with the Resideo. to start i imagine there may be some in the audience who are not yet familiar with the resideo Mike, Chris, could you briefly share the history of the Resideo, your core business lines, and defining elements of your company culture, please? mike chris could you briefly share the history of the resideo your core business lines and defining elements of your company culture please

Speaker 2: Sure, happy to. Resideo is a company that was originally spun out of Honeywell about eight or nine years ago in 2018, and today we operate as a two-segment business. We call one segment our P&S, Products and Solutions business, and that business is focused on developing and manufacturing products that are involved in the residential control and sensing. If the home is a system of systems, of, you know, your water system, your electrical system, your HVAC system. We are focused on developing products that control those systems, that sense those systems, and make them more enjoyable, more affordable, more comfortable, more safe for the homeowner. It's our primary focus on the product side. Sure, happy to. sure happy to Resideo is a company that was originally spun out of Honeywell about eight or nine years ago in 2018, and today we operate as a two-segment business. resideo is a company that was originally spun out of honeywell about eight or nine years ago in 2018 and today we operate as a two-segment business We call one segment our P&S, Products and Solutions business, and that business is focused on developing and manufacturing products that are involved in the residential control and sensing. we call one segment our p&s products and solutions business and that business is focused on developing and manufacturing products that are involved in the residential control and sensing If the home is a system of systems, of, you know, your water system, your electrical system, your HVAC system. if the home is a system of systems of you know your water system your electrical system your hvac system We are focused on developing products that control those systems, that sense those systems, and make them more enjoyable, more affordable, more comfortable, more safe for the homeowner. we are focused on developing products that control those systems that sense those systems and make them more enjoyable more affordable more comfortable more safe for the homeowner It's our primary focus on the product side. it's our primary focus on the product side The other side of the business, our ADI distribution business, is a distribution business focused on the light commercial security, low voltage, and high-end residential AV distribution space, where we're selling to over 100,000 professional integrators that are installing those products into both people's homes and into all kinds of different commercial establishments. The business has operated in that way since it was spun off from Honeywell, but recently, last July, we announced that we're going to actually separate the business through a tax-free spin-off, separate it into two standalone companies. You know, when Honeywell spun this off, there were some reasons that it made sense to do so under common ownership. Really, for a number of years, we've said it makes more sense for these businesses to operate on a standalone basis. They have different go-to markets. The other side of the business, our ADI distribution business, is a distribution business focused on the light commercial security, low voltage, and high-end residential AV distribution space, where we're selling to over 100,000 professional integrators that are installing those products into both people's homes and into all kinds of different commercial establishments. the other side of the business our adi distribution business is a distribution business focused on the light commercial security low voltage and high-end residential av distribution space where we're selling to over 100,000 professional integrators that are installing those products into both people's homes and into all kinds of different commercial establishments The business has operated in that way since it was spun off from Honeywell, but recently, last July, we announced that we're going to actually separate the business through a tax-free spin-off, separate it into two standalone companies. the business has operated in that way since it was spun off from honeywell but recently last july we announced that we're going to actually separate the business through a tax-free spin-off separate it into two standalone companies You know, when Honeywell spun this off, there were some reasons that it made sense to do so under common ownership. you know when honeywell spun this off there were some reasons that it made sense to do so under common ownership Really, for a number of years, we've said it makes more sense for these businesses to operate on a standalone basis. really for a number of years we've said it makes more sense for these businesses to operate on a standalone basis They have different go-to markets. they have different go-to markets They have different business models. One's distribution, one's product manufacturing. They have different capital allocation strategies, capital needs of the business. We've always said it makes sense to separate them. We had a bit of an overhang from a related party transaction from Honeywell that was a result of the spin that we couldn't separate them until that was settled. We settled that last summer. We've now been working for the last, you know, nine months or so on getting the businesses separated. We just gave some updated information that we're going to effectuate that separation sometime between the middle of Q3 and the middle of Q4. Given the time frame around it's either going to be the middle of Q3 or the middle of Q4. They have different business models. they have different business models One's distribution, one's product manufacturing. one's distribution one's product manufacturing They have different capital allocation strategies, capital needs of the business. they have different capital allocation strategies capital needs of the business We've always said it makes sense to separate them. we've always said it makes sense to separate them We had a bit of an overhang from a related party transaction from Honeywell that was a result of the spin that we couldn't separate them until that was settled. we had a bit of an overhang from a related party transaction from honeywell that was a result of the spin that we couldn't separate them until that was settled We settled that last summer. we settled that last summer We've now been working for the last, you know, nine months or so on getting the businesses separated. we've now been working for the last you know nine months or so on getting the businesses separated We just gave some updated information that we're going to effectuate that separation sometime between the middle of Q3 and the middle of Q4. we just gave some updated information that we're going to effectuate that separation sometime between the middle of q3 and the middle of q4 Given the time frame around it's either going to be the middle of Q3 or the middle of Q4. given the time frame around it's either going to be the middle of q3 or the middle of q4 You know, it's hard to do those things, end of August, timing of financial statements. Those are the two windows that are out there. Everything's green. We feel pretty good about doing it sooner rather than later, but we need to make sure all the IT systems are set up, all the other things that allow both businesses to be successful are complete and done. We'll continue to move that forward. We have announced that our investor days will be in mid-July. Each company will have their own standalone investor day, where we'll talk about the businesses on a standalone basis at that point. You know, it's hard to do those things, end of August, timing of financial statements. you know it's hard to do those things end of august timing of financial statements Those are the two windows that are out there. those are the two windows that are out there Everything's green. everything's green We feel pretty good about doing it sooner rather than later, but we need to make sure all the IT systems are set up, all the other things that allow both businesses to be successful are complete and done. we feel pretty good about doing it sooner rather than later but we need to make sure all the it systems are set up all the other things that allow both businesses to be successful are complete and done We'll continue to move that forward. we'll continue to move that forward We have announced that our investor days will be in mid-July. we have announced that our investor days will be in mid-july Each company will have their own standalone investor day, where we'll talk about the businesses on a standalone basis at that point. each company will have their own standalone investor day where we'll talk about the businesses on a standalone basis at that point

Speaker 3: Thank you, Mike. Then you're becoming CFO for ADI side, right? Thank you, Mike . thank you mike Then you're becoming CFO for ADI side, right? then you're becoming cfo for adi side right

Speaker 2: I am. You know, I originally joined Resideo when the ADI side of the business bought my previous company, Snap One. It made a lot of sense as we went through the separation, as we talked about how to set the teams up to make sure each business had the right folks on each side. Made a lot of sense for me to stay with ADI to help them be a separate standalone public company. Chris Lee, who runs Investor Relations for us, is actually gonna stay on the P&S side. We'll have good continuity on both sides. We'll be folks able to tell the story. In fact, we'll probably let Chris do most of the talking about the product side of the business today. He could do both sides. I am. i am You know, I originally joined Resideo when the ADI side of the business bought my previous company, Snap One. you know i originally joined resideo when the adi side of the business bought my previous company snap one It made a lot of sense as we went through the separation, as we talked about how to set the teams up to make sure each business had the right folks on each side. it made a lot of sense as we went through the separation as we talked about how to set the teams up to make sure each business had the right folks on each side Made a lot of sense for me to stay with ADI to help them be a separate standalone public company. made a lot of sense for me to stay with adi to help them be a separate standalone public company Chris Lee, who runs Investor Relations for us, is actually gonna stay on the P&S side. chris lee who runs investor relations for us is actually gonna stay on the p&s side We'll have good continuity on both sides. we'll have good continuity on both sides We'll be folks able to tell the story. we'll be folks able to tell the story In fact, we'll probably let Chris do most of the talking about the product side of the business today. in fact we'll probably let chris do most of the talking about the product side of the business today He could do both sides. he could do both sides We can both do both sides, but we figure we'll start that process now. We are, as we announced, I think, last Monday, we filed our Form 10. We filed some other information about the separation, and we said that we are in the midst of recruiting for a CFO for the P&S business as well. We can both do both sides, but we figure we'll start that process now. we can both do both sides but we figure we'll start that process now We are, as we announced, I think, last Monday, we filed our Form 10. we are as we announced i think last monday we filed our form 10 We filed some other information about the separation, and we said that we are in the midst of recruiting for a CFO for the P&S business as well. we filed some other information about the separation and we said that we are in the midst of recruiting for a cfo for the p&s business as well

Speaker 3: Right. Thank you very much. Let's dive into the business, starting from Products and Solutions, P&S segments. In the recent earnings call, last week, you mentioned the demand in the retail and OEM channels was strong. How do you view the current state and outlook for the housing and the remodeling markets for the P&S business, please? Right. right Thank you very much. thank you very much Let's dive into the business, starting from Products and Solutions, P&S segments. let's dive into the business starting from products and solutions p&s segments In the recent earnings call, last week, you mentioned the demand in the retail and OEM channels was strong. in the recent earnings call last week you mentioned the demand in the retail and oem channels was strong How do you view the current state and outlook for the housing and the remodeling markets for the P&S business, please? how do you view the current state and outlook for the housing and the remodeling markets for the p&s business please

