We'll just go ahead and get started. We do have slides, actually, so this is great. Adam Tyndall, this is part of my connected devices coverage here at Raymond James. Very happy to have Mike Carlet, CFO now of Resideo. You might remember him from a different company last year, so same face, different company. Interesting story. In terms of format, we'd love to keep it interactive, of course. Any questions, feel free to raise your hand as we go. Mike's going to just do three slides to give you a little bit of an overview of the company, and then we'll shift into fireside chat. Cool. Thanks, Adam. Great to see you again. Yeah. Team. So just real high level, just thought for those of you that don't know the Resideo story, thought we'd just, at a very high level, talk about what we are. And Resideo, and I, you know, it's been six years, but it's hard to talk about Resideo without saying it was spun out of Honeywell six years ago. And Honeywell really took two businesses, took ADI, which is the leading global wholesale distributor of security, fire, AV products, and a bunch of, so that was a business that was operating sort of within Honeywell as a standalone business, and then took a number of products within the residential connected space that didn't really fit a number of things. And so let's put this together, spin it off. They did that six years ago. So today, oh, by the way, and as Adam said, they bought my previous company, Snap One, back in June. We closed the deal, announced it in April. And I was lucky enough to meet some of the board members. Tony Trunzo was the CFO of Resideo, and they all thought it'd be a good idea for me to join them. So after a number of conversations, I ended up coming on board with them after the transition. And so these numbers are prior to the Snap acquisition. These are the 2023 numbers. But you look at P&S, the product group, $2.6 billion of revenue, billion of gross profit, very strong business. Brands such as Honeywell Home, First Alert, we'll talk about that in a second. You can see here some strong brands around it. Then the ADI business on that distribution side, $3.6 billion of revenue, $0.7 billion of gross profit. Snap added about $1.1 billion of revenue and another $100 million of EBITDA into these numbers that you see here. Really happy with the business. The business has been performing well. If you flip, Chris, just real quick, you know, a number of brands you might have heard from. Most of P&S and most of Snap were very focused on the residential side of the business. Most of ADI is primarily in commercial. We'll talk more about that as we go. Some of the brands that we have here. Just one more slide. If you just think about why Resideo exists and what do we do, you know, we are very focused on the professional. Both ADI and P&S think about the products that we build and our distribution footprint as serving those professionals that go into residential establishments and commercial establishments and install the products that relate to the technology and the infrastructure of the home. So everything from smoke detectors, fire detectors, security panels, thermostats on the residential side, access control, and then ADI very much on the security surveillance video side of the business as well. So that's how we think about it. I think since we've gotten spun off from Honeywell, the big value creation opportunity that has existed in the company over the last six years has been really driving optimization of performance. When these businesses were spun out, there was a lot of opportunity. There was a ton of opportunity to drive optimization of the gross margin, particularly on the P&S side. And I think you've seen real good execution on that over the last couple of years. And then as we just think about the overall home, the business cycle, the tailwinds that are out there now from residential housing coming back, and then just think about over time, we believe that there'll be more professionals with more technology and more homes. And we think we will be the best company that's positioned to serve those professionals to make sure they have the products they need and the services they need to be successful in how they install and support that technology. So that's the basic overview, and we can dive into it later. And Chris, thanks for getting the slides pulled up. Yes. So why don't we start maybe just high level demand, and we'll get into some of the more specifics on the story. But, you know, our audience here at the conference is both consumer and tech investors, so you have a good perspective on both. As we enter holiday season and kind of, you know, finish out with Black Friday and all that, what are you seeing from a macro perspective? And, you know, curious if there's any notable differences between the ADI side and the product side on demand trends. Yep. Definitely differences. And the product business is interesting because we have four lines of businesses, and there's really some different demand factors as you think about what goes through there. We have everything from selling, you know, smoke detectors at Lowe's to consumers to lots of professionals to selling OEM products to, you know, water boiler manufacturers. And so there's a