Resideo - Earnings Call - Q2 2021

Transcript

Speaker 0

Ladies and gentlemen, at this time, I'd like to welcome everyone to the Resideo Second Quarter twenty twenty one Earnings. Today's call is being recorded. All participants will be in a listen only mode until the formal question and answer portion of the call. It is now my pleasure to introduce Mr. Jason Lilly, Vice President of Investor Relations.

Mr. Lilly, you may now begin.

Speaker 1

Good afternoon, everyone, and thank you for joining us for Resideo's second quarter twenty twenty one earnings call. On today's call will be Dave Geldmacher, Resideo's Chief Executive Officer and Tony Trunzo, our Chief Financial Officer. A copy of our earnings release and related presentation materials are available on the Investor Relations page of our website at investors.resideo.com. We would like to remind you that this afternoon's presentation contains forward looking statements. Statements other than historical facts made during this call may constitute forward looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties.

Actual results may differ materially from those in the forward looking statements as a result of a number of factors, including those described from time to time in 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 ks and other SEC filings. With that, I will now turn the call over to Jay.

Speaker 2

Thank you, Jason, and good afternoon, everyone. Our Q2 performance reflects positive market trends, the strong position we've built with our customers and solid execution across the organization. We grew revenue 44% year over year as both Products and Solutions and ADI continue to benefit from positive residential spending trends, with ADI also seeing a healthier commercial backdrop. Significant improvements in operational execution has allowed us to successfully manage the difficult and dynamic supply chain and logistics environment. Profitability expanded meaningfully year over year in Q2.

Both segments leveraged higher revenue and continued focus on cost management to deliver improvement in gross margin and operating margin. We continue to make progress with our value and cost engineering programs within Products and Solutions. Additionally, our investments in technology to improve customer support, sales force effectiveness and digital tools are showing benefits within both ADI and Products and Solutions. We continue to manage through significant logistics and supply chain challenges, and these dynamics are creating some headwinds to financial results. While we believe the team continues to do an excellent job delivering for our customers in this environment, our backlog grew in the second quarter and remains at elevated levels.

The entire supply chain team, along with senior leadership, including myself, are actively engaged with our suppliers and focus on continuing to ensure that we are able to procure more than our fair share of critical components. Our freight costs are also running well ahead of 2020 levels as the tight supply chain situation and unpredictable ocean freight conditions are necessitating more expediting in air freight. We currently expect challenging component supply and freight dynamics through at least the 2021. During the quarter, we continued our strategic work and business transformation efforts. As part of this, we unveiled Resideo's overarching vision and purpose to our employees.

This work is grounded in a desire to clearly lay out and articulate what Resideo is, what we stand for, and what we aspire toward. Our vision and purpose will represent and inform our strategies across Resideo. This begins with our vision. We imagine a world where homes and buildings are good for the planet, where technology works to simplify everyday life. In that world, people are healthy, happy, and secure.

To help create this future, we will work every day to simplify the connected world so people have peace of mind and can focus on what matters most. This is our purpose. Our new vision and purpose will help us align the Resideo culture around common beliefs and aspirations and serve as a galvanizing force in pursuit of our long and short term objectives. As a follow on to this work, we will surely be rolling out new core values to the Resideo team. From a business and organizational standpoint, we continue to focus on tightening our collaboration and breaking down silos within Products and Solutions.

During the quarter, we aligned Product Management into two groups: Integrated Home and Building Solutions and OEM and Partner Solutions. This change better positions us to focus on the needs of our very customers and allocate resources, particularly software development, to common initiatives across product categories. By improving internal collaboration and thinking more holistically across the home when road mapping and developing solutions, We expect the new integrated home and building solution structure to better position us for long term connected home opportunity. During the quarter, we also finalized our decision to relocate our corporate headquarters from Austin, Texas to Scottsdale, Arizona. This move will allow us to consolidate our real estate square footage and better positions us for engagement with key customers and suppliers.

The headquarters move and resizing our footprint in Austin are expected to generate ongoing annual savings of approximately $2,000,000 During Q2, Products and Solutions saw strong demand across markets, geographies and trade and OEM channels. This is a continuation During of the positive trends we have seen since the 2020 as investments in Home and Security Solutions remain priorities for many individuals. Our execution within Products Q2, and and Solutions on new product introduction continues to gain momentum. This includes the release of the latest version of our ProSeries security platform in North America. This release brings improvements, including increased wireless communication range and enhanced panel support for video from cameras and doorbells.