Speaker 1: Yeah. Thanks, Tomo. I think when we look at the macro environment, it's, with the Q1 print, the view is pretty much the same as we had at the beginning of the year when we set the annual guide, which is, the residential market is still relatively depressed. It's probably clicking along at a very low-single digit rate. I think it's for all the known and spoken reasons in the marketplace for the last several years. It's interest rate sensitive, it's availability sensitive, and I think there's a number of structural things that could provide tailwind in the future, as rates improve the market and confidence becomes more constructive. Yeah. yeah Thanks, Tomo. thanks tomo I think when we look at the macro environment, it's, with the Q1 print, the view is pretty much the same as we had at the beginning of the year when we set the annual guide, which is, the residential market is still relatively depressed. i think when we look at the macro environment it's with the q1 print the view is pretty much the same as we had at the beginning of the year when we set the annual guide which is the residential market is still relatively depressed It's probably clicking along at a very low- single digit rate. it's probably clicking along at a very low- single digit rate I think it's for all the known and spoken reasons in the marketplace for the last several years. i think it's for all the known and spoken reasons in the marketplace for the last several years It's interest rate sensitive, it's availability sensitive, and I think there's a number of structural things that could provide tailwind in the future, as rates improve the market and confidence becomes more constructive. it's interest rate sensitive it's availability sensitive and i think there's a number of structural things that could provide tailwind in the future as rates improve the market and confidence becomes more constructive There's more, you know, evidence of home building or the resale of existing homes. Today, you know, we would probably characterize that we're more so in a repair market versus a repair and remodel market. I think when we look at our preference and bias, you know, certainly, the products and solutions side or the RemainCo Resideo prefers a remodel market. It, it provides an opportunity for greater sale, greater opportunity for the professional to do work. I think in the current repair market, it still demonstrates Resideo's importance to the end user because, you know, we make best-of-breed products that are critical, as Mike said, to the operation of your home. There's more, you know, evidence of home building or the resale of existing homes. there's more you know evidence of home building or the resale of existing homes Today, you know, we would probably characterize that we're more so in a repair market versus a repair and remodel market. today you know we would probably characterize that we're more so in a repair market versus a repair and remodel market I think when we look at our preference and bias, you know, certainly, the products and solutions side or the RemainCo Resideo prefers a remodel market. i think when we look at our preference and bias you know certainly the products and solutions side or the remainco resideo prefers a remodel market It, it provides an opportunity for greater sale, greater opportunity for the professional to do work. it it provides an opportunity for greater sale greater opportunity for the professional to do work I think in the current repair market, it still demonstrates Resideo's importance to the end user because, you know, we make best-of-breed products that are critical, as Mike said, to the operation of your home. i think in the current repair market it still demonstrates resideo's importance to the end user because you know we make best-of-breed products that are critical as mike said to the operation of your home You know, it goes back to the mission statement that Mike talked about, which is, again, to reiterate, you know, we make your lives more comfortable, more safe and secure, and more cost-effective. When you think about you're sitting in the Northeast this past winter, and it's awfully cold, and your thermostat breaks down, you go out and buy a new Honeywell Home product. You know, it goes back to the mission statement that Mike talked about, which is, again, to reiterate, you know, we make your lives more comfortable, more safe and secure, and more cost-effective. you know it goes back to the mission statement that mike talked about which is again to reiterate you know we make your lives more comfortable more safe and secure and more cost-effective When you think about you're sitting in the Northeast this past winter, and it's awfully cold, and your thermostat breaks down, you go out and buy a new Honeywell Home product. when you think about you're sitting in the northeast this past winter and it's awfully cold and your thermostat breaks down you go out and buy a new honeywell home product

Speaker 3: Right. Right. right

Speaker 1: Because you know it works. I think, you know, as we look forward, you know, and, you know, given some of the things we've talked about over the last six to eight quarters about the self-help, the things we've been improving upon, we feel well-positioned to take advantage of an improving macro if and when. Because you know it works. because you know it works I think, you know, as we look forward, you know, and, you know, given some of the things we've talked about over the last six to eight quarters about the self-help, the things we've been improving upon, we feel well-positioned to take advantage of an improving macro if and when. i think you know as we look forward you know and you know given some of the things we've talked about over the last six to eight quarters about the self-help the things we've been improving upon we feel well-positioned to take advantage of an improving macro if and when

Speaker 3: Thank you. I think it's last week you also talk about the market share gains in safety products and strong adaptations of the new offerings. What do you see as the Resideo's key competitive advantages in the P&S segment, versus major peers? Thank you. thank you I think it's last week you also talk about the market share gains in safety products and strong adaptations of the new offerings. i think it's last week you also talk about the market share gains in safety products and strong adaptations of the new offerings What do you see as the Resideo's key competitive advantages in the P&S segment, versus major peers? what do you see as the resideo's key competitive advantages in the p&s segment versus major peers

Speaker 1: I think, you know, just to dovetail on something I mentioned before, we believe in manufacturing and selling best-of-breed product that, you know, leverages our long, you know, over a century of heritage and domain expertise, and continuously selling to our moat, which are the professionals. You know, we think that is a virtuous flywheel that we can continue to perpetuate and build upon because, you know, we have an operating scale advantage. We have key brands that are very well known, like Honeywell Home and First Alert. We also have a brand that's very well known in the professional community called BRK, and all of those brands are synonymous with quality. I think, you know, just to dovetail on something I mentioned before, we believe in manufacturing and selling best-of-breed product that, you know, leverages our long, you know, over a century of heritage and domain expertise, and continuously selling to our moat, which are the professionals. i think you know just to dovetail on something i mentioned before we believe in manufacturing and selling best-of-breed product that you know leverages our long you know over a century of heritage and domain expertise and continuously selling to our moat which are the professionals You know, we think that is a virtuous flywheel that we can continue to perpetuate and build upon because, you know, we have an operating scale advantage. you know we think that is a virtuous flywheel that we can continue to perpetuate and build upon because you know we have an operating scale advantage We have key brands that are very well known, like Honeywell Home and First Alert. we have key brands that are very well known like honeywell home and first alert We also have a brand that's very well known in the professional community called BRK, and all of those brands are synonymous with quality. we also have a brand that's very well known in the professional community called brk and all of those brands are synonymous with quality I think we wanna continue to, you know, live up to that heritage that we have around quality, around product excellence, and frankly, around innovation, which is core to our go-forward strategy. I think relative to the competitive landscape, I, you know, we believe we have market share leading positions in a number of the categories we play in, and I think that's buttressed by the amount of volume that we manufacture, you know, on our very large operating footprint. I think we wanna continue to, you know, live up to that heritage that we have around quality, around product excellence, and frankly, around innovation, which is core to our go-forward strategy. i think we wanna continue to you know live up to that heritage that we have around quality around product excellence and frankly around innovation which is core to our go-forward strategy I think relative to the competitive landscape, I, you know, we believe we have market share leading positions in a number of the categories we play in, and I think that's buttressed by the amount of volume that we manufacture, you know, on our very large operating footprint. i think relative to the competitive landscape i you know we believe we have market share leading positions in a number of the categories we play in and i think that's buttressed by the amount of volume that we manufacture you know on our very large operating footprint

Speaker 3: Thank you. Then if you could touch on the mega trends or tailwinds, the portions that you mention about for the P&S segment for the medium long term, please? Thank you. thank you Then if you could touch on the mega trends or tailwinds, the portions that you mention about for the P&S segment for the medium long term, please? then if you could touch on the mega trends or tailwinds the portions that you mention about for the p&s segment for the medium long term please

Speaker 1: Yeah. I think when we look, you know, at the landscape, the residential landscape specifically, you know, we believe there is an under-housing that's been, you know, pinned by the lack of new construction. We also think that when rates come down, that will help to create more velocity in the sale of existing homes, both of which, you know, we would be exposed to. I think if you were to ask us, you know, where our greatest exposure is, it's more so to the R&R or the Repair and Remodel part of the marketplace versus residential new construction. I would tell you probably over 50% of our exposure, we believe, is to R&R. When we look at where we play, certainly we have a presence not only in R&R and in residential new construction, but also think about the replacement cycle. Yeah. yeah I think when we look, you know, at the landscape, the residential landscape specifically, you know, we believe there is an under-housing that's been, you know, pinned by the lack of new construction. i think when we look you know at the landscape the residential landscape specifically you know we believe there is an under-housing that's been you know pinned by the lack of new construction We also think that when rates come down, that will help to create more velocity in the sale of existing homes, both of which, you know, we would be exposed to. we also think that when rates come down that will help to create more velocity in the sale of existing homes both of which you know we would be exposed to I think if you were to ask us, you know, where our greatest exposure is, it's more so to the R&R or the Repair and Remodel part of the marketplace versus residential new construction. i think if you were to ask us you know where our greatest exposure is it's more so to the r&r or the repair and remodel part of the marketplace versus residential new construction I would tell you probably over 50% of our exposure, we believe, is to R&R. i would tell you probably over 50% of our exposure we believe is to r&r When we look at where we play, certainly we have a presence not only in R&R and in residential new construction, but also think about the replacement cycle. when we look at where we play certainly we have a presence not only in r&r and in residential new construction but also think about the replacement cycle You know, many of our products have, you know, a stated lifetime. You know, a smoke and carbon monoxide alarm, I think, has an eight-year life on average. You know, that's probably something that you really don't wanna go too far beyond from a, a lifetime standpoint. I also think we're able to penetrate new markets with our products. For example, we called out the MRO market, the Maintenance and Repair market recently, which has a lot of appeal and efficacy to us because they serve multi-family units by and large, and there's a lot of use cases for us in those types of, you know, large, you know, dense dwellings. You know, many of our products have, you know, a stated lifetime. you know many of our products have you know a stated lifetime You know, a smoke and carbon monoxide alarm, I think, has an eight-year life on average. you know a smoke and carbon monoxide alarm i think has an eight-year life on average You know, that's probably something that you really don't wanna go too far beyond from a, a lifetime standpoint. you know that's probably something that you really don't wanna go too far beyond from a a lifetime standpoint I also think we're able to penetrate new markets with our products. i also think we're able to penetrate new markets with our products For example, we called out the MRO market, the Maintenance and Repair market recently, which has a lot of appeal and efficacy to us because they serve multi-family units by and large, and there's a lot of use cases for us in those types of, you know, large, you know, dense dwellings. for example we called out the mro market the maintenance and repair market recently which has a lot of appeal and efficacy to us because they serve multi-family units by and large and there's a lot of use cases for us in those types of you know large you know dense dwellings