variety of demand factors that are out there. But I think globally what we would say is that, you know, the main drives of our business are going to be on the residential new home building and remodel activity piece. New home building seems to be getting a good little bounce, not significant, but it's certainly off the troughs that we've seen. Most of our products actually go in at the tail end of a new home construction. So if you think about everything from a, you know, three-month to a six-month to a year-long construction project, our stuff is going to be the stuff that goes in the last month or so as those get done. We're not putting the trusses in place, and so we're seeing some of those impacts are out there positively. I think the resale market is still very compressed, and a lot of this activity happens when you buy a new home and then remodel it. We have not seen any positive movement there, but overall, the remodel market that's not tied to resale seems to be doing okay, so all that residential thing, we think we bounced off the trough. We think we're still at a relative low point, and we think there's positivity ahead as we're out there. Commercial has been doing pretty good. The commercial market, we've seen, you know, growth in that market. Some of that growth driven by share capture at the ADI side, but also just seeing there's some low levels of growth within that commercial. Mostly the office piece is, you know, that's the main piece that we serve into. Yep. And then how about, you know, because you have a global business here, any difference in trends on domestic versus international? Yeah. EMEA has been one of the more challenging markets. That's where a lot of our global climate solutions or some of the OEM products is. So that has been somewhat constrained by lots of changes in regulatory. That's a very regulatory driven market where people, where some of the governments have added regulation and taken away, and so there's some confusion. I think outside of that piece, I think the trends in EMEA are not significantly different than we're seeing domestically. Okay. And then I guess now kind of getting a little bit more into the specifics of the story, Resideo acquiring Snap One, you know, massive deal. Aside from gaining an excellent CFO, and I think Chris wrote this part of the question. Hold on, I'm looking at $20. Maybe just talk about the strategic and financial merits to this merger. Yeah. It's funny. We met the Snap One team at the Snap AV team at the time. I met Rob Aarnes, who runs ADI back when it was still part of Honeywell. And back in 2017, Snap was going through a transaction. We were owned by General Atlantic. We were going through a sales process. Hellman & Friedman ended up buying it. But through that process, we met Rob, spent some time talking to him, talking about ADI, and came out of that meeting, and this was in 2017, and said, "Boy, it'd be great if we could find a way to put these two companies together." The synergistic value, we both had the same philosophy about supporting the professionals. ADI much more focused on commercial, Snap much more focused on residential. Both of us thinking about it, Snap more digitally oriented, ADI more brick and mortar oriented. But they were moving into digital. We were moving into brick and mortar. We were trying to get into commercial. They were trying to get into residential. And so after seven years of off and on again conversations, you know, we were able to consummate that transaction. And I think that synergistic fit has been everything that we thought it would be. You know, there's tons of cost synergy, but there's lots of revenue synergy, there's margin synergy. And ultimately, you know, while we will continue to be the best distribution partner to our third party suppliers of product, Snap was very much focused on what we call Exclusive Brands, we just call proprietary products, our own brands. And we still think that opportunity is there to take more of those exclusive branded products where we had higher margins and sell them through that much bigger footprint. Snap had 20,000 customers. ADI has over 100,000 customers, and so exposing that additional customer base to those products, we think creates even more opportunity. We went out and said there's $75 million of synergy at three years at the time of the deal, and we remain highly confident in those numbers. You think about Snap's EBITDA of $100 million, you know, that's a pretty good synergistic layer on top of it. We think the deal is doing everything that we hoped it would. I'm going to ask one more and continue on that thought, then I'm going to pause for audience questions here. But how far along is the integration and maybe even taking a step back? What were the growth and margin profiles of Resideo and obviously I knew Snap, but just to cover that separately, and how are you thinking about what growth and margins could look like together? Yep. So first, how's it going? I think we are well. We're done with the people aspects, which is the most important aspects, right? The ADI Global leadership team under Rob, I think has. I might be off by one person, but has eight people, and five of them are ADI, three of them are legacy Snap. The legacy Snap