Ladies and gentlemen at this time I'd like to welcome you to the Resideo Technologies First Quarter 2021 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] Now it's my pleasure to introduce Vice President of Investor Relations, Mr. Jason Willey. Sir I hand it to you. .

Good afternoon everyone and thank you for joining us for Resideo's First Quarter 2021 Earnings Call. On today's call will be; Jay Geldmacher, Resideo's Chief Executive Officer; and Tony Trunzo, our Chief Financial Officer.

A copy of our earnings release and related presentation materials are available on the Investor Relations page of our website at investor.resideo.com. We would like to remind you that this afternoon's presentation contains forward-looking statements.

Statements other than historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties.

Actual results may differ materially from those in the forward-looking statements as a result of a number of factors including those described from time to time in Resideo's filings with the Securities and Exchange Commission. The company assumes no obligation to update any such forward-looking statements.

We identify the principal risks and uncertainties that affect our performance in our annual report on Form 10-K and other SEC filings. With that I will now turn the call over to Jay. .

Thank you Jason and good afternoon everyone. Q1 was a strong quarter across the business. We grew revenue 20% year-over-year as both Products & Solutions and ADI continued to benefit from a strong residential demand environment with ADI seeing improved activity in commercial markets.

We are building on these market tailwinds with improved execution across the business for manufacturing and supply chain through the engineering, innovation and sales organizations. With positive demand driving better-than-expected revenue we delivered meaningful profitability expansion.

Both businesses leverage the higher revenue into improved operating margin. Operating profit grew by $96 million year-over-year and cash from operating activities expanded by $79 million year-over-year.

As discussed previously, we are taking advantage of the strong market conditions and business performance to accelerate investment in high-return activities.

Focus areas within Products & Solutions include key new product initiatives such as accelerating Pro series releases, enhancing customer experience staffing and tools and a number of activities aimed at optimizing the sales organization and processes. At ADI, we continue to invest in our digital platforms and initiatives.

Sales force effectiveness tools and expansion in adjacent categories organically and through M&A. Products & Solutions saw strong demand across the markets and channels during Q1. This is a continuation of trends that developed last summer as people focused attention on their homes and security.

We also believe we benefited in a number of markets by having the ability to step up and meet our increased customer demand. The underlying market trends and spending on both repair and renovation and new home sales remained positive in the first quarter. Trends we see continuing throughout 2021.

While repair and renovation work are the largest drivers of Products & Solutions sales, we are encouraged by early signs of success in our stepped-up Residential New Construction or RNC efforts.

An example is our recent engagement -- agreement with Meritage Homes to integrate a range of our products into their homes and provide the platform to support their connected home offering. This win demonstrates Resideo's unique opportunity in the RNC market created by our broad product portfolio.

We believe this product breadth will take on increasing competitive importance. as builders look to integrate more in front of and behind the wall connected and smart home content into their portfolio. In the face of meaningful logistics and supply chain headwinds, the team did an excellent job delivering for our customers.

While our backlog is elevated relative to where it is -- it has historically trended, we believe that in aggregate we are managing through these challenges better than the overall market, presenting us with opportunity in certain categories and geographies.

During the quarter, we completed a comprehensive strategic review and planning process within Products & Solutions. The development of eight strategic pillars outlined on Slide 4 of our earnings slides was a key outcome of the process. This work formed the foundation for the strategy we outlined back in early March at our Virtual Investor Event.

These pillars were developed to balance long-term decisions with key immediate actions. As part of this process, Products & Solutions will prioritize a shift from discrete traditional products to cross-category solutions with an emphasis on enabling the Pro through data analytics.

We are focused on thinking about the home holistically with clarity on where to play and where not to play. The team is now executing to this strategy, taking the concepts and turning them into actionable items with clearly defined owners. At ADI, Q1 performance reinforces our continued leadership position in the security distribution market.

