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What changed in RESIDEO TECHNOLOGIES, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RESIDEO TECHNOLOGIES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+360 added−260 removedSource: 10-K (2024-02-14) vs 10-K (2023-02-21)

Top changes in RESIDEO TECHNOLOGIES, INC.'s 2023 10-K

360 paragraphs added · 260 removed · 78 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeDiversity is a key component of service level agreements we maintain with our recruiting process outsourcing (“RPO”) partners to ensure they are accountable and meet our sourcing standards. We maintained our diverse slate guidelines for career level 5+ roles requiring that interview slates include female and/or racially/ethnically diverse candidates, except in rare circumstances. 5 Table of Contents Resideo Technologies, Inc.
Biggest changeAdditionally, we maintained our diverse slate guidelines for career level 5+ roles requiring that interview slates include female and/or racially/ethnically diverse candidates, except in rare circumstances. Talent Acquisition, Management and Development : We have a robust recruiting model to attract all levels of talent across the regions where we operate.
Regulatory and Environmental Compliance and Regulatory Capital Expenditures We are subject to various federal, state, local, and foreign government requirements relating to environmental health and safety protection standards and permitting, labeling and other requirements regarding, among other things, electronic and wireless communications, air emissions, wastewater discharges, the use, handling, and disposal of hazardous or toxic materials, remediation of environmental contamination, data privacy and security, telemarketing, email marketing, other forms of online advertising and consumer protection, licensing, working conditions for and compensation of our employees and others.
Regulatory and Environmental Compliance and Regulatory Capital Expenditures We are subject to various federal, state, local, and foreign government requirements relating to environmental health and safety protection standards and permitting, labeling and other requirements regarding, among other things, electronic and wireless communications, air emissions, wastewater discharges, the use, handling, and disposal of hazardous or toxic materials, remediation of environmental contamination, data privacy and security, cybersecurity, telemarketing, email marketing, other forms of online advertising and consumer protection, licensing, working conditions for and compensation of our employees and others.
Culture : In 2022, we continued to reinforce our four Core Values: • Start with the Customer: We understand our customers’ needs and pride ourselves on delivering exceptional experiences; • Act as One Team: We work together toward common goals, engaging from a place of humility and respect; • Pioneer the Future: We embrace change, boldly step into the unknown, and relentlessly foster innovation to fuel our growth; and • Make a Difference: We care about the long-lasting, positive impact we make on each other, our customers, our communities, and the planet.
Culture : In 2023, we continued to reinforce our four Core Values: • Start with the Customer: We understand our customers’ needs and pride ourselves on delivering exceptional experiences; • Act as One Team: We work together toward common goals, engaging from a place of humility and respect; • Pioneer the Future: We embrace change, boldly step into the unknown, and relentlessly foster innovation to fuel our growth; and • Make a Difference: We care about the long-lasting, positive impact we make on each other, our customers, our communities, and the planet.
Research and Development and Intellectual Property We have major product design centers in the U.S., Europe, Asia, and Latin America and software centers of excellence in Austin, Texas; Bengaluru, India; and Melville, New York. In addition, our laboratories are certified to meet various industry standards, such as FCC and UL, enabling us to test and certify products internally.
Research and Development and Intellectual Property We have major product design centers in the U.S., Europe, Asia, and Latin America and software centers of excellence in Bengaluru, India and Melville, New York. In addition, our laboratories are certified to meet various industry standards, such as FCC and UL, enabling us to test and certify products internally.
Our common stock began trading “regular way” under the ticker symbol “REZI” on the NYSE on October 29, 2018. Description of Business Resideo is a leading global manufacturer and developer of technology-driven products and components that provide critical comfort, energy management, and safety and security solutions to over 150 million homes globally.
Our common stock began trading “regular way” under the ticker symbol “REZI” on the NYSE on October 29, 2018. Description of Business Resideo is a leading global manufacturer and developer of technology-driven products and solutions that provide critical comfort, energy management, water management, and safety and security solutions to over 150 million homes globally.
All of the reports that we file or furnish with the SEC are also available on the SEC’s website (www.sec.gov). In addition, in this Form 10-K, we incorporate by reference certain information from parts of our Proxy Statement for the 2023 Annual Meeting of Shareholders, which will also be available free of charge on our website.
All of the reports that we file or furnish with the SEC are also available on the SEC’s website (www.sec.gov). In addition, in this Form 10-K, we incorporate by reference certain information from parts of our Proxy Statement for the 2024 Annual Meeting of Shareholders, which will also be available free of charge on our website.
Our deep domain expertise, proprietary technology and brands are protected by a combination of patents, trademarks, copyrights, trade secrets, non-disclosure agreements, and contractual provisions. We own approximately 2,400 worldwide active patents and pending patent applications to protect our research and development investments in new products and services.
Our deep domain expertise, proprietary technology and brands are protected by a combination of patents, trademarks, copyrights, trade secrets, non-disclosure agreements, and contractual provisions. We own approximately 2,800 worldwide active patents and pending patent applications to protect our research and development investments in new products and services.
Our offerings include temperature and humidity control, thermal and combustion solutions, water and indoor air quality solutions, smoke and carbon monoxide detection home safety products and fire suppression products, security panels, sensors, peripherals, wire and cable, communications devices, video cameras, other home-related lifestyle convenience solutions, cloud infrastructure, installation and maintenance tools, and related software.
Our offerings include temperature and humidity control, thermal and combustion solutions, water and indoor air quality solutions, smoke and carbon monoxide detection home safety products and fire suppression products, security panels, sensors, peripherals, communications devices, video cameras, other home-related lifestyle convenience solutions, cloud infrastructure, installation and maintenance tools, and related software.
Diversity, Equity, Inclusion and Belonging (“DEIB”) : We are committed to creating a diverse, equitable and inclusive working environment where individuals feel a sense of belonging. This year, we expanded our Diversity, Equity, Inclusion narrative to include “belonging” to ensure we not only have a diverse and inclusive culture, but our people feel connected to our organization.
Diversity, Equity, Inclusion and Belonging (“DEIB”) : We are committed to creating a diverse, equitable and inclusive working environment where individuals feel a sense of belonging. Last year, we expanded our Diversity, Equity, Inclusion narrative to include “belonging” to ensure we not only have a diverse and inclusive culture, but our people feel connected to our organization.
Factors influencing our competitive position in the industry include product and service innovation, our reputation and the reputation of our brands, sales and marketing programs, product performance, reliability and warranty, quality and breadth of product training and events, product availability, speed and accuracy of delivery, service and price, technical support, and credit availability.
Factors influencing our competitive position in the industry include product and service innovation, our reputation and the reputation of our brands, sales and marketing programs, customer relationships, product performance, reliability and warranty, quality and breadth of product training and events, product availability, speed and accuracy of delivery, service and price, technical support, and credit availability.
We use these channels to communicate with our shareholders and the public about us, our products, solutions and other issues. It is possible that the information we post on social media could be deemed to be material information.
We use these channels to communicate with our stockholders and the public about us, our products, solutions and other issues. It is possible that the information we post on social media could be deemed to be material information.
Products and Solutions : Our comfort, energy management and safety and security products and solutions benefit from the trusted, well-established Honeywell Home brand as well as key branded offerings such as Resideo, Braukmann, First Alert, BRK, and others.
Products and Solutions : Our products and solutions for comfort, energy management, safety and security benefit from the trusted, well-established key branded offerings such as Honeywell Home, First Alert, Resideo, Braukmann, BRK, and others.
Other Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports are available free of charge on our website (www.Resideo.com) under the heading Investors (see SEC Filings) immediately after they are filed with, or furnished to, the SEC.
Other Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports are available free of charge on our website (www.Resideo.com) under the heading Investors (see SEC Filings) immediately after they are filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
At the end of 2022 our global Total Case Incident Rate or “TCIR” (the number of occupational injuries and illnesses per 100 employees) was 0.28. We monitor our safety through a balanced scorecard of key performance indicators.
At the end of 2023 our global Total Case Incident Rate or “TCIR” (the number of occupational injuries and illnesses per 100 employees) was 0.37. We monitor our safety through a balanced scorecard of key performance indicators.
We also have a user experience design group that consists of researchers and product and user experience designers aligned with development sites with the primary studios in Golden Valley, Minnesota. As of December 31, 2022, we employed approximately 940 engineers.
We also have a user experience design group that consists of researchers and product and user experience designers aligned with development sites with the primary studios in Golden Valley, Minnesota. As of December 31, 2023, we employed approximately 898 engineers.
Our business may also be affected by changes in governmental regulation of energy efficiency and conservation standards and product safety regulations. These and other laws and regulations impact the manner in which we conduct our business, and changes in legislation or government policies can affect our worldwide operations, both favorably and unfavorably.
Our business may also be affected by changes in governmental regulation of energy efficiency and conservation standards and product safety regulations. These and other laws and regulations impact the 4 Table of Contents Resideo Technologies, Inc. manner in which we conduct our business, and changes in legislation or government policies can affect our worldwide operations, both favorably and unfavorably.
Through our whole home presence on the wall and behind the wall, we are an enabler of home connectivity with approximately 10.9 million connected customers. Our connected solutions harness this data to provide control, visibility, insights, and alerts to the end user.
Through our whole home presence on the wall and behind the wall, we are an enabler of home connectivity with approximately 11.6 million connected customers. Our connected solutions harness data to provide control, visibility, insights, and alerts to the end user.
We 3 Table of Contents Resideo Technologies, Inc. continue to provide value-added services including presales system design, 24/7 order pick-up, and the selective introduction of new product categories such as professional audio-visual.
We continue to provide value-added services including presales system design, 24/7 order pick-up, and the selective introduction of new product categories. 3 Table of Contents Resideo Technologies, Inc.
For a more detailed description of the various laws and regulations that affect our business, refer to Item 1A. Risk Factors . 4 Table of Contents Resideo Technologies, Inc. Our efforts to comply with numerous federal, state, and local laws and regulations applicable to our business and products often results in capital expenditures.