Chief Product Officer, Chief Revenue Officer, and Chief Operating Officer all still are now part of the ADI leadership team, so they really are thinking about almost as new code, so take the best of breed of both companies, bring them together, and let's operate this brand together. Resideo, you for me. Yeah, I'm in Resideo. I'm up in Resideo. Now I'm around. I pay attention to it. And so that's going well. We've gotten the whole sort of organization brought together, which is the most important thing. And I think that's, you know, operating right there. Now, it'll be a longer put to do the other two things that really need to be done. One is the technology aspects. You know, one of the problems Snap had, and we were talking about this, is we did a bunch of M&A, and we did not have the technology platform to consolidate everything onto because as we were growing, there were different business models. ADI has done a really good job of having those models, and they've already been in the midst of a replatforming of a lot of their technology. And so it's easier to just fit Snap into that. Now it's not going to be done tomorrow, but there's already great progress on that aspect, and I think you'll see really good bringing the websites together, bringing the technology platform. And then the other big long putt is going to be the real estate footprint, which will probably be; that's why it's going to be three years to get all the synergy. There's two stores in a market. There's an ADI store. There's a Snap store. We only need one store in that market. I think there's 150-ish, 145 total locations. ADI had about 105, 110 prior to the transaction. We don't need many more than that. They were in almost every market. But as we consolidate, we might need to go to a new location because it has to have the right footprint now to support all the products that are there. And so, going through that transition, great plans. We've got our first co-branded or co-located or complete Store of the Future, whatever you want to call it, open, and it's going really well. And we're going to continue to do that, to bring the footprint together. That's going to take about three years. I think from a margin profile perspective, you know, it's interesting. Snap had bought all these distribution businesses back in 2018 and 2019 and really got into that piece of it. The ADI model is the most efficient distribution business that existed within, you know, our segment. And so ADI would be typically operating about an 8% EBITDA margin, between 7%-8%, up to bump up a bit. Yeah. And they did a good job. Typically, you know, gross margins as you would expect around that. I think Snap had higher EBITDA margins in the low double digits. We thought there was opportunity to continue to grow that up. Back in the days before we had started going into the local distribution, Snap's gross EBITDA margins were close to 20%. It's because the gross margin on the proprietary product on those Exclusive Brands, you know, typically will be up in the 50% range, or on third party products, you know, down high teens, low twenties type of ranges. Again, all depend upon the product line that you're in. Again, we think that opportunity continues to exist to drive margins forward. Questions so far? We're not going to feed you lunch if you don't ask. I'll make sure you get lunch. All right. I'll keep going. You know, this merger brings together two large competitors, you know, and have obviously a very strong competitive market position after this. I guess what changes have you seen or do you expect to see in the competitive environment around you now? You know, it's interesting. While ADI and Snap were competitors, we weren't, we didn't view ourselves as our most important direct competitor. Again, ADI very much focused on commercial and security. Snap very much focused on residential and audio video. And so, you know, that's why we think this may be, and we were both looking to grow into the other's territory. So as we went forward, it was clear that we were going to be more competitive in the future, but where it existed today, not totally competitors. And most, a lot of Snap customers bought from ADI. Of the 20,000 Snap customers, over half of them were already ADI customers. And so they were making decisions. I think from our standpoint, you know, we think that combined, we are an even better strategic partner to those professionals. We think we have the best tools for them. We have the best website. We have the best brick and mortar footprint to serve them. We'll continue to be the preferred choice. We continue to see a move to digital. I think we're winning. ADI even before the transaction was doing a really good job expanding their digital presence. And I think the industry we're in has, you know, lagged the general population in changing buying habits to move to digital, but we're clearly seeing that accelerate right now. Really well positioned to do that. And I think other than that, you know, on the product side, we're in a lot of different categories, and we will continue to compete with various competitors, you know, in every one of the exclusive brand categories we're in, and we'll try to be the best competitor we can be. One of the