Speaker 3: Thank you. Then, shifting gear to margins and pricing and costs. Your P&S segment has delivered 12 consecutive quarters of gross margin expansions. If you could talk about the how much of that is due to pricing power versus mix, and if you could talk about the sustainabilities for the next couple of quarters, please? Thank you. thank you Then, shifting gear to margins and pricing and costs. then shifting gear to margins and pricing and costs Your P&S segment has delivered 12 consecutive quarters of gross margin expansions. your p&s segment has delivered 12 consecutive quarters of gross margin expansions If you could talk about the how much of that is due to pricing power versus mix, and if you could talk about the sustainabilities for the next couple of quarters, please? if you could talk about the how much of that is due to pricing power versus mix and if you could talk about the sustainabilities for the next couple of quarters please

Speaker 1: Yeah, no, that's a great question. You know, I think we have a really exciting part of the story here. You know, I think with what I painted before, you know, we've been able to execute, you know, in a low- to mid-single digit, you know, revenue growth profile with an improving margin expansion, which has been borne, you know, fundamentally on structural operating efficiencies that we've been gaining. You know, when we, when Mike gave the overview of when we spun out of Resideo, I think it's underappreciated that the products and solutions segment were product lines in disparate parts of Honeywell's businesses when it was contributed. When it was contributed, we had a lot of manufacturing and supply chain sprawl that we had to work through, and that's some of the benefits you're seeing historically in the 12 consecutive quarters of expansion. Yeah, no, that's a great question. yeah no that's a great question You know, I think we have a really exciting part of the story here. you know i think we have a really exciting part of the story here You know, I think with what I painted before, you know, we've been able to execute, you know, in a low- to mid-single digit, you know, revenue growth profile with an improving margin expansion, which has been borne, you know, fundamentally on structural operating efficiencies that we've been gaining. you know i think with what i painted before you know we've been able to execute you know in a low- to mid-single digit you know revenue growth profile with an improving margin expansion which has been borne you know fundamentally on structural operating efficiencies that we've been gaining You know, when we, when Mike gave the overview of when we spun out of Resideo, I think it's underappreciated that the products and solutions segment were product lines in disparate parts of Honeywell's businesses when it was contributed. you know when we when mike gave the overview of when we spun out of resideo i think it's underappreciated that the products and solutions segment were product lines in disparate parts of honeywell's businesses when it was contributed When it was contributed, we had a lot of manufacturing and supply chain sprawl that we had to work through, and that's some of the benefits you're seeing historically in the 12 consecutive quarters of expansion. when it was contributed we had a lot of manufacturing and supply chain sprawl that we had to work through and that's some of the benefits you're seeing historically in the 12 consecutive quarters of expansion I think going forward, you know, there's still more room to, you know, to be had. We're, you know, we think we're in the middle innings of that ballgame, where we can continue to extract operating efficiencies from, you know, for example, you know, looking at underutilized factories or looking at ways we can optimize the supply chain further. With the new product introduction that I mentioned earlier, we think there is some pricing power because, you know, as I mentioned, we believe our products are best of breed. We think they're differentiated relative to the competition, you know, we should be able to earn some price for that. Also think about, you know, the volume that we're manufacturing, which is, you know, large. When you're manufacturing that amount of throughput across a healthier manufacturing and supply chain footprint, that's actually margin beneficial. I think going forward, you know, there's still more room to, you know, to be had. i think going forward you know there's still more room to you know to be had We're, you know, we think we're in the middle innings of that ballgame, where we can continue to extract operating efficiencies from, you know, for example, you know, looking at underutilized factories or looking at ways we can optimize the supply chain further. we're you know we think we're in the middle innings of that ballgame where we can continue to extract operating efficiencies from you know for example you know looking at underutilized factories or looking at ways we can optimize the supply chain further With the new product introduction that I mentioned earlier, we think there is some pricing power because, you know, as I mentioned, we believe our products are best of breed. with the new product introduction that i mentioned earlier we think there is some pricing power because you know as i mentioned we believe our products are best of breed We think they're differentiated relative to the competition, you know, we should be able to earn some price for that. we think they're differentiated relative to the competition you know we should be able to earn some price for that Also think about, you know, the volume that we're manufacturing, which is, you know, large. also think about you know the volume that we're manufacturing which is you know large When you're manufacturing that amount of throughput across a healthier manufacturing and supply chain footprint, that's actually margin beneficial. when you're manufacturing that amount of throughput across a healthier manufacturing and supply chain footprint that's actually margin beneficial We're really excited about all that because, you know, I think we have a lot of things planned from a new product introduction standpoint. We're really excited about all that because, you know, I think we have a lot of things planned from a new product introduction standpoint. we're really excited about all that because you know i think we have a lot of things planned from a new product introduction standpoint

Speaker 3: Thank you. You just talk about the supply chains and manufacturing. If you could talk about the strengths and risks of your Mexico-centric manufacturing footprints, and how are you investing in automations or diversification? Thank you. thank you You just talk about the supply chains and manufacturing. you just talk about the supply chains and manufacturing If you could talk about the strengths and risks of your Mexico-centric manufacturing footprints, and how are you investing in automations or diversification? if you could talk about the strengths and risks of your mexico-centric manufacturing footprints and how are you investing in automations or diversification

Speaker 1: I think one thing to call out, Tomo, as you rightfully did, is our philosophy from a manufacturing standpoint is nearshoring. For all the products that we sell in North America, we manufacture in Mexico. When we look at other parts of the world, we have a similar setup. I think because of the, you know, the vast majority of our revenues are generated from North America, puts a lot of focus on our Mexican operations. You know, currently we're a beneficiary of the exemptions under USMCA. Looks like, you know, right now we continue to be a beneficiary. Who knows what tomorrow will bring, right? I think one thing to call out, Tomo, as you rightfully did, is our philosophy from a manufacturing standpoint is nearshoring. i think one thing to call out tomo as you rightfully did is our philosophy from a manufacturing standpoint is nearshoring For all the products that we sell in North America, we manufacture in Mexico. for all the products that we sell in north america we manufacture in mexico When we look at other parts of the world, we have a similar setup. when we look at other parts of the world we have a similar setup I think because of the, you know, the vast majority of our revenues are generated from North America, puts a lot of focus on our Mexican operations. i think because of the you know the vast majority of our revenues are generated from north america puts a lot of focus on our mexican operations You know, currently we're a beneficiary of the exemptions under USMCA. you know currently we're a beneficiary of the exemptions under usmca Looks like, you know, right now we continue to be a beneficiary. looks like you know right now we continue to be a beneficiary Who knows what tomorrow will bring, right? who knows what tomorrow will bring right You know, I think when we look at our flexibility, and this is where our scale, our global scale from a manufacturing standpoint is to our advantage. We have a lot of things in our playbook that could, you know, you know, move some of the manufacturing or, you know, look at other alternative ways we can manufacture the product that may be if Mexico should, you know, that environment change. You know, we're not banking on that. We're continuing to make investments down in Mexico in terms of labor, in terms of automation of the manufacturing facility, you know, to increase that output. You know, I, we're very excited about what we're doing there. We'll talk more about it at our Investor Day. You know, I think when we look at our flexibility, and this is where our scale, our global scale from a manufacturing standpoint is to our advantage. you know i think when we look at our flexibility and this is where our scale our global scale from a manufacturing standpoint is to our advantage We have a lot of things in our playbook that could, you know, you know, move some of the manufacturing or, you know, look at other alternative ways we can manufacture the product that may be if Mexico should, you know, that environment change. we have a lot of things in our playbook that could you know you know move some of the manufacturing or you know look at other alternative ways we can manufacture the product that may be if mexico should you know that environment change You know, we're not banking on that. you know we're not banking on that We're continuing to make investments down in Mexico in terms of labor, in terms of automation of the manufacturing facility, you know, to increase that output. we're continuing to make investments down in mexico in terms of labor in terms of automation of the manufacturing facility you know to increase that output You know, I, we're very excited about what we're doing there. you know i we're very excited about what we're doing there We'll talk more about it at our Investor Day. we'll talk more about it at our investor day

Speaker 3: Thank you. Shifting gear to innovations and new products, and with over 14 million connected customers via Honeywell Home. How do you plan to further monetize this base, and what role do software subscriptions and revenues play out? Thank you. thank you Shifting gear to innovations and new products, and with over 14 million connected customers via Honeywell Home. shifting gear to innovations and new products and with over 14 million connected customers via honeywell home How do you plan to further monetize this base, and what role do software subscriptions and revenues play out? how do you plan to further monetize this base and what role do software subscriptions and revenues play out

Speaker 1: Yeah, I think, it will have a role in the future, which, you know, we'll likely lean into more so in the future. I think today what should be appreciated is we already have an existing base of recurring monthly revenue as part of our security business, and what I'm referring to is the backend monitoring system that, or the backend monitoring service we offer on a monthly basis to our customers. That's called AlarmNet. That's basically, you know, if the signal gets tripped on the intrusion security, the signal goes to a clearing house which we control, and then we route that to the first responder. We think in our future, aligned with our new product introduction strategy, we intend to produce more and more connected product. Yeah, I think, it will have a role in the future, which, you know, we'll likely lean into more so in the future. yeah i think it will have a role in the future which you know we'll likely lean into more so in the future I think today what should be appreciated is we already have an existing base of recurring monthly revenue as part of our security business, and what I'm referring to is the backend monitoring system that, or the backend monitoring service we offer on a monthly basis to our customers. i think today what should be appreciated is we already have an existing base of recurring monthly revenue as part of our security business and what i'm referring to is the backend monitoring system that or the backend monitoring service we offer on a monthly basis to our customers That's called AlarmNet. that's called alarmnet That's basically, you know, if the signal gets tripped on the intrusion security, the signal goes to a clearing house which we control, and then we route that to the first responder. that's basically you know if the signal gets tripped on the intrusion security the signal goes to a clearing house which we control and then we route that to the first responder We think in our future, aligned with our new product introduction strategy, we intend to produce more and more connected product. we think in our future aligned with our new product introduction strategy we intend to produce more and more connected product I think what's interesting and what we'll lean into more at our investor day is enabling an ecosystem that has more connected product that can interop not only with each other in our ecosystem, but also with third-party product that is in the ecosystem enabled by our communication protocol and supported by a software layer. Again, we'll talk more about that at the investor day, but we're pretty excited about what those opportunities can bring. I think what's interesting and what we'll lean into more at our investor day is enabling an ecosystem that has more connected product that can interop not only with each other in our ecosystem, but also with third-party product that is in the ecosystem enabled by our communication protocol and supported by a software layer. i think what's interesting and what we'll lean into more at our investor day is enabling an ecosystem that has more connected product that can interop not only with each other in our ecosystem but also with third-party product that is in the ecosystem enabled by our communication protocol and supported by a software layer Again, we'll talk more about that at the investor day, but we're pretty excited about what those opportunities can bring. again we'll talk more about that at the investor day but we're pretty excited about what those opportunities can bring