The business is benefiting from increased interest in security products across residential and commercial markets and industry-leading execution. On the Commercial side of ADI which typically makes up over 2/3 of their business we saw an acceleration of activity. Residential focused categories remained strong in the quarter.

In line with our strategy to increase investment in ADI we continue to enhance our e-commerce capabilities and the rollout of our sales force effectiveness tools. E-commerce continues to grow as a portion of ADI sales.

We also saw positive expansion in our private label business which remains a relatively small part of ADI's mix but an attractive long-term opportunity. During the quarter, ADI completed the acquisition of Norfolk Wire & Electronics, a US regional distributor of data communication products with 11 physical locations in the Mid-Atlantic.

And earlier today, we announced another acquisition in the distribution space with Shoreview, a US distributor of ProAV products. Shoreview serves the entire US through distribution locations on both coasts and brings a strong brand portfolio that builds on our existing Herman ProAV business.

Both acquisitions are an example of our strategy to utilize M&A to accelerate expansion in attractive adjacent categories. I want to welcome both the Norfolk and Shoreview employees to the Resideo team. With that I will turn the call over to Tony to discuss our first quarter performance and 2021 outlook in more detail..

Thank you, Jay and good afternoon, everyone. Both ADI and Products & Solutions exceeded our expectations in Q1 and delivered substantial year-over-year improvement across key financial metrics. Consolidated Q1 revenue was $1.4 billion an increase of 20% compared to Q1 last year.

Gross margin of 25.9% was up 180 basis points from the first quarter of 2020. Selling, general and administrative expenses totaled $238 million down 5% from Q1 last year and representing 17% of total revenue compared with 21% of total revenue in the first quarter of last year.

Operating profit for the first quarter was $130 million or 9.2% of sales compared to $34 million or 2.9% of sales last year. Products & Solutions first quarter revenue of $606 million was up 28% due to improved demand and strong underlying market conditions across all of our major product categories and channels.

Products & Solutions gross profit margin in Q1 was 38% up from 33.9% in Q1 2020. P&S operating profit was $130 million or 21.5% of sales compared with $58 million or 12.2% of sales last year.

This improved operating performance is due to fixed cost leverage on higher volume as well as over $10 million in engineering materials productivity improvements.

These benefits were partially offset by $12 million in higher freight and logistics costs and increased investment of approximately $5 million targeted at new product development, marketing and sales force effectiveness. ADI first quarter revenue of $813 million was up 15% year-over-year. ADI had three more selling days this Q1 compared to 2020.

Thus the daily sales average for the first quarter was up by 10%. Demand was strong in residential and commercial categories led by intrusion and video surveillance. ADI's investment in e-commerce and digital selling tools has continued to yield results with e-commerce sales up 60% year-over-year and now accounting for 15% of total ADI sales.

ADI gross profit margin in Q1 was 17.2% versus 17.9% in Q1 2020. The lower gross margin was a result of lower supplier rebates year-over-year and unfavorable sales mix in the EMEA region. However, we did see a 40 basis point increase in underlying product line gross margin.

ADI operating profit was $59 million or 7.3% of sales up 23% from $48 million or 6.8% of sales in Q1 last year. ADI operating profit benefited from higher revenue and continued focus on cost management partially offset by increased investment activity of approximately $3.5 million largely around digital and sales force effectiveness initiatives.

Corporate costs for the quarter were $59 million or 4.2% of sales compared with $72 million or 6.1% of sales in the first quarter of 2020.

This reflects a reduction in spend and transformation-related costs of approximately $20 million partially offset by the build-out of our internal innovation transformation and strategy teams as well as higher compensation and bonus expense.

Consolidated cash from operations for the first quarter was $5 million an improvement of $79 million compared with the use of cash of $74 million in the prior period. The first quarter is typically our lowest cash generation quarter due to payment of annual bonuses and customer rebates accrued in prior quarters.