We are committed to further enhancements of our security offering, including the rollout of Pro Series to our EMEA customers. At ADI, Q2 performance further demonstrates our leadership in the market. We saw a strong year over year growth across all major product categories, serving both commercial and residential customers. ADI is performing well in meeting customer demand by focusing on having the products their customers need when and where they need them. ADI's focus on product availability has enabled the business to grab additional sales and deliver strong support to existing and new customers.

This is evident in the growth rates ADI has consistently delivered when compared to competitors and the overall industry. ADI is making good progress with the integration of our recent Northfolk and Shoreview acquisitions. We are already seeing great collaboration and opportunity between the acquired organizations and ADI. We expect the integration of both Northfolk and Shoreview to be completed by year end. With that, I will turn the call over to Tony to discuss our second quarter performance and 2021 outlook in more detail.

Speaker 3

Thank you, Jay, and good afternoon, everyone. In the second quarter, we again delivered strong growth in revenue and profitability across Resideo. Consolidated Q2 revenue was $1,500,000,000 an increase of 44% compared to Q2 last year, which was negatively impacted by the emergence of COVID-nineteen. Q2 gross margin of 25.8% was up two ninety basis points from Q2 twenty twenty. Consolidated operating expenses were $260,000,000 in the quarter, up just 7 percent from last year despite sharply higher revenue and a $16,000,000 expense related to the pending shareholder litigation settlement we announced on Tuesday.

Operating expenses were 18% of total revenue compared with 24% in Q2 twenty twenty. Operating profit for the second quarter was 121,000,000 or 8.2% of sales compared to a loss of $6,000,000 last year. Products and Solutions second quarter revenue of $598,000,000 was up 50% due to continued strong demand across our major product categories, geographies and channels. Products and Solutions gross profit margin in Q2 was 38.6%, up from 33.9% in the 2020. P and S operating profit was $129,000,000 or 21.6% of sales compared with $42,000,000 or 10.6% of sales last year.

The improved margin performance was primarily due to fixed cost leverage and productivity improvements, net of the negative impact of recent materials price inflation of approximately $8,000,000 as well as $20,000,000 of higher freight costs year over year. Gross profit also benefited from a $7,000,000 reversal of an inventory reserve. Operating expense was up 10% year over year due to higher sales commissions and incentive compensation as well as incremental investment initiatives. ADI Q2 revenue of $879,000,000 increased 39% year over year. Demand was strong across commercial and residential markets with over 30% growth in each of ADI's six largest product categories.

ADI's investments in e commerce and digital selling tools continued to show results with e commerce sales up over 65% year over year and accounting for 14% of ADI total sales. ADI's two recent acquisitions contributed $15,000,000 in Q2 revenue. ADI gross profit margin in the second quarter was 17.3%, up from 16% last year. The higher gross margin was a result of better mix, including a higher proportion of private brand sales, improved product line margin resulting from our MVC pricing initiative and more favorable supplier rebates due to higher volumes. Operating profit was $66,000,000 or 7.5% of sales, up 113 from $31,000,000 or 4.9% of sales in Q2 last year.

KDI operating profit benefited from higher revenue, partially offset by increased investment activity of approximately $4,000,000 largely around digital tools initiatives. The recent acquisitions were not material to operating profit. Corporate costs for the quarter were $74,000,000 or 5% of sales compared with $79,000,000 or 7.7% of sales in the 2020. This reflects a reduction in spin and transformation related costs of approximately 25,000,000 as well as the litigation settlement expense this year. The pending settlement reduced Q2 operating income by $16,000,000 net income by $12,000,000 and diluted earnings per share by $08 Consolidated cash from operations for the second quarter was $94,000,000 compared with $145,000,000 in the prior year period.

Cash from operations last year was affected by unusual COVID related positive cash flow items, including a reduction in working capital and focused cash conservation efforts. We ended Q2 with cash and cash equivalents of five seventy nine million dollars and total outstanding debt of $1,200,000,000 Our net debt stood at $615,000,000 compared to $1,100,000,000 at the end of the 2020. As a result of continued strong performance and our current view into the near term demand environment, we are revising our outlook for the full year and now expect 2021 revenue to be in the range of $5,850,000,000 to $5,950,000,000 implying year over year growth in the range of 15% to 17%. Consolidated gross margin is expected to be in the range of 26% to 28%, and GAAP operating profit is expected to be in the range of $535,000,000 to $565,000,000 For the third quarter of twenty twenty one, we expect revenue in the range of $1,500,000,000 to $1,550,000,000 Consolidated gross margin in Q3 is expected to be in the range of 26.5% to 28.5%, and GAAP operating profit is expected to be in the range of $140,000,000 to $150,000,000 Our revised 2021 revenue outlook anticipates an increase in Products and Solutions backlog in the second half due to continuing shortages of certain components.