For a more detailed description of the various laws and regulations that affect our business, refer to Item 1A. Risk Factors . Our efforts to comply with numerous federal, state, and local laws and regulations applicable to our business and products often results in capital expenditures.
The effects of climate change, such as extreme weather conditions and events and water scarcity, may exacerbate fluctuations in typical weather patterns, creating financial risks to our business. In addition, the dynamic global and macro economic conditions may further disrupt these seasonal patterns. 6 Table of Contents Resideo Technologies, Inc.
The effects of climate change, such as extreme weather conditions and events and water scarcity, may exacerbate fluctuations in typical weather patterns, creating financial risks to our business. In addition, the dynamic global and macro-economic conditions may further disrupt these seasonal patterns.
Through nearly 200 stocking locations in 16 countries, ADI Global Distribution distributes more than 350,000 products from over 1,000 manufacturers to a customer base of approximately 100,000 professionals and is recognized for superior customer service. We believe this global footprint gives us distinct scale and network advantages in our core products over our competitors.
Through nearly 200 stocking locations in 13 countries, ADI Global Distribution distributes more than 450 thousand products from over one thousand manufacturers to a customer base of approximately 100 thousand professionals and is recognized for superior customer service. We believe this global footprint gives us distinct scale and network advantages in our core products over our competitors.
Sales activity is generally highest in the fall and early winter months, reflecting increased customer purchases of heating related products with the highest sales at the end of the third quarter and throughout the fourth quarter in the majority of our geographical markets.
Sales activity is generally highest in the fall and early winter months, reflecting increased customer purchases of heating related products with the 6 Table of Contents Resideo Technologies, Inc. highest sales at the end of the third quarter and throughout the fourth quarter in the majority of our geographical markets.
Each ERG is sponsored and supported by a senior leader of the company and our ERGs have held conversations with our executive leadership to discuss ideas for improving our culture of inclusion and belonging. Each ERG has increased membership in 2022. Our corporate functions and business units continue to track progress with respect to our diversity and inclusion initiatives.
Each ERG is sponsored and supported by a senior leader of the company and have held conversations with our executive leadership to discuss ideas for improving our culture of inclusion and belonging. Our corporate functions and business units continue to track progress with respect to our diversity and inclusion initiatives. Diversity is a core component of our recruiting strategy.
Health and Safety : Our commitment to providing a safe and healthy workplace for all employees continued throughout 2022 demonstrated by progress towards full ISO 14001:2015 and ISO 45001:2018 certification with a total of 7 manufacturing locations now certified to ISO 14001:2015 and 6 manufacturing locations certified to ISO 45001:2018.
Health and Safety : Our commitment to providing a safe and healthy workplace for all employees continued throughout 2023 demonstrated by progress towards full ISO 14001:2015 and ISO 45001:2018 certification with a total of 10 manufacturing locations now certified to ISO 14001:2015, 8 manufacturing locations certified to ISO 45001:2018, and 4 manufacturing sites certified to ISO 50001:2018.
The Company’s News Page (https://www.Resideo.com/news) The Company’s Facebook Page (www.facebook.com/Resideo) The Company’s Twitter Feed (https://twitter.com/Resideo) The Company’s LinkedIn Feed (https://www.linkedin.com/company/Resideo1/) References to our website and other social media channels are made as inactive textual references and information contained on them is not incorporated by reference into this Annual Report.
The Company’s News Page (https://www.Resideo.com/news) The Company’s Facebook Page (www.facebook.com/Resideo) The Company’s Twitter Feed (https://twitter.com/Resideo) The Company’s LinkedIn Feed (https://www.linkedin.com/company/Resideo1/) References to our website and other social media channels are made as inactive textual references and information contained on them is not incorporated by reference into this Form 10-K. 7 Table of Contents Resideo Technologies, Inc.
We deliver value to our customers via two business segments, Products and Solutions and ADI Global Distribution, which respectively contributed 43.7% and 56.3% of our net revenue for the year ended December 31, 2022. Our primary focus is on the professional channel where we are a trusted partner to approximately 100,000 professionals.
We deliver value to our customers via two business segments, Products and Solutions and ADI Global Distribution, which respectively contributed 42.8% and 57.2% of our net revenue for the year ended December 31, 2023. Our primary focus is on the professional channel where we are a trusted partner to approximately 100 thousand professionals.
Our comprehensive product suite has also allowed us to develop and sustain long-standing partnerships with professional installers who have relied on our selection and availability of products and configured solutions to help them succeed. The ability to better understand the functioning of a home through sensors, systems and controls, and connectivity has created a large and fast-growing connected home market.
Our comprehensive product suite has also allowed us to develop and sustain long-standing partnerships with professionals who have relied on our selection and availability of products and configured solutions to help them succeed. Connectivity has created a large and fast-growing connected home market.
Human Capital As of December 31, 2022, we employed approximately 15,200 employees in 30 countries, of which about 3,700 employees were located in the U.S. and 6,900 in Mexico. Approximately 4% of Resideo’s U.S. employees and 8% non-U.S. employees are covered under collective bargaining agreements. We believe relations with our workforce are good.
Human Capital As of December 31, 2023, we employed approximately 14,000 employees in 32 countries, of which about 3,100 employees were located in the U.S. and 7,000 in Mexico. Approximately 4% of Resideo’s U.S. employees and 8% non-U.S. employees are covered under collective bargaining agreements. We believe relations with our workforce are good.
Our program has several hundred members in paired mentorships, and the standard mentorship length is 6 months to 1 year. We believe that making investments in our future leaders will improve our succession capabilities. Our focus on developing future leaders is supported by the Resideo Leadership Program (“RLP”). Up and coming leaders are chosen to participate in this program.
We believe that making investments in our future leaders will improve our succession capabilities. Our focus on developing future leaders is supported by the Resideo Leadership Program (“RLP”). Up and coming leaders are chosen to participate in this program. This year, we completely revamped the program into a longitudinal leadership transformation program.
Managers and their team members continue to participate in tri-annual “Pulse” conversations to set performance expectations and monitor and evaluate performance. People managers at Resideo are strongly encouraged to give frequent, informal feedback so that employees are always clear on their performance level.
People managers at Resideo are strongly encouraged to give frequent, informal feedback so that employees are always clear on their performance level.
Our overall engagement score for the 2022 cycle was 7.9 on a 10-point scale, a 0.3-point increase over last year. Our employee Net Promoter Score (“NPS”) was 33, an increase of 7 points over last year, on a scale ranging from -100 to +100 (based on industry standards for employee NPS, any score above 10 is considered good).
Our employee Net Promoter Score (“NPS”) was 31, a decrease of 2 points over last year, on a scale ranging from -100 to +100 (based on industry standards for employee NPS, any score above 10 is considered good). Each sub-organization is tasked with creating an action plan based on feedback received.
We believe our significant presence in the home, both on the wall and behind the wall, positions us well for the value and convenience consumers will expect out of the connected home in the future.
We believe a significant opportunity exists to provide products, solutions and services to professionals and consumers that integrate the disparate sensors, systems and controls inside the home, and enable differentiated insight. Our significant presence in the home, both on the wall and behind the wall, positions us well for the value and convenience consumers expect out of the connected home.
Our ongoing environmental compliance programs also result in capital expenditures. Regulatory and environmental considerations are a part of all significant capital expenditure decisions; however, expenditures in 2022 related solely to regulatory compliance were not material.
As of December 31, 2023, we have recorded a liability for environmental investigation and remediation of approximately $22 million related to sites owned and operated by Resideo. Regulatory and environmental considerations are a part of all significant capital expenditure decisions; however, expenditures in 2023 related solely to regulatory compliance were not material.
As of December 31, 2022, we have recorded a liability for environmental investigation and remediation of approximately $22 million related to sites owned and operated by Resideo. We make capital expenditures to design and upgrade our products to comply with or exceed standards applicable to the industries in which they compete.
We make capital expenditures to design and upgrade our products to comply with or exceed standards applicable to the industries in which they compete. Our ongoing environmental compliance programs also result in capital expenditures.
Internally, strategic talent reviews and succession planning occur on an annual basis, globally and across all business areas. In 2022, we continued our annual cycle of our Employee Voice Survey. This survey allows each function in our company to see its ratings across three levers: Motivation, Ability, and Knowledge of Expectations.
In 2023, our average time to fill open roles was 41 days, and we hired 4,350 employees, of which approximately 3,400 were production workers. Internally, strategic talent reviews and succession planning occur on an annual basis, globally and across all business areas. In 2023, we continued our annual cycle of our Employee Voice Survey.
Diversity is a core component of our recruiting strategy. Our diversity outreach includes contacting various categories of diversity job boards, including HBCUs (Historically Black Colleges and Universities) and diverse partnerships, such as Society of Women Engineers (“SWE”) and National Society of Black Engineers (“NSBE”).
We continue to assess the needs of the business and identify diverse organizations to partner with that promote a pipeline of diverse talent. Our diversity outreach includes contacting various categories of diversity job boards and diverse partnerships, such as Society of Women Engineers (“SWE”) and 5 Table of Contents Resideo Technologies, Inc. National Society of Black Engineers (“NSBE”).
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To date, we believe this market has been primarily composed of point products and services from a wide variety of industry participants, creating significant complexity for consumers.
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With respect to our ADI Global Distribution business, we rely on key suppliers of branded products to deliver certain products for resale to our customers who may purchase based on job specifications or otherwise based on brand reputation.
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Given this complexity, we believe a significant opportunity exists to provide products, solutions and services to professional installers and consumers that integrate the disparate sensors, systems and controls inside the home, and enable differentiated insight.
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With respect to our ADI Global Distribution business, we rely on third-party manufacturers to supply both third-party branded and ADI Global Distribution exclusive branded products. Backlog We include in backlog accepted product purchase orders from customers and worldwide distributor stocking orders.