competitors that seems to always come up in just covering connected home over the years is, of course, Amazon, you know, with Ring and their whole ecosystem, and then Google with Nest in that ecosystem. Maybe the question would be, how do you and the board in particular see their place in the market, and how do you think about this evolving in the coming years? Yeah. First of all, we like those companies. We think they're good products. We distribute most of those products, and we did that at Snap, and we do it at ADI. And so there's a place that, and professionals will choose to install those products for the right application. The big tech companies are not focused on what the professionals need to deliver the best home experience. It's not where they're deploying capital. It's not how they think about it. And so if you think of a professional coming in that wants to be able to install a system in your home, and this is not entry level homes, and again, I'm talking more on the ADI Snap side of the equation here, you know, so it might be that you just want a Nest thermostat and a Ring doorbell, and maybe you put eero networking, and you need somebody to help hang a TV and you sort of put that in. There's nothing wrong with that. We think that's great. It introduces you to the opportunities for technology that are there. And then as you talk to that professional or another professional, as you grow with that technology, you want more connectivity, more devices. You might have five smart lights, but you want all of your lighting to be smart. You might have, you know, a surveillance camera or a Ring doorbell, but you really want five cameras around your house that are going to be on your roofs. And, you know, you don't want to go to the SimpliSafe route and just start, you know, having to install all this stuff yourself. And it goes back to this combination of products and service that the professional provides. And the professional wants the products that they can install easily, they can support easily, and allow them to be profitable. That's where we focus our efforts to continue to provide that solution. I think on the P&S side, it's not dissimilar. Now it's much more product oriented. We're not selling direct to the professionals. We're selling through channel partners, but whether it's on the security panel side, whether it's on the thermostat side, whether it's on the fire and safety side, it's all the same philosophy of bringing those things to market. Got it. And as we think about recent performance of the business, Q3, the quarter that you just reported, was the first quarter since the second quarter of 2022 that saw organic growth in P&S and ADI. Yep. Maybe just talk about that turn. Hey, that's right. That's right. It must have been you coming on board. Not me. Just talk about what drove that performance and maybe sustainability of that trend. Yeah. I think there's a couple of things. A, we talked about that little bounce from home building. And so we're clearly seeing that benefit. I think the commercial business, again, is doing a little bit better. I think we are clearly capturing share at ADI from a, you know, digital experience standpoint. And we continue to benefit on the P&S side a little bit from price. Now, I think going forward, you know, we think our products are adequately priced. You're always going to get a little bit of price in there. But we think we've really turned the corner on some of the volume aspects. We've been fighting channel inventory for years. We think inventory now is at the normalized levels. You know, I go back, this has been an issue in a lot of companies. I think most, not all, have sort of reached close to a new normal. And I think we're just back to the normal sell in, sell through noise. It's going to bounce. It's never going to be flat. It's always going to bounce around. But I think we are relatively close to normalized levels right now, which is great for all of us. We can actually look at underlying business performance. And I think that has gotten to the point now where last year there was still inventory coming out. We're going against easier comps. And again, this is all on the fringe, but I think that's also having some positive impacts. Yeah. We literally just heard that from one of my last connected home companies. Sell in and sell through is kind of starting to match finally. Okay. Good. I do want to talk about the impact that that has on cash and cash flow as you work down working capital. But before I get there, let me just pause. Any other questions that have come up? Quiet group. I know. We're shy. All right. I'll keep going. So on cash and cash flow, so converting cash above 100% over the last four years, over $400 million of free cash flow on a trailing 12-month basis. Those are big numbers. You've got $530 million of cash with almost $2 billion of debt. So I kind of answered a lot of the questions on capital structure and stuff for you. Didn't have to memorize those. Yep. Maybe just talk about how you view capital structure and capital allocation priorities. Yeah. I think that, you know, the philosophy that the company's had, which I'm very supportive of, is, you know, we want to think about our debt as relatively investment