We are also forecasting higher cost of goods in the 2021 as a result of an estimated $20,000,000 of additional year over year freight costs incremental to volume growth as well as inflation in the cost of certain components of approximately $25,000,000 Offsetting these higher costs are expected pricing benefits above our typical baseline of approximately $50,000,000 in the second half. Corporate expenses for the year are expected to be approximately $260,000,000 compared with $290,000,000 in 2020. This includes the $16,000,000 litigation settlement in Q2. Also included in our outlook is up to $12,000,000 in one time leasehold impairment costs related to subleasing our former Austin headquarters office. We expect approximately $7,000,000 of this cost to fall in the third quarter.

Additional outlook details can be found on Page 10 of our earnings slides. As a reminder, ADI will have five fewer selling days in the fourth quarter compared to Q4 twenty twenty. I will now turn the call back to Jay for a few concluding remarks before we take questions. Thanks, Tony.

Speaker 2

We continue to take advantage of the positive business performance and market momentum to increase our investment in the business. We are focused on building out systems and tools to better understand and support our customers. We believe these investments will better position us for future growth and profitability expansion. While we expect supply and logistics headwinds to continue to create short term challenges, Our teams are focused on ensuring that we deliver for our customers and turn these macro challenges into long term opportunity for Resideo. This concludes our prepared remarks.

Operator, we are now ready for questions.

Speaker 0

Thank you. Your first question comes from the line of Ian Zaffino with Oppenheimer. Your line is open.

Speaker 4

Hi. Great. You know, can you guys just maybe talk a little bit about EDI? It's positioning in the market now. You're in an inflationary environment.

Do you expect it to benefit from that similar to maybe some of the other distribution peers? And then how do you think about pricing and recouping margins? Is it margin dollar you think about, margin percentage you think about? Just maybe a discussion on that would be helpful.

Speaker 3

Sure. Afternoon, Ian. It's Tony. So thematically, in terms of how distribution operations work, yes, I mean, should be something that ideally, you're able to pass along your cost plus margin on the incremental cost. Our approach at at ADI really isn't focused on that.

I mean, we're really focused on execution in that business, to the extent that we see some benefit because we're passing through price and and able to leverage, you know, leverage a little bit of margin out of that that, you know, we'll certainly take that. But that's not part of the outlook that we're laying out here, and it's it's kinda not part of strategy. We do think about that business from the standpoint of margin percentage because that's always reflective of your execution capabilities in the business. You know, for example, I I talked in the script about about the MVP pricing initiatives that we've undertaken, about digital selling, about ecommerce. Those kinds of things should support above market revenue growth.

But over time, they should also support, some you reasonable amount of margin expansion. And that all tracks back to what we talked about at our Investor Day back in March where we think this this business has has a ways to go there. And we talked about the fact we're putting investment against it this year, and that's clearly impacting margins. We knew it would. It was in the guidance.

And the returns that we're seeing on those investments, thanks to the ADI team, have been, you know, have been terrific. So we're, we're gonna continue to do it.

Speaker 4

Okay. Perfect. And then, you know, just just another question. Can you just and I know you in your prepared comments, you mentioned a lot about technology, leading with technology. I think we're we're we're the words maybe not.

But, either way, can you help us understand what maybe your product lineup looks like as far as, you know, what's out there that that you might not have talked about that, you know, will be introduced or maybe the areas, you know, where you'll find that? And does that mean you need more m and a? Or can you do it, you know, with your resources you you currently have? Thanks.

Speaker 3

So I'll start if Jay may have something to to offer here too. But, we've been pretty clear that we'll talk about new products when they're ready for the market and when they're hitting the markets. And we really don't want to get out over our skis on talking about things that are coming some period down downplay. We're really going to be focused on execution in terms of our NPI and driving that and talking about that when it becomes real. For sure, our NPI is going to be more technology focused, because that's how you drive margin and that's how you drive differentiated product and innovation.

So for sure, I think you're going to see a bias in terms of our R and D and new product introductions to more innovation and more sort of embedded technology, whether that's sensors or software or AI or anything of that nature. Those the logical trends. In terms of M and A, yes, that's an option that we have available to us. That's why we fixed the GAAP structure. And there may be situations where it's appropriate for us to make acquisitions that contribute to our technology portfolio as opposed to trying to build it ourselves.