Speaker 3: Thank you, Chris. I would pause here if anyone have questions on P&S. We're good? All right. Thank you, Chris. Moving to ADI. Thank you for starting, Mike. Thank you, Chris. thank you chris I would pause here if anyone have questions on P&S. i would pause here if anyone have questions on p&s We're good? we're good All right. all right Thank you, Chris. thank you chris Moving to ADI. moving to adi Thank you for starting, Mike. thank you for starting mike

Speaker 2: I enjoyed listening to Chris for once. That was good. I enjoyed listening to Chris for once. i enjoyed listening to chris for once That was good. that was good

Speaker 3: All right. All right. all right

Speaker 1: Thank you. Thank you. thank you

Speaker 3: That's one, yeah. That's one, yeah. that's one yeah

Speaker 2: I'm glad you can, you know, save your vocal cords. I'm glad you can, you know, save your vocal cords. i'm glad you can you know save your vocal cords

Speaker 3: Yeah. Yeah. yeah

Speaker 2: You want a sip of water before you go? You want a sip of water before you go? you want a sip of water before you go

Speaker 3: No, I'm good. Thank you. Okay. Then Mike, if you could talk about the ADI's market environment, and I think it's, you talk about the sequential growth in security product categories, and then some have rebound in video surveillance. How do you view the current state and outlook of the commercial securities and AV markets? No, I'm good. no i'm good thank you okay Thank you. i'm good thank you okay Okay. i'm good thank you okay Then Mike, if you could talk about the ADI's market environment, and I think it's, you talk about the sequential growth in security product categories, and then some have rebound in video surveillance. then mike if you could talk about the adi's market environment and i think it's you talk about the sequential growth in security product categories and then some have rebound in video surveillance How do you view the current state and outlook of the commercial securities and AV markets? how do you view the current state and outlook of the commercial securities and av markets

Speaker 2: Yeah. ADI really serves in two primary markets with growth in some adjacent markets. Again, that commercial security market is the legacy ADI business where we've grown tremendously, over the last, you know, decade. With the Snap acquisition, that was much more the residential AV. I think those are two different markets, right? Commercial security continues to be a very strong market. There's lots of innovation there. If you think about both product innovation, the impact of AI on surveillance and security and video, putting those detection technologies, those identification technologies. You know, when somebody walks into a bank, how do you identify them? How do you make sure you're keeping track of security situations? Like, that is an emerging, continuing evolution of technology. Yeah. yeah ADI really serves in two primary markets with growth in some adjacent markets. adi really serves in two primary markets with growth in some adjacent markets Again, that commercial security market is the legacy ADI business where we've grown tremendously, over the last, you know, decade. again that commercial security market is the legacy adi business where we've grown tremendously over the last you know decade With the Snap acquisition, that was much more the residential AV. with the snap acquisition that was much more the residential av I think those are two different markets, right? i think those are two different markets right Commercial security continues to be a very strong market. commercial security continues to be a very strong market There's lots of innovation there. there's lots of innovation there If you think about both product innovation, the impact of AI on surveillance and security and video, putting those detection technologies, those identification technologies. if you think about both product innovation the impact of ai on surveillance and security and video putting those detection technologies those identification technologies You know, when somebody walks into a bank, how do you identify them? you know when somebody walks into a bank how do you identify them How do you make sure you're keeping track of security situations? how do you make sure you're keeping track of security situations Like, that is an emerging, continuing evolution of technology. like that is an emerging continuing evolution of technology We will continue to be playing in that, and our integrators that install those products will continue to play in it. That is a strong market, continues to be a strong market that we think will continue to grow at very healthy levels. Video's certainly a big part of that. You know, the whole surveillance, this whole security business has changed to surveillance. And detection around that rather than break entry into lots of other things. Incredibly important part of the business. The residential AV business, you know, that we bought from Snap One is about 20% of our business. Much more challenged. I think the big difference between the P&S business that Chris was talking about that is very residential-focused and this residential AV piece at the high end is the residential P&S part of the business is mostly non-discretionary purchases. You're going to have a smoke detector. We will continue to be playing in that, and our integrators that install those products will continue to play in it. we will continue to be playing in that and our integrators that install those products will continue to play in it That is a strong market, continues to be a strong market that we think will continue to grow at very healthy levels. that is a strong market continues to be a strong market that we think will continue to grow at very healthy levels Video's certainly a big part of that. video's certainly a big part of that You know, the whole surveillance, this whole security business has changed to surveillance. you know the whole surveillance this whole security business has changed to surveillance And detection around that rather than break entry into lots of other things. and detection around that rather than break entry into lots of other things Incredibly important part of the business. incredibly important part of the business The residential AV business, you know, that we bought from Snap One is about 20% of our business. the residential av business you know that we bought from snap one is about 20% of our business Much more challenged. much more challenged I think the big difference between the P&S business that Chris was talking about that is very residential-focused and this residential AV piece at the high end is the residential P&S part of the business is mostly non-discretionary purchases. i think the big difference between the p&s business that chris was talking about that is very residential-focused and this residential av piece at the high end is the residential p&s part of the business is mostly non-discretionary purchases You're going to have a smoke detector. you're going to have a smoke detector You're going to have carbon monoxide. You're going to have a thermostat. You're going to have a hot water heater where our ignition system's gonna be on it, and most people, you know, choose to have a security system. They don't view it as a discretionary purchase. I think at the high-end residential AV, there's a lot more discretion in there, while we could all talk about the wealthy folks in this world and their resilience, and their ability to continue to make discretionary purchases, I think when it comes down to the piece we're at, when you tie it back to housing starts and the resale activity, people aren't waking up one day and saying, hey, I wanna go put speakers in my ceiling in the kitchen. That's usually tied to an event. You're going to have carbon monoxide. you're going to have carbon monoxide You're going to have a thermostat. you're going to have a thermostat You're going to have a hot water heater where our ignition system's gonna be on it, and most people, you know, choose to have a security system. you're going to have a hot water heater where our ignition system's gonna be on it and most people you know choose to have a security system They don't view it as a discretionary purchase. they don't view it as a discretionary purchase I think at the high-end residential AV, there's a lot more discretion in there, while we could all talk about the wealthy folks in this world and their resilience, and their ability to continue to make discretionary purchases, I think when it comes down to the piece we're at, when you tie it back to housing starts and the resale activity, people aren't waking up one day and saying, hey, I wanna go put speakers in my ceiling in the kitchen. i think at the high-end residential av there's a lot more discretion in there while we could all talk about the wealthy folks in this world and their resilience and their ability to continue to make discretionary purchases i think when it comes down to the piece we're at when you tie it back to housing starts and the resale activity people aren't waking up one day and saying hey i wanna go put speakers in my ceiling in the kitchen That's usually tied to an event. that's usually tied to an event Those events are happening less and less. That market's been a bit more challenged, but I think overall we feel really good about the overall markets that we participate in. We believe that the housing piece that the side we serve will come back, and that will also benefit us. I think in the, you know, the more recency, we probably underperformed the market a little bit given some of the challenges we've talked about with our ERP implementation. We feel really good about the activities we have in place to offset that. From a growth market standpoint, those are the core markets. In the Pro AV side of the business and the Datacom side of the business, those are continuing to grow at healthy rates as well. Those are markets that we participate in. We've got good beachheads in. Those events are happening less and less. those events are happening less and less That market's been a bit more challenged, but I think overall we feel really good about the overall markets that we participate in. that market's been a bit more challenged but i think overall we feel really good about the overall markets that we participate in We believe that the housing piece that the side we serve will come back, and that will also benefit us. we believe that the housing piece that the side we serve will come back and that will also benefit us I think in the, you know, the more recency, we probably underperformed the market a little bit given some of the challenges we've talked about with our ERP implementation. i think in the you know the more recency we probably underperformed the market a little bit given some of the challenges we've talked about with our erp implementation We feel really good about the activities we have in place to offset that. we feel really good about the activities we have in place to offset that From a growth market standpoint, those are the core markets. from a growth market standpoint those are the core markets In the Pro AV side of the business and the Datacom side of the business, those are continuing to grow at healthy rates as well. in the pro av side of the business and the datacom side of the business those are continuing to grow at healthy rates as well Those are markets that we participate in. those are markets that we participate in We've got good beachheads in. we've got good beachheads in We have, you know, businesses that are, you know, in the nine figures, but they're still a relatively small part of the business, and we think we have lots of opportunity to continue to grow in those businesses, and we think that both those areas are ones that we'll look to continue to see drive incremental growth. We have, you know, businesses that are, you know, in the nine figures, but they're still a relatively small part of the business, and we think we have lots of opportunity to continue to grow in those businesses, and we think that both those areas are ones that we'll look to continue to see drive incremental growth. we have you know businesses that are you know in the nine figures but they're still a relatively small part of the business and we think we have lots of opportunity to continue to grow in those businesses and we think that both those areas are ones that we'll look to continue to see drive incremental growth