We ended Q1 with cash and cash equivalents of $508 million and total outstanding debt of $1.2 billion. Our net debt stood at $688 million compared to $1.2 billion at the end of the year ago period.

As a result of our robust Q1 results and the expectation of continued strong demand for the remainder of 2021, we are raising our outlook for the full year and now expect 2021 revenue to be in the range of $5.5 billion to $5.7 billion, an increase of $300 million across the range and implying year-over-year growth of between 8% and 12%.

Consolidated gross margin is expected to be in the range of 26% to 29%. GAAP operating profit is expected to be in the range of $500 million to $550 million, an increase of $50 million from prior guidance. Our 2021 outlook anticipates corporate expenses of approximately $235 million compared with $290 million in 2020.

Additional outlook details can be found on page 10 of our earnings slides. As a reminder ADI will have two fewer selling days in 2021 compared to 2020 reflecting three more days in the just finished first quarter and five fewer days in the fourth quarter.

Revenue of approximately $40 million arising from the acquisitions of Norfolk and Shoreview are included in our revised outlook. But we expect these acquisitions to have minimal impact on 2021 operating profit due to acquisition and integration costs.

Post integration, we expect both acquisitions to contribute operating profit at levels above ADI's current margins. For the second quarter of 2021, we expect revenue in the range of $1.4 billion to $1.45 billion.

Consolidated gross margin is expected to be in the range of 25.5% to 27.5%, and GAAP operating profit is expected to be in the range of $115 million to $125 million.

Our outlook both for the year and for the second quarter takes into account supply chain constraints, higher freight and material expediting charges and market shortages of certain components, such as microprocessors, all of which we now expect to persist through the remainder of 2021.

Also, included in our revised outlook for 2021 our incremental investments compared to 2020 totaling approximately $50 million. At ADI, these investments are targeted at driving scalable growth, including systems to accelerate our e-commerce offerings, sales effectiveness and improved customer service.

Within Products & Solutions, we're investing in incremental engineering and innovation capabilities, customer experience, sales force tools, manufacturing optimization and processes and systems enhancements.

And at the corporate level, we're focused on numerous back-office transformation projects as well as ongoing innovation, strategy and transformation activities. That concludes my comments. I'll now turn the call back to Jay for concluding remarks before we take questions.

Jay?.

Thanks Tony. As we look to the remainder of 2021, we see the strong market trends in the residential and overall security markets continuing. We also expect increased opportunity for ADI within its core commercial categories as more geographies and markets open up and work begins or as restarted on projects.

And we remain focused on execution on our transformation efforts targeted at both cost optimization and growth initiatives. We see this work driving significant long-term value creation with progress expected to be increasingly visible in our financial results, as we move through 2021 and into 2022.

We win in the market because of the quality and reliability we deliver, which combined with our customer service and breadth of products provides a compelling offering for the professional, whether through Products & Solutions or ADI.

We are putting in place a strategy to further leverage these strengths and enhance our innovation, which we believe will position us to drive sustainable long-term outperformance in the markets we serve. This concludes our prepared remarks. And operator, we are now ready for questions..

All right. [Operator Instructions] And our first question is going to come from the line of Amit Daryanani with Evercore ISI..

Hey, guys. This is Michael on for Amit. Just -- so to start with just wondering if we look at the Q2 guidance you take the midpoint of the revenue and the operating profit it implies margins are stepping down around 70 basis points sequentially. I was just wondering if there's anything to call out there..

Yes. Hi, Michael, it's Tony. Yes, a couple of things. I mean, first of all, we're going to shift mix a little bit in Q2 to ADI over P&S. And we're also going to have -- we gave you the investment number for the full year. We're going to have more investment in the business in the second quarter than we did in the first.

From a mix standpoint, P&S has a little bit less attractive makeup in their sales plan for 2020 for the second quarter, which will also have an effect on the margin. Overall, though there's no structural change in any of the margin outlooks for of our core markets..