Speaker 2

I'd also add, Ian, this is Jay, that as you know, from our discussions over the last year, know, I brought in an individual by the name of Jeff Frank who heads up our entire innovation ideation area, which has been has brought a lot to the table in our in our MPI process, as well as I brought an individual in from the outside who heads up not all only that also also, you know, covers all of global engineering, but he has product management. And as part of that, he's done some quite a

Speaker 1

bit of

Speaker 2

organizational changes to streamline the the the MPI process to make it more efficient. And I've talked about we talked about that during the Investor Day. And what we talked about and what I talked about during my our opening comments about the alignment on product management into two groups with the integrated home and building solutions and OMS and partner solutions, another big step there. Because we really do believe that in the area with P and S, in terms of taking things a

Speaker 1

look at taking a look

Speaker 2

at things holistically and in a total ecosystem across all the different products we have, we're gonna bring more value to our customers. There's more opportunities to bring more products to market. So customers look to us for a, you know, a complete basket of goods as this the entire this particular space evolves and grows.

Speaker 4

Perfect. Thanks for all the color, guys.

Speaker 0

Your next question comes from Amit Daryanani with Evercore. Your line is open.

Speaker 3

Hi. This is Michael Fisher on for Amit. Wanted to dig in a little into your comments on some price increases. Is this surely done as a response to, you know, cost inflation you're seeing, or is this more you guys taking a look at the portfolio and maybe identifying some areas where you're not really being properly compensated for the value provided? I'd say yes.

It's it's a combination of both. I mean, you know, this is there are there are chunks of our there are chunks of our our business where it's difficult to move price because, you know, contracts contracts are limiting. But in terms of places where we can take a critical opportunity to look at what we're bringing in terms of value and driving that through the marketplace, this is an an environment where we would focus in those areas in in terms of price increases. Right? Because you have you have a market that is generally oriented towards seeing more price inflation.

So some of it is strategic in the sense that we feel like we're maybe not getting, you know, fully compensated for the value that we were bringing. And some of it has to do with the fact that people understand that our costs are going up, and they're going up substantially. And, you know, our customers have been, you know, our customers have been partners with us in terms of supporting that, you know, the implications of that for our business.

Speaker 2

Yeah. And I would say, you know, it's through this, know, the the challenges that are going on out there in this the global supply chain, which is, you know, really started towards the very end of last year and and and and, of course, all of this year. And as as I mentioned in my comments, it will continue forward into and probably into the 2021. So I what Tony how Tony phrased that, I perfect.

Speaker 3

Great. Thanks. And then just on revenue guidance. I think if I plug in your 3Q guidance, kind of implies the December revenues maybe around flat year over year. Obviously, pretty tough comps looking against December 20, but I'm just curious, is that you just maybe being a little bit more cautious given the tough comparison, or is there something specific you're seeing there?

There's there's nothing specific other than the fact that, you know, we've got a plan for a supply constrained dynamic with respect to revenue rather than a demand constrained dynamic with respect to revenue. Yeah. We have seen our backlog increase. Our outlook calls for our backlog to continue to grow. I I made a reference a minute ago about our customers, you know, partnering with us.

Speaker 2

I

Speaker 3

think that's one of the, you know, meaningful steps that we've made in the last twelve months is, you know, we're very engaged with all of our customers about what's happening in the marketplace, doing everything we possibly can to satisfy their needs, and making them aware of where we have supply constraints, that are preventing our ability to drive more revenue.

Speaker 2

I'd like to add to that. I mean, I really commend the organization of being super close to the customer. And that's really that's I mean, it's always important for, you know, your depth of relationship with your customers to grow together. But during these times, it's even more so. And you can work together to help from the standpoint of making sure you can do the best job you can on supplying to them, but also dealing with the areas that Tony was talking about.

Inclusive of that is the suppliers. How important it is to be working with our suppliers through this and the depth of relationships there. And as I mentioned, isn't just the supply chain organisation. It's myself, personally, Paul, Bill Theodore, Scott Zipper, the head

Speaker 3

of engineering, and many

Speaker 2

others in the organisation to

Speaker 3

help make that happen. And we're doing that. One one other one other thing I'd mention, and it's not trivial from the standpoint of revenue dollars. ABI has five fewer selling days in q in q four. Yeah.

Good point.

Speaker 4

Great. Thanks for taking my questions.