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Backlog Our Products and Solutions and ADI Global Distribution segments had backlogs of approximately $240 million and $185 million at December 31, 2022, respectively. We expect to fill 100% of this backlog in 2023.
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Product orders in our backlog are subject to changes in delivery schedules or cancellation at the option of the purchaser typically without penalty. Our backlog may fluctuate significantly depending upon customer order patterns which may, in turn, vary considerably based on rapidly changing business circumstances.
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In addition, we focused on further integrating DEIB into our business and expanded our commitment to DEIB by investing in a new leader, Vice President, Diversity, Equity, Inclusion and Belonging. We continue to support and evolve our employee resource groups (“ERGs”) across six categories: Women, LGBTQIA+, Black, Latino, Veterans, and People with Differing Abilities.
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Accordingly, we do not believe that our backlog at any time is necessarily representative of actual sales for any succeeding period.
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Talent Acquisition, Management and Development : We have a robust recruiting model to attract all levels of talent across the regions where we operate. In 2022, our average time to fill open roles was 54 days, and we hired 5,070 employees, of which approximately 3,360 were production workers.
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In 2023, we focused on executing our DEIB strategy, which includes (1) attract, develop, and retain a diverse workforce, (2) foster a winning culture and (3) be identified as a company of choice by our customers and the communities we serve.
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Each sub-organization is tasked with creating an action plan based on feedback received. We continue to provide regular trainings to our people managers. In 2022, we rebranded this development program as the People Leadership Seminar. Enhancements include an increased focus on leadership skills and engagement with senior leaders.
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One example of how we executed our DEIB strategy is through the continued support and evolution of our six employee resource groups (“ERGs”): Women, LGBTQIA+, Black, Latino, Veterans, and People with Differing Abilities.
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Participants learn from our executive leaders and external instructors on a variety of leadership and business fundamental topics. Participants in this program also work on group ‘stretch’ projects together that solve important Company needs while simultaneously allowing them to put their learnings from the RLP into practice. In 2022, we initiated our Executive Leadership Program (“ELP”).
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This survey allows each function in our company to see its ratings across three levers: Motivation, Ability, and Knowledge of Expectations. Our overall engagement score for the 2023 cycle was 7.8 on a 10-point scale, a 0.1-point decrease over last year.
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This program brings together all our Vice President level employees annually to focus on executive and leadership development. In addition, in 2022, we introduced the Leader of Teams training for our managers. This 8-week training program focused on the development of core leadership traits consistent with those taught in the RLP and ELP.
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We continue to provide regular trainings to our people managers. In 2023, we continued the People Leadership Seminar with an increased focus on bringing strategy and respect for others to life across the organization. Managers and their team members continued to participate in tri-annual “Pulse” conversations to set performance expectations and monitor and evaluate performance.
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Over 900 managers successfully completed the Leader of Teams training.
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New for 2023, we designed and implemented a new internal certification program called Talent Builder, to help educate our mentors on expectations in mentoring relationships while also creating a more consistent experience for mentees. To date, we have certified more than 100 mentors as Resideo Talent Builders.
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To continue driving a culture in alignment with our values, we developed multiple Here@Resideo videos to educate employees and managers on how our values can continue to be brought to life through some of our highlighted activities.
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Participants went on a journey to discover new depths of leadership capacity and character development.
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We also deployed a Culture Manager Toolkit to help leaders understand their role in being a culture advocate and how to emulate leadership behaviors that enable our values. Seasonality Our Products and Solutions business typically experiences a moderate level of seasonality.
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In addition to reinforcing our Core Values and expanding our commitment and attention to building a positive culture, we broadened the role of our VP of DEIB and increased the scope to include culture and learning and development, changing the title to VP of Culture and Talent Excellence.
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To continue driving a culture in alignment with our values, we developed and deployed a new onboarding offering called Ready, Set, Resideo to help integrate our new hires into our values from Day 1. The course provides an overview of our company, our brand promise, and our culture.
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Of those who completed a course completion survey, 85% agree that this new onboarding offering is better than any onboarding course they have attended at previous companies.
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We also explored additional opportunities to push nudges to managers to help with change management efforts across the company and conducted listening sessions with employees to understand what is needed to create potential culture ambassadors across the company in the future. Seasonality Our Products and Solutions business typically experiences a moderate level of seasonality.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur ability to consummate any future acquisitions will be partially dependent upon the availability of suitable acquisition candidates at favorable prices and upon advantageous terms and conditions.
Biggest changeOur ability to consummate any future acquisitions will be partially dependent upon the availability of suitable acquisition candidates at favorable prices and upon advantageous terms and conditions. We may not be able to find suitable acquisition candidates to purchase or may be unable to acquire on economically acceptable terms or to receive necessary regulatory approvals or support.
We have received allegations of patent infringement from third parties, including both operating companies and non-practicing entity patent holders, as well as communications from customers requesting indemnification for allegations brought by third parties. These have resulted in ongoing patent litigation relating to certain of our products and may continue to result in new litigation.
We have received allegations of patent infringement from third parties, including both operating companies and non-practicing entity patent holders, as well as communications from customers requesting indemnification for allegations brought by third parties. These allegations have resulted in ongoing patent litigation relating to certain of our products and may continue to result in new litigation.
The consummation of any particular acquisition will depend, in part, on our ability to raise the capital necessary to fund such acquisition which may not be available to us at all or on economically advantageous terms. In addition, if we consummate an acquisition, our capitalization and results of operations may change significantly.
The consummation of any particular acquisition may depend, in part, on our ability to raise the capital necessary to fund such acquisition which may not be available to us at all or on economically advantageous terms. In addition, if we consummate an acquisition, our capitalization and results of operations may change significantly.
A significant natural disaster, such as an earthquake, hurricane, fire, flood, or a public health pandemic, such as COVID-19, or a significant power outage could harm our business, financial condition, cash flows and results of 10 Table of Contents Resideo Technologies, Inc. operations.
A significant natural disaster, such as an earthquake, hurricane, tornado, fire, flood, or a public health pandemic, such as COVID-19, or a significant power outage could harm our business, financial condition, cash flows and results of 10 Table of Contents Resideo Technologies, Inc. operations.
In addition, some of our competitors have significant bases of customer adoption in other services and in online content, which they could use as a competitive advantage in the growing connected home solutions services market or otherwise in our product or distribution businesses.
In addition, some of our competitors have significant bases of customer adoption in other services and online content, which they could use as a competitive advantage in the connected home solutions services market or otherwise in our product or distribution businesses.
We rely on certain suppliers of products, materials and components and are otherwise subject to raw material price and supply variability with our suppliers which may impact our ability to meet commitments to customers and cause us to incur significant liabilities.
We rely on certain suppliers of products, materials and components and are otherwise subject to raw material supply variability with our suppliers which may impact our ability to meet commitments to customers and cause us to incur significant liabilities.
We may not have sufficient resources to continue to make such investments and we may be unable to maintain our competitive position including due to the fact that our competitors and potential competitors may have greater brand recognition, resources, access to capital, including greater research and development or sales and marketing funds, more customers, lower costs and more advanced technology platforms, particularly with our products and services in connected and energy management services and in new geographic regions.
We may not have sufficient resources to continue to make such investments and we may be unable to maintain our competitive position including due to the fact that our competitors and potential competitors may have greater brand recognition, resources, access to capital, including greater research and development or sales and marketing funds, more customers, lower costs and more advanced technology platforms, particularly with our connected products and services and in energy management services, as well as in new geographic regions.
Extreme weather, natural disasters, power outages, global health crises or other unexpected events has in the past and could in the future disrupt our operations by impacting the availability and cost of materials needed for manufacturing, causing physical damage and partial or complete closure of our manufacturing sites or distribution centers, loss of human capital, disruption in the manufacturing and supply of products and services to customers.
Extreme weather, natural disasters, power outages, global health crises or other unexpected events have in the past and could in the future disrupt our operations by impacting the availability and cost of materials needed for manufacturing, causing physical damage and partial or complete closure of our manufacturing sites or distribution centers, loss of human capital, and disruption in the manufacturing and supply of products and services to customers.
Growth of the retail markets and greater electronic retail distribution alternatives relative to the professional installation markets may negatively impact our sales and margins, which could negatively affect our cash flow and have an adverse effect on our business, financial condition and results of operations and cash flows.
Growth of the retail markets and greater electronic retail distribution alternatives relative to the professional installation markets may negatively impact our sales and margins, which could have an adverse effect on our business, financial condition and results of operations and cash flows.
With respect to our Products and Solutions segment, we operate seven factories in Mexico and rely on third party manufacturing partners with manufacturing capabilities in Mexico. Approximately 52% of our finished products are manufactured in Mexican sites, several of which operate in water stressed environments.
With respect to our Products and Solutions segment, we operate seven factories in Mexico and rely on third-party manufacturing partners with manufacturing capabilities in Mexico. Approximately 45% of our finished products are manufactured in Mexican sites, several of which operate in water stressed environments.
With respect to our ADI Global Distribution segment, terminations of supply or services agreements or a change in terms or conditions of sale from one or more of our key manufacturers could negatively affect that segment’s operating income and margins, net revenue or the level of capital required to fund operations.
With respect to our ADI Global Distribution segment, terminations of supply or services agreements or a change in terms or conditions of sale from one or more of our key manufacturers have in the past and could in the future negatively affect that segment’s operating income and margins, net revenue or the level of capital required to fund operations.
The expansion by large technology companies into connected home solutions, could result in pricing pressure, a shift in customer preferences towards the services of these companies and a reduction in our market share.
The expansion by large technology companies into connected home solutions, could result in pricing pressure, a shift in customer preferences toward the services of these companies and a reduction in our market share.
Our future results in our Products and Solutions segment depend upon a number of factors, including our ability to (i) identify emerging technological trends and consumer preferences, (ii) develop and maintain competitive products, in part by adding innovative features that differentiate our products from those of our competitors and prevent commoditization of our products, as well as through the use of intellectual property protections such as patents and trade secrets, (iii) grow our market share, (iv) develop, manufacture and bring compelling new products to market quickly and cost-effectively, (v) find and effectively partner with and continue to partner with home connected device platforms and (vi) attract, develop and retain individuals with the requisite technical expertise and understanding of customers’ needs to develop new technologies and introduce new products.