Okay. And then a bit more strategic of one. I'm just curious. So, the M&A strategy with the ADI business seems very logical given how fragmented that market is. So, the only real risk we see here is kind of around execution. So, Jay and Tony as well.

I'm just kind of wondering if maybe you could give us some insight into how you approach acquisitions and maybe some past experience you've had with this sort of strategy?.

I'll comment. This is Jay, and then I'll let Tony jump in. I mean, the people we've brought into the organization over the last year are very, very experienced in terms of operators of doing integrations in our past lives, as well as Rob in the ADI side has a team in place that also have done a nice job of developing an integration playbook.

And as an example, the Herman acquisition that they did right before COVID hit. They did a really nice job of integrating the business through COVID. And as they -- their own learning experiences from that they're going to apply to these additional tuck-ins that they're executing on now.

So I'm very confident between what the ADI team in terms of their own playbook and then from a P&S standpoint. Phil, the transformation team and the other folks we bought in have done a lot of this in their careers. And as you know integration is one of the big keys of success of great M&A, and some companies do it poorly and some do a great job.

And I'm really confident that as we do -- as we carry out M&A that we'll actually do an exceptional job in that area.

Tony, do you have any added comments to that?.

Yes. I'd just add that to Jay's point, while M&A is relatively new to ADI as a component of their strategy, they have a very structured execution-oriented, process-oriented culture that lends itself really well to M&A. And as Jay said, they've prepared for this for a long time.

We have beefed up the hour M&A capabilities not just at the executive levels, but also a little further in the organization with some folks who have pretty deep experience in M&A.

And I guess the last, well, two more points these deals individually are pretty small, right? I mean, we've got two deals here that – over the next nine months we're going to generate $40 million of revenue. So we've definitely started it cautiously in terms of scale.

We're going to walk before we run, we're going to make sure that we don't over burden them with too many deals at one-time and we'll monitor the progress as we go forward..

Okay. Yeah, great thanks for that color.

I just wanted to just double check one number -- you said $40 million from the two deals you've done so far?.

Correct..

Okay. Great. Thanks..

Yes..

And our next question will come from the line of John Lovallo with Bank of America..

Hey, guys. Thank you for taking my questions. The first one is the 26% to 29% full-year gross margin range, it's fairly wide. First quarter gross margin, I think, was 25.9%, second quarter you guys are thinking 25.5% to 27.5%.

So this would seem to imply the second half gross margins, we need to be well in excess of 30% to hit the high-end of that range.

So can you just help us think through some of the potential drivers of the high and low-end of this gross margin range?.

Sure. Yeah, so hey, John, it's Tony. I guess the first thing, I'd say is we've expanded the range by a point is – as I'm sure you've noticed, we were 26% to 28%, we moved it to 26% to 29%, because, and you're right, I think that's a broad range at this point in the year. But it's somewhat of an unprecedented year.

We have concerns around the cost of rate, we have concerns around expedited delivery. We actually had some supply chain concerns about making sure that we can get everything we need for some of our product lines. And that's part of the reason why the range is relatively wide.

Your calculations are – you're right in the sense that second half gross margins are going to be higher than first half gross margins that was the case last year as well.

And to be honest with you I would say that, Jay and myself and the leadership team as we continue to focus things we kind of understand over the last couple of quarters that that's probably a structural aspect of the mix of sales in the P&S business. It's just that the – you have a heating season and you have a cooling season.

And this is a gross oversimplification, but the products that get sold in one season are – may have a somewhat more profitable profile than the ones that get sold in other parts of the season. And then there's all kinds of puts and takes.

I mean, in one part of our business we have a – we basically – we have a wire business where we pass-through the cost of copper. And it's basically a pure pass-through. So those dollars go through as revenue but we kind of empty calories, because they don't drive any margin.

A fair bit of that in the first half of the year and relative to the – relative to revenue in the second half of the year that type of activity is likely to be less. .

Got it. Okay. That's -.