Speaker 0

Your next question comes from Eric Wadring with Morgan Stanley. Your line is open.

Speaker 5

Hi. This is Sabrina Howe on for Eric Wadring. Thanks for taking the question. First, can you just talk at a high level about some of the demand trends you saw in the June by product? So comfort versus security versus residential thermal.

Anything that noticeably stuck out to you would be helpful. And then I have a follow-up.

Speaker 3

The short answer, Sabrina, is there really isn't anything we call out that's differentiated from the portfolio as a whole. We saw strength pretty much everywhere. Yep. Really, really across the board. The other comment I'll make is we're spending less time focused on the Comfort RTS and security business lines.

And as Jay mentioned, you know, we've taken the the business and we've been talking about breaking down silos and really getting collaboration across the business. You know, moving forward, the conversation we're gonna have is gonna be around the integrated Homes and Building Solutions and the OEM and partner solutions. So it'll be a little bit of a different paradigm.

Speaker 5

Got it. That's helpful. And just looking into the second half, what's giving you confidence that demand will hold up? Are there any KPIs that you evaluate? And if so, can you help us understand kind of what they are and what you're seeing there?

Speaker 3

Yes. I mean, this is mostly a terms business, right? Jay and myself and Scott and Bill and Rob, we look at we look at sales every day. We look at bookings every day. And we are, I think, meaningfully closer to our customers than we were, you know, three, four, five quarters ago.

And we're in consistent dialogue with them. And everything we see from all of those indicators is the demand continues to be strong. I mentioned the fact that our outlook calls for us to be to seeing backlog grow between now and the end of the year. And that's it's an indication of the strength in market that we see. Ideally, we'd be able to satisfy all of that backlog.

But in a in a turns business like this, you're you're not really gonna have kind of, you're not gonna see backlog. And things like, you know, new housing starts and those kinds of things, we're gonna be affected by them that have some level. But on a quarter by quarter basis, that's not something that that we really track as an indicator of where we see demand, headed in the short term.

Speaker 5

Great. Thanks so much for the question for the answers.

Speaker 0

Your next question comes from Brian Wattenberg with Imperial. Your line is open.

Speaker 6

Yes. Thank you very much. Just have a question on, the commercial side of the business, what you're seeing. You know, some of your competitors, obviously, a lot of them are seeing dramatic slowdown in new office. But ADT and Alarm, you've probably been monitoring both reported this week, and they're seeing a a big rise on the commercial side.

Obviously, not new office, but everything from churches to schools to, you know, everything is is on the rise. And, you know, ADT is calling for market share gains, alarms. You know? Anyway, I wanna get your take on what you're seeing on the commercial side of your business and what caught, what's not.

Speaker 3

So, yeah. I mean, the things you just referenced are, affecting, and it's it's really ADI, Brian, that is you know, that's got a significant commercial component to it. You know? Or that's more commercial than it is residential by by a pretty wide margin. And exactly what you just described is what we're seeing.

Schools, retail, government, those of commercial projects. And you're right also that most of them are retrofit, most of them aren't new, are helping that business for sure.

Speaker 2

Yes, Ryan. And I'll just add to that, mean, I think it's pretty obvious. But a lot of those types of projects were on hold during COVID when people couldn't get access to those types of facilities. And so one of the drivers is just what Tony said, schools for sure, government, retail installations. And so ADI is definitely has benefited by that.

Speaker 3

Yes. Mean, one of the remarkable things about ADI during the during the height of the pandemic was that they posted really strong revenue growth in the face of some pretty significant constraints to the commercial business. And now seeing commercial kind of come out of that wilderness is definitely plus for them. There's not a lot of commercial really on the, on the P and S side. There's some, but there's not a ton.

Speaker 6

Right. And just to follow-up on that on the commercial side with ADI. Is it, any specific products that that are leading the charge in there, you know, that schools are looking for x versus government versus retail? Is it a total solution? Is it, upgrade of the old system?

Can you give us give me some kind of data point?

Speaker 3

It's it's clearly upgrades, but our six largest our six largest product lines all grew more than 30% this past quarter. So it's pretty much across the board. Intrusion, fire, video, all of them are all of them are showing strong growth.

Speaker 6

Okay. Perfect. Thank you very much.

Speaker 0

Your next question comes from Paul Dirks with William Blair. Your line is open.

Speaker 7

Hi, good afternoon, and thanks for taking my questions.

Speaker 3

Sure. Hey, Paul.

Speaker 7

So a couple for me. First one, on the price increases, can you remind us of the dates of implementation for the different price increases you've instituted? And also how much of your business is on the long term contracts that may be subject to a lag here?