Speaker 3: Thank you, Mike. If you could talk about competitive environment for ADI. You emphasized ADI's operational stabilities and top-tier customer service recognitions. What is the structural advantage of the ADI's 200+ locations, omnichannel model, and how does the Snap One integration strengthens your moat? Thank you, Mike. thank you mike If you could talk about competitive environment for ADI. if you could talk about competitive environment for adi You emphasized ADI's operational stabilities and top-tier customer service recognitions. you emphasized adi's operational stabilities and top-tier customer service recognitions What is the structural advantage of the ADI's 200+ locations, omnichannel model, and how does the Snap One integration strengthens your moat? what is the structural advantage of the adi's 200+ locations omnichannel model and how does the snap one integration strengthens your moat

Speaker 2: Yeah, definitely. First, we have too many locations, so I'll start there and say that from the Snap One acquisition, we have about 30, 35 markets right now in the U.S. where we have both an ADI store and a Snap store, and you really don't need both. You got to make sure you're in the right spot, but our markets are not big enough where we're not McDonald's. You don't need one on every corner. We're not Starbucks. We do think we have the opportunity to rationalize that footprint over the coming months and over the next 12 months-18 months, I think you'll see us get the store count down a bit, more closely resembling from a store count standpoint where ADI was before the Snap acquisition. Yeah, definitely. yeah definitely First, we have too many locations, so I'll start there and say that from the Snap One acquisition, we have about 30, 35 markets right now in the U.S. where we have both an ADI store and a Snap store, and you really don't need both. first we have too many locations so i'll start there and say that from the snap one acquisition we have about 30 35 markets right now in the u.s where we have both an adi store and a snap store and you really don't need both You got to make sure you're in the right spot, but our markets are not big enough where we're not McDonald's. you got to make sure you're in the right spot but our markets are not big enough where we're not mcdonald's You don't need one on every corner. you don't need one on every corner We're not Starbucks. we're not starbucks We do think we have the opportunity to rationalize that footprint over the coming months and over the next 12 months- 18 months, I think you'll see us get the store count down a bit, more closely resembling from a store count standpoint where ADI was before the Snap acquisition. we do think we have the opportunity to rationalize that footprint over the coming months and over the next 12 months- 18 months i think you'll see us get the store count down a bit more closely resembling from a store count standpoint where adi was before the snap acquisition There'll be a few more incremental locations, but pretty close to that footprint. That will drive a significant amount of cost savings without impacting the customer experience. With that, you know, ADI is very much an omnichannel business. Both our it's not just our store footprint. It's the omnichannel aspect. We talk every quarter about how much our e-commerce business grew. Even when we talk about e-commerce, it's not e-commerce on a standalone basis. It really is the ability for these 100,000 integrators to come and shop with us how they want to, get the product where they want to. Shop online, pick up in store. In a given week, I don't remember the exact number, so Rob will yell at me because I'll probably get this wrong, but it's north of 80%, and might be north of 90% of our customers are interacting with us online. There'll be a few more incremental locations, but pretty close to that footprint. there'll be a few more incremental locations but pretty close to that footprint That will drive a significant amount of cost savings without impacting the customer experience. that will drive a significant amount of cost savings without impacting the customer experience With that, you know, ADI is very much an omnichannel business. with that you know adi is very much an omnichannel business Both our it's not just our store footprint. both our it's not just our store footprint It's the omnichannel aspect. it's the omnichannel aspect We talk every quarter about how much our e-commerce business grew. we talk every quarter about how much our e-commerce business grew Even when we talk about e-commerce, it's not e-commerce on a standalone basis. even when we talk about e-commerce it's not e-commerce on a standalone basis It really is the ability for these 100,000 integrators to come and shop with us how they want to, get the product where they want to. it really is the ability for these 100,000 integrators to come and shop with us how they want to get the product where they want to Shop online, pick up in store. shop online pick up in store In a given week, I don't remember the exact number, so Rob will yell at me because I'll probably get this wrong, but it's north of 80%, and might be north of 90% of our customers are interacting with us online. in a given week i don't remember the exact number so rob will yell at me because i'll probably get this wrong but it's north of 80% and might be north of 90% of our customers are interacting with us online They're coming there, and they're researching. They're learning. They might be shopping. They might be buying, or they might just learn there, then come into the store then. Buy online, pick up in store, all those things are going on. We really view that ecosystem of omnichannel experience as really the differentiated moat that ADI has from a go-to-market standpoint, we execute better than anybody else in the industry. When I joined the ADI, you know, when they bought my company Snap a couple years ago, when I watched what they did, we always knew this from afar. Being inside the house and just seeing how well they execute, how customer-focused they are, how much they're ensuring that the customer experience is just absolutely great is just impressive to watch. You put those things together, and we think we've got a great protective moat. They're coming there, and they're researching. they're coming there and they're researching They're learning. they're learning They might be shopping. they might be shopping They might be buying, or they might just learn there, then come into the store then. they might be buying or they might just learn there then come into the store then Buy online, pick up in store, all those things are going on. buy online pick up in store all those things are going on We really view that ecosystem of omnichannel experience as really the differentiated moat that ADI has from a go-to-market standpoint, we execute better than anybody else in the industry. we really view that ecosystem of omnichannel experience as really the differentiated moat that adi has from a go-to-market standpoint we execute better than anybody else in the industry When I joined the ADI, you know, when they bought my company Snap a couple years ago, when I watched what they did, we always knew this from afar. when i joined the adi you know when they bought my company snap a couple years ago when i watched what they did we always knew this from afar Being inside the house and just seeing how well they execute, how customer-focused they are, how much they're ensuring that the customer experience is just absolutely great is just impressive to watch. being inside the house and just seeing how well they execute how customer-focused they are how much they're ensuring that the customer experience is just absolutely great is just impressive to watch You put those things together, and we think we've got a great protective moat. you put those things together and we think we've got a great protective moat We've got competitors out there that are trying to do the same things, and some are great competitors as well, but we think we outperform them every single time it comes down to execution. We've got competitors out there that are trying to do the same things, and some are great competitors as well, but we think we outperform them every single time it comes down to execution. we've got competitors out there that are trying to do the same things and some are great competitors as well but we think we outperform them every single time it comes down to execution

Speaker 3: Thank you. You just talk about the e-commerce. The revenue was up low teens year-over-year. Exclusive brands growing over the next three to five years. Which product categories do you see as the biggest share of wallet gainers within your integrator customer base? Thank you. thank you You just talk about the e-commerce. you just talk about the e-commerce The revenue was up low teens year-over-year. the revenue was up low teens year-over-year Exclusive brands growing over the next three to five years. exclusive brands growing over the next three to five years Which product categories do you see as the biggest share of wallet gainers within your integrator customer base? which product categories do you see as the biggest share of wallet gainers within your integrator customer base