I'd also – just one other thing I'd add is the transformation team you've heard us talk about as that team has really picked up momentum and had done a lot of things that is our actions that are very critical for the future of the business as part of our DNA going forward, but there are also lot of things that they action to help offset some of the things that we're facing that world is facing with logistics and supply chain that Tony talked about.

So again, I think that does add, sort of, the fact that we want – we're being careful in terms of exactly what we're communicating to all of you. But it Tony's comments about what we've learned about the business or I would agree with also..

Got it. Okay. And then you may going back to the question that Michael asked and just looking at the second quarter guide. The outlook of 14% to 14.5% on the top line is pretty similar to what you printed in the first quarter. Let's assume the midpoint of the gross margin range of 26.5%.

I mean, that would seem to imply a pretty decent step up quarter-over-quarter in SG&A, we call it $15 million to $20 million.

Just wanted to take that operating profit range that you're talking about, and how much of that $15 million to $20 million is the incremental investment? And what else is potentially driving that higher?.

Significant majority of that is the incremental investment. There's some smaller stuff in there John. There's ordinary increases kick in on April 1st things like that. But the large majority of it is incremental investment from compared with where we were in Q1..

Okay. Thank you guys..

Thank you..

And our next question will come from the line of Ian Zaffino with Oppenheimer..

Hi, great. I actually just wanted to ask for that mix question again.

I think you said 2021 mix is going to be different, or is that not what you meant and we're really talking more about a seasonal mix? Because I understand the heating/cooling seasons but just kind of wanted to clarify if that mix is in actual 2021 thing versus 2020, or is it seasonal? And if so, what would be driving that mix of business year-over-year?.

Sorry broadly, what I was driving at here was that it's seasonal. We have a more profitable mix particularly in Q3 and Q4 than we do particularly in Q3 we have a more profitable mix than we do in Q1 and Q2.

It's not to be – broadly speaking the mix of products within P&S and the mix of sales between P&S and ADI are not – they're not massive shifts in mix compared to last year. It's really just the seasonal flux that we're talking about. And this doesn't really have a cooling season.

So it tends to be – they don't – as we ramp a cooling season in North America there tends to be a little less of that in EMEA. And then like I said, the heating season in season just tends to be – those products just tend to be a little bit more profitable..

Okay. I got you. And on the microprocessor shortage, where does that hit you that would mainly be in security? Are there other areas where it's going to hit you? Any color there would be helpful. .

It depends in terms of which -- where the chips are going, but it isn't just security. So it's -- and it isn't only microchips either I mean from resins to many other things that they were grinding and out as other companies are doing. So I would just say that it's a variety of different areas.

Securities one of the larger ones I would say, but not the only area. .

Yes. I mean we've got... .

But also -- go ahead Tony. No I'm just going to say comfort also, in particular comfort and security. If I had to pick two categories, the thermal solutions group a little bit. I mean because I just -- the supply chain issues just it's a matter of degree, which ones are bigger problem childs than others. But in general, I'd say security and comfort. .

Okay. Great. Thank you very much..

And our next question will come from the line of Erik Woodring with Morgan Stanley. .

Hey, guys. Thanks for taking my call. Congrats on the quarter. I guess I'll throw out two for you guys here.

Just starting in terms of your performance in the first quarter maybe you could just provide a little more commentary on just how P&S did across comfort versus security versus residential, thermal anything that you'd call out there? And then same for ADI on the geographic side, anything of note that you'd call out? And then I have a follow-up.

Thanks..

On P&S -- Erik thanks for the questions. On the P&S side, all three of the -- what I'll call the traditional business lines grew pretty robustly during the quarter. Security was clearly the strongest. ADT is a terrific and significant customer of that business. They did really well. We introduced our Pro series line, which did well in the market in Q1.

So security saw the most robust growth of the three segments, but all three of them -- all three of them showed meaningful growth. In terms of ADI, I'm trying to remember there's not a lot. EMEA did a little bit better. But there's not anything particularly dramatic in terms of their mix or anything that I call out one geography or another. .