Speaker 3

So the the majority of the price increase to date has been has been in May, June. There's some more pending now, but those have been kind of the two the two big moves. I don't have a percentage to offer you, but a meaningful amount of our OEM business is, you know, has has effectively negotiated prices in it that don't contemplate pricing. This is for the, you know, for the term of a contract. So I I don't, like I said, I don't have a percentage, to to really offer you, but it's a it's a meaningful chunk.

Speaker 7

Got it. That's that's helpful. And then just on on a different note, following up on the ADI discussion. Is there any way to quantify some of the share gains that you're achieving here and specifically drilling in on the fact that e commerce being up so strongly here for the last several quarters and the fact that the benefit there would be to free up sales associates. With the healthier commercial backdrop across verticals, is there a way that I mean, perhaps you could just speak to it qualitatively, but if there's a way to quantify the share gains, I'd be interested to know.

Speaker 3

You know, there's not really an open source or sort of a public source that is is looking at share. You know, we have our views as to where the market is growing. We certainly think that we're outgrowing the market by at a pretty by a pretty healthy amount. Through the pandemic, we think the market was probably flat to down, and we grew that business pretty meaningfully. It feels like we're continuing to do that based on what we see.

I wish I had a quantitative measure for you, but we really don't.

Speaker 2

Yeah. I agree with that.

Speaker 7

Alright. Fair enough. And then maybe lastly, you know, maybe you could touch upon your conversations with the pro channel, specifically as it relates to labor. You know, we've heard a lot of comments across industries about the significant shortage of labor and some places it seems to be getting worse than ever. So I know that's part of your strategy to help enable and empower the pros, but maybe you could talk about what you've observed here in the last sixty, ninety days with the channel.

And then also, are there any new tools or resources that you're looking to implement here to help keep the channel vibrant?

Speaker 3

So, I think on buy you're you're right that there are labor constraints with the, you know, with a lot of the contractors. And, you know, they they have struggled to to keep the volume of people that they want. And you're also right that, you know, our involvement with the Building Talent Foundation and with some other partnerships with some of our major our major customers is is focused on helping them source source talent and really helping them rebuild the pipeline of, you know, of technicians that has has kind of been depleted over, you know, over some number of years. I I think a bigger factor, frankly, though, is the supply constraint. I think if you had regular flow of, you know, goods and we were able to satisfy all of the the product demand, then I think you might see the sort of the next constraint being, gee, I don't have a crew to go do that job.

But I don't think that's the if you look at it as a Pareto, I don't think that's that's the driver there. But we are focused on that. I mean, that's a you know, our view is if we can support growth of technicians and young technicians getting into the, you know, getting into the trades and be a you know, be a supporter of them early in their career. We get customers for life. And that's something that, again, is is new in the past year or so, but we've really been we've been Yes.

Speaker 2

Healthy or who, you know, is president of products and solution has been, you know, a big driver of that and and done a lot with his organization to make sure that we're deeply involved in training of the type of people we're talking about here. And not just The United States, but global training. And then the gentleman who heads up our service organization, he also has one of his big focuses. So training is a big deal and is going to help fuel the pipeline for future installers. And then that helps us deepen our relationship even further with the pro installed base.

So a lot of benefits in doing that. I'll just add a comment on the labor thing. I mean, as you said, there's many places, many different industries that are all being impacted in different ways and labor shortages. And we're seeing that in the install base, like what Tony said, but also we've been seeing it in some of our distribution places also. But you know, the good news is we're grinding through that, and we've been able to help overcome some of those issues.

But this training piece that I mentioned before back on the D and S side, it's a big deal. You and we're gonna be sharing more information with

Speaker 1

you about that because I

Speaker 2

think it's really meaningful and impactful of of what we're doing there.

Speaker 7

Very helpful. Thank you, guys.

Speaker 0

Thank you. There are no further questions at this time. I will now turn the call back to Jay for closing remarks.

Speaker 2

Thank you very much, operator. I wanted to close off things today and thank all of the Resideo global employees for their very hard work and really great execution during Q2 and really the 2021, as well as their really passionate commitment to serve our customers throughout the world.

Speaker 3

So I want to thank them very,

Speaker 2

very much in in in

Speaker 1

as part of my closing remarks. Thank you, everyone, for your participation today, and we look forward to speaking with you over the coming months. Have a good rest of your day.

Speaker 0

This concludes today's conference call. You may now disconnect.