Our future results in our Products and Solutions segment depends upon a number of factors, including our ability to (i) identify consumer preferences and emerging technological trends and broader trends, such as decarbonization and electrification efforts in response to climate change, (ii) develop and maintain competitive products, in part by adding innovative features that differentiate our products from those of our competitors and prevent commoditization of our products, as well as through the use of intellectual property protections such as patents and trade secrets, (iii) grow our market share, (iv) develop, manufacture and bring compelling new products to market quickly and cost-effectively, (v) find and effectively partner with and continue to partner with home connected device platforms and (vi) attract, develop and retain individuals with the requisite technical expertise and understanding of customers’ needs to develop new technologies and introduce new products.
In addition, there may be new technologies that are introduced that reduce demand for our solutions or make them obsolete. Our Products and Solutions business' offerings are primarily delivered through networks of professional contractors, distributors, and OEMs, as well as major retailers and online merchants.
In addition, there may be new technologies that are introduced that reduce demand for our solutions or make them obsolete. 8 Table of Contents Resideo Technologies, Inc. Our Products and Solutions business' offerings are primarily delivered through networks of professional contractors, distributors, and OEMs, as well as major retailers and online merchants.
With respect to our ADI Global Distribution business, if retail outlets, including online commerce or big box stores increase their participation in wholesale distribution markets, or if buying patterns for our products become more retail or e-commerce based through these outlets than they currently are, our ADI Global Distribution business may not be able to 8 Table of Contents Resideo Technologies, Inc. effectively compete, which could have an adverse effect on our business, financial condition, results of operations and cash flow.
With respect to our ADI Global Distribution business, if retail outlets, including online commerce or big box stores increase their participation in wholesale distribution markets, or if buying patterns for our products become more retail or e-commerce based through these outlets than they currently are, our ADI Global Distribution business may not be able to effectively compete, which could have an adverse effect on our business, financial condition, results of operations and cash flows.
Future acquisitions could result in gross and or operating income or dilution and further could result in incurring additional debt or equity issuances and contingent liabilities and an increase in interest and amortization expenses or periodic impairment expenses related to goodwill and other intangible assets as well as significant charges relating to integration costs.
Future acquisitions could result in gross and/or operating income dilution, the incurring of additional debt or equity issuances and contingent liabilities and an increase in interest and amortization expenses or periodic impairment expenses related to goodwill and other intangible assets and significant charges relating to integration costs.
Our business, results of operations, financial condition and cash flows have been and could continue to be adversely affected by disruptions in supply from our third-party suppliers and manufacturers, whether due to work stoppages, component failures, material inflation, natural disasters, 9 Table of Contents Resideo Technologies, Inc. pandemics, economic, political, financial or labor concerns, weather conditions affecting products or shipments or transportation disruptions or other reasons, or if suppliers lack sufficient quality control or if there are significant changes in their financial or business condition or otherwise.
Our business, results of operations, financial condition and cash flows have been and could continue to be adversely affected by disruptions in supply from our third-party suppliers and manufacturers, whether due to work stoppages, cyberattacks, component failures, natural disasters, pandemics, economic, political, financial or labor concerns, weather conditions affecting products or shipments or transportation disruptions or other reasons, or if suppliers lack sufficient quality control or if there are significant changes in their financial or business condition or otherwise.
Any of these risks, could materially and adversely affect our business, financial condition, results of operations and cash flows and the actual outcome of matters as to which forward-looking statements are made in this Form 10-K. 7 Table of Contents Resideo Technologies, Inc.
Any of these risks could materially and adversely affect our business, financial condition, results of operations and cash flows and the actual outcome of matters as to which forward-looking statements are made in this Form 10-K.
We may not be successful in effectively identifying all risks of an acquired business, integrating the acquired business, product, software, service or technology into our existing business and operations or realizing the benefits expected at acquisition.
We may not be successful in effectively identifying all risks of an acquired business, integrating the acquired business or technology into our existing business or realizing the benefits expected at acquisition.
Our ability to manage inventory and meet delivery requirements has been and may continue to be constrained by our suppliers’ inability to scale production and adjust delivery of long lead-time products during times of volatile demand. Our inability to fill our supply needs would jeopardize our ability to fulfill our contractual obligations.
Although unlikely, our ability to manage inventory and meet delivery requirements could be constrained by our suppliers’ inability to scale production and adjust delivery of long lead-time products during times of volatile demand. Our inability to fill our supply needs would jeopardize our ability to fulfill our contractual obligations.
Our business is subject to the risks of earthquakes, hurricanes, fires, power outages, floods, pandemics, epidemics, natural disasters and other catastrophic events. or other public health emergencies, such as the coronavirus (“COVID-19”) outbreak.
Our business is subject to the risks of earthquakes, hurricanes, tornadoes, fires, power outages, floods, pandemics, epidemics, natural disasters and other catastrophic events. or other public health emergencies.
Manufacturers who currently distribute their products through our ADI Global Distribution business may decide to shift to or substantially increase their existing distribution with other distributors, their own dealer networks, or directly to resellers or end-users.
Manufacturers who currently distribute their products through our ADI Global Distribution business have in the past and could in the future decide to shift to or substantially increase their existing distribution with other distributors, their own dealer networks, or directly to resellers or end-users.
We could also be subjected to claims of infringement regardless of our lack of involvement in the development of the licensed technology. Although a third-party technology provider is typically obligated to indemnify us if the provided technology infringes on another party’s intellectual property rights, such indemnification is often limited in amount and may be worthless if the provider becomes insolvent.
Although a third-party technology provider is typically obligated to indemnify us if the provided technology infringes on another party’s intellectual property rights, such indemnification is often limited in amount and may be worthless if the provider becomes insolvent. 9 Table of Contents Resideo Technologies, Inc.
Our business, results of operations, financial condition, cash flows, and stock price may be adversely affected by public health emergencies, such as the COVID-19 virus pandemic as described in this Annual Report,
Our business, results of operations, financial condition, cash flows, and stock price may be adversely affected by public health emergencies, such as the COVID-19 pandemic. The COVID-19 outbreak has negatively impacted and may again negatively impact the global economy.
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For example, we experienced the impact of a global semiconductor supply shortage in 2022.
Added
In addition, aggressive pricing actions by competitors may affect our ability to manage the price/cost relationship to achieve desired revenue growth and profitability levels.
Removed
While our supply chain team has been diligently working to help ensure surety of supply, we have experienced instances where our third-party suppliers and manufacturers have failed to deliver materials, products, parts and components on time and at reasonable prices, and we have had and could continue to have difficulties fulfilling our orders or stocking our distribution centers on similar terms or at all.
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We could also be subjected to claims of infringement regardless of our lack of involvement in the development of the licensed technology.
Removed
This has resulted and may continue to result in increased component and expedited freight costs. Sales and profits could decline, and our commercial reputation could be damaged if these trends continue.
Added
To the extent any such public health emergencies adversely affect our business and financial results, they may also have the effect of heightening many of the other risks described in this “Risk Factors” section. Market and economic conditions may adversely affect the economic conditions of our customers, demand for our products and services and our results of operations.
Removed
We may not be able to find suitable acquisition candidates to purchase or may be unable to acquire desired businesses or assets on economically acceptable terms or may be unable to receive necessary regulatory approvals or support. We regularly engage in discussions with respect to potential acquisition and investment opportunities.
Added
As a global provider of comfort, energy management and life safety products, services and technologies for the home, as well as a wholesale distributor of low-voltage electronics products, smart home, fire and security life safety products, power, audio and ProAV, networking, communications, wire and cable, enterprise connectivity, and structured wiring products, our business is affected by the performance of the global new and repair and remodel construction industry.
Removed
Acquisitions involve risks that the businesses acquired will not perform in accordance with expectations and that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect.
Added
Geopolitical, social and economic conditions could result in increased volatility in worldwide financial markets and economies that could harm our sales. Similarly, slowing of the housing market may result in reduced demand for our products and services.
Added
Our markets are sensitive to changes in the regions in which we operate and are also influenced by cyclical factors such as interest rates, inflation, energy costs, availability of financing, consumer spending habits and preferences, housing market demand, employment rates and other macroeconomic factors over which we have no control, and which could adversely affect our business, financial condition, results of operations and cash flows.
Added
Failure to achieve and maintain a high level of product and service quality could damage our reputation with customers and negatively impact our results. Product and service quality issues could result in a negative impact on customer confidence in our Company, our products and our brand image.
Added
If our offerings do not meet applicable legal and safety standards or our customers’ expectations regarding safety or quality, or if our products are improperly designed, manufactured, packaged, or labeled, or are otherwise alleged to cause harm or injury, we may need to recall those items, experience increased warranty costs or lost sales and increased costs and exposure to legal, financial and reputational risks including litigation and government enforcement action, as well as product liability claims.
Added
Such actions may damage our relationship with our customers which may result in a loss of market share. Additionally, the financial expenses related to such events may not be covered by our insurance or may be subject to deductibles.
Added
We have in the past and in the future may not be able to obtain indemnity or reimbursement from our suppliers or other third parties for the warranty costs or liabilities associated with our products and there can be no assurance that we will have adequate reserves to cover any recalls and repair and replacement costs.
Added
A significant product recall, warranty claim, or product liability case, especially with respect to our security and life safety-related products or services, could also result in adverse publicity, damage to our reputation, and a loss of consumer confidence in our products and services.
Added
We have in the past experienced, and may in the future experience, product recalls and litigation related to our products or services, none of which have been material to date. 11 Table of Contents Resideo Technologies, Inc. We may not be able to retain or expand relationships with certain significant customers.
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A number of our customers contribute significantly to our net revenue and operating income.