Speaker 2: As we continue to grow, you know, we love the e-commerce business. We think it's easier for our customers, you know, when they buy online, and we've seen a shift. I think this industry has shifted. We all talk about as consumers e-commerce is, like, old, like, you know, Amazon's been around a little while. I think in this industry that purchasing behavior of shifting from either walking into the store or sending a PO in, it really has shifted more in the last three to five years than historically before that, and we do think that's a really important continued piece of the business that will continue to drive that growth. Now again, we don't think about just as e-commerce. It really is the digital experience and the overall omnichannel growth, but that will continue to be a significant part of growth as we look at it. As we continue to grow, you know, we love the e-commerce business. as we continue to grow you know we love the e-commerce business We think it's easier for our customers, you know, when they buy online, and we've seen a shift. we think it's easier for our customers you know when they buy online and we've seen a shift I think this industry has shifted. i think this industry has shifted We all talk about as consumers e-commerce is, like, old, like, you know, Amazon's been around a little while. we all talk about as consumers e-commerce is like old like you know amazon's been around a little while I think in this industry that purchasing behavior of shifting from either walking into the store or sending a PO in, it really has shifted more in the last three to five years than historically before that, and we do think that's a really important continued piece of the business that will continue to drive that growth. i think in this industry that purchasing behavior of shifting from either walking into the store or sending a po in it really has shifted more in the last three to five years than historically before that and we do think that's a really important continued piece of the business that will continue to drive that growth Now again, we don't think about just as e-commerce. now again we don't think about just as e-commerce It really is the digital experience and the overall omnichannel growth, but that will continue to be a significant part of growth as we look at it. it really is the digital experience and the overall omnichannel growth but that will continue to be a significant part of growth as we look at it The overall exclusive brands look, exclusive brands are great. ADI had exclusive brands before the Snap acquisition. They were more in the basic camp I would put in, things that weren't overly complex. I think once we brought ADI and Snap together and we saw the opportunity of some of the things Snap was doing on the residential side, on the more value-enhancing side of the business where you can add a software layer to some products or add some services and support around the products, we think we can do that. What we're focused on right now is continuing to have that product innovation deliver those products within the residential AV market, but how do we leverage that expertise that we have and bring it over to that commercial security side of the business? We wanna do that in a way where we're filling industry gaps, right? The overall exclusive brands look, exclusive brands are great. the overall exclusive brands look exclusive brands are great ADI had exclusive brands before the Snap acquisition. adi had exclusive brands before the snap acquisition They were more in the basic camp I would put in, things that weren't overly complex. they were more in the basic camp i would put in things that weren't overly complex I think once we brought ADI and Snap together and we saw the opportunity of some of the things Snap was doing on the residential side, on the more value-enhancing side of the business where you can add a software layer to some products or add some services and support around the products, we think we can do that. i think once we brought adi and snap together and we saw the opportunity of some of the things snap was doing on the residential side on the more value-enhancing side of the business where you can add a software layer to some products or add some services and support around the products we think we can do that What we're focused on right now is continuing to have that product innovation deliver those products within the residential AV market, but how do we leverage that expertise that we have and bring it over to that commercial security side of the business? We wanna do that in a way where we're filling industry gaps, right? what we're focused on right now is continuing to have that product innovation deliver those products within the residential av market but how do we leverage that expertise that we have and bring it over to that commercial security side of the business? we wanna do that in a way where we're filling industry gaps right We are and will continue to be a business that is primarily focused on distributing other folks' product, our third-party products. Today, you know, sub 20% of our business is our exclusive brands business. In the future, we see that growing to low 20%. You know, we're not talking about shifting this to being 50% exclusive brands or something, but we do think there's opportunities where the market is not being served by the existing product companies, that we could incrementally grow our exclusive brands into the commercial space, continuing to identify the areas in the residential space to do it. There's a bunch of opportunities there. We'll start with one, the WattBox product that we have, that we built for the residential market, has a lot of relevance into the commercial market. We are and will continue to be a business that is primarily focused on distributing other folks' product, our third-party products. we are and will continue to be a business that is primarily focused on distributing other folks' product our third-party products Today, you know, sub 20% of our business is our exclusive brands business. today you know sub 20% of our business is our exclusive brands business In the future, we see that growing to low 20%. in the future we see that growing to low 20% You know, we're not talking about shifting this to being 50% exclusive brands or something, but we do think there's opportunities where the market is not being served by the existing product companies, that we could incrementally grow our exclusive brands into the commercial space, continuing to identify the areas in the residential space to do it. you know we're not talking about shifting this to being 50% exclusive brands or something but we do think there's opportunities where the market is not being served by the existing product companies that we could incrementally grow our exclusive brands into the commercial space continuing to identify the areas in the residential space to do it There's a bunch of opportunities there. there's a bunch of opportunities there We'll start with one, the WattBox product that we have, that we built for the residential market, has a lot of relevance into the commercial market. we'll start with one the wattbox product that we have that we built for the residential market has a lot of relevance into the commercial market It's, you know, IP-enabled power that allows you to remotely access, allows the integrator to remotely access their job, manage the power situation, reset things remotely. There's a lot of things you can do there. The, the lift to get that product commercial ready is not huge. Now, you have to do things like have MFA. Like, you don't need Multi-Factor Authentication in a residential home, but you probably do once you put that in a commercial environment. There are tweaks to the products we need to make, but we think that's a really good one, an easy one to continue that, make that move, and there's other ones as well that we'll continue to look at. Again, it's being done in a way that we don't wanna start competing with our great suppliers. It's, you know, IP-enabled power that allows you to remotely access, allows the integrator to remotely access their job, manage the power situation, reset things remotely. it's you know ip-enabled power that allows you to remotely access allows the integrator to remotely access their job manage the power situation reset things remotely There's a lot of things you can do there. there's a lot of things you can do there The, the lift to get that product commercial ready is not huge. the the lift to get that product commercial ready is not huge Now, you have to do things like have MFA. now you have to do things like have mfa Like, you don't need Multi-Factor Authentication in a residential home, but you probably do once you put that in a commercial environment. like you don't need multi-factor authentication in a residential home but you probably do once you put that in a commercial environment There are tweaks to the products we need to make, but we think that's a really good one, an easy one to continue that, make that move, and there's other ones as well that we'll continue to look at. there are tweaks to the products we need to make but we think that's a really good one an easy one to continue that make that move and there's other ones as well that we'll continue to look at Again, it's being done in a way that we don't wanna start competing with our great suppliers. again it's being done in a way that we don't wanna start competing with our great suppliers We wanna find ways that we can fill in the gaps where they're maybe not meeting the needs that are out there. We wanna find ways that we can fill in the gaps where they're maybe not meeting the needs that are out there. we wanna find ways that we can fill in the gaps where they're maybe not meeting the needs that are out there

Speaker 3: Thank you. Then let's move on the margin side. Mike, if you could talk about the margins for ADI. What are the main delivers for margin expansion at ADI? You mentioned the business transformation actions and margin expansion targets last week, and how do you like Snap One integration, digitalizations, exclusive brands mix contributed to the future probabilities? Thank you. thank you Then let's move on the margin side. then let's move on the margin side Mike, if you could talk about the margins for ADI. mike if you could talk about the margins for adi What are the main delivers for margin expansion at ADI? what are the main delivers for margin expansion at adi You mentioned the business transformation actions and margin expansion targets last week, and how do you like Snap One integration, digitalizations, exclusive brands mix contributed to the future probabilities? you mentioned the business transformation actions and margin expansion targets last week and how do you like snap one integration digitalizations exclusive brands mix contributed to the future probabilities

Speaker 2: Yep. Yep. yep

Speaker 3: Profitability, sorry. Profitability, sorry. profitability sorry

Speaker 2: If you go back and look at Snap and ADI prior to the acquisition, I think pro forma, you know, if you added Snap and ADI together, we were running somewhere around a 7% EBITDA margin. We've actually stepped back from that a little bit over the last couple years. We've seen a little bit of underperformance on the residential AV side of the business from where we expected, and at the same time, at the acquisition, we expected to be making some investments. We've grown our SG&A piece of the business at a rate that's faster than what the top line revenue growth has been. If you go back and look at Snap and ADI prior to the acquisition, I think pro forma, you know, if you added Snap and ADI together, we were running somewhere around a 7% EBITDA margin. if you go back and look at snap and adi prior to the acquisition i think pro forma you know if you added snap and adi together we were running somewhere around a 7% ebitda margin We've actually stepped back from that a little bit over the last couple years. we've actually stepped back from that a little bit over the last couple years We've seen a little bit of underperformance on the residential AV side of the business from where we expected, and at the same time, at the acquisition, we expected to be making some investments. we've seen a little bit of underperformance on the residential av side of the business from where we expected and at the same time at the acquisition we expected to be making some investments We've grown our SG&A piece of the business at a rate that's faster than what the top line revenue growth has been. we've grown our sg&a piece of the business at a rate that's faster than what the top line revenue growth has been As we're sitting here today, you know, the team said, okay, we haven't had quite the revenue growth we expected, therefore we have to fix the cost side of the business a little bit. I think the very first thing that we need to do, and are doing, and will do this year, is just go rightsize the cost base a little bit. Rob and his team are out there today. They've identified tens of millions of dollars of cost saving opportunities that will impact tens of millions of dollars in year. Again, on a full year basis, that will be even more than that. That is going back and identifying those areas that either we've invested a little bit at a rate that's not supported by the growth of the business, or continued synergy and integration. As we're sitting here today, you know, the team said, okay, we haven't had quite the revenue growth we expected, therefore we have to fix the cost side of the business a little bit. as we're sitting here today you know the team said okay we haven't had quite the revenue growth we expected therefore we have to fix the cost side of the business a little bit I think the very first thing that we need to do, and are doing, and will do this year, is just go rightsize the cost base a little bit. i think the very first thing that we need to do and are doing and will do this year is just go rightsize the cost base a little bit Rob and his team are out there today. rob and his team are out there today They've identified tens of millions of dollars of cost saving opportunities that will impact tens of millions of dollars in year. they've identified tens of millions of dollars of cost saving opportunities that will impact tens of millions of dollars in year Again, on a full year basis, that will be even more than that. again on a full year basis that will be even more than that That is going back and identifying those areas that either we've invested a little bit at a rate that's not supported by the growth of the business, or continued synergy and integration. that is going back and identifying those areas that either we've invested a little bit at a rate that's not supported by the growth of the business or continued synergy and integration You know, again, we talked about the geographic footprint, rationalizing that. That's all in there. We feel really good that the first thing we're going to do to drive EBITDA expansion is get back to where we were and a little bit above that by just getting the cost back to right size in light of where the revenue has performed over the last couple years. That's one. Two, you know, we think we're in really good position to continue to grow that revenue. Last half of last year was tough for ADI. You know, we put this once in a generation ERP system in place. You know, again, we talked about the geographic footprint, rationalizing that. you know again we talked about the geographic footprint rationalizing that That's all in there. that's all in there We feel really good that the first thing we're going to do to drive EBITDA expansion is get back to where we were and a little bit above that by just getting the cost back to right size in light of where the revenue has performed over the last couple years. we feel really good that the first thing we're going to do to drive ebitda expansion is get back to where we were and a little bit above that by just getting the cost back to right size in light of where the revenue has performed over the last couple years That's one. that's one Two, you know, we think we're in really good position to continue to grow that revenue. two you know we think we're in really good position to continue to grow that revenue Last half of last year was tough for ADI. last half of last year was tough for adi You know, we put this once in a generation ERP system in place. you know we put this once in a generation erp system in place It went well, right? I think from a technology standpoint, you know, it was a B+. Like, the technology all worked. Like, changing things that people have worked on for, you know, decades, it's tough. I, you know, I started in public accounting in 1989. I remember, you know, Ernst & Whinney, where I started, was a Lotus shop, Arthur Young was a Mac Excel shop, E&Y merged right when I started, all the E people got forced into the Y side and became an Excel shop, and they took the backslash away. Again, that was painful. That's what's been going on in our stores, right, is that sort of transition from a system that people know how to use. It slowed down things at the stores. It went well, right? it went well right I think from a technology standpoint, you know, it was a B +. i think from a technology standpoint you know it was a b + Like, the technology all worked. like the technology all worked Like, changing things that people have worked on for, you know, decades, it's tough. like changing things that people have worked on for you know decades it's tough I, you know, I started in public accounting in 1989. i you know i started in public accounting in 1989 I remember, you know, Ernst & Whinney, where I started, was a Lotus shop, Arthur Young was a Mac Excel shop, E&Y merged right when I started, all the E people got forced into the Y side and became an Excel shop, and they took the backslash away. i remember you know ernst & whinney where i started was a lotus shop arthur young was a mac excel shop e&y merged right when i started all the e people got forced into the y side and became an excel shop and they took the backslash away Again, that was painful. again that was painful That's what's been going on in our stores, right, is that sort of transition from a system that people know how to use. that's what's been going on in our stores right is that sort of transition from a system that people know how to use It slowed down things at the stores. it slowed down things at the stores When it slowed down things at the stores, we had a customer that we had, you know, 90% of their wallet share. They went down the road a couple times, now we still have that customer. We've lost no customers. I'm sure we lost a couple, in total, we've lost no customers. We have lost a little bit of wallet share with some customers who have now spread their spend a little bit. We've got a lot of actions in place to go back and reclaim that lost share. We're doing those right now. Again, Rob and his team very focused on executing against that in the back half of this year. We feel really good about those things. When it slowed down things at the stores, we had a customer that we had, you know, 90% of their wallet share. when it slowed down things at the stores we had a customer that we had you know 90% of their wallet share They went down the road a couple times, now we still have that customer. they went down the road a couple times now we still have that customer We've lost no customers. we've lost no customers I'm sure we lost a couple, in total, we've lost no customers. i'm sure we lost a couple in total we've lost no customers We have lost a little bit of wallet share with some customers who have now spread their spend a little bit. we have lost a little bit of wallet share with some customers who have now spread their spend a little bit We've got a lot of actions in place to go back and reclaim that lost share. we've got a lot of actions in place to go back and reclaim that lost share We're doing those right now. we're doing those right now Again, Rob and his team very focused on executing against that in the back half of this year. again rob and his team very focused on executing against that in the back half of this year We feel really good about those things. we feel really good about those things On top of that, you know, this, the impact of that depression on revenue last year, we're lapping some pretty easy comps in the second half of this year. All that, as you get revenue back to where it should be, helps the margin profile as well. Those are all the short-term things. Just go get them done right now. If you think about our guide for the year, that's all baked. Not totally baked, at least parts of it are baked into the guide. Over the longer term model, once we get that fixed, it really is about those couple things that really drive the scale and the leverage. One, you know, exclusive brands have margins that are 2x-2.5x greater than our exclusive, our third party products. On top of that, you know, this, the impact of that depression on revenue last year, we're lapping some pretty easy comps in the second half of this year. on top of that you know this the impact of that depression on revenue last year we're lapping some pretty easy comps in the second half of this year All that, as you get revenue back to where it should be, helps the margin profile as well. all that as you get revenue back to where it should be helps the margin profile as well Those are all the short-term things. those are all the short-term things Just go get them done right now. just go get them done right now If you think about our guide for the year, that's all baked. if you think about our guide for the year that's all baked Not totally baked, at least parts of it are baked into the guide. not totally baked at least parts of it are baked into the guide Over the longer term model, once we get that fixed, it really is about those couple things that really drive the scale and the leverage. over the longer term model once we get that fixed it really is about those couple things that really drive the scale and the leverage One, you know, exclusive brands have margins that are 2x- 2.5 x greater than our exclusive, our third party products. one you know exclusive brands have margins that are 2x- 2.5 x greater than our exclusive our third party products Like, to the extent we are able to tweak the percentage of sales up on that area, identify areas that we can bring those products to market, drive incremental growth, in those areas, that is very much, accretive to the bottom line from a margin perspective, a margin percentage. E-commerce, as we talked about, just is a higher margin business. It's easier for our customers. It makes us a little bit more money, not because we're charging more, just because at the end of the day, it's a more efficient and effective way of doing business, so that drives a little bit of margin down to the bottom line as well. We're gonna continue to look for other opportunities from the cost standpoint to identify things to do. Like, to the extent we are able to tweak the percentage of sales up on that area, identify areas that we can bring those products to market, drive incremental growth, in those areas, that is very much, accretive to the bottom line from a margin perspective, a margin percentage. like to the extent we are able to tweak the percentage of sales up on that area identify areas that we can bring those products to market drive incremental growth in those areas that is very much accretive to the bottom line from a margin perspective a margin percentage E-commerce, as we talked about, just is a higher margin business. e-commerce as we talked about just is a higher margin business It's easier for our customers. it's easier for our customers It makes us a little bit more money, not because we're charging more, just because at the end of the day, it's a more efficient and effective way of doing business, so that drives a little bit of margin down to the bottom line as well. it makes us a little bit more money not because we're charging more just because at the end of the day it's a more efficient and effective way of doing business so that drives a little bit of margin down to the bottom line as well We're gonna continue to look for other opportunities from the cost standpoint to identify things to do. we're gonna continue to look for other opportunities from the cost standpoint to identify things to do