Okay. That's super helpful. And then maybe Tony or Jay either one can take this. But big picture your leverage has dramatically improved over the last 12 months. You no longer have any significant maturities before 2026. You saw some ratings upgrades.

So just curious how you're thinking about your target capital structure and leverage going forward? And then how you'd prioritize cash uses given this dynamic? Thanks..

Great question. We'll have more to say about that over the next couple of quarters. I mean, we did a rollout in an Investor Day of some of our long-term targets. We're thinking more deeply now and working through with a little more clarity exactly where we want to be in terms of return metrics and those kinds of things.

And that really does -- that feeds into the kind of the long-term capital structure. I made the comments early in my tenure at Resideo that I would like to see us have an investment-grade credit profile. Our leverage and the business performance are there. But the track record and the consistency, probably isn't.

And frankly, we've gotten the significant component of exposure in the Honeywell IRA. So anytime, we're thinking about our leverage we think about the reimbursement agreement, obligation to Honeywell as something that's tantamount to a fixed obligation.

As we grow the business that shrinks as a proportion of the whole, but it's something we have to take into account when thinking about the capital structure. So a long way of saying, we are -- I would say right now we're in a period where we probably are carrying less leverage than we feel like we could carry over the long term.

If there were sensible or reasonable things from a cash deployment standpoint that would take our leverage up a little bit, we'd be comfortable doing that as long as given the constraints I just described. .

I would just jump in with Tony -- sorry Tony to interrupt, that last thing you just said, I want to just reinforce I think that's a great way of framing it, is that we're being more cautious.

But at the same time we -- I think we've done a really good job of putting ourselves in the right position to be able to take advantage of opportunities as they come up. .

And we're -- and in terms of how we deploy that capital the prioritization is inorganic growth. The deals that you see us doing in ADI -- at ADI there -- we fund them with cash flow, that's not a problem. They're not really of a meaningful scale.

But now that we have a foundational perspective on the go-forward strategy in P&S, I mentioned earlier, we brought in as our treasurer a few months ago and somebody who has very -- he's also head of quoted -- very deep M&A experience. We're building out that strategy. We're building out the road map to how we want to play in that market.

And the whole point of doing the debt refinance and the capital raise last year was to put ourselves in a position. I think we used the phrase to be strategically proactive. And that's where we are. And that's... .

Yes. And I'd add -- I think Tony said that really well. And in our presentation deck, there we have a one page slide called P&S strategic overview with the strategic pillars that I mentioned.

And those are the areas that of course that the P&S business is focused on and we just want to make sure that we have that as we move forward in each of those pillars that we have the flexibility to be able to act as we need to be it organically or M&A, but being smart about it. .

This is a long answer to your question, but one other thing I want to mention is the transformation of our capital structure and the deleveraging of the business over the last 12 months has had a profound impact on the strategic and operational decision-making in the business.

We've really been able to point people to making the best decisions for the business over a reasonable time horizon or the time horizon were over a multiyear time horizon as opposed to thinking about what's the cash implication or what's the EBITDA implication of something.

And that was really one of the reasons why it was second high priority for us early in the game as the new leadership team if we wanted to take concerns about important strategic and operational decision-making, we wanted to take the financial concerns surrounding those decisions off the table for people. And it feels like we've done that. .

That was great color. Thank you very guys..

[Operator Instructions] And our next question is going to come from the line of Paul Dircks with William Blair. .

Hi, good afternoon and congrats on a good quarter..

Thanks Paul. .

Thank you, Paul. .

So, two for me. First in P&S given the robust nature of the residential market now and the very tight labor market that we're seeing nationally and into trades.

Is the value proposition that Resideo is offering to pros strengthening? In other words, are there things that you guys can do in this kind of market environment to differentiate and to grow closer to some of your contractors and perhaps even recruit new contractors to your brands and to your products?.