Added
Consolidation, change of control, or termination of the contractual relationships with any of these customers, particularly among our OEM customers (and in certain instances, their authorized dealers), or a decision by any one or more of our customers to outsource all or most manufacturing work to a single equipment manufacturer, or to partner with third parties has in the past and may in the future continue to concentrate our business in a limited number of customers and expose us to increased risks relating to dependence on a smaller number of customers.
Added
We generally have to qualify, and are required to maintain our status, as a supplier for each of our OEM customers.
Added
A significant failure or an inability to comply with customer specifications and manufacturing requirements or delays or other problems with existing or new products or inability to meet price requirements could result in financial penalties, cancelled orders, increased costs, loss of sales, market share shift, loss of customers or potential breaches of customer contracts, which have had and could in the future have an adverse effect on our profitability and results of operations.
Added
By virtue of certain customers’ size and the significant portion of revenue that we derive from them, they can exert significant influence in the negotiation of our commercial agreements and the conduct of our business with them which could adversely affect our profitability.
Added
If consolidation among our retailers, distributors or other channel partners who purchase our products becomes more prevalent, our business, results of operations and financial conditions could be adversely affected.
Added
Failure to increase productivity through sustainable operational improvements, as well as an inability to successfully execute transformation programs or to effectively manage our workforce, may reduce our profitability or adversely impact our businesses. Our profitability and margin growth are dependent upon our ability to drive sustainable improvements.
Added
In addition, we seek productivity and cost savings benefits through our ongoing transformation, restructuring and other programs, such as consolidation and outsourcing of manufacturing operations or facilities, reductions in manufacturing shifts, transitions to cost-competitive regions, workforce optimizations, product line rationalizations and divestitures, and other cost-saving initiatives.
Added
Risks associated with these actions that we have in the past or may in the future experience include delays in execution of the planned initiatives, additional unexpected costs, asset impairments, realization of fewer than estimated productivity improvements, reduced ability to manage supply chain anomalies, employment claims, and adverse effects on employee morale leading to reduced production and unanticipated departures.
Added
We may not realize the full operational or financial benefits we expect, the recognition of these benefits may be delayed and these actions may potentially disrupt our operations. In addition, organizational changes, attrition, labor relations difficulties, or work stoppages could have an adverse effect on our business, reputation, financial condition, results of operations, and cash flows.
Added
We are subject to the economic, political, regulatory, foreign exchange and other risks of international operations. Our international revenue represented approximately 24% of our net revenue for the year ended December 31, 2023.
Added
Our international geographic footprint subjects us to many risks including: exchange control regulations; wage and price controls; antitrust/competition and environmental regulations; employment regulations; foreign investment laws; monetary and fiscal policies and protectionist measures that may prohibit acquisitions or joint ventures, establish local content requirements, or impact trade volumes; import, export and other trade restrictions (such as embargoes); tariffs; violations by our employees of anti-corruption laws (despite our efforts to mitigate these risks); changes in regulations regarding transactions with state-owned enterprises; nationalization of private enterprises; natural and man-made disasters, hazards and losses; backlash from foreign labor organizations related to our restructuring actions; violence; civil and labor unrest; acts of terrorism; and our ability to hire and maintain qualified staff and maintain the safety of our employees in these regions.
Added
Additionally, certain of the markets in which we operate have adopted increasingly strict requirements concerning personal and non-personal data, privacy and cybersecurity.
Added
These requirements may negatively affect our ability to maintain, develop, sell and advertise our products and our services, may limit our ability to derive revenue from data, may require us to disclose product and services data to our competitors, may cause us to incur additional expense in obtaining mandatory certifications and may restrict our ability to transfer data internationally.
Added
With respect to our Products and Solutions segment, we operate seven factories in northern Mexico. Approximately 45% of our finished products are manufactured in Mexico, a country that periodically experiences heightened civil unrest or may experience trade disputes with the U.S., both of which could cause a disruption of the supply of products to or from these facilities.
Added
Some of our Mexican facilities are authorized to operate as Maquiladoras by the Ministry of Economy of Mexico. Maquiladora status allows us to temporarily import raw materials into Mexico, provided that such items, after processing, are exported from Mexico within a stipulated time frame.
Added
Maquiladora status is subject to various restrictions and requirements, including compliance with the terms of the Maquiladora program and other local regulations, which have 12 Table of Contents Resideo Technologies, Inc. become stricter in recent years. In addition, if the Mexican government adopts additional adverse changes to the program, including nationalization, our manufacturing costs in Mexico would increase.
Added
Current global conflicts, such as those between Russia and Ukraine as well as the Middle East crisis between Hamas and Israel, have created substantial uncertainty in the global economy, including sanctions and penalties imposed on certain countries from several governments.
Added
While we do not have a physical presence in these locations and do not have significant direct exposure to customers and vendors in those countries, we are unable to predict the impact that these actions will have on the global economy or on our financial condition, results of operations, and cash flows as of the date of these financial statements.
Added
We operate in many diverse regions that require modifications to our products based on local building codes, regulations, standards, certifications and other factors, which may impact our cost to serve and profitability as we continue our penetration into these regions.
Added
We rely on a dependable IT infrastructure and network operations that have adequate cyber-security functionality to produce and sell our products and solutions and manage our business.
Added
The efficient operation of our business requires substantial investment in technology infrastructure systems, including enterprise resource planning (“ERP”) systems, information systems, supply chain management systems, digital commerce systems and connected solutions platforms and network operations and systems.
Added
The failure to acquire, implement, maintain and upgrade as required, these systems may impact our ability to respond effectively to changing customer expectations, manage our business, scale our solutions effectively or impact our customer service levels, which may put us at a competitive disadvantage and negatively impact our business, results of operations, financial condition and cash flows.
Added
Repeated or prolonged interruptions of service, due to cyber threats or problems with our systems or third-party technologies, whether or not in our control, could have a significant negative impact on our reputation and our ability to sell products and services.
Added
Our business, results of operations, financial condition and cash flows may be adversely affected if our information systems fail, become unavailable for prolonged periods of time, are corrupted or do not allow us to transmit accurate information.
Added
Failure to properly or adequately address these issues, including the failure to fund backups, upgrades and improvements to our systems, could impact our ability to perform necessary business operations, which could adversely affect our reputation, competitive position, business, results of operations, financial condition and cash flows.
Added
Our ability to keep our business operating is highly dependent on the proper and efficient operation of our data centers, networks, and data backup systems.
Added
In addition, a significant portion of our employees are engaged in remote or hybrid work from their homes, which further exposes our information technology (“IT”) systems to potential cyber interference and disruption of work activities based on availability and performance of internet access in the regions in which our employees reside.
Added
Our IT and engineering systems contain sensitive information, including personal data, trade secrets, and other proprietary information. In addition, our connected products potentially expose our business and customers to cybersecurity threats.
Added
As a result, we have experienced and may in the future be subject to systems interruption, data corruption, data loss and service and product failures, not only resulting from the failures of our products or services but also from the failures of third-party service providers, natural disasters, power shortages or terrorist attacks, and cyber or other security threats.
Added
There is no assurance that the comprehensive security measures we have put in place to protect our IT and engineering systems, services, and products against unauthorized access and disclosure of personal data or confidential or trade secret information will be effective in every case.
Added
We have experienced, and expect to continue to experience, cybersecurity threats and incidents, none of which, to our knowledge, have been material to date.
Added
The potential consequences to any of our connected solutions platforms, data centers, or network operations and systems resulting from a material cyber or other security incident such as a successful ransomware attack or malicious publication of confidential information, trade secrets or personal data include financial loss, reputational and brand impact, negative media coverage, loss of stockholder value, loss of customers, litigation with third parties, including class-action litigation, regulatory investigations, audits or other enforcement actions, theft of intellectual property, fines, diminution in the value of our investment in research, development and engineering, regulatory reporting for data breaches, and increased cyber and other security protection and remediation costs due to the increasing sophistication and proliferation of threats, which in turn could adversely affect our competitiveness, business, financial condition, results of operations, and cash flows.
Added
In addition, damages, fines and claims arising from such incidents may not be covered by, or may exceed the amount of any insurance available or may not be insurable. 13 Table of Contents Resideo Technologies, Inc. Enhanced tariff, import/export restrictions, or other trade barriers may have an adverse impact on global economic conditions, financial markets and our business.
Added
We are subject to certain laws and regulations affecting our international operations which, among other things, provide certain preferential duties and tariffs for qualifying imports subject to compliance with the applicable rules of origin and other requirements.
Added
There have been, and continue to be, uncertainties with respect to the global economy and trade relations between the U.S. and other countries globally.
Added
Implementation of more restrictive trade policies or the renegotiation of existing U.S. trade agreements or trade agreements of other countries where we sell, procure or manufacture large quantities of products and services or procure supplies and other materials incorporated into our products could negatively impact our business results of operations, cash flows and financial condition.
Added
Tariffs, sanctions and other barriers to trade could adversely affect the business of our customers and suppliers, which could in turn negatively impact our net revenue and results of operations. Specifically, we source certain components and approximately 7% of our finished goods from suppliers in Asia, a significant portion of which are subject to tariffs.
Added
New tariffs or other restrictions imposed on imports from Asia, where certain components included in our end-user equipment are manufactured and where certain of our distribution business suppliers are located, and any counter-measures taken in response to such new restrictions, may harm our business and results of operations.

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Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−0 removed0 unchanged
Biggest changeThe following table shows the regional distribution of these sites: Americas Asia Pacific EMEA Sites 163 11 81 We also sublease 3 sites that include office and engineering space from Honeywell, which is included above. 28 warehouses are operated by third parties.
Biggest changeThe following table shows the regional distribution of these sites: Americas Asia Pacific EMEA Sites 166 9 81 We also sublease 1 site that includes office and engineering space from Honeywell, which is included above. In addition, 27 warehouses are operated by third parties.
Item 2. Properties Our corporate headquarters is located in Scottsdale, Arizona. Products and Solutions owns or leases 20 manufacturing sites and 4 warehouses. ADI Global Distribution owns or leases 175 stocking locations and 5 warehouses. The Corporate segment leases 3 sites.