Speaker 3: Thank you. Thank you. thank you

Speaker 1: One other thing to add, which might be relevant and interesting to the audience is, you know, in the current environment, there's a lot of questions for everybody around inflationary cost pressures. One other thing to add, which might be relevant and interesting to the audience is, you know, in the current environment, there's a lot of questions for everybody around inflationary cost pressures. one other thing to add which might be relevant and interesting to the audience is you know in the current environment there's a lot of questions for everybody around inflationary cost pressures

Speaker 3: Yes. Yes. yes

Speaker 1: You know, I think, you know, let's just address this now 'cause it really covers both ADI and P&S, which is we've told, you know, the public and our customers that we're raising prices in this quarter. When we look at the impact in the second half of the year, we believe those price increases will, you know, cover or more than cover the inflationary cost pressure. I think however, in the second quarter because we are implementing those increases now, there's gonna be a gap in when they attach, and as a result there'll be a little bit of leakage that will impact our bottom line. However, that leakage, as we talked about on the earnings call last week, is immaterial to the total business. You know, I think, you know, let's just address this now 'cause it really covers both ADI and P&S, which is we've told, you know, the public and our customers that we're raising prices in this quarter. you know i think you know let's just address this now 'cause it really covers both adi and p&s which is we've told you know the public and our customers that we're raising prices in this quarter When we look at the impact in the second half of the year, we believe those price increases will, you know, cover or more than cover the inflationary cost pressure. when we look at the impact in the second half of the year we believe those price increases will you know cover or more than cover the inflationary cost pressure I think however, in the second quarter because we are implementing those increases now, there's gonna be a gap in when they attach, and as a result there'll be a little bit of leakage that will impact our bottom line. i think however in the second quarter because we are implementing those increases now there's gonna be a gap in when they attach and as a result there'll be a little bit of leakage that will impact our bottom line However, that leakage, as we talked about on the earnings call last week, is immaterial to the total business. however that leakage as we talked about on the earnings call last week is immaterial to the total business Okay? I think it's important for people to make sure they understand that, because there's, you know, a lot of questions in general about fuel, about commodity costs, and we've been very thoughtful and proactive around not only how we cover it this year, but we're also thinking about next year already. Okay? okay I think it's important for people to make sure they understand that, because there's, you know, a lot of questions in general about fuel, about commodity costs, and we've been very thoughtful and proactive around not only how we cover it this year, but we're also thinking about next year already. i think it's important for people to make sure they understand that because there's you know a lot of questions in general about fuel about commodity costs and we've been very thoughtful and proactive around not only how we cover it this year but we're also thinking about next year already

Speaker 3: Right. Thank you, Chris. The last question's from Mike, ADI. Do you plan to pursue like a further M&A like Snap One? What does the ideal target profile like look like, if any? Right. right Thank you, Chris. thank you chris The last question's from Mike, ADI. the last question's from mike adi Do you plan to pursue like a further M&A like Snap One? do you plan to pursue like a further m&a like snap one What does the ideal target profile like look like, if any? what does the ideal target profile like look like if any