I'll jump it first because I get excited when you ask me that question and I'll let Tony.

But yes, I mentioned in my comments Paul as you know about RNC the Residential New Construction and the total portfolio of products that we can offer as part of our growth together and deepening the relationship further with this great asset of pro installers that we have out there.

So, that's just one big example that we've got a lot of focus and effort on. Also, Phil Theodore who's President of Products & Solutions and his team have working a lot in terms of training out there into the trades. And you'll hear more about that as we move forward.

And that's an important part and one of many things to be able to as young new people come on board in this market and in those areas with the trades that they learn about us as partners. We're there to help support that. So, your question is a really good question and one that we're very focused on both short term and long term.

Tony you've got anything to add to that?.

Yes. Paul, it's a pressure question really because it's an area that we focused on inside of P&S it really -- you're right to ask the question in the context of the pandemic and labor shortages.

But there's a longer-term challenge for our pros which is their nuts and bolts labor force and their skilled technicians they're aging and they're not -- we're not producing those tax at the rate that is necessarily in the future.

And we've had significant engagement with a number of our customers to work with them for -- in areas of scholarships and supporting young folks coming into these trades because for a whole bunch of reasons. One, it's the right thing to do. Two, it supports our customers today.

But you make a fan for life if you help somebody with their education, right? So, there's a tremendous amount of goodness associated with that. The other thing I wanted to mention though and Jay may have more color on this too. When we do product design one of the things that we're focused on is making the pro successful.

And what that really means is when they show up in somebody's house the product has to be -- they got to be trained on it. It has to be easy to install. It has to be robust. And those types of -- that type of process that type of work really improves the labor efficiency of the professionals as they're going out to the homes.

So, really your question really goes back all the way into our product design cycles. .

Yes. Good feedback. .

Got it. That's very helpful color. I appreciate that. I'm sure there'll be more to come on this topic. Second question for me switching to ADI, in particular, on the e-commerce side, the e-commerce growth in the quarter up 60% year-over-year very robust. I believe last year was somewhere in the 20s maybe mid- upper 20s.

I guess what's working there? And specifically, are there any changes in the marketplace or with your execution that you can point to that have increased your effectiveness and are now commanding more investment dollars from you?.

It's definitely commanding more investment dollars. So, there's no question about it. We have improved our e-commerce experience I think meaningfully but we also have a long way to go.

And we have product information systems that are coming online here as part of this investment that we've been talking about that are going to improve that web experience and that e-commerce experience even more for our customers. The other part is training and driving our customers to that portal for what I'm going to call the everyday buys.

Our objective in this is one we think it will increase sales overall and make for a better experience for our customers at ADI.

But our real objective is also to free up our sales associates to be able to be consultative with our customers and really take the order taking I say clerical but sort of the process pieces of the job out of their hands move it to the web move it to an e-commerce experience that is valuable and productive for our customers such that our sales associates who today we get tremendous performance out of can be more consultative with the customers in the branches.

.

Yes, I think that's -- Tony hit the nail right in the head with that. And I would just add that as you stated Paul, I mean we've had nice growth since last year. So, I think it gave us some opportunity through COVID and it forced -- it helped accelerate that through COVID because of that. There's no doubt about it.

But now after we saw that and the market even coming out of COVID people are saying, how I can do this a lot easier by using the digital experience. And so as Tony said we're investing further. That's one of our investment areas to further accelerate that.

So, I know Rob and his team of people at ADI are super excited about it because they can see the results every month..

Understood. I appreciate the thoughtful answers. Thank you..

Thanks. Paul..

And at this time, it appears we have no further question. I will turn the call over to you for any closing comments..

I just appreciate everyone's participation today on the call. Please reach out if you have any follow-ups and we look forward to speaking with you over the coming weeks and months. Take care everyone. Thank you. .

Once again, we'd like to thank you for participating in today's Resideo Technologies conference call. You may now disconnect..