Item 2. Properties Our corporate headquarters is located in Scottsdale, Arizona. The Products and Solutions segment owns or leases 20 manufacturing sites and 3 warehouses. The ADI Global Distribution segment owns or leases 169 stocking locations and 5 warehouses. The Corporate segment leases 3 sites.
There is 1 warehouse and 47 other sites owned or leased by both Products and Solutions and ADI Global Distribution, including offices and engineering, and lab sites used by the Products and Solutions segment.
There is 1 warehouse and 55 other sites owned or leased by both the Products and Solutions and ADI Global Distribution segments, including offices and engineering, and lab sites used by the Products and Solutions segment.
In addition, Honeywell leases or subleases 2 manufacturing sites and other sites, with office and warehouse space, from us. We believe our properties are adequate and suitable for our business as presently conducted and are adequately maintained.
Honeywell also leases or subleases 4 manufacturing sites and other sites, with office and warehouse space, from us. We believe our properties are adequate and suitable for our business as presently conducted and are adequately maintained.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+4 added−0 removed2 unchanged
Biggest changeAs of February 15, 2023, 147 million shares of our common stock were outstanding. Dividends We have never declared or paid any cash dividends on our common stock and we currently do not intend to pay cash dividends. We currently expect to retain any future earnings to fund the operation and expansion of our business and pay back debt obligations.
Biggest changeAs of February 2, 2024, approximately 145 million shares of our common stock were outstanding. Dividends We have never declared or paid any cash dividends on our common stock and we currently do not intend to pay cash dividends.
Stock Performance The following graph shows a comparison through December 31, 2022 of the cumulative total returns for (i) our common stock, (ii) the S&P Small Cap 600 Total Return Index and (iii) the S&P 400 Industrials assuming an initial investment of $100 on the Spin-Off date and reinvestment of all dividends.
Stock Performance The following graph shows a comparison through December 31, 2023 of the cumulative total returns for (i) our common stock, (ii) the S&P Small Cap 600 Total Return Index and (iii) the S&P 400 Industrials assuming an initial investment of $100 in the stock or the index on December 31, 2018 and reinvestment of all dividends.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange under the symbol “REZI.” On February 15, 2023, there were 35,719 holders of record of our common stock and the closing price of our common stock on the New York Stock Exchange was $18.96 per share.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange under the symbol “REZI.” On February 2, 2024, there were 34,908 holders of record of our common stock and the closing price of our common stock on the New York Stock Exchange was $17.10 per share.
The returns in the graph are not intended to forecast or be indicative of possible future performance of our common stock.
This graph covers the period from December 31, 2018 through December 31, 2023. The returns in the graph are not intended to forecast or be indicative of possible future performance of our common stock. 23 Table of Contents Resideo Technologies, Inc.
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We currently expect to retain any future earnings to fund the operation and expansion of our business, pay back debt obligations or to repurchase our common stock.
Added
Issuer Purchases of Equity Securities The following table summarizes information with respect to the purchase of our common stock during the three months ended December 31, 2023.
Added
Share Repurchases (1) Period Total Number of Shares Purchased (thousands) (2) Average Price Paid per Share Excluding Commissions Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (thousands) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (millions) October 1, 2023 to October 28, 2023 12 $ 15.72 12 $ 120 October 29, 2023 to November 25, 2023 550 $ 16.03 550 $ 111 November 26, 2023 to December 31, 2023 157 $ 16.36 157 $ 109 Total 719 $ 16.15 719 (1) This table does not include the value of equity awards surrendered to satisfy tax withholding obligations or forfeitures of equity awards.
Added
(2) Refer to Note 20. Stockholders’ Equity to the Consolidated Financial Statements for information about the share repurchase program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

3 edited+95 added−166 removed0 unchanged
Biggest changeAs a global provider of comfort, energy management and life safety products, services and technologies for the home, as well as a worldwide wholesale distributor of low-voltage electronics products, smart home, fire and security life safety products, power, audio and ProAV, networking, communications, wire and cable, enterprise connectivity, and structured wiring products, our business is affected by the performance of the global new and repair and remodel construction industry.
Biggest changeOur ADI Global Distribution business is a leading wholesale distributor of low-voltage products including access control, fire detection, security, and video products and participates significantly in the broader related markets of audio, communications, data communications, networking, power, ProAV, smart home, and wire and cable.
Payment of deferred amounts and certain other amounts could cause the amount we are required to pay under the Reimbursement Agreement in respect of liabilities arising in any given calendar year to exceed $140 million.
The amount payable in respect of such liabilities arising in any given year is subject to a cap of $140 million. Reimbursement Agreement expenses are presented within other expense, net in the Consolidated Statements of Operations and within other accrued liabilities payable under Indemnification Agreements in the Consolidated Balance Sheets. Refer to Note 15.
We test, at least annually, the carrying value of goodwill for impairment, as discussed in Note 2. Summary of Significant Accounting Policies to Consolidated Financial Statements. We review other intangible assets and long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable.
Goodwill We review the carrying values of goodwill and identifiable intangibles whenever events or changes in circumstances indicate that such carrying values may not be recoverable and annually, on the first day of the fourth quarter.
Removed
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . The COVID-19 outbreak has negatively impacted and may again negatively impact the global economy. We cannot ensure uninterrupted operations in geographical areas impacted by COVID-19 and could experience a decline in labor availability, which could impact productivity.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations (In millions, except per share amounts) The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help you understand the results of our operations and financial condition for the three years ended December 31, 2023, and should be read in conjunction with the Consolidated Financial Statements and the notes thereto contained elsewhere in this Form 10-K.
Removed
The COVID-19 outbreak has had, and may again have, an impact on our ability to obtain certain of the raw materials, parts and components we need to manufacture our products as our suppliers face disruptions in their businesses.
Added
Overview and Business Trends We are a leading global manufacturer and distributor of technology-driven products and solutions that help homeowners and businesses stay connected and in control of their comfort, security and energy use.
Removed
If our suppliers fail to meet our manufacturing needs, it could delay our production and our product shipments to customers and negatively affect our operations.
Added
We are a leader in the home heating, ventilation and air conditioning controls markets, smoke and carbon monoxide detection home safety and fire suppression products, and security markets. We have a global footprint serving commercial and residential end-markets. We manage our business operations through two operating segments, Products and Solutions and ADI Global Distribution.
Removed
In addition, we have in the past, and may continue in the future during such public health emergencies, to be subject to government inspections of our manufacturing facilities to confirm compliance with government regulations related to employee health and safety at our sites.
Added
The Products and Solutions operating segment, consistent with our industry, has a higher gross and operating profit profile in comparison to the ADI Global Distribution operating segment.
Removed
To the extent any such public health emergencies adversely affect our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section. Market and economic conditions may adversely affect the economic conditions of our customers, demand for our products and services and our results of operations.
Added
Our Products and Solutions operating segment offerings include temperature and humidity control, energy products and solutions, water and air solutions, smoke and carbon monoxide detection home safety products, security panels, sensors, peripherals, communications devices, video cameras, other home-related lifestyle convenience solutions, cloud infrastructure, installation and maintenance tools, and related software.
Removed
Geopolitical, social and economic conditions could result in increased volatility in worldwide financial markets and economies that could harm our sales. Similarly, slowing of the housing market may result in reduced demand for our products and services.
Added
Our ADI Global Distribution strategy is focused on growth in our omni-channel presence, expansion into adjacent markets, and continued enhancements to our value-add services to support our professional installers’ efficiency and profitability.
Removed
Our markets are sensitive to changes in the regions in which we operate and are also influenced by cyclical factors such as interest rates, inflation, availability of financing, consumer spending habits and preferences, housing market changes, employment rates and other macroeconomic factors over which we have no control, and which could adversely affect our business, financial condition, results of operations and cash flows.
Added
Our financial performance is influenced by macroeconomic factors such as repair and remodeling activity, residential and non-residential construction, employment rates, interest rates and bank lending standards, supply chain dynamics, and the overall macroeconomic environment. The ongoing uncertainty and volatility in the global macroeconomic conditions have affected and could continue to affect our visibility toward future performance.
Removed
Failure to achieve and maintain a high level of product and service quality could damage our reputation with customers and negatively impact our results. Product and service quality issues could result in a negative impact on customer confidence in our Company, our products and our brand image.
Added
While we believe supply chain and logistics will continue to normalize over 2024, customer demand continues to moderate as inventories rebalance over the period and uncertainties remain including the potential for changes in inflation and interest rates, increased labor costs, reduced consumer spending due to softening labor markets, elevated mortgage rates, unfavorable foreign currency impacts from a stronger U.S. dollar, and potential market and other disruption from the ongoing conflict between Russia and Ukraine as well as the Middle East crisis between Hamas and Israel.
Removed
If our offerings do not meet applicable legal and safety standards or our customers’ expectations regarding safety or quality, or if our products are improperly designed, manufactured, packaged, or labeled, or are otherwise alleged to cause harm or injury, we may need to recall those items, experience increased warranty costs or lost sales and increased costs and be exposed to legal, financial and reputational risks including litigation and government enforcement action, as well as product liability claims.
Added
Current Period Highlights • Net revenue of $6.24 billion in 2023, down 2% from $6.37 billion in 2022 • Gross profit margin of 27.2%, compared to 27.7% in the prior year comparable period • Income from operations of $547 million , or 8.8% of revenue, compared to $611 million , or 9.6% of revenue in 2022, including restructuring and impairment expenses o f $42 million and $35 million in 2023 and 2022, respectively • Fully diluted earnings per share of $1.42, compared to $1.90 per share in the same period last year • Cash Flow From Operations was $440 million in 2023 as compared to $152 million in 2022 Outlook Expectations for key macro trends expected to impact our business in 2024 include residential repair and remodel activity flat to down low-single-digits year-over-year, residential new construction starts expected to grow low to mid-single digits.