grade. Now, we're not shooting for an investment grade rating on the debt that comes with some, you know, handcuffs about optionality, about what you might or might not be able to do. But we want to operate as we think about investment grade-ish type of debt levels. That's around 2x leverage. You know, we'll lever up there to do the deal. We added leverage to go get the Snap deal done. If you look at our bank covenants, you know, we're below 2x leverage. Now, covenants, as we all know, have lots of adjustments in them. But you know, we think about it from that standpoint that we have clarity that we can, you know, be operating at 2x leverage in the reasonable timeframe. As you said, we have $500 million of cash. We're generating a lot of cash. By, you know, this time, 12-18 months from now, we'll be at that leverage level. And I think at that point, you know, we will continue to look for M&A opportunities. If they look like the Snap deal with seven years of dating and, you know, synergy equal to 75% of EBITDA. And, you know, I can argue this either from the Resideo point or the Snap point, but, you know, didn't have to pay a significant premium to what the stock price was. There was a premium, obviously. But I think they did a great job negotiating. It was the best deal out there. The board made a decision to do it, which was great. But I think if you can do those things, buy it at the right price, have lots of synergy that other people can't realize, see the cultural fit, see the opportunity to bring it together, like we'll look for those type of deals. But, you know, there's not, that's not a deal of a week, right? Those will be few and far between. And if we don't see those deals, we'll think about what to do with that excess cash, pay down debt, return it to shareholders, and we'll get there. But we think there's those type of opportunities out there that we could execute against. Great. And, you know, moving to margins, on the last earnings call, you mentioned lots of opportunity for gross margin accretion, particularly on the P&S side. Continuing to think about new product innovation. Just talk about the levers to drive margin up and which areas of the market that you're prioritizing for innovation. Yep. I think, you know, what the company has done over the last three or four years, as we've talked about, you know, the focus has been to fix the operations of the business, improve the operations of the business. That has really been about optimizing the manufacturing base, supply chain on the P&S side of the business. And I think we now have six quarters of consecutive year-over-year gross margin improvement. We're up, you know, hundreds of basis points year-over-year the last, you know, few quarters. And while I think the growth will slow down, it's not going to stop. We still have those opportunities just with the existing product suite as we think about factory utilization and the opportunities that exist there. Some of that's just driven by volume. So as the cycle turns a little bit, we get a little bit more volume. If you see volume grow, those things will be directly correlated. More volume equals better margin. Less volume, you know, margins will get impacted a little bit. So that has a continued tailwind for the next few years to continue to see growth there. And then I think as we talk about the NPI initiatives that we have, where do we invest? Where do we deserve to win? Where can we bring new products to market that have that incremental value proposition that can drive some incremental margin as well? Are the evaluations we're going through as we look at NPI? Got it. From a management perspective, obviously you've taken on the CFO seat. Jay, your CEO, announced his intention to retire as CEO in 2025. Maybe just talk about what the company's looking for in a successor. Yeah. It's interesting. As I've gotten there and as I went through my process of evaluating the opportunity and really learning about Resideo, what Resideo is, is two strong operating businesses. You've got ADI, you've got P&S. There's a very strong customer-supplier relationship between those two businesses. Roughly 15% of what P&S sells, they sell through ADI. Likewise, you know, mid-teens of what ADI sells is P&S product. But it's very much a customer-supplier relationship. And other than that, the businesses operate very standalone. Rob has run ADI since it's been at Honeywell, sort of standalone. What Jay and the team added a lot of value over the last four years has been driving this operational improvement at the P&S side. About a little bit over a year ago, about a year ago now, we brought in a new leader on the P&S side, the business, Tom. And so Tom has taken really the reins of that. And so as I stepped in and looked at the business, you've got Tom and Rob running their two businesses, you know, very strongly. Good performance. As long as that good performance continues, you know, that's there. We've had them on our last two earnings calls. You can hear them speak. They're both really strong operators and really strong leaders for their businesses. And so as we think about Resideo, if we have those two strong operating businesses, as the board evaluates, you know, what do we need in a CEO? You know, they'll