Speaker 2: Yeah. look, the Snap One acquisition is a once in a lifetime, maybe not once in a lifetime, but you know, those sort of transformational things you've got to have such a high level of confidence and underwritability, where you see that much synergy in a transaction. You know, we talked about putting ADI and Snap One together for years. We met Rob, I was on the Snap One side, we met Rob, I think it was 2017, might've been before that. Said, we should put these two businesses together. It took, you know, seven to eight years to get that done, but made a ton of sense. I think those kind of things, you know, they come along very infrequently. That is, we're not planning for those. We're not out there looking, saying, we have to do it. Yeah. look, the Snap One acquisition is a once in a lifetime, maybe not once in a lifetime, but you know, those sort of transformational things you've got to have such a high level of confidence and underwritability, where you see that much synergy in a transaction. yeah look the snap one acquisition is a once in a lifetime maybe not once in a lifetime but you know those sort of transformational things you've got to have such a high level of confidence and underwritability where you see that much synergy in a transaction You know, we talked about putting ADI and Snap One together for years. you know we talked about putting adi and snap one together for years We met Rob, I was on the Snap One side, we met Rob, I think it was 2017, might've been before that. we met rob i was on the snap one side we met rob i think it was 2017 might've been before that Said, we should put these two businesses together. said we should put these two businesses together It took, you know, seven to eight years to get that done, but made a ton of sense. it took you know seven to eight years to get that done but made a ton of sense I think those kind of things, you know, they come along very infrequently. i think those kind of things you know they come along very infrequently That is, we're not planning for those. that is we're not planning for those We're not out there looking, saying, we have to do it. we're not out there looking saying we have to do it I think the M&A that we look at on the ADI side is very much driven by as we think about those growth markets of Pro AV, of datacom, where we don't have all the customers. In the commercial security space, we have all the customers. In the high-end residential AV space, we have all the customers, or at least all the customers that we're gonna get. We can get incremental, but there's no big customer base that we haven't attacked. On those other growth areas, there's a lot of customers out there we don't have. If we can find bolt-on acquisitions, things that make sense, that bring a customer base that we don't have that we could expose to that great execution at ADI, bring them into our ecosystem where we serve the customer really, really well, those are the kind of things we would do. I think the M&A that we look at on the ADI side is very much driven by as we think about those growth markets of Pro AV, of datacom, where we don't have all the customers. i think the m&a that we look at on the adi side is very much driven by as we think about those growth markets of pro av of datacom where we don't have all the customers In the commercial security space, we have all the customers. in the commercial security space we have all the customers In the high-end residential AV space, we have all the customers, or at least all the customers that we're gonna get. in the high-end residential av space we have all the customers or at least all the customers that we're gonna get We can get incremental, but there's no big customer base that we haven't attacked. we can get incremental but there's no big customer base that we haven't attacked On those other growth areas, there's a lot of customers out there we don't have. on those other growth areas there's a lot of customers out there we don't have If we can find bolt-on acquisitions, things that make sense, that bring a customer base that we don't have that we could expose to that great execution at ADI, bring them into our ecosystem where we serve the customer really, really well, those are the kind of things we would do. if we can find bolt-on acquisitions things that make sense that bring a customer base that we don't have that we could expose to that great execution at adi bring them into our ecosystem where we serve the customer really really well those are the kind of things we would do I think similarly at P&S. While we're not looking for customers, because again, we're selling through distribution, we have most of the customers we'd have, if you think about the direct customer being the distributor, the big box, whoever it is we're selling through. What we're thinking about there is where are the adjacent products? Where we're in a category, we're in HVAC, we're the leader in thermostats, but we're not the leader in a lot of other things down there. Now, again, we're not trying to manufacture the whole big unit and system, but where are the things that we can identify that might be bolt-on acquisitions that could augment our existing product platform, that we could go to our existing, you know, distribution network, bring those products in, layer our manufacturing expertise and the other things we're doing on top of it, and bring those. I think similarly at P&S. i think similarly at p&s While we're not looking for customers, because again, we're selling through distribution, we have most of the customers we'd have, if you think about the direct customer being the distributor, the big box, whoever it is we're selling through. while we're not looking for customers because again we're selling through distribution we have most of the customers we'd have if you think about the direct customer being the distributor the big box whoever it is we're selling through What we're thinking about there is where are the adjacent products? what we're thinking about there is where are the adjacent products Where we're in a category, we're in HVAC, we're the leader in thermostats, but we're not the leader in a lot of other things down there. where we're in a category we're in hvac we're the leader in thermostats but we're not the leader in a lot of other things down there Now, again, we're not trying to manufacture the whole big unit and system, but where are the things that we can identify that might be bolt-on acquisitions that could augment our existing product platform, that we could go to our existing, you know, distribution network, bring those products in, layer our manufacturing expertise and the other things we're doing on top of it, and bring those. now again we're not trying to manufacture the whole big unit and system but where are the things that we can identify that might be bolt-on acquisitions that could augment our existing product platform that we could go to our existing you know distribution network bring those products in layer our manufacturing expertise and the other things we're doing on top of it and bring those I think on both sides, you know, we think bolt-on M&A is part of the story, when we have the right leverage levels. Let's start with. You know, we're going out there, we've got a leverage level today that might be a little bit high. Again, from a management standpoint, very comfortable running the company with the leverage it has. The markets don't like, you know, as much leverage as management likes sometimes. I think on both sides, you know, we think bolt-on M&A is part of the story, when we have the right leverage levels. i think on both sides you know we think bolt-on m&a is part of the story when we have the right leverage levels Let's start with. let's start with You know, we're going out there, we've got a leverage level today that might be a little bit high. you know we're going out there we've got a leverage level today that might be a little bit high Again, from a management standpoint, very comfortable running the company with the leverage it has. again from a management standpoint very comfortable running the company with the leverage it has The markets don't like, you know, as much leverage as management likes sometimes. the markets don't like you know as much leverage as management likes sometimes

Speaker 3: Right. Right. right

Speaker 2: We think what we need to get leverage down to, you know, the right market levels. We have to be very focused on both companies post-spin. We'll think about other capital allocation opportunities, whether it's bolt-on M&A, returning capital to shareholders out there. I don't think, you know, transformational M&A is not in anybody's business plan. Not that it's never gonna happen, that's not the plan for either business. There's bolt-on M&A, certainly is. We think what we need to get leverage down to, you know, the right market levels. we think what we need to get leverage down to you know the right market levels We have to be very focused on both companies post-spin. we have to be very focused on both companies post-spin We'll think about other capital allocation opportunities, whether it's bolt-on M&A, returning capital to shareholders out there. we'll think about other capital allocation opportunities whether it's bolt-on m&a returning capital to shareholders out there I don't think, you know, transformational M&A is not in anybody's business plan. i don't think you know transformational m&a is not in anybody's business plan Not that it's never gonna happen, that's not the plan for either business. not that it's never gonna happen that's not the plan for either business There's bolt-on M&A, certainly is. there's bolt-on m&a certainly is

Speaker 3: Thank you. Please, last question. Thank you. thank you Please, last question. please last question

Speaker 4: You know, there's always been this interesting aspect about home automation which is it seems very isolated in pockets. The camera system around the house. You know, the alarm systems. aspects of the kitchen seem like they're now. You know, there was, you know, the automated, vacuuming systems. None, nothing's ever really been like- You know, there's always been this interesting aspect about home automation which is it seems very isolated in pockets. you know there's always been this interesting aspect about home automation which is it seems very isolated in pockets The camera system around the house. the camera system around the house You know, the alarm systems. aspects of the kitchen seem like they're now. you know the alarm systems aspects of the kitchen seem like they're now You know, there was, you know, the automated, vacuuming systems. you know there was you know the automated vacuuming systems None, nothing's ever really been like- none nothing's ever really been like-

Speaker 2: Yeah. Yeah. yeah

Speaker 4: Integrated or connected? Is there something, I mean, is there some magic moment that people are waiting for? Or things that you guys are partnering up with other people about? Integrated or connected? integrated or connected Is there something, I mean, is there some magic moment that people are waiting for? is there something i mean is there some magic moment that people are waiting for Or things that you guys are partnering up with other people about? or things that you guys are partnering up with other people about

Speaker 2: Yeah. Listen, I just moved into a new house two weeks ago. Okay? We'd spent six months remodeling it before I moved in, and I have nothing but, literally almost nothing, well, there might be one, I'm not gonna mention the name. Except Resideo and Snap One product or, you know, ADI product in the house. I was very conscious about that, and it all, I mean, product is great. You know, I have my Resideo First Alert app, which has my HVAC system control. It has my security system, all my smoke and fire is all in that system. I have my Control4 system through ADI, my speakers, my whole, my media over IP that controls all the Like, it's all there, it all works. Now, I could have probably done 75% of that with just disparate systems, disparate apps. Yeah . yeah Listen, I just moved into a new house two weeks ago. listen i just moved into a new house two weeks ago Okay? okay We'd spent six months remodeling it before I moved in, and I have nothing but, literally almost nothing, well, there might be one, I'm not gonna mention the name. we'd spent six months remodeling it before i moved in and i have nothing but literally almost nothing well there might be one i'm not gonna mention the name Except Resideo and Snap One product or, you know, ADI product in the house. except resideo and snap one product or you know adi product in the house I was very conscious about that, and it all, I mean, product is great. i was very conscious about that and it all i mean product is great You know, I have my Resideo First Alert app, which has my HVAC system control. you know i have my resideo first alert app which has my hvac system control It has my security system, all my smoke and fire is all in that system. it has my security system all my smoke and fire is all in that system I have my Control4 system through ADI, my speakers, my whole, my media over IP that controls all the Like, it's all there, it all works. i have my control4 system through adi my speakers my whole my media over ip that controls all the like it's all there it all works Now, I could have probably done 75% of that with just disparate systems, disparate apps. now i could have probably done 75% of that with just disparate systems disparate apps It doesn't have to all be controlled. How many apps do you want on your phone? How do you want? Because I did it all this way, I will tell you there's probably not a house in the U.S. that works as well as my house does on an integrated basis. It's that little bit of incremental. That's what people Because people are like, I want Sonos, or, I want. We sell Sonos. We love Sonos, right It's not native to some of these things. As Matter comes out, we'll continue to participate. As a distributor in exclusive brands, we'll continue to sell products on both the commercial and residential side that customers want. P&S will continue to develop products that operate there and will either be integrated or standalone. It's all gonna work. It works well together. It just works better if you do it together. It doesn't have to all be controlled. it doesn't have to all be controlled How many apps do you want on your phone? how many apps do you want on your phone How do you want? how do you want Because I did it all this way, I will tell you there's probably not a house in the U.S. that works as well as my house does on an integrated basis. because i did it all this way i will tell you there's probably not a house in the u.s that works as well as my house does on an integrated basis It's that little bit of incremental. it's that little bit of incremental That's what people Because people are like, I want Sonos, or, I want. that's what people because people are like i want sonos or i want We sell Sonos. we sell sonos We love Sonos, right It's not native to some of these things. we love sonos right it's not native to some of these things As Matter comes out, we'll continue to participate. as matter comes out we'll continue to participate As a distributor in exclusive brands, we'll continue to sell products on both the commercial and residential side that customers want. as a distributor in exclusive brands we'll continue to sell products on both the commercial and residential side that customers want P&S will continue to develop products that operate there and will either be integrated or standalone. p&s will continue to develop products that operate there and will either be integrated or standalone It's all gonna work. it's all gonna work It works well together. it works well together It just works better if you do it together. it just works better if you do it together It doesn't have to though. I think that's the differentiation. It doesn't have to though. it doesn't have to though I think that's the differentiation. i think that's the differentiation

Speaker 1: Right. To Mike's point, I've been to his house, so I've seen firsthand how well it works. I think. Right. right To Mike's point, I've been to his house, so I've seen firsthand how well it works. to mike's point i've been to his house so i've seen firsthand how well it works I think . i think

Speaker 2: We did have 20 people over a week after we moved in. My wife is not yet over it. We did have 20 people over a week after we moved in. we did have 20 people over a week after we moved in My wife is not yet over it. my wife is not yet over it

Speaker 4: You don't have the Resideo page of the house? You don't have the Resideo page of the house? you don't have the resideo page of the house

Speaker 2: Nope. Nope. Nope. nope Nope. nope

Speaker 4: Like a home environment? Like a home environment? like a home environment

Speaker 1: No. No. no

Speaker 2: Nope. Nope. Nope. nope Nope. nope

Speaker 1: No, let's not go there. I think, look, Mike's house and example's emblematic of the ecosystem. No, let's not go there. no let's not go there I think, look, Mike's house and example's emblematic of the ecosystem. i think look mike's house and example's emblematic of the ecosystem