Removed
Such actions may damage our relationship with our customers which may result in a loss of market share; additionally, the financial expenses related to such events may not be covered by our insurance or may be subject to deductibles.
Added
We expect ADI’s key commercial markets to grow low-single-digits with continued headwinds in the residential security business. We expect these trends to support our 2024 year-over-year revenue outlook of flat to down low single-digits. 25 Table of Contents Resideo Technologies, Inc.
Removed
We may not be able to obtain indemnity or reimbursement from our suppliers or other third parties for the warranty costs or liabilities associated with our products and there can be no 11 Table of Contents Resideo Technologies, Inc. assurance that we will have adequate reserves to cover any recalls, repair and replacement costs.
Added
Recent Developments On January 23, 2023, we acquired 100% of the outstanding equity of BTX Technologies, Inc., a leading distributor of professional audio, video, data communications and broadcast equipment. This acquisition will allow ADI to further expand our ProAV and private brand offerings across North America.
Removed
A significant product recall, warranty claim, or product liability case, especially with respect to our security and life safety-related products or services, could also result in adverse publicity, damage to our reputation, and a loss of consumer confidence in our products and services.
Added
During the third quarter of 2023, we announced a restructuring program to align our cost structure with market conditions. For the twelve months ended December 31, 2023, we recognized restructuring and impairment expenses of $42 million. These expenses primarily related to workforce reductions.
Removed
We have in the past experienced, and may in the future experience, product recalls and litigation related to our products or services, none of which have been material to date. We may not be able to retain or expand relationships with certain significant customers. A number of our customers contribute significantly to our net revenue and operating income.
Added
On August 3, 2023, we announced that our Board of Directors authorized a share repurchase program for the repurchase of up to $150 million of our common stock over an unlimited time period. During the twelve months ended December 31, 2023, we repurchased 2.6 million shares of common stock in the open market at a total cost of $41 million.
Removed
Consolidation, change of control, or termination of the contractual relationships with any of these customers, particularly among our OEM customers (and in certain instances, their authorized dealers), or a decision by any one or more of our customers to outsource all or most manufacturing work to a single equipment manufacturer, or partner with third parties may continue to concentrate our business in a limited number of customers and expose us to increased risks relating to dependence on a smaller number of customers.
Added
On August 9, 2023, we acquired 100% of the outstanding equity of Sfty SA, a developer of cloud-based services providing alerts to multifamily homes and property managers with smoke, carbon monoxide and water leak detection products. This acquisition will allow us to further expand our safety and security service offerings in the Products and Solutions business segment.
Removed
We generally have to qualify, and are required to maintain our status, as a supplier for each of our OEM customers.
Added
On October 16, 2023, we sold the Genesis Cable business in a cash transaction for $86 million, subject to working capital and other closing adjustments. We recognized a pre-tax gain of $18 million in other expenses, net in our Consolidated Statements of Operations, which includes $5 million of divestiture related costs.
Removed
A significant failure or inability to comply with customer specifications and manufacturing requirements or delays or other problems with existing or new products or inability to meet price requirements could result in financial penalties, cancelled orders, increased costs, loss of sales, market share shift, loss of customers or potential breaches of customer contracts, which have had and could in the future have an adverse effect on our profitability and results of operations.
Added
The divested business did not represent a strategic shift that has a major effect on our operations and financial results, and, as such, it was not presented as discontinued operations. 26 Table of Contents Resideo Technologies, Inc. Results of Operations This section of the Form 10-K discusses fiscal 2023 and fiscal 2022 items and year-over-year comparisons of these periods.
Removed
By virtue of certain customers’ size and the significant portion of revenue that we derive from them, they can exert significant influence in the negotiation of our commercial agreements and the conduct of our business with them which could adversely affect our profitability.
Added
Discussions of fiscal 2021 items and year-over-year comparisons between fiscal 2022 and fiscal 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in the Company’s 2022 Annual Report on Form 10-K filed February 21, 2023.
Removed
If consolidation among our retailers, distributors or other channel partners who purchase our products becomes more prevalent, our business, results of operations and financial conditions could be adversely affected.
Added
The following table represents results of operations on a consolidated basis for the periods indicated: Years Ended December 31, (in millions, except per share data and percentages) 2023 2022 $ change % change Net revenue $ 6,242 $ 6,370 $ (128) (2.0) % Cost of goods sold 4,546 4,604 (58) (1.3) % Gross profit 1,696 1,766 (70) (4.0) % Gross Profit % 27.2 % 27.7 % (50) bps Operating expenses: Research and development expenses 109 111 (2) (1.8) % Selling, general and administrative expenses 960 974 (14) (1.4) % Intangible asset amortization 38 35 3 8.6 % Restructuring and impairment expenses 42 35 7 20.0 % Total operating expenses 1,149 1,155 (6) (0.5) % Income from operations 547 611 (64) (10.5) % Other expenses, net 169 139 30 21.6 % Interest expense, net 65 54 11 20.4 % Income before taxes 313 418 (105) (25.1) % Provision for income taxes 103 135 (32) (23.7) % Net income 210 283 (73) (25.8) % Earnings per share: Basic $ 1.43 $ 1.94 $ (0.52) (26.5) % Diluted $ 1.42 $ 1.90 $ (0.49) (25.5) % Net Revenue Net revenue for the year ended December 31, 2023 was $6,242 million, a decrease of $128 million, or 2.0%, from the prior year, driven primarily by lower volume of $414 million and unfavorable foreign exchange fluctuations of $10 million.
Removed
Failure to increase productivity through sustainable operational improvements, as well as an inability to successfully execute transformation programs or to effectively manage our workforce, may reduce our profitability or adversely impact our businesses. Our profitability and margin growth are dependent upon our ability to drive sustainable improvements.
Added
Partially offsetting these decreases were $153 million from acquisitions and higher selling prices of $143 million across both segments. 27 Table of Contents Resideo Technologies, Inc. Gross Profit The chart below presents the drivers of the gross profit variance from the year ended December 31, 2022 to December 31, 2023.
Removed
In addition, we seek productivity and cost savings benefits through our ongoing transformation, restructuring and other programs, such as consolidation and outsourcing of manufacturing operations or facilities, reductions in manufacturing shifts, transitions to cost-competitive regions, workforce optimizations, product line rationalizations and divestitures, and other cost-saving initiatives.
Added
Gross profit dollars decreased in 2023 as noted in the chart above. Gross margin of 27.2% was 50 bps lower when compared to 27.7% in the prior year primarily due to lower unit volume and unfavorable product mix.
Removed
Risks associated with these actions include delays in execution of the planned initiatives, additional unexpected costs, asset impairments, realization of fewer than estimated productivity improvements, reduced ability to manage supply chain anomalies, employment claims, and adverse effects on employee morale leading to reduced production and unanticipated departures.
Added
Research and Development Expenses Research and development expenses for the year ended December 31, 2023, were $109 million, a decrease of $2 million as compared to the same period in 2022.
Removed
We may not realize the full operational or financial benefits we expect and the recognition of these benefits may be delayed and these actions may potentially disrupt our operations. In addition, organizational changes, attrition, labor relations difficulties, or work stoppages could have an adverse effect on our business, reputation, financial condition, results of operations, and cash flow.
Added
The decrease was primarily driven by net cost savings of $5 million offset by additional research and development costs of $3 million from the acquisition of First Alert, Inc. in first quarter of 2022.
Removed
We are subject to the economic, political, regulatory, foreign exchange and other risks of international operations. Our international revenue represented approximately 25% of our net revenue for the year ended December 31, 2022.
Added
Selling, General and Administrative Expenses Selling, general and administrative expenses for the year ended December 31, 2023, were $960 million, a decrease of $14 million, or 1.4%, as compared to the same period in 2022.
Removed
Our international geographic footprint subjects us to many risks including: exchange control regulations; wage and price controls; antitrust/competition and environmental regulations; employment regulations; foreign investment laws; monetary and fiscal policies and protectionist measures that may prohibit acquisitions or joint ventures, establish local content requirements, or impact trade volumes; import, export and other trade restrictions (such as embargoes); tariffs, violations by our employees of anti-corruption laws (despite our efforts to mitigate these risks); changes in regulations regarding transactions with state-owned enterprises; nationalization of private enterprises; natural and man-made disasters, hazards and losses; backlash from foreign labor organizations related to our restructuring actions; violence, civil and labor unrest; acts of terrorism; and our ability to hire and maintain qualified staff and maintain the safety of our employees in these regions.
Added
The decrease was driven by cost savings from restructuring actions of $42 million that more than offset $18 million in costs related to the inclusion of First Alert, Inc. and $10 million of transaction costs incurred in the first quarter of 2022. 28 Table of Contents Resideo Technologies, Inc.
Removed
Additionally, certain of the markets in which we operate have adopted increasingly strict data privacy and data protection requirements that may restrict how and to whom we can advertise, develop and sell our products and services, our ability to transfer personal data internationally or that may require local storage and processing of data or similar requirements.
Added
Restructuring and Impairment Expenses In the fourth quarter of 2022, and throughout 2023, we have taken actions to lower costs, increase margins and position us for growth resulting in restructuring and impairment expenses of $35 million and $42 million, respectively. We expect to fully execute our restructuring initiatives and programs over the next 12 to 24 months.
Removed
With respect to our Products and Solutions segment, we operate seven factories in northern Mexico.
Added
Restructuring and impairment expenses were allocated among our segments as follows: December 31, (in millions) 2023 2022 Products and Solutions $ 27 $ 29 ADI Global Distribution 12 2 Corporate 3 4 Restructuring and impairment expenses $ 42 $ 35 Intangible Asset Amortization Intangible asset amortization increased $3 million for the year ended December 31, 2023, as compared to the same period in 2022 due to the increased amortization costs primarily due to intangibles obtained through acquisition activities.
Removed
Approximately 52% of our finished products are manufactured in Mexico, a country that periodically experiences heightened civil unrest or may experience trade disputes with the U.S., both of which could cause a disruption of the supply of products to or from these 12 Table of Contents Resideo Technologies, Inc. facilities.