make a decision as to how we think about Resideo and where it is, capital deployment decisions, M&A opportunities, making sure we don't lose sight of those two good, strong operating businesses and we keep the pressure on to grow them. But I think those are the basic blocking and tackling things that'll be out there. I'm sure you get this question, and I'm going off script here, but because of the two different businesses, I mean, is there a thought to potentially operate them independently, separate them with some of the P&S argument? You know, what would be the pros and cons to that? Yeah. I think first, from a valuation standpoint, I think it is sum of the parts argument. Again, I think the company over the years, there's some vertical integration, there's some shared services. Those opportunities are there, but it very much is two separate operating businesses. In fact, we're going through our budget process. We're trying to get our budget deck out to the board tonight. And it really is just two separate budgets with a consolidated. So if it's a 50-slide budget deck, there's six slides that are the consolidated entity and 45 slides of the, you know, 25 on each, 25 on each of the separate businesses. That's the way the mentality works. You know, who owns it? We own it. Honeywell spun it off. There are some complications around this. There's this thing you might or might not know about called the Honeywell Liability. Yeah, I know you know it. I'm not sure everybody does. It's a pain. You know, I think when Honeywell spun it off, they did some financial engineering. There's a 30-second conversation about this liability. It drives everybody crazy. And I will say all you need to think about is this: ignore everything in the financial statements about it. Pull everything related to the Honeywell liability out of the financial statements, the balance sheet, the P&L. Ignore all of it. Do whatever modeling you want to do. And after you're done with your modeling, at the very bottom, say minus $35 million every single quarter for the next 18 years to pay Honeywell under this liability. It just is what it is. It's a fixed payment. It's cash flow. It's not deductible for taxes. It just is what it is. That's the short version. Now, we can spend two hours. Three Q. Yep. Predates everybody. You know, it's the way they got spun off, and so that puts some restrictions on what we can and can't do with the businesses. So is there an opportunity at some point to maybe separate them if we thought it was the right thing to do? That opportunity might be there. It would take a lot to get it done. I'm not going to say it's impossible. I'm not going to say it's the right thing to do, so I think there's still even, you know, you do have that customer supplier. There are definitely synergies there. It's almost like we would do it if we could, but right now we can't. Maybe in the future, if we can, we'll consider it, but right now, you know, it's not something that's going to happen imminently. We're going to run these two businesses the way they are. Makes sense. Just to wrap up here, and it's been a great conversation. Appreciate it. What's top of mind? You said you're doing, you know, a big budget slide deck and kind of, you know, knee-deep in it. What's top of mind as you look to 2025 and beyond and the key message that you want to leave investors with today? Yeah. First, I think, you know, the story is not different than it's been at Resideo for the last few years. It's continued execution. This isn't a transformative business. The company operates well. We've had good performance. P&S will continue to drive margin. On ADI, it's all about integrating Snap One and doing it well, which has been going really well so far. So continuing that execution is the most important thing. If we do nothing else, make sure that happens. We can't control the cycle, but we can control our execution and go do that. Two, I think, you know, listen, I think that because of the focus on execution, growth has not really been a big part of the Resideo story. And so I think one thing that we're at least leaning into a little bit now is like, let's at least make little G part of the story going forward. Where do we invest in NPI? Where do we deserve to win? How do we think about, you know, new product launches? If we had, you know, if we're growing gross margins this much, is there an opportunity to take a little bit of that and reinvest it into some R&D, some sales and marketing that drives future growth? You know, not all of it by any stretch, not even, you know, a significant part of it, but at least some of it to think about that reinvestment, which is not really the way the company has overly thought in the past. We're considering how do we add that layer of conversation in, continue to generate, you know, strong cash flow. I think like everybody trying to understand what this new administration is going to do, if there's any risk or exposure or opportunity around, you know, however that's going to change the world we operate in, is obviously we're contingency planning for things that are unknowable at this time. Right. All All right. Sounds good, Mike. Really appreciate it. Thanks for joining us. Thanks, Adam. Appreciate it.