Added
For further information refer to Note 9. Goodwill and Intangible Assets, net to Consolidated Financial Statements. Other Expenses, Net Other expenses, net increased $30 million for the year ended December 31, 2023, as compared to the same period in 2022 due to increased Reimbursement Agreement expenses as noted in Note 15. Commitments and Contingencies .
Removed
Some of our Mexican facilities are authorized to operate as Maquiladoras by the Ministry of Economy of Mexico. Maquiladora status allows us to import raw materials into Mexico duty-free, provided that such items, after processing, are exported from Mexico within a stipulated time frame.
Added
Other expenses, net includes $18 million gain recorded in connection with the sale of the Genesis Cable business.
Removed
Maquiladora status, which is renewed periodically, is subject to various restrictions and requirements, including compliance with the terms of the Maquiladora program and other local regulations, which have become stricter in recent years. In addition, if the Mexican government adopts additional adverse changes to the program, including nationalization, our manufacturing costs in Mexico would increase.
Added
Interest Expense, Net Interest expense, net increased $11 million for the year ended December 31, 2023 as compared to the same period in 2022, due to higher interest rates in 2023 compared to 2022 and additional borrowings of $200 million in March 2022 under A&R Credit Agreement.
Removed
Russia’s invasion of Ukraine and the global response, including the imposition of sanctions by the European Union, the U.S. and other countries, could create or exacerbate risks facing our business.
Added
Tax Expense Income tax expense of $103 million for the year ended December 31, 2023, includes $16 million of discrete tax benefit. The effective tax rate for the year ended December 31, 2023, excluding discrete tax benefits of $16 million, was 37.9% versus 33.7% for the same period in 2022, which excluded a discrete tax benefit of $6 million.
Removed
While we do not have a physical presence in Russia or Ukraine, we have evaluated our operations, vendor contracts and customer arrangements, and at present we do not expect the conflict to directly have a material and adverse effect on our financial condition or results of operations.
Added
Income tax expense decreased for the year ended December 31, 2023, primarily due to a decrease in pre-tax earnings and a change in the tax basis of foreign assets. The increase in the overall effective tax rate was primarily driven by non-deductible indemnification costs, other non-deductible expenses, and U.S. taxation of foreign earnings. 29 Table of Contents Resideo Technologies, Inc.
Removed
Further escalation of geopolitical tensions related to the military conflict, including increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, supply disruptions, significant volatility in supply energy resources, commodity prices and availability, lower consumer demand, changes to foreign exchange rates and financial and capital markets and could potentially have a substantial impact on the global economy and our business for an unknown period of time.
Added
Segment Results of Operations Products and Solutions The chart below presents net revenue and income from operations for the years ended December 31, 2023 and 2022.
Removed
We operate in many diverse regions that require modifications to our products based on local building codes, regulations, standards, certifications and other factors, which may impact our cost to serve and profitability as we continue our penetration into these regions.
Added
Products and Solutions revenue decreased $111 million, or 4%, mainly due to lower sales volume of $307 million and unfavorable foreign exchange fluctuations of $5 million, partially offset by price increases of $102 million and $99 million of revenue from First Alert, Inc.
Removed
Enhanced tariff, import/export restrictions, or other trade barriers may have an adverse impact on global economic conditions, financial markets and our business. We are subject to certain laws and regulations affecting our international operations which, among other things, provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements.
Added
Income from operations decreased $32 million, or 6.1%, from the same period in 2022, primarily due to lower sales volume of $166 million, restructuring expense of $27 million, and unfavorable price/mix of $38 million from mix shifts to lower priced products.
Removed
There have been, and continue to be, uncertainties with respect to trade relations between the U.S. and other countries globally.
Added
Partially offsetting the unfavorable impacts to income from operations were $97 million of lower manufacturing input costs, primarily material and freight, due to the inflationary environment stabilizing and $20 million from the First Alert, Inc. acquisition. ADI Global Distribution The chart below presents net revenue and income from operations for the years ended December 31, 2023 and 2022.
Removed
Implementation of more restrictive trade policies or the renegotiation of existing trade agreements in the U.S. or other countries where we sell, procure or manufacture large quantities of products and services or procure supplies and other materials incorporated into our products could negatively impact our business results of operations, cash flows and financial condition.
Added
ADI Global Distribution net revenue decreased $17 million, or 0.5%, driven by lower volume of $108 million, primarily in sales of residential security and AV categories, and $5 million of unfavorable foreign exchange fluctuations, partially offset by $55 million of revenue due to acquisitions and $41 million from price increases.
Removed
Tariffs, sanctions and other barriers to trade could adversely affect the business of our customers and suppliers, which could in turn negatively impact our net revenue and results of operations. Specifically, we source certain components and approximately 12% of our finished goods from suppliers in Asia, a significant portion of which are subject to tariffs.
Added
Income from operations decreased $43 million, or 14%, due to $23 million of higher input costs, primarily material, $17 million of lower sales volume, and $12 million of restructuring expenses, slightly offset by other favorable impacts of $7 million. 30 Table of Contents Resideo Technologies, Inc.
Removed
New tariffs or other restrictions imposed on imports from Asia, where certain components included in our end-user equipment are manufactured and where certain of our distribution business suppliers are located, and any counter-measures taken in response to such new restrictions, may harm our business and results of operations.
Added
Corporate Corporate costs for the year ended December 31, 2023, were $218 million, a decrease of $11 million, or 5%, from $229 million in the same period of 2022. The decrease was primarily due to the cost savings actions offsetting incremental selling, general and administrative costs from the acquisition of First Alert, Inc, which totaled $11 million.
Removed
In addition, the U.S. federal government has imposed certain restrictions on the licensing, use and import of certain surveillance, telecommunications and other equipment manufactured by certain of our suppliers based in China for our ADI Global Distribution business, which may require us to find additional sources of end-user products and result in higher costs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+2 added−0 removed2 unchanged
Biggest changeThe Swap Agreements effectively converted a portion of our variable interest rate obligations based on three-month LIBOR with a minimum rate of 0.50% per annum to a base fixed weighted average rate of 0.9289% over a term of one year, six months to three years. For more information on the Swap Agreements, refer to Note 12.
Biggest changeUnder the amended Swap Agreements, we convert a portion of our variable interest rate obligations based on Term SOFR with a minimum rate of 0.39% per annum to a base fixed weighted average rate of 1.13% over the remaining terms. For more information on the Swap Agreements, refer to Note 12. Derivative Financial Instruments to Consolidated Financial Statements.
Commodity Price Risk While we are exposed to commodity price risk, we attempt to pass through significant changes in component and raw material costs to our customers based on the contractual terms of our arrangements. In limited situations, we may not be fully compensated for such changes in costs. 33 Table of Contents
Commodity Price Risk While we are exposed to commodity price risk, we attempt to pass through significant changes in component and raw material costs to our customers based on the contractual terms of our arrangements. In limited situations, we may not be fully compensated for such changes in costs. 36 Table of Contents
Foreign Currency Exchange Rate Risk We are exposed to market risks from changes in currency exchange rates. While we primarily transact with customers and suppliers in the U.S. Dollar, we also transact in foreign currencies, primarily including the Euro, British Pound, Canadian Dollar, Mexican Peso, Czech Koruna, and Indian Rupee.
Foreign Currency Exchange Rate Risk We are exposed to market risks from changes in currency exchange rates. While we primarily transact with customers and suppliers in the U.S. dollar, we also transact in foreign currencies, primarily including the Euro, Mexican Peso, British Pound, Canadian Dollar, Indian Rupee, and Polish Zloty.
We rely primarily on natural offsets to address our exposures and may supplement this approach from time to time by entering into forward and option hedging contracts. As of December 31, 2022, we have no outstanding hedging arrangements.
We rely primarily on natural offsets to address our exposures and may supplement this approach from time to time by entering into forward and option hedging contracts. As of December 31, 2023, we have no outstanding foreign currency hedging arrangements.
Derivative Financial Instruments to Consolidated Financial Statements. The fair market value of our fixed-rate financial instruments and Swap Agreements are sensitive to changes in interest rates. As of December 31, 2022, an increase in interest rate by 100 basis points would have an approximate $6 million impact on our annual interest expense.
The fair market value of our fixed-rate financial instruments and Swap Agreements are sensitive to changes in interest rates. As of December 31, 2023, an increase in interest rate by 100 basis points would have an approximate $6 million impact on our annual interest expense.
We manage our exposure to these market risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. Interest Rate Risk As of December 31, 2022, $571 million of our $1,131 million A&R Term B Facility debt outstanding, excluding unamortized deferred financing costs, carried variable interest rates.
We manage our exposure to these market risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. Interest Rate Risk As of December 31, 2023, $1,119 million of our $1,419 million outstanding debt, excluding unamortized deferred financing costs, and carried variable interest rates.
In March 2021, we entered into eight interest rate swap agreements with various financial institutions for a combined notional amount of $560 million (“the Swap Agreements”).
In March 2021, we entered into eight interest rate swap agreements (“Swap Agreements”) with several financial institutions for a combined notional value of $560 million. The Swap Agreements were entered into to reduce the consolidated interest rate risk associated with variable rate, long-term debt.
Added
In March and April 2023, we modified two of the eight Swap Agreements, each with a notional value of $70 million that matures in May 2024 as follows: (i) the original interest rate swap agreements were cancelled for no termination payment and (ii) we simultaneously entered into new pay-fixed interest rate swap agreements with a notional amount of $70 million each, effectively blending the asset positions of the original interest rate swap agreements into new pay-fixed interest rate swap agreements and extending the term of our hedged positions to February 2027.
Added
In connection with these transactions, no cash was exchanged between us and the counterparty. On June 23, 2023, we amended the Swap Agreements to transition from a hedge of LIBOR-based cash flows to a hedge of SOFR-based cash flows.

Other REZI 10-K year-